Wednesday, August 8, 2012

Work Till You Drop

The 401K may be the greatest scam ever pulled on the working class. Push all the onus to save for retirement onto the backs of workers while eliminating their guaranteed pensions, and then blame the workers themselves for their indigence in their old age. And thanks to American Calvinism, the workers will accept all the blame, even as they lose their homes and wind up on the streets after a lifetime of work.

Oh, and never mind that people are now required to enter the workforce tens or even hundreds of thousands of dollars in debt – they need to “save” for retirement. And how are they going to do that when their income is siphoned off paying for bank loans – loans which cannot be discharged and for which social security can be garnished to pay off? And if you’re not heavily in debt, you’ve probably got a low-paying job that has no retirement plan, and that doesn’t pay enough to save for one even if it did.

Oh, and even as Americans are told “you’re on your own” and you need to save for retirement, the amount of money workers have to do so is shrinking rapidly. Incomes are actually back to what they were in the early nineties, even as the stock market has tanked. Costs for everything have gone up, and things like medical debt can ruin people financially for a lifetime.

The purpose of the 401K was to fool Americans into thinking they were part of the investor class, and that they were better off with policies that boosted stock prices, even though those same policies gutted wages and benefits. This article was on of the most popular on The New York Times:
To maintain living standards into old age we need roughly 20 times our annual income in financial wealth. If you earn $100,000 at retirement, you need about $2 million beyond what you will receive from Social Security. If you have an income-producing partner and a paid-off house, you need less. This number is startling in light of the stone-cold fact that most people aged 50 to 64 have nothing or next to nothing in retirement accounts and thus will rely solely on Social Security.

If we manage to accept that our investments will likely not be enough, we usually enter another fantasy world — that of working longer. After all, people hear that 70 is the new 50, and a recent report from Boston College says that if people work until age 70, they will most likely have enough to retire on. Unfortunately, this ignores the reality that unemployment rates for those over 50 are increasing faster than for any other group and that displaced older workers face a higher risk of long-term unemployment than their younger counterparts. If those workers ever do get re-hired, it’s not without taking at least a 25 percent wage cut.

Like the nation’s wealth gap, the longevity gap has also widened. The chance to work into one’s 70s primarily belongs to the most well off. Medical technology has helped extend life, by helping older people survive longer with illnesses and by helping others stay active. The gains in longevity in the last two decades almost all went to people earning more than average. It makes perfect sense for human beings to think each of us is special and can work forever. To admit you can’t, or might not be able to, is hard, and denial and magical thinking are underrated human coping devices in response to helplessness and fear.

So it’s not surprising that denial dominates my dinner conversations, but it is irresponsible for Congress to deny that regardless of how much you throw 401(k) advertising, pension cuts, financial education and tax breaks at Americans, the retirement system simply defies human behavior. Basing a system on people’s voluntarily saving for 40 years and evaluating the relevant information for sound investment choices is like asking the family pet to dance on two legs.

Not yet convinced that failure is baked into the voluntary, self-directed, commercially run retirement plans system? Consider what would have to happen for it to work for you. First, figure out when you and your spouse will be laid off or be too sick to work. Second, figure out when you will die. Third, understand that you need to save 7 percent of every dollar you earn. (Didn’t start doing that when you were 25 and you are 55 now? Just save 30 percent of every dollar.) Fourth, earn at least 3 percent above inflation on your investments, every year. (Easy. Just find the best funds for the lowest price and have them optimally allocated.) Fifth, do not withdraw any funds when you lose your job, have a health problem, get divorced, buy a house or send a kid to college. Sixth, time your retirement account withdrawals so the last cent is spent the day you die.

As we all know, these abilities are not common for our species. The current model for retirement savings, which forces individuals to figure out a plan for their retirement years, whether through a “guy” or by individual decision making, will always fall short. My friends are afraid, and they are not alone. In March, according to the Employee Benefit Research Institute, only 52 percent of Americans expressed confidence that they will be comfortable in retirement. Twenty years ago, that number was close to 75 percent.
Our Ridiculous Approach to Retirement (New York Times)

Of course the author proposes a solution, but the whole point of the 401(k) fiasco is to funnel money to Wall Street, not to give people secure retirements. that's the last think the elites want. They have all the retirement money they'll ever need thanks to their workers, so what's the problem? Your senator has a nice pension funded by your tax money (and prime health care and five weeks of vacation, etc.), on top of all the swag he or she gets from their campaign funding buddies. Again, what incentive is there to "solve" this problem?

And as for Social Security, well, it appears the central cause celebre of the one percent is to make sure it doesn’t exist, and that money winds up in their pockets, even though they already have more money than they can spend. It’s interesting how the “social secutiry as Ponzi scheme” meme is tirelessly promoted by conservative think tanks funded by the one percent libertarian billionaires, and how the working classes in this country have bought into it (is their anything they won’t buy?). Yet how can they not acknowledge the stock market as an even bigger Ponzi scheme rigged for the benefit of insiders? Oh, and bonds? Guess what, the money to pay those has to come from somewhere.Read it and pass the cat food:

As George Carlin said, they're coming after your Social Security, and they'll get it.

One has to wonder at the breathtaking sociopathy of the people who designed such a system. One has to wonder at the suckers who fell for it. I guess we’re just that stupid. We're an enormously wealthy society. There's no more reason anyone should have to work beyond 65, just as there's no real reason we have to work 40+ hours a week. It's another consequence of our idiotic systems. And if you doubt this is the era of full-throated class warfare, please see this:
In a recent post for The New Yorker, Adam Gopnik argued that Adam Smith, the father of capitalism, thought prosperity depended on “what might be called niceness.” Even if a “wise producer” can make more money by hiring children or looting someone’s pension fund, he won’t, because he knows such actions “will break the bonds of common sympathy, the sense that we’re all in this together, on which the producer’s…well-being ultimately depends.” Smith was also a great believer in decent wages: “the high price of labor,” Smith once wrote, “is the essence of public opulence.”

Compare Smith’s brand of capitalism with the one apparent in today’s Times story on Caterpillar, a manufacturing company that earned a record $4.9 billion profit last year and projected better results for 2012—yet “is insisting on a six-year wage freeze and a pension freeze for most of the 780 production workers at its factory” in Joliet, Illinois.

Caterpillar says the freeze is necessary because its unionized workers are paid above market rates. The unionized workers see the situation rather differently—they point out that the $4.9 billion in profit translates to $39,000 in profit per employee—and have called a strike.

Relatedly, Caterpillar raised executive compensation in recognition of strong profits.
Caterpillar Post Record Profits, Tries To Freeze Worker Wages (New York Times). But at least they have their 401(K), right? P.S. Why we're so "broke":


  1. Just today I saw, on the backs of trucks and SUVs: "I don't believe the liberal media," "End of an error: 1/09/2013," and "Obama or America - you can't have both." Even Will Rogers way back when said the working classes will gladly follow the millionaire's directions.

  2. Family/Clan/Tribe: The Original Social Security.

    That's where we are heading. Back towards tribal organization. The social contract is bust. Trust is breaking down. Nebulous group IDs like "American" are breaking down in favor of race, religion and geography. Same as it ever was.

  3. Being a member of the white underclass who is not in thrall to the right wing is like having a conjoined twin who's suicidal.

  4. @Ross - it makes me wonder if the nation-state was a failed experiment. When I read things like Buckminster Fuller I wonder if human beings are even capable of the level of cooperation required to carry out his ideas by their very nature.


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