Now consider that if I continue to follow the average Medicare beneficiary, I can expect to spend $2,920 a year in out-of-pocket expenses from age 65 to 74; $3,815 a year from age 75 to 74; and $4,615 a year above the age of 85 – only by then, medical costs will have increased by a rate far higher than the rate of cost-of-living adjustments in my Social Security benefit. That won’t leave much for food or shelter. God help me if I stop working!
Defined benefit pensions are disappearing: in 1980, 38 percent of workers were covered by DB pensions. In 2008, only 3 percent had solely DB pensions; another 12 percent had a combination of DB and defined contribution (like 401K) plans. Only 31 percent of workers have any kind of pension plan.
The U.S. savings rate is in the toilet (3.7 percent) and household debt is rising, including among seniors.
The unemployment rate for people 55 and older has more than doubled since 2007 and their length of unemployment is the highest of all workers. Untold numbers have given up and gone into involuntary retirement.
Social Security and Medicare keep millions out of poverty but many are hanging on by their fingernails. Any cuts to these programs – programs paid for by the beneficiaries all their working lives in the form of the highly regressive payroll tax – would send them right over their own fiscal cliffs. The impact would ricochet down the generations, as already financially stressed families would scramble to take care of their elder loved ones.
Yes, we need to bring down the deficit. But doing it by pushing vast numbers of the middle class into poverty (or the poor deeper) is not the way. It’s morally wrong. Moreover, it will torpedo economic recovery. And it will strew boulders into our path to sustainability for generations to come.
Financial journalist Eric Laursen says we don’t need to slash benefits or raise the retirement age in order to put Social Security on an even stronger foundation. I spoke with him about his book, The People’s Pension. It’s a fascinating and exhaustive study of what he calls the “war against the geezers” – the decades-long project to gut social security and Medicare.
“Social Security is a very efficient program,” Laursen asserted.
“It costs us 4.5% of GDP every year. That’s not very much when you consider all it does for us. Older people are able to live on their own, not become a burden on their younger families; they are putting money back into the economy in consumer spending; and they’re not a burden on relief on the local and state level.”
But Laursen does warn that we are on the verge of another retirement crisis because home equity has declined, wage stagnation has made it harder for people to save on their own, employers are canceling their own pension plans, and all of those things are coming together right at the time that many people in Washington are calling for reducing Social Security.
“This is crazy,” he told me. “The whole debate over the last 30 years has been upside down. We should be looking to improve and expand this program.”
Implications for CSR
So what does all this have to do with CSR? At the most fundamental level, it’s a moral issue. Our ballooning deficit was caused largely by:
The flagrant irresponsibility of Wall Street and the banks, which destroyed millions of jobs and cost trillions in lost economic activity – and therefore sank government revenues, but left the perpetrators laughing all the way to the taxpayer-funded bailout;
The Bush tax cuts for the wealthy;
The bloated military budget that pays off big for the military industry but sucks money away from investing in America, including a Greener economy.
Yet, some of the same companies that caused our ballooning debt are the very ones mounting a full-court press to “Fix The Debt” as a back-door attack on our social insurance programs. According to a just-released report from the Institute for Policy Studies, the Fix The Debt Coalition’s prescription is to slash Medicare and Social Security, while – you guessed it -- handing out more tax breaks to corporations:
Take a look, for example, at a slideshow presentation the campaign has prepared as a "CEO tool" for wooing supporters. You can check it out right on their website. It says flat out that the so-called "fiscal cliff" is an opportunity to push for "considerably less" spending on Medicare and Medicaid. It also calls for a shift to a "territorial tax system," which would permanently exempt U.S. corporations' foreign income from U.S. taxes.
Among the Coalition’s members are major defense industry contractor General Electric and the investment bank goliaths, JPMorgan Chase, Goldman Sachs and Bank of America. (GE CEO Jeffrey Immelt was among those invited on November 14th to a palaver with the President about the “fiscal cliff.”)
These companies (and their CEOs) would save billions in taxes – thereby worsening the U.S. debt – if one of the Fix The Debt Coalition’s recommendations were followed: a territorial tax system that would offshore profits, hiding them from Uncle Sam.
Social Insurance and Sustainability
But slashing social security isn’t good economic policy, either.
GE touts its sustainability chops, but with all due respect to Ecomagination, the Green Transition is going to take a healthy middle class to happen. Market-based solutions to drive the economy onto the green path depends on the ability of consumers to pay the premiums green technology, eco-products and sustainable agriculture command.
Families burdened with the care of their impoverished elders – or elders robbed of a comfortable retirement – are not going to be buying Chevy Volts or supporting their local farmers market. Nor will they be installing solar panels on the roof. They’ll be lucky if they can afford a little extra insulation in their attics or plastic on the windows.
Nor will they support the kind of public investment necessary to make that transition. When the Great Recession hit, the public’s interest in protecting the environment cratered. Desperate people don’t go green.
What Should Socially Responsible Companies Do?
Instead of leading the fight against Social Security and Medicare, companies need to do their part to avert the retirement crisis and cut the federal debt. Here’s what they can – and should – do:
Pay their fair share in corporate taxes and onshore taxes, instead of offshoring them. Also like Warren Buffet, lobby for raising the capital gains tax rate to the income tax rate for high earners prevalent during the Clinton presidency.
Promote policies that strengthen Social Security: Raising or removing the cap on earnings subject to the payroll tax and trimming benefits on a sliding scale on the highest earning beneficiaries would completely erase the modest shortfall coming in 2038.
Bring back defined benefit pensions for their employees and incentivize workers to save by providing matching contributions.
Fight age discrimination: hire older workers.
Make sure all their workers earn at least a living wage, so their social security benefits are adequate when they retire.
And, by the way, do you want to save Medicare? Making drug prices competitive would go a long way toward reining in ballooning Medicare costs.
The war against the geezers is a war against all generations, present and future. Taking care of our elders is the responsible thing to do.