Striking workers’ pension demand reflects longing for a bygone era – msn/WaPost
In the private sector, traditional pensions have been replaced by defined contribution (DC) plans via 401(k)s and IRAs. The DC system has grown to become both a major engine of US capitalism and driver of economic inequality. Most low-wage workers and about half the entire workforce are left out of the retirement savings/investment system. Powerful lobbies representing Wall Street interests want to keep it that way. See:
‘The 401(k) industry owns Congress’: How lawmakers quietly passed a $300 billion windfall to the wealthy – Politico
“Greased by lobbying and campaign cash, tax breaks for retirement savings are one thing Congress agrees on. But they also blow out the deficit and add to income inequality.”
This passage is at the end of the article: “Meanwhile, a bipartisan group of lawmakers is proposing a new government savings system run by the Treasury Department for workers who don’t have access to private plans. The bill would also offer a government match of up to 4 percent to low-income workers who put savings in such accounts.
“House Ways and Means committee member Lloyd Smucker (R-Pa.), who sponsored the bill alongside six Republicans and three Democrats, acknowledged that provisions from Secure 2.0 like catch-ups do not reach low-income taxpayers at all. ‘Definitely not,’ Smucker said. ‘Most of them have no retirement savings at all.’ Finance committee member Thom Tillis (R-N.C.), who is a co-sponsor of the Senate version of the bill, said such provisions are ‘not something that the vast majority of the American people are even blessed to be able to contemplate.’
“Lobbyists are fiercely working to oppose the legislation, which they see as an existential threat to the private system of tax-advantaged plans — with the ARA and the ICI spending $1.6 million and $5.1 million respectively in 2023 on provisions that prominently list the bill. Davis & Harman was likewise paid $210,000 by the American Benefits Council in 2023 to lobby on bills that include the proposal.
“At an April, 2023, retirement industry ‘summit’ in San Diego, the ARA’s Graff alerted the large audience to the threat of a new government alternative to private plans. According to an article by an ARA subsidiary on the event, Graff said one of the arguments driving the proposal was the ongoing coverage gap where 60 million people have no retirement savings at all. Indeed, after more than a quarter-century of expansion of private retirement legislation aimed specifically at solving this problem, the number has barely budged.
“‘At some point, people in Washington, D.C. are going to grow tired of this systemic coverage gap and they’re going to start pushing for some type of federal intervention,’ Graff said. ‘We need to make clear that a federally run retirement system will never be acceptable.'”
Congress needs to create a retirement savings system that includes ALL workers. A universal system has two necessary elements: 1) creation of plans for workers left out of the current system, and 2) a modest government contribution to all workers’ retirement accounts. Providing tax credits for workers not making enough to contribute themselves leaves millions out and does not go far enough. Now, high-income workers get a huge tax break for retirement savings. Most low-income workers get nothing.
By the way, most of the expert critics quoted by the Politico article were silent before Congressed passed Secure 2.0. Here’s what we wrote before it was passed:
Related CCSE work:
Half of Americans have no retirement savings — here’s how Congress can look out for them – op-ed