Retirement: No Good Options
We can't rely on private companies, the stock market, or the taxpayers to maintain our lifestyle in our golden years.
The Wall Street Journal, of all places, reports (“Retiring Boomers Find 401(k) Plans Fall Short“) that people who did everything they were supposed to are finding that relying on private retirement investments isn’t all it was cracked up to be.
The 401(k) generation is beginning to retire, and it isn’t a pretty sight.The retirement savings plans that many baby boomers thought would see them through old age are falling short in many cases.
The median household headed by a person aged 60 to 62 with a 401(k) account has less than one-quarter of what is needed in that account to maintain its standard of living in retirement, according to data compiled by the Federal Reserve and analyzed by the Center for Retirement Research at Boston College for The Wall Street Journal. Even counting Social Security and any pensions or other savings, most 401(k) participants appear to have insufficient savings. Data from other sources also show big gaps between savings and what people need, and the financial crisis has made things worse.
[…]
The problems are widespread, especially among middle-income earners. About 60% of households nearing retirement age have 401(k)-type accounts, according to government data, and those represent the majority of most people’s savings. The situation is less dire for those in a higher income bracket, who tend to save more outside their 401(k) accounts and who have more margin for error if their retirement returns fall below the recommended 85% figure.
[…]
In general, people facing problems today got too little advice, or bad advice. They didn’t realize that a 6% annual contribution, with a 3% company match, might not be enough. Some started saving too late or suspended contributions when they or their spouses lost jobs. Others borrowed against 401(k) accounts for medical emergencies or ran up debts too close to their planned retirement dates. In the stock-market collapses of 2000-2002 and 2007-2009, many people were over-invested in stocks. Some bailed out after the market collapse, suffering on the way down and then missing the rebound.
Initially envisioned as a way for management-level people to put aside extra retirement money, the 401(k) was embraced by big companies in the 1980s as a replacement for costly pension funds. Suddenly, they were able to transfer the burden of funding employees’ retirement to the employees themselves. Employees had control over their savings, and were able carry them to new jobs.
[…]
They were a gold mine for money-management firms. In 30 years, the 401(k) went from a small program to a multi-trillion-dollar industry supporting thousands of financial planners and money managers. But a 401(k) also requires steady, significant savings. And unlike corporate pension plans, which are guaranteed by the U.S. government, 401(k) plans have no such backstop.
John Cole is characteristically scornful:
It’s important to keep in mind that this is the model for the future foisted upon us by our Galtian overlords (who fight any attempts to regulate the looting on Wall Street), and the austerity mobs are busy making sure that the pension you were promised is hatcheted and your social security is whittled away because we can’t afford it after lavishing all the social security proceeds on the rich in the form of the Bush and Obama tax cuts. But don’t worry, you will also have your collective bargaining rights stripped away, removing the last upward pressure on wages, and with Medicare rate increases you’ll have the peace of mind to know that you are contributing more to your health care.
How does it feel being fisted by the Invisible Hand, America?
The real problem is with the concept of retirement — at least, retirement in one’s mid-60s — itself rather than with investment in the stock market.
I started saving for my retirement, nearly a quarter century ago, as a young Army officer. I was sold on the virtues of dollar cost averaging and compound investment and had money taken out of my monthly check and automatically invested into an IRA and later a mutual fund.
Like everyone else, my retirement nest egg took a sizable hit with the Great Recession. Unlike some, I left my money invested, so I’ve gotten quite a bit back since. Still, if I were planning to retire in 2010 rather than, oh, 2030 I’d have had to make a pretty big lifestyle adjustment.
Aside from diversifying one’s portfolio over both time and scope of investments, there’s no great option. As I recently told an investment counselor who was encouraging me to move investments from one fund to a one that “would have a higher rate of growth,” if she really had the ability to accurately predict which stocks would go up, she wouldn’t need to be advising clients for a living. Anyone who claims to know what the market is going to do over the long term is an idiot or a liar.
That said, while I believe we need a government-funded safety net, it’s not like that’s the full answer, either. One only has to look to Western Europe to see what happens when a large number of retirees expect to be supported in the lifestyle to which they’ve become accustomed by a relatively small number of working age people. It’s simply not sustainable.
There just aren’t any good answers.
The days of spending your life working for a company and then retiring in relative luxury on a generous pension are long gone. Part of that is union-busting, corporate greed, or whatever bugaboo you want to call it. Mostly, it’s a consequence of a global economy that is pulling hundreds of millions out of poverty but forcing people in the developed world to compete on a wage basis with those in the developing world. It’s great for Western investors and consumers but not so great for Western workers. (And, yes, there’s a substantial but complicated overlap between workers and consumers.
Most people probably can’t save enough to fund years, if not decades, of leisure. They either don’t make enough money during their working years, have crises eat up their retirement savings, make investments that don’t pan out, and so forth.
If I remain healthy, I fully expect to work at least part time for pretty much the rest of my life. But I have the luxury of being able to make a living from the comfort of an office. It’s simply unreasonable to expect a coal miner to work until he’s 70; hell, 65 is too much.
And we haven’t even discussed the impact of catastrophic illness on the whole equation.
We can’t rely on private companies, the stock market, or the taxpayers to maintain our lifestyle in our golden years. And not everyone can just keep on working, either. Nor do I advocate the Logan’s Run option. So, I haven’t the foggiest what to do about all this.
Let’s see. We used to have pensions as part of our salaries. Until hedge funds and other started buying companies and looting the pension plans, distributing the money to the CEOs and shareholders.
This was deferred pay, part of a binding contract. But there was no penalty for stealing tens of millions of dollars for workers.
And we can’t depend on the government because we’ve decided the only important thing in American economic policy is to make sure the top 1% own at least half of the country’s wealth. We can’t possibly raise taxes, because that violates the sacred Libertarian law that suddenly rules the universe.
No, it’s all a mystery how we can solve this problem. I guess we should all just die while worshipping our Galtian overlords.
@JJ
“We can’t rely on private companies, the stock market, or the taxpayers to maintain our lifestyle in our golden years. And not everyone can just keep on working, either. Nor do I advocate the Logan’s Run option. So, I haven’t the foggiest what to do about all this.”
Probably because nothing can be done about it, save exhort us all to strive to live simpler lives. I mean, what’s the alternative?
@WR:
First, the “we” who had significant pensions was always a small part of the total workforce. But we’re now in a global economy; it’s hard enough to compete with low wage, low overhead countries without adding the burden of retirement payouts. And, even aside from that, we can’t count on companies to stay in business forever.
Second, even if we raise taxes on top earners, it’s not as if there’s a bottomless pit to pay for a lopsided ratio of retirees to workers. People live much longer after retirement than they used to and there are far fewer workers to support them. And they’re not going to put up with paying half their paycheck to the state to support healthy old people’s leisure.
@sam:
I fear you’re correct. The problem is that many of us can do that, since we’re living in relative affluence. But what do we do with people who are living pretty close to the simplicity line during their working years?
We are going to have to move back to the traditional multi-generational household of old to survive our twilight years. Not that I’m sad at that prospect. Families for millenia lived in that fashion. You married, raised children, and when you got old, the kids took care of you and you helped with their children. The circle of life. I recall the happiness of my youth when we lived with my grandparents and my grandmother living with us to the end of her life. Yes, and I too plan on working in some capacity until I am no longer able to. Sitting at home doing nothing and being unproductive is not something for me in my old age.
“The real problem is with the concept of retirement — at least, retirement in one’s mid-60s — itself rather than with investment in the stock market.”
You mean retirement is no longer an option until we slip into senescence. Defined contribution 401k’s came into existence as a means of companies getting out from under the burden of defined benefits plans. I was there, I know. Naturaly they were sold as another one of these conservative panaceas where people were going to responsible for managing their own affairs. It’s no different from a lot of these ludicrous voucher and tax credit proposals being floated as a solution to health care reform. What they ignore is human nature and incompetence. The vast majority of Americans who would have difficulty balancing their checkbook have zero competence at managing a portfolio, the very idea is ridiculous. So except for a few 401ks are a bust. They either make crazy investment decisions (technology funds late 90’s, money market accounts) or get caught retiring when the market crashes. 401ks can work if they are managed intelligently. Even for an investment dunce the last 2 years have been one of the greatest money making opportunities of my lifetime, but you have to some notion of what you’re doing. There are methods of harnessing the stock market and other investment vehicles for ordinary people but it has to be done intelligently. But even if this can be done your still faced with the notorious improvidence of Americans; declining real incomes; violent employment cycles.
The 401K mechanism isn’t that horrible, but it does require one thing: a high savings rate.
Take a look at a good balanced stock fund, like Vanguard Wellesley, Wellington, or their Balanced Index Fund. 30 year returns on those are very good.
But … the Average 401(k) balance is $66,900 that’s about 1/10th what most people need.
http://www.miamiherald.com/2010/06/11/1675674/average-401k-balance-is-66900.html
BTW, when you say “can’t save enough” be sure to differentiate between those who can’t, due to illness, unemployment, or other trauma, and those who instead buy showplace cars and houses.
I would say, and this might just be my SoCal perspective, that most people put more in “status gambits” than in retirement saving.
(If you hang out with “Bogleheads,” the followers of Vanguard’s John Bogle, you meet a lot of ordinary Joes who retire with million dollar portfolios. They did it by living simply, driving an old car, living in a small house.)
BTW before anyone says I’m dealing in magic asterisks, the solution is a return to standardised defined benefit plans for the entire public and private sector but they can’t be corporate or government playthings; piggy banks for employees; they have to be actruarily sound; and transportable. Is it going solve all the poblems? No. But it’s going to solve most of the problem. Pity it’s not going to happen.
john personna says:
Monday, February 21, 2011 at 10:23
The problem is it’s unrealistic and not how most people aught to live their lives. If you can’t pig out occasionally life isn’t worth living. I agree about the need to save at a fairly high rate however the volatiility of US employment and declining real incomes aren’t conducive to that.
I really don’t think there is money for a defined benefits plan, Joe.
It only works in a very rapidly expanding economy, and probably only in a rapidly expanding population.
My retirement plan is 1) don’t get sick, and 2) if I do get sick then die quickly.
The French and the Germans and the Swedes somehow manage all this. But we can’t. The essential difference? There are no Republicans in France.
We posted at the same time.
So is what you are really suggesting Joe, a hidden high savings rate?
That is, a very high tax rate to make up for the fact that people don’t save?
michael, you have the copyright-retirement plan as well. a very special case.
(I believe the Swedes do use the “high tax as high savings” route.)
JP:
That does help, I’ll admit. Not enough, but yes it does yield the ocasional few grand.
Brummagem Joe has it about right.
Aside to wr: Long before hedge funds came along, large corporations were doing a fine job of “looting” their own pension plans by seriously underfunding them. They accomplished this by a variety of methods, but the easiest way was to eliminate the middle-man (independent insurer) and then assume wildly implausible future rates of return in order to reduce contribution requirements.
Most of those private pension plans are long-gone now. Most public employee pension plans now face the same problem. In California, for example, both the CalPERS and the state teachers retirement system continue to use unsound actuarial assumptions as their basis. Were it a private plan, the UC retirement system would be declared insolvent and virtually everyone associated with running or overseeing it over the past two decades would be facing criminal charges. As I understand it, about 20 years ago, administrators were looking for money, saw that the fund was running a surplus and decided not to make any contributions that year. Or the next. Or the one after that. Or the next 16 after that. (IIRC, even the employee contributions were skipped or drastically reduced during that time.)
“It only works in a very rapidly expanding economy, and probably only in a rapidly expanding population.”
Our population is expanding rapidly. And there’s sufficient income to cover it, There are after all quite a few db plans still funtiioning. The problem is all too often they are corporate piggy banks(they’re often in the balance sheet) , over promised on benefits (a lot of the public plans), non transportable etc. Back in the 50’s there was much more of a sense of stewardship by management of such plans but they have become a corporate football as I know from personal experience.
@Michael Reynolds:
But the Western Europeans are in crisis mode right now over that social bargain. It’s not sustainable when you have 2 retirees for every worker.
James — If the problem is that it’s so hard to compete with low wage countries, why do we pay our CEO’s tens or hundreds of millions of dollars? Aren’t those costs that are hurting the bottom line?
Western Europeans are in crisis mode right now mostly because of the global financial meltdown and the necessity of rescuing their banks from the international criminal conspiracy of Goldman Sachs et al.
But we can’t tax the bankers who caused this crisis, because that wouldn’t be nice.
“So is what you are really suggesting Joe, a hidden high savings rate?”
No but US disposable income levels still are fairly good by international standards. If you’ve got a public or private sector job you have to contribute to a pension plan, period, although all run by the the employers they are are standardized, no game playing, employers can’t opt out in bad years or good years, can’t trade them, they’d be off balance sheet, transportable when the person moves to another job. It’s doable.
James Joyner says:
Monday, February 21, 2011 at 10:53
“But the Western Europeans are in crisis mode right now over that social bargain. It’s not sustainable when you have 2 retirees for every worker.”
You’re generalizing JJ. Not all European states are in crisis mode. Some like Greece are in crisis because they have a huge public sector that can retire ridiculously early on huge pensiions. It’s by no means a universal crisis although like us they have an ageing problem.
JJ:
The Greeks are in crisis mode, not the French, Germans or Scandinavians. (The Italians have been in crisis mode since Nero.)
The more recent additions to the EU are having trouble, and the Brits — who have their own “Republicans” are having problems. But those countries where they simply accept the need of a social safety net and then demand it be run competently seem to do pretty well. As a matter of fact Sweden just beat out the US as a home for competitiveness.
The reason we can’t get the social safety net of most other wealthy, developed nations is that we have one party devoted to the proposition that government is inherently evil or at least permanently incompetent. We have no consensus because we still have libertarian fantasists who read Ayn Rand as teenagers and took it seriously.
The Europeans by contrast understood that the poor would not magically be trickled away, that people would not stop aging, and that bills would have to be paid. Facts that escape the GOP.
michael reynolds says:
Monday, February 21, 2011 at 11:07
They’ve also a history of SS programs stretching back to my hero the Iron Chancellor Bismarck in the 1880’s. He realized if you wanted loyal citizens of the Fatherland you had take care of your own. It’s no different in its way than Henry Ford who realized the key to selling a lot cars was to provide his workers with the means to buy them. Republican theory today believes you sell more cars by reducing people’s means to buy them. That is it deals with reality not some theoretical idea of it.
So, BJ, you want someone else to fund retirement through a guaranteed benefit for people who really shouldn’t be forced to avoid pigging out during their working lives. And this benefit should be such as to not cause those who refused to live within their means from suffering a decline in status?
But God forbid, that those responsible for providing this mythical benefit should have any control over the mythical funds that will provide it. In this land of yours, this land without inflation, without failed businesses, without any declines in the stock market or real estate, do all the women have big boobs?
But let’s just deal with one unfailing human reality. There can never be a pool of money in existence that those with power will not try to loot. I give you the Social Security Trust Fund, or as it turns out those who saved, invested, and created wealth that is now constantly the topic of taking via increased taxation on the top one, five, ten percent of taxpayers.
@Michael Reynolds
Actually, even the wealthy Western European states are having serious problems. See:
Europeans Fear Crisis Threatens Liberal Benefits (NYT, 22 May 2010)
Can The European Welfare State Survive? (NPR, 21 Feb 2011)
And, frankly, they’ve only held out as long as they have because the United States greatly overspends on defense, allowing them to free ride.
You do understand that Social Security is a “defined benefits” plan and is in trouble for all the same reasons, right?
Michael, don’t you remember the huge protests they had in France a couple of months back? That was because the government was trying to raise the age limit and other requirements for France’s social security pension equivalent.
Germany hasn’t had a problem both because of very high German savings rates as well as the fact that they’ve already made some of the key reforms – the required age to collect the German equivalent of Social Security is 67.
In any case, I think the best way to avoid this problem would have been mandated savings a la Chile or Singapore. Part of your income gets taxed and put into an account that you can convert into one of several possible annuities when you reach a certain age.
That might work. What won’t work is the idea that we can all live high consumption lifestyles, and the money will just come from somewhere, like magic.
I’d imagine that those Chileans and Singaporeans lived with somewhat less flash than we are used to.
Brett #2 says:
Monday, February 21, 2011 at 11:36
“That was because the government was trying to raise the age limit and other requirements for France’s social security pension equivalent.”
It didn’t make any difference they still raised them. No one disputes that some EU countries have pension problems of varying degrees of intensity but JJ’s generalisation was completely overblown.
JKB says:
Monday, February 21, 2011 at 11:20
“So, BJ, you want someone else to fund retirement through a guaranteed benefit for people who really shouldn’t be forced to avoid pigging out during their working lives.”
Why don’t read what I said and engage brain before opening mouth. Essentiallly I proposed a compulsory savings plan for all with tight rules. It’s never going to happen but that doesn’t mean it s not viable.
john personna says:
Monday, February 21, 2011 at 11:33
“You do understand that Social Security is a “defined benefits” plan”
You do understand it’s not really in trouble except except according conservative polemicists. Some modest tweaks like adjusting the cap on contributions and raising retirement by say two years solves the problem. You’ll after stop buying into these Republican urban myths.
“Some modest tweaks like adjusting the cap on contributions and raising retirement by say two years solves the problem”
lol, exactly!
So would you expect to make “modest tweaks” along the way to your defined benefit plans as well?
What happens when you raise effective payout date? That makes it somewhat less “defined benefits” doesn’t it?
“And, frankly, they’ve only held out as long as they have because the United States greatly overspends on defense, allowing them to free ride.”
JJ trots out the standard free ride myth. Jim if the EU spent as much per capita on defense as we do would it make any substantial difference to US defence spending? Er no.
Some crisis the French have. Sarkozy may raise retirement age from 60 to 62.
Our retirement age? 66 in my cohort. That’s six years over current French retirement age and four years over their “crisis” retirement age.
And we’re talking about bumping ours still higher.
@BJ:
The Europeans’ ability to free ride on the US defense umbrella allows them to spend much less on defense than they’d otherwise have to. If they weren’t free riding, would we spend significantly less? Who knows? They’ve been doing it for decades.
lol, exactly!
“So would you expect to make “modest tweaks” along the way to your defined benefit plans as well?”
Probably. Because these things aren’t set in amber. SS was introduced in the mid thirties, we’ve made some modest tweaks several times since then, but the program is still functioning fine. Most functioning DB plans undergo regular mods including one I’m a member of. What’s so extraordinary about this?
I think I can rest my case on the fact that all of the western market democracies are moving out their retirement ages. I don’t think the French 62 will be their last move.
The conditions for broad defined benefits retirement are not met by western market democracy growth and/or savings rates.
James Joyner says:
Monday, February 21, 2011 at 12:05
“The Europeans’ ability to free ride on the US defense umbrella allows them to spend much less on defense than they’d otherwise have to. If they weren’t free riding, would we spend significantly less? Who knows?”
Unless one is completely dim I think we have a reasonable idea. Of course we have an easy remedy we can force them to increasse their spending by dramatically reducing ours. That will stop them spending on social programs.
john personna says:
Monday, February 21, 2011 at 12:08
“The conditions for broad defined benefits retirement are not met by western market democracy growth and/or savings rates.”
So why aren’t they being all shut down rather being the subject of modest tweaks (The French have raised the retirement age to 62, wow, the world is ending). Public SS programs are no more disappearing than we’re going to have a double dip recession.
One major reason the Greece is in meltodown — as reexplained in today’s NY Times — is that everyone demands benefits and no one is willing to pay their taxes.
It’s the Tea Party ideal.
BJ, it’s that defined benefit that is the problem. That is just throwing the funding risk on someone else. I would fully support mandatory contributions to a fund operated independent of company, union or government. in which investment options were limited to index funds such as the Thrift Savings Plan for USG employees. However, I expect at some point the Congress and President to raid the Thrift Savings Plan and the same would happen to this large pool of money. Either overt confiscation or as they do now, by severely limiting the amount of money that can be squirreled away in retirement accounts tax free. Why they need that money for their schemes.
In any case, a large mandatory contribution retirement pool would only be safe if culturally we adopted the practice that anyone, president, senator, banker, community organizer, private citizen who advocated diverting funds to other purposes for any reason was summarily executed. Within the hour of such utterances. Otherwise, at some point, the funds would be replaced with worthless Treasury bonds like the SS trust fund.
he greatest danger to an adequate old-age security plan is rising prices. A rise of 2% a year in prices would cut the purchasing power of pensions about 45% in 30 years. The greatest danger of rising prices is from wages rising faster than output per man-hour…. Whether the nation succeeds in providing adequate security for retired workers depends in large measure upon the wage policies of trade unions.
— Sumner H. Slichter
And this is where we are today. For better or worse, public employee unions are at the heart of this simply because the nature of the work limits the productivity increase possible for teachers, professors, cops, etc. Private sector unions have limited the productivity increases by opposing automation in order to keep bodies on the floor. But even without productivity increases, they demand spiraling wages.
American productivity has been skyrocketing for years while pay has been slashed and increased profits go to the owners.
There is no longer a connection between worker productivity and worker pay.
By the way, as I understand it, the French have not YET moved the age to 62, they’re considering it.
Meanwhile we’re thinking 70.
But it’s much worse than that. The Frenchman retires at 60 or 62 after a lifetime in which he has never had to worry about health care, has taken a month of paid vacation every year, has his kids in good schools that regularly outperform ours, and was able to take time off to raise his kids and then had excellent child care options available, drives on embarrassingly beautiful highways through farmland where farmers (shock!) still farm their own land.
That’s not because we picked up part of the tab for military. That’s because they have a smart, well-run government, a relatively informed population, and lack a political party devoted to making the rich richer and screwing everyone else.
In short: we have Republicans. And that’s why we have to work until we die — bankrupted by medical expenses — without ever taking a day off. But that’s okay, because at least our budget isn’t in as bad a shape as their . . . Oh, wait, no, our budget’s in worse shape. Like our schools, our roads, our airports, our internet, our cities and our health.
JKB says:
Monday, February 21, 2011 at 12:23
“BJ, it’s that defined benefit that is the problem. That is just throwing the funding risk on someone else.”
Not if the actuaril calculations are done correctly and the program is properly managed. I realize this is a big if but contrary to popular myth the US hasn’t made too bad a job with SS. These are human organiized programs with all that implies. Unfortunately as all the silly comments about executions etc demonstrate you don’t really have much serious to say about this.
We spend, give or take, 660 billion on defense. Let’s say a third of that is us subsidizing other countries, okay? A full third. 220 billion.
Now let’s apportion that among the various defendees, shall we? Saudi Arabia, Korea, Taiwan, the Philippines, Japan, and hey, we haven’t even gotten to Europe yet. We have dozens of countries free-riding. So France’s fair slice of that would be what, do you figure? Back in the cold war maybe as high as ten percent. Today, effectively nothing. But let’s pretend it’s still 1975, and dollars being equal, etc…
Let’s say France therefore was getting the equivalent of a 22 billion a year free ride. Using those absurdly exaggerated numbers, the average Frenchman is taking a 367 dollar per person defense subsidy. You think that’s the difference?
Yeah, right.
@JKB
“For better or worse, public employee unions are at the heart of this simply because the nature of the work limits the productivity increase possible for teachers, professors, cops, etc.”
Where we are today is a result of rapidly rising health care costs, as Dave Schuler mentioned elsewhere.
The Republicans carry their share of the blame, but the people carry a big share themselves.
They want it all now, and they want it all later.
I know, you blame the Republicans for teaching them that’s possible … while those left of center here make glib promises about unfunded benefits.
You might actually get voters to support some thin increase in SS contribution, but only by lying and telling them it’s invisible, and that they can still trade up to the bigger house and the bigger SUV … all while making minimum payments on the credit card bill.
JP:
I think that’s a fair recap of my views. The question in any hustle is who is more to blame: the hustler or the sucker?
The American people were fools to buy Reagan’s glib line of bullshit. You may recall that the DEmocrats did try to tell the truth. Recall Mondale’s admission that he would raise taxes. The American people chose free candy and generational theft instead.
In the hustler vs. hustled dynamic I tend to blame the premeditated criminal a bit more. The Republicans could have committed themselves to ensuring that our government was efficient and effective and as small as we could keep it consistent with a decent life.
Instead they sold their souls to the rich and fleshed out their numbers with appeals to bigotry and magical thinking.
michael reynolds says:
Monday, February 21, 2011 at 13:17
Neat bit of math Michael, I’m too lazy to check it, but it sounds about right. It’s nonsense of course , states don’t decide their defense spending based on what others do but on a definition of their own security needs. I wonder sometimes who JJ thinks he’s convincing with these banal rejoinders.
“You might actually get voters to support some thin increase in SS contribution, but only by lying and telling them it’s invisible,”
Actually there have been a bunch of polls showing voters would accept an increase in FICA contributions but don’t want benefit cuts. There’s also a heck of a case for rasing the cap.
I don’t think Ronald Reagan invented American consumerism. I don’t think he invented the McMansion, the SUV, or the six year auto loan. I don’t think he set 401K contributions from thin, to none.
He didn’t invent a credit culture.
Do you, joe and michael, think you can keep the suburban middle class dream, and just magic the retirement money from someplace else?
Remember, the Swedes do it with high tax, apartments, and a lot fewer, smaller, cars.
John:
I think the essential con was the Reagan assertion that we could cut taxes and revenues would go up — the Laffer Curve. The self-financing tax cut for the rich.
While simultaneously arguing that the “beast” would be starved. The magical no-hard-decisions cut.
And that the problem was not middle class Americans, let alone (heaven forfend!) rich people, but a Cadillac-driving welfare queen. The “it’s all someone else’s fault, probably a black person,” line.
Magical thinking, irresponsibility — an unwillingness to actually make the hard decisions — all embellished with a dash of race-baiting to ensure the continued acquiescence of lower class whites.
is it our fault for buying that? Sure. But it’s their fault for lying. And the con is more guilty than the mark in American law.
As for consumerism, wasn’t that fed by the illusion of something for nothing at the government level? People didn’t track on just how far in debt their government was going, or if they did track they in many cases bought the magical thinking of Republican hucksters.
Once we took away that welfare queen’s Caddy we were all set, right? Plus the rich would trickle on everyone. Besides, deficits only matter when they’re Democratic deficits. We can have a huge military, and fight lots of wars, and set up a missile shield in space, plus not have to make any cuts in medicare or social security. Just make sure rich people get tax cuts, make sure no one “over regulates,” and tell those negros to get a job and we’ll all be fine.
We’ve had 30 years of that. Now we’re in the toilet and these same jackasses are crying for more, more of the same.
john personna says:
Monday, February 21, 2011 at 14:39
“Do you, joe and michael, think you can keep the suburban middle class dream, and just magic the retirement money from someplace else?”
I do wish you’d read what I say. Above I point out that in disposal income the US compares favorably with others…since when did I suggest a non contributory savings program? Sure it might be necessary to downgrade from a beamer to a toyota to fund this program but most people could live with it….you claim that politicians would have to lie to the American peope to get them to agree to greater FICA contributions…it’s simply not true..
michael reynolds says:
Monday, February 21, 2011 at 15:30
BTW Michael on your divvying up of our defense budget I forgot that back in 1975 France wasn’t actually in NATO at the time they had the Force de Frappe. Either way JJ is advancing a totally specious argument.
michael reynolds says:
Monday, February 21, 2011 at 15:30
John:
“I think the essential con was the Reagan assertion that we could cut taxes and revenues would go up — the Laffer Curve. The self-financing tax cut for the rich.”
This was the start of the great con. Today many of its original proponents agree it’s balls. Even Reagan’s administration had to claw back something like a third of his original tax cuts within a couple of years and he and his two successorw were hiking taxes for years thereafter. The bottom line is the American public want to wear a certain suit of clothes and at bottom they’re willing to pay for it providing it’s explained properly.
I think the American people are almost scared enough to start considering reality. The problem is that there’s no trust between the two parties. The GOP attacks any time they hear “tax increase,” and the Dems attack whenever they hear, “changes in social security or medicare.”
We now need both parties to essentially admit that their long-held positions are untenable.
At the moment we have Obama saying, in effect, “Look, I proposed a bunch of cuts. So don’t pretend I’m not cutting. And I went along on your taxes, so you can’t say I’m raising taxes. Now what?”
It’s a tactical move. Probably smart. The GOP has been talking trash about how they’r going to balance the budget. And the GOP has nothing aside from some score-settling with Elmo.
So it’s a demonstrably full-of-sh*t GOP vs. a counterpunching-rather-than-leading president. That’s a likely win for Obama, who may not be a profile in courage but is generally liked, vs. the GOP as represented by the not-exactly-charismatic Boehner and a chorus of shrieking loons.
We’ll probably win politically, but that doesn’t mean the problem is getting solved.
michael reynolds says:
Monday, February 21, 2011 at 16:43
Michael: I agree with you as to the political dynamics. But then we don’t need serious cuts at this precise moment because of its deflationary effect. As the economy recovers it’s going to dramatically push up receipts but it still won’t be enough. Essentially the effective tax take has to go back to around 24% of income and I suspect that if he wins a second term this will be on the agenda. Letting all the cuts lapse gets you about half way there. For the moment however, it’s definitely check Boehner. I’m going to be really interested (and I’m not being funny) to see how he handles this. Basically he’s got next week to get a CR either by whipping his own unruly caucus or by going for a vote with Democratic support. Otherwise it’s the shutdown show. Whichever way you game this he has a BIG problem.
Joe:
I agree, cuts today are not the point. Rather we need a long-term glide path.
It’s not so much that you are wrong about what could make it work, higher savings rate and lower early-life consumption, you are just dreaming about them accepting it.
hahaha
It’s a pity that with global warming we won’t have enough ice flows for all our elderly.
You know what? I have not read a SINGLE POST…. by any body. You know why? Because we are the richest country in the world and yet…. some how…. someway… we can not take care of our aged. We can not take care of our disabled. This is not hard, it CAN be done.
But we choose not to.
If there is a God (and I highly doubt it) we are all bound for hell…. and we DESERVE it.
If only Michael Reynolds had the authority to send all those mean, ignorant Republicans to reeducation camps all would be right, I mean correct, with America. My goodness what a delusional man.
tom p, the ground rules have changed but you seem to be ignoring that. You want benefits from an age that was romanticized beyond all reasonableness for a population that is growing older on average and living longer than ever, with those later years consuming more and more resources. These arguments remind me of sports boards where people keep assuming that all you need to win is to want it bad enough. Sadly, there are no good solutions, including national bankruptcy.
Tom P: Thank you.
Charles:
You usual logic and data-free response.
Well JJ, let me suggest that we got here by you supporting the political party that got us here. I know you are not one of the “crazies” but your support enabled the situation to arise. Now, you simply give up-very well done. But what can be done- let’s examine medical practices in other countries for starters, that is if you are willing to look past your Galtian overlords.
> You usual logic and data-free response.
Delivered it with his trademark whiny tone as well…
People forget that the taxes are so high in Germany that most German have given up the idea of having children. Germany ranks 218 out of 221 countries in birthrate. Germany also spending less than the U.S. on education because they have so few children.
The birthrate of the upper middle class Americans has dropped below replacement values. Michael refuses to acknowledge how the U.S.can have the economy of Sweden with the population of Brazil.
Michael can repeat moveon.org talking points all he wants but the best advantage that Sweden, Germany, or France have is those countries do not have the demographics of the U.S. and do not even have the geography of U.S. I doubt if the U.S. can reproduce the economy of Sweden when Sweden is smaller than the Greater Los Angeles Metropolian Area.
Super:
The highest birth rates in the world are in sub-Saharan Africa, followed by every other poor, miserable country on earth. Not quite sure why you think high birth rate is a good thing. Lusting after all the fun of Chad or Uganda, are you?
There’s a clear correlation between wealth and low birth rate. All the wealthy, stable, happy, free nations have low birth rates. All the steaming sh*tpiles have high birth rates.
Afghanistan has a really high birth rate. I bet you can get a deal on a rock n’ dung hovel there, so, enjoy!
Charles:
You usual logic and data-free response.
I learn at the feet of the master.