Private, individual tax-deferred retirement savings are a failure — a noble one, perhaps, but they were sold as a replacement for defined-benefit pensions that brought a dignified retirement to an entire generation of American workers from the 1940s all the way up to and into the 1980s.
Let me show you something. This is a graph of the Dow Jones Industrial Average from the late 19th century until 2009. Focus particularly on that big dip after October 1929:
Notice that the Dow Jones does not again reach its 1929 peak for about 25 years.
Now, imagine that you are 64 years old on Oct. 1, 1929, and had just about reached the point where your investments would provide you with a comfortable retirement. Four years later, your stocks are worth 1/10th of what they were in 1929, you are three years into retirement and those savings are dwindling away to nothing. You just have to wait another 22 years or so (when you’re 89) to get the retirement you were counting on.
That’s one reason 401(k)s are not an adequate substitute for a defined benefit pension. Leaving retirees at the mercy of Wall Street seems the height of cruelty.
There needs to be a new deal (as it were) between capital and labor: We workers will give you our best efforts and the best years of our lives, and capital will use part of the profits we provide them through our labor to provide us with an adequate retirement in return.
That seems a fair deal: both parties have rights, and both parties have responsibilities. This used to be seen as one of those “of course” things that barely merited discussion.
Putting more spending power into the hands of retirees would be a good thing for capital as well — more spending power equals more sales for American companies. And it would be good for the workers who would produce the things those retirees would buy.
It is ludicrous that in a country as wealthy as the United States, the possibility of cutting Social Security benefits comes up so regularly. We should be talking about making Social Security more generous, not less. Expanded benefits could be financed by eliminating the cap on the amount of income subject to the Social Security tax, perhaps supplemented with a Financial Transaction Tax, as has been proposed by former Labor Secretary Robert Reich and others.
I mentioned in Part I that our country’s military retirees could expect to receive 50 percent of their last active-duty paycheck if they retire after 20 years, and the amount escalates to 100 percent for retirees with 40 years of active service.
It is time we recognize that ordinary, non-military American workers also serve our country — sometimes in a very literal way, as in the case of wait staff. But what about the nurses who deliver our babies and care for us when we get sick, the people who stock the shelves in our supermarkets, the mechanics who fix our cars, the carpenters who build our homes and schools, the iron workers who construct safe bridges for us to cross? Is it too much to ask that they, too, should have the kind of retirement we give our military? Large American corporations have the means to provide this to their workers; they do not yet have a mandate to do so.
I believe providing a guaranteed income upon retirement is a responsibility of, and should be a legal requirement for, every sizeable corporation in America, and there should be government support to smaller companies so that they can do the same with their employees.
During this Holiday season, it is appropriate that we reflect on the many blessings we have in our lives, and turn our thoughts to providence. It is good that we do so — but I invite you also to give a thought today to how we might work together to thank one another for giving the best years of our lives serving one another in our economic needs.