Economist Calls Pensions National Security Blanket; Urges Congress to Act

Teresa Ghilarducci, a noted economist and pensions expert, said Nov. 17 that government intervention was vital in protecting the American workforce's retirement in the future, offering the union-pension model as the ideal after the recent collapse of Wall Street and the huge losses suffered by 401k plans.

The Chief-Leader/Pat Arnow BULLISH ON PENSIONS: Teresa Ghilarducci calls on Congress to 'do something bold' by supporting a universal pension system as a sounder retirement program than 401k plans. Looking on is District Council 37 Retirees' Association President Stuart Leibowitz.

Ms. Ghilarducci was discussing her new book, "When I'm Sixty-Four: The Plot Against Pensions and the Plan to Save Them" with District Council 37 Retirees' Association President Stuart Leibowitz and United Federation of Teachers Treasurer Mel Aaronson after testifying before the Congressional Committee on Education and Labor about workers' retirement security in October.

Calls for 'Universal Pensions'

She said that "Social Security is the only source of retirement income that is strong and predicted to increase," and proposed "that Congress do something bold and support a universal employee pension system as an alternative to 401k's," especially among private employees, who have taken hits up to 40 percent on their retirement funds in recent months.

In his remarks, Mr. Leibowitz said that one key point of Ms. Ghilarducci's book was her emphasis on union strength, and the defined benefit pension plans that unions give their members, held up as the ideal retirement system for Americans. "Good unions equal good pensions," he said. "The decline of the unions goes along with the stunning decline in defined pensions. There's no question about it, there's a direct correlation."

Mr. Leibowitz said that in the "glory days" post-World War II, unions created the optimal benefits plan for their members through political action, but said that they shared the blame as much as anyone for the fall of defined pensions since then. "One of the things the unions don't do enough is educate their members on the value of fringe benefits, the value of their retirees, the value of hoping to live to become retirees, the fact that retiree benefits are gonna be waiting for them when they retire," he said. "As public employees, all of our benefits derive from the political process. What politicians can giveth, they can also taketh away."

Social Security Solid

Mr. Leibowitz said that retirees had much to fear, as they would be "disproportionately" affected by the economic collapse, but that the collapse of some benefits, such as Social Security, was greatly exaggerated.

"Right now, Social Security has a profit of over $100 billion. What that profit does is buy the government paper ... don't worry, Social Security is fine. Even in the worst-case scenario of Bush's actuaries," he said, "what they're saying is, in the year 2041, it's going to be bankrupt. That's a lie! That's an absolute lie. In the year 2041, using their numbers, the outgo will equal the income. The Federal Budget Office says this'll happen in 2051. Even in the absolute worst-case scenario, we'd still get 75 percent of it then, and that's not that bad."

Mr. Aaronson, who also is a trustee of the Teachers' Retirement System, agreed that defined benefit pension plans were a far more secure option for America's future retirees. "More and more employers are cutting their health insurance plans," he said. "General Motors, who promised health insurance to their retirees, just said that this January they are going to stop paying for health insurance for their white-collar workers who are management employees." Unionized workers for GM, he pointed out, have a defined plan and thus will have their health insurance provided indefinitely.

Mr. Aaronson proposed "some kind of plan similar to what [Teresa] sets forth ... funds which are managed by government, the government pays very low cost rates and the funds grow much larger than they could grow in any investment or retail mutual funds." He said that this would mean a retiree "would be able to count on 70 percent of their final salary as a lifetime income," which financial experts say is sufficient for a middle-income person to live on for the rest of their lives "at the same standard of living."