Morning Must Reads: Pensions, Health Care and Crony Capitalism

The Philadelphia Inquirer this morning reviews polling by the Employee Benefits Research Institute (EBRI) on retirement confidence.

Results from the survey of 1,262 people in January show workers' confidence in having enough money to live comfortably throughout retirement remains near the all-time lows recorded in the 2011 survey. Just 14 percent identified themselves as "very confident," while 23 percent said they were not confident at all. In 2011, those percentages were 13 percent and 27 percent...

In an interview, [Jack] VanDerhei [of the EBRI] said that those who described themselves as being "on track" with retirement savings showed no change in their confidence level, but that the worse off workers were, the more negative their confidence.

In other words, many people are confronting more immediate financial worries than saving for retirement. Forty-two percent of workers and 41 percent of retirees identified "job uncertainty" as their No. 1 worry, followed by "making ends meet," which was mentioned by 10 percent of workers and 13 percent of retirees.

Such clear and present anxiety tends to overshadow a distressing trend that has persisted in EBRI's survey over the last decade: Many workers say they have not saved much for retirement.

In 2002, 50 percent said the value of household savings and investments (excluding their house and pension plan) was less than $25,000. In 2012, that percentage had grown to 60 percent, with 30 percent saying the amount was less than $1,000...

[Vanderhei's] message is: "If you can afford it, if you have a job, please save now."

Most people don't save enough for retirement and most workers even in here in Pennsylvania have no pension plan at work. Labor Economist Teresa Ghilarducci of the New School recently offered up an actual solution to this problem.

Rather than curtailing public and private pensions, New York and other states could save millions of workers from impending poverty by creating public pensions for everyone.

While the recession bears some blame for the looming retirement crisis, experts agree that the primary cause is more fundamental: Most workers do not have retirement accounts at work...over half of American workers do not have pension plans at work.

Private-sector pensions have been on the retreat for decades. In fact, in the late 1970s and early ’80s, Congress, worried about the dismal rate of pension coverage, tried to remedy the situation by extending 401(k) plans, originally designed for executives, to everyone, while also passing a law to create individual retirement accounts.

The problem is that these steps set up incentives through the tax code, which means that the biggest benefits go to the highest earners — people who, moreover, would probably have saved anyway. Today 79 percent of such tax breaks go to the top 20 percent of workers.

Meanwhile, despite extensive commercial advertising for retirement planning, coverage for ordinary people stalled. And even many of those who do save for retirement fail to consistently put away the 5 to 10 percent of their pay necessary to adequately supplement their Social Security benefits.

In response, in late February California State Senator Kevin De León and Darrell Steinberg, the Senate president pro tempore, introduced legislation that would allow private-sector workers in California to enroll in a modest, state-operated retirement program financed by the workers and their employers — at virtually no cost to taxpayers.

This would increase coverage because employers would put every worker into a plan, either their own or the California plan. In the California version workers could opt out; some will, but most workers once in a plan will stay in...

Both plans would use the same professional staff and institutional money managers that invest the state and city pension funds to manage contributions made by participating employers and employees in the private sector.

This is a vital step: public pension plans usually outperform 401(k) plans and individual retirement accounts, because instead of a single worker managing a single account, large institutional plans pool workers of all ages, diversify the portfolio over longer time periods, use the best professional managers that aren’t available for retail accounts and have the bargaining power to lower fees and prioritize long-term investment.

By some estimates, costs for public pensions are over 45 percent lower than for individual 401(k) plans.
Of course, since these plans would be financed by workers and their employers, there would be no cost to taxpayers.

Unless you live in a cave, you know the U.S. Supreme Court hears arguments this week on efforts to invalidate the Affordable Care Act. The Philadelphia Inquirer opens this week with a strong editorial in favor of health care reform. 

There's no courtroom big enough, of course, to hold all the Americans with health insurance who are reaping the early benefits of the federal health overhaul. But their interests — and those of 30 million uninsured citizens — are integral to the legal drama unfolding this week, as the Supreme Court hears arguments in a lawsuit seeking to overturn the reform.

While the second anniversary of the landmark legislation finds the law under siege, it also brings proof that the reforms are already improving the lives of millions.

In this tri-state region, that includes 375,000 seniors now saving on drug costs, another 2.6 million people who received free preventive-health screenings, and the nearly 140,000 young adults who were brought under their parents' insurance plans. Thousands of small businesses, as well, have utilized federal tax credits to help them provide their workforce with health insurance.

Paul Krugman this morning notes that privatization efforts aren't about promoting free markets but about expanding corny capitalism.

What is ALEC? Despite claims that it’s nonpartisan, it’s very much a movement-conservative organization, funded by the usual suspects: the Kochs, Exxon Mobil, and so on. Unlike other such groups, however, it doesn’t just influence laws, it literally writes them, supplying fully drafted bills to state legislators. In Virginia, for example, more than 50 ALEC-written bills have been introduced, many almost word for word. And these bills often become law.

Many ALEC-drafted bills pursue standard conservative goals: union-busting, undermining environmental protection, tax breaks for corporations and the wealthy. ALEC seems, however, to have a special interest in privatization — that is, on turning the provision of public services, from schools to prisons, over to for-profit corporations. And some of the most prominent beneficiaries of privatization, such as the online education company K12 Inc. and the prison operator Corrections Corporation of America, are, not surprisingly, very much involved with the organization.

What this tells us, in turn, is that ALEC’s claim to stand for limited government and free markets is deeply misleading. To a large extent the organization seeks not limited government but privatized government, in which corporations get their profits from taxpayer dollars, dollars steered their way by friendly politicians. In short, ALEC isn’t so much about promoting free markets as it is about expanding crony capitalism.

Speaking of crony capitalism, in case you missed it, the Corbett administration unveiled its Governor's Innovation Office last week. 

The newly formed Governor's Innovation Office is billed as helping Pennsylvania's government work better and more efficiently. The Innovation Office will sift through state agencies' ideas, suggestions from the public, and recommendations from the Governor's Advisory Council on Privatization and Innovation.

Who is it that makes up the Governor's Advisory Council on Privatization and Innovation?


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