That crashing sound you hear is the sickening thud of the nation's pensions hitting the brick wall of financial reality. After years of being warned about making financial promises we cannot afford, private and public pension systems are cutting benefits across the country. Employees are being asked to shoulder more of their own retirement load. Retiree healthcare help is becoming a relic of earlier times when unions had serious workplace clout.
Ford and GM are making very visible efforts to control pension expenses by offering lump-sum buyouts. Voters in San Diego and San Jose, Calif., this week acted to actually cut retirement benefits. Wisconsin voters may not have wildly cheered Republic Governor Scott Walker's curbs on union rights. But they understand the financial times we live in, and clearly felt (aided by enormous recall campaign contributions from conservative groups) his actions did not justify his recall.
What we're seeing is, unfortunately, the early edge of a wave of fiscal reckoning that is unavoidable. Even before the recession, promised pension and healthcare benefits for retirees were widely judged to be beyond the means of many companies as well as state and local governments. Today, with an anemic economic recovery, the situation has gotten worse.
Washington gridlock continues to prevent serious attention to rising deficits and unsustainable healthcare benefits. How long our nation's leaders can continue to kick this can down the road is one of the major parlor games inside the Washington Beltway. Outside the Beltway, however, reality has already come calling.
Current and future retirees are well-advised to learn how to further tighten their belts, but that's hardly a new reality. There is little prospect for making things better on the pension front.
The story is much different on the federal level. With income from pensions and private investments under long-term pressure, the traditional three-legged retirement stool is being supported mostly by the single leg that we know of as Social Security.
During the recession, Social Security held up its end of the deal and then some. Its payments did not falter and, despite a lot of unfounded rhetoric to the contrary, its long-term financial position has not been greatly compromised during these very difficult past five years.
Two years ago, the nation seemed close to doing something meaningful about its decaying fiscal situation. The National Commission on Fiscal Responsibility and Reform, appointed by President Obama, put together a sobering but widely respected budget reform blueprint for getting the nation back on track. The plan went nowhere, of course, and the moment was lost amidst the increasingly strident ideological rants that have become our lamentable excuse for national leadership.
The Commission's plan included significant changes to Social Security. Most fiscal experts did not think then and do not think now that Social Security's financial pressures are a major cause of our national fiscal distress. That honor clearly goes to healthcare. The mounting deficits of the Medicare and Medicaid programs dwarf any problems with Social Security.
Still, fixing Social Security was seen as a modest way to chalk up a win for fiscal reform. If we could restore its long-term financial balance, it was thought, we just might be able to pave the way for the much tougher issues involving healthcare and tax policy.
If those Fiscal Commission proposals had come up for a vote, it's likely we would have already agreed to raise the retirement age, reduce the size of automatic cost-of-living increases to Social Security benefits, raise the ceiling on annual earnings subject to the program's payroll tax, and perhaps even reduce Social Security benefits for wealthy Americans.
Today, making such adjustments seems unlikely or an event that will happen only after a scorched-earth defense by a large number of senior and social-policy groups and lobbies. If we paid lip service to the importance of Social Security before, events in recent years have greatly increased the recognition of how important the program is to the retirement well-being of not just some, but most older Americans.
AARP has launched an advocacy campaign to protect Social Security and Medicare benefits called You've Earned a Say. Don't expect a totally level playing field when AARP talks about Social Security. But it knows its 37 million members include people of all political stripes. It is more likely to take a straight line here than are more extreme groups.
The organization has just commissioned liberal and conservative experts to analyze a dozen proposals to change Social Security:
1. Raise the full retirement age
2. Longevity indexing
3. Recalculate the COLA (cost of living adjustment)
4. Increase the payroll tax cap
5. Eliminate the payroll tax cap
6. Reduce benefits for higher earners
7. Increase the payroll tax rate
8. Tax all salary reduction plans
9. Cover new state and local government workers
10. Benefit improvements
11. Increase the years used to calculate initial benefits
12. Begin means-testing Social Security benefits
With national elections less than five months away, it is incumbent on older voters to know where their candidates stand on these possible Social Security changes. Press them for detailed proposals and not just bromides about supporting our nation's seniors.
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