Retirement Security: A Moral Economy Proposal
One constant refrain of contemporary conservatives is that liberals and progressives are devoid of ideas. They act as though people should rally in support of the President’s deeply flawed Social Security proposals just because the opposition has failed to advance an alternative proposal. But this is a shell game; conservatives have defined the problem incorrectly and then come up with disastrous policy ideas. What progressives need to do is redefine the problem and then suggest bold new ideas that give substance to our vision of a Moral Economy that reflects our deepest values. Fortunately, there is a fair, progressive and moral solution to the problem of financing Social Security, Medicare, and other retirement programs that has not yet become part of the national debate.
But the first step is to understand the problem correctly. The President has vastly exaggerated the immediacy of Social Security's funding problems; they don’t become serious until 2042. Moreover, his proposal for progressive indexation of future Social Security benefits will turn the prospect of increasing longevity into a curse for millions of citizens. With smaller Social Security checks, future recipients will live in terror of outliving their savings. Already, many Social Security recipients in their 80’s, particularly women, receive too little to afford housing, food, and health care. So the first need is to bolster the financing of Social Security to assure that no retirees live in poverty.
So far, the President has been silent on the more urgent funding crisis that Medicare faces. Even if we can get runaway health care costs under control, the second need is for increased funds to assure quality health care for retirees over the next fifty years. The third need involves the Federal program that guarantees pensions for those employees whose private pensions have failed. This program is facing a growing funding deficit since an increasing number of private pension plans are in trouble. In short, we have to find increased funds to protect the elderly or many of them will face growing hardship.
One core tenet of a Moral Economy is that everybody needs to pitch in and help solve our common problems. But it should be obvious to everyone that U.S. corporations are no longer paying their fair share or contributing enough to the common good. Even while CEO compensation has gone through the roof, what U.S. corporations pay in income tax has fallen to ridiculously low levels. Our corporations now pay half as much as corporations in other wealthy countries. Moreover, our big corporations have been systematically reneging on their obligations to their employees–past and present. They have eliminated pension plans, refused to fund established plans at adequate levels, and they have shifted pension obligations onto the federal government. The latest example of this was United Airlines’ decision to use the cover of bankruptcy to transfer its pension bills to the government. The losers are both the retirees who get smaller pensions and the taxpayers who have to make up what the corporations failed to pay.
Fortunately, there is a way to solve the financing problems of retiree programs while also modeling how corporations should be contributing to the public good. We can do this by Americanizing the idea of an annual share levy on corporations. Each year, U.S. corporations would be required to issue new shares of stock equal to 10% of their profits and these shares would be given to a retirement Trust Fund. The Trust Fund would be required to hold the shares for at least five years and not more than twenty--with very specific rules as to how the shares would be sold so as to avoid any disruption of the stock market.
Robin Blackburn, a British scholar, has estimated that if such a levy were established in the U.S., it would produce $2.6 trillion in value after 20 years--more than enough to solve the shortfall in Social Security with funds left over to help with Medicare and pension guarantees. To tailor this idea to U.S. politics, there could be a provision that these shares would have no voting rights as long as they were held by the government. The voting rights would be restored when the shares were sold back to the public. That way, there would be no danger of government officials getting involved in corporate governance. And the requirement that the government would hold no shares for longer than twenty years eliminates the danger that the government would own too much of the nation’s economy.
The core idea is similar to what the President was proposing in his private accounts–to let future recipients benefit from stock market appreciation. But unlike the President’s preferred solution, this proposal preserves the core idea of Social Security–to insulate individuals from market risks. Had this measure been in effect in the 1980's and 1990's, then retirees would have benefited from the rapid rise in Microsoft’s stock value. The value of the Trust Fund’s stock portfolio would fall during a stock market decline, but individual retirees would still be assured of their full benefit check even if the market sell-off continued for several years.
A number of complexities would have to be worked out to translate this proposal into actual legislation. But the core idea of an annual share levy to bolster the financing of retirement programs could be a win-win solution for the U.S. economy. It would allow the dynamism of the private sector to support the public good without increasing individual or corporate income taxes. It would make it easier to focus future increases in tax revenues on investments that will be truly productive—increased spending on our children and on the new technologies of the 21st century. So if the conservatives really want to fight on the terrain of ideas, progressives have some that are fair, moral, and productive.