Ideal pension system
Michael Clowes still does not understand that Social Security is not a retirement plan. It is a social insurance program that began 65 years ago, and today provides working Americans and their families with protection against the financial ravages of death, disability and, if the worker survives until retirement, a guaranteed, inflation-protected, tax-favored lifetime income. Furthermore, the income is designed so that the replacement income is higher as a percentage of salary for lower earners, but provides that higher earners get a larger number of dollars.
Are there faults with the design? Probably. However, I have through letters to P&I and other means challenged the investment community to come up with suggestions to improve the system. The only suggestion made by Wall Street was to privatize the system, to change the defined benefit nature of the most successful investment program in history to a risky defined contribution scheme, making Social Security just another retirement alphabet or numerical plan like IRA, SEP, Keogh, 401(k), 403(b), 457. These programs already provide, at huge fees, plenty of opportunity for tax-favored savings. But none of these plans provides anybody with a guaranteed lifetime inflation-protected stream of income. And not one of them provides benefits in case a working person dies or becomes disabled. We already have what Mike calls for in his column in these programs.
What we need for an ideal pension system is one that provides what Social Security provides, a complete social insurance program that provides for the needs of all the people.
I again call on the investment industry to give up their one answer solution - privatization. Let them use their skills to figure out a way to make sure that if Social Security has any minor long-term funding problems (by the way there are many actuaries who do not believe that there are even minor long-term problems) that these problems be resolved in a manner that preserves the basic fundamentals of the Social Security system. Working people will not give up the protection of the Social Security system without a fight.
treasurer and chairman
United Federation of Teachers