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January 16th, 2006Social Security Looming Large in Pennsylvania Senate Race
January 16th 05:17:35 PM
From the Citizen's Voice
State Treasurer Robert P. Casey Jr., the leading challenger for Santorum's Senate seat, says that's not a plan, it's a "scheme." Santorum responds that Casey hasn't advanced any reforms.
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Money for Nothing
January 16th 02:21:26 PM
Check out Kerry Kerstetter's post at Social Security Choice on how the government collects more than its fair share of payroll taxes.
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January 13th, 2006Candidate for House Majority Leader Boehner on Social Security Reform
January 13th 05:38:11 PM
From Freedom Works
Rep. John Boehner, one of the candidates for House Majority Leader, released a fairly detailed manifesto/agenda that would put Social Security banck front and center for the House GOP.
"I'd be remiss if I didn't share with you what I see as some major challenges and opportunities that will be facing us in the next several years.
First is the budget. We all know Social Security receipts start slowing down next year, that payments will start exceeding receipts within a dozen years, and that the trust fund will be exhausted within 20 years after that – probably faster, given current increases in life expectancy. Other entitlement programs are also on unsustainable paths. As I've said in every campaign in my district since 1990, we need to fix these problems soon because they just get harder over time. And I believe that if we as a Republican Congress can pass fair, responsible reforms that preserve the key promises of these programs while protecting their long-term health, we'll be rewarded at election time."
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Forced to sleep with the enemy
January 13th 04:34:03 PM
John Carlisle writing at the American Spectator website points out how we were all forced to help AARP take a position against much needed Social Security reform.
"The defeat of private accounts is just the latest example of AARP's longtime commitment to liberal activism. Of course, as a private nonprofit organization it has the right to take any stand it chooses on a public policy issue. However, the fact that AARP pursues its agenda using federal dollars stirs considerable anger among many taxpayers, and not just those who oppose its politics.
The AARP 2004 annual report shows that the organization received $83 million from the federal government through a variety of grants. Thus, when AARP spent at least $10 million torpedoing Social Security reform, more than 10 percent of its $800 million budget came from the U.S. taxpayer.
Charlie Jarvis, Chairman and CEO of USA Next, estimates that since 1989, 'AARP appears to have taken over a billion dollars in taxpayer money.'"
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Pension War looms as baby boomers start to retire
January 13th 01:58:13 PM
Fortune Magazine's commentary on America's pension time bomb:
"Some of the nastiest conflicts in America's future have recently begun to reveal themselves. Let's call them, broadly, the pension wars.
They will be fought on a wide range of battlefields, involving not just workers and their employers but also governments at all levels, regulators, accountants and taxpayers. And these wars will be bitter -- because the combatants will be desperate."
read on...
A hint of what's to come could be seen in the New York City transit strike. Most of America didn't notice exactly what sparked the first such strike in 25 years, costing businesses, individuals and the city hundreds of millions of dollars. The answer is pensions. The transit authority and the workers were agreed on virtually everything except how much new employees would contribute toward their pensions--6 percent of wages vs. 2 percent -- and neither side felt it could give an inch on that.
The reasons illustrate the larger problem. The transit authority, like many private and public employers, is watching its pension costs rocket as longer-living retirees increase in number. That burden will become unbearable. On the other side, union members are watching employers nationwide dumping or cutting their pensions just as Social Security starts to look shaky. They figure retirement security is the one thing they cannot sacrifice. Result: war.
New York's transit strike also illustrates an important reason that the pension wars weren't headed off long ago. The truth about pensions has been systematically hidden, with all parties collaborating in the deceit. Public-employee pensions have never been accounted for like those run by private employers. No government is required to tell you its pension liability the way, say, General Motors is, on the theory that governments can always just extract more money from the taxpayers to pay retirees.
But this year the Governmental Accounting Standards Board, which sets the rules for the public sector, is changing its regulations. State and local governments will now have to reveal their pension liabilities, which may be underfunded by $1 trillion or more.
Private employers, while required to account for their pensions, have played sophisticated games with the numbers -- all within the rules. For example, they can assume the pension fund increased in value when it actually declined. They can assume it will continue increasing in value at a rate that is almost certainly way too high. They can even jack up their reported profits based on that assumed, though nonexistent, increase in pension-fund value.
But eventually actual dollars must be paid out, a prospect that has seriously spooked private employers. Just this month IBM (Research) announced that it would join the long list of companies (Verizon, Hewlett-Packard, Motorola) that have frozen their pension plans, instead increasing 401(k) contributions for employees. And the 18-month negotiation between UPS and its pilots has come down to just two points: whether outsourced pilots overseas must be union members, and (you guessed it) pensions.
The pension wars will inevitably include Congress, which is working out a way to increase funding for the federal Pension Benefit Guaranty Corp., now deeply in the red as huge companies like UAL, parent of United Air Lines, dump their pension plans on it. Since the PBGC is an insurer, the logical move is to raise the premiums companies pay, especially for the riskiest plans.
But if Congress mandates a premium hike, as it probably will, then more companies will just dump their plans on the PBGC, redoubling the need for more funds, leading to more premium hikes, and so on. If you can see any way taxpayers will not get billed for a giant bailout, please e-mail Congress immediately.
And then there's the greatest pension crisis of all: Social Security. We've stayed in denial thanks to the so-called trust fund, that magical place where the plan's annual surpluses are sent to be invested until we need them. But since those surpluses must by law be invested in government bonds, they have simply been handed over to the U.S. Treasury and spent by Congress.
The trust fund is in fact meaningless, a bit of marketing hooey cooked up in the '30s. When Social Security's annual surpluses end in just six or seven years, the battle over whose ox to gore in order to cover the plan's obligations will be truly epic.
The hard reality is that for decades we haven't told ourselves the truth about pensions. Now, as the first baby-boomers turn 60, we must finally confront reality -- and absolutely no one will like it. In New York last month, transit workers and management compromised; employees will make small contributions toward health insurance premiums but will keep one of the richest retirement deals around.
Soon those compromises simply won't be affordable. And that's when the pension wars will explode.
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January 12th, 2006Getting Heard
January 12th 10:07:17 PM
S4's Ryan Lynch continues to be a social security rockstar getting this letter published in the Sunday edition of the Times Leader
The Times Leader's Dec. 28 article, "Push for private accounts trips Bush," nicely summed up the debate on Social Security reform. President Bush, Treasury Secretary Snow, Senator Santorum, and others have offered conscientious and courageous support of personal retirement accounts in Social Security, yet PRAs have been opposed each step of the way by advocates for ... well, apparently for doing nothing.
read more...
Politicians on both sides of the aisle have recognized PRAs as an effective, if not essential, tool in dealing with Social Security’s problems. The reason for this bipartisan recognition is simple: the problems inherent in the government’s largest entitlement program are not political in nature.
Politicians opposing Bush’s plan have been challenged to submit their own plans for reform, and the bipartisan panel’s recent proposals should provide a good foundation toward that end. Because Social Security reform is an issue that, as you note, is not going away, each member of Congress should have a clear plan for dealing with the looming shortfall.
The Social Security program worked exceptionally well for the last 70 years, but changing demographics, bad accounting, and cowardly politicians are threatening to derail the system. PRAs are an excellent way to switch tracks while maintaining the program’s effectiveness.
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Ryan Lynch Students for Saving Social Security Chicago
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Pensions Go the Way of the Dodo
January 12th 11:54:55 AM
If the initials IBM once could have stood for I'm Being Managed, they now should stand for I'd Better Manage (myself).
Courtesy of www.KansasCity.com
Pensions go the way of the dodo
By DIANE STAFFORD
Columnist
If the initials IBM once could have stood for I’m Being Managed, they now should stand for I’d Better Manage (myself).
International Business Machines, once a lion of paternalism in U.S. industry, made news last week for freezing its pension plan for nonunion employees.
IBM joins legions of U.S. businesses in dropping defined-benefit pension plans in favor of contributing to workers’ 401(k) individual retirement savings accounts.
An easy prediction: We won’t be hearing about too many other pension increases like the one the International Association of Machinists and Aerospace Workers won from Boeing last fall.
Most American workers — at least those with employer-sponsored retirement plans — will be caught in an inexorable shift from pension plans to 401(k)s.
The problem with pension plans has been noted for years, at first with bankrupt companies like Bethlehem Steel, which forced the federal Pension Benefit Guaranty Corp. to take over its insolvent pension plan.
As financially hurtful as that was to Bethlehem workers, many other workers shrugged it off as isolated and understandable, given the corporate failure and its pension liabilities.
But the IBM announcement last week solidified the trend away from defined-benefit pensions.
It’s now clear that corporate insolvency is not a prerequisite for abandoning pension plans.
It’s also clear that many U.S. companies are saying they cannot compete globally if they continue to be saddled with their defined-benefit pension costs.
At the same time, Social Security’s ability to sustain future retirees continues to be doubted and debated.
The message: If you’re not now aggressively saving for retirement on your own, your retirement may not be what you’ve dreamed.
The guaranty corporation will make headlines for bailing out some troubled pension plans, but most defined-benefit plans will quietly go the way of the dinosaur.
In their place, employers who continue to offer a retirement savings plan to their workers are cutting benefit costs by contributing up to 10 percent a year of employees’ annual pay to workers’ individual 401(k) accounts.
That can be a good deal for workers only if they participate in the plan.
The problem to date is that American workers are woefully deficient savers.
About three in 10 workers have failed to take advantage of their existing employer-sponsored 401(k) offerings.
Because of this financial negligence, about a third of plan providers have opted for automatic enrollment of their employees in 401(k)s, according to a Society for Human Resource Management survey.
So, a bit of corporate paternalism returns.
If workers aren’t saving on their own volition, some companies are at least making them jump through a hoop to opt out of participating in the savings plan that the company is helping them fund.
The opt-in/out-out debate pales, of course, in comparison to the quandary over what to do with workers who have no employer-sponsored retirement plan.
If there’s no pension, and the outlook for Social Security is hazy, and individual savings rates are dismal … well, a comfortable retirement is just another dinosaur.
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Diane Stafford’s workplace column appears on Thursdays.
Reach her at stafford@kcstar.com or (816) 234-4359.
To read archived At Work columns, go to KansasCity.com and click on Business, then Columnists.
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January 11th, 2006Card Says Social Security Will Be Alive in '07
January 11th 05:47:32 PM
WASHINGTON (Dow Jones)--White House Chief of Staff Andrew Card
acknowledged Wednesday that Social Security reform is dead this year,
but said lawmakers should be ready to work on an overhaul in 2007.
Asked at a U.S. Chamber of Commerce luncheon whether the administration had anything new to report on its now-dormant effort to reform the entitlement program, Card said, "No. But that doesn't mean that it shouldn't be reformed."
Once one of the White House's top domestic priorities, Social Security
reform has fallen out of view since President George W. Bush's proposal to create private accounts met heavy resistance. The White House isn't expected to push the issue further this year, an election year.
"I think the reality is that Congress is predisposed not to do the heavy lifting that is necessary for Social Security reform in 2006, but they definitely should be prepared to start lifting in 2007," Card said.
The bulk of Card's comments to the business group was devoted to the
administration's top priorities - the war on terror and keeping the
economy growing. He provided few specifics on the White House's domestic agenda, other than to tout the importance of making tax cuts permanent and heightened budget discipline.
"Today, we are in the final stages of preparing the fiscal '07 budget,
and there's a budget review process that I'm in the middle of, listening to appeals and dashing expectations or rising them up, but the discipline is what's important," Card said.
Treasury Secretary John Snow said Tuesday that the administration's
budget for the year beginning Oct. 1 will call for reductions in the
growth of spending at every government agency. Though the federal
deficit declined 23% to $319 billion in fiscal 2005, it's expected to
rise again in 2006 - possibly as high as $400 billion - due in part to
costs related to the recovery from the Gulf Coast hurricanes.
"I'm expecting that you will find that the budget for fiscal year '07
will be a very disciplined budget," Card said Wednesday. "It will fund
the appropriate priorities of winning the war on terror, securing the
homeland, but it will say tighten the belt, make the tough decisions
about which programs are necessary and fund them appropriately, but
exercise prudence with the taxpayers' money."
Asked about Judge Samuel Alito's ongoing confirmation hearings, Card
predicted the Supreme Court nominee will pass through the Senate
Judiciary Committee in a partisan vote and be confirmed by the full
Senate by "a comfortable margin."
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January 10th, 2006Show Us Your Angry Face
January 10th 02:36:23 PM
S4's Activism Director Evan Dent visited the Art Institute of Seattle over the holidays. Check out the pictures of the students angry about Congress ruining their retirement.
Submit pictures to us of your mad face, or of your own rallies, and we'll show them on the blog.
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Good Riddance to Traditional Pensions
January 10th 11:52:56 AM
International Business Machines is moving away from paternalism and giving workers more control over their own retirements. The U.S. government should do the same in reforming Social Security.... IBM's decision offers a good model for reforming Social Security. Let new workers waive Social Security taxes and benefits and choose a 401(k); let current workers freeze their benefits and pay lower payroll taxes while boosting their 401(k) as a substitute. The U.S. government will have a sounder fiscal future when, like IBM, it stops treating adult American workers like children.
Good Riddance to Traditional Pensions
By James K. Glassman
Publication Date: January 9, 2006
IBM announced last week that it would freeze the old-style pension plans it provides to more than 100,000 employees and instead offer an improved version of its 401(k) plan. This is no run-of-the-mill accounting change or cut-costing measure. It is a major philosophical and economic shift for a bellwether corporation.
IIt means, in short, that International Business Machines is moving away from paternalism and giving workers more control over their own retirements. The U.S. government should do the same in reforming Social Security.
The IBM decision is good news as well for taxpayers, who ultimately could be left holding the bag if the Pension Benefit Guaranty Corp., a federal institution that insures pensions, can't meet the obligations of overextended companies.
Of course, IBM is in no danger of becoming the next Delphi. At last report, it had revenues of about $100 billion, after-tax profits of $8 billion and loads of cash. IBM's pension plan, with $48 billion in assets, is robust. But 40 years can pass between the time someone joins a company and the time he retires. Things change, as GM employees now know. It makes far more sense for workers to carry their retirement assets on their own backs, rather than counting on the company to ante up decades later.
There are two kinds of pensions. Defined benefit (DB) plans, or traditional pensions, involve a promise from a company to provide monthly checks to retirees at a specific rate, depending on how long they worked and at what salary. DBs are headed for the dustbin of history--and good riddance. There were 112,000 of them in 1985 and just 29,000 today.
Second is the defined contribution (DC) plan. Its paradigm is the 401(k), named for an IRS provision. A quarter-century ago, 401(k) plans began sprouting. Some 43 million U.S. workers now have them.
A 401(k) allows workers and employers to put pre-tax income into an account that's mainly composed of mutual funds (IBM offers more than 200 choices). Dividends, interest and capital gains pile up tax-deferred, and the account is owned by the worker. IBM's 401(k), with $26 billion in assets, is the nation's largest. IBM says that, starting Jan. 1, 2008, it will freeze the DB benefits of current workers and instead enhance the DC plan. New hires go straight to the DC.
Under the new 401(k), IBM will match, dollar for dollar, employee contributions of 6 percent of pay (the match is now 3 percent)--and, in some cases, up to four points more.
This is not altruism. IBM figures it will save about $500 million a year through the changes. Probably more important, however, the company gains certainty (the funding requirements of DBs fluctuate), and it provides workers with a stronger sense of responsibility and more confidence in a comfortable retirement.
Some disagree. Lee Conrad, a labor organizer, said after the IBM news: "Employees are going to be losing out on all kinds of benefits. You've got to wonder what's going to happen to the next generation of workers."
No, you don't. A study released last September by the Employee Benefit Research Institute and the Investment Company Institute found that Americans do a fine job with their 401(k) plans. Even with the rotten stock-market conditions of the early 2000s, the average account balances of 401(k) participants rose about 40 percent, to $91,000. And remember, these workers still have two decades to retirement.
Employees have, on average, two-thirds of their 401 (k) money in stocks--an appropriate share--and they are investing more in "life-cycle" funds, which shift to bonds as retirement nears. Loans from the plans are modest and declining.
More financial education wouldn't hurt, but DC plans are working exceptionally well, and complaints that people are too stupid to manage their own money are dead wrong. After all, a record 69 percent of Americans own their own homes--a far more difficult and risky purchase than the slow accumulation of mutual fund assets over 40 years.
IBM's decision offers a good model for reforming Social Security. Let new workers waive Social Security taxes and benefits and choose a 401(k); let current workers freeze their benefits and pay lower payroll taxes while boosting their 401(k) as a substitute. The U.S. government will have a sounder fiscal future when, like IBM, it stops treating adult American workers like children.
James K. Glassman is a resident fellow at AEI.
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