The Great Debate

Social Security is not the problem – it is the solution.

Washington is filled with talk of a looming “retirement crisis.” The discussion focuses on funding Social Security and usually includes calls to cut benefits – either by changing payout formulas or raising the retirement age.

But the real problem is not the long-term solvency of Social Security. Rather, it is the fact that millions of Americans are facing an insecure and underfunded retirement.

The best way to address this retirement issue would not be to cut Social Security but to expand it, as Michael Lind, Steven Hill, Robert Hiltonsmith and I argue in a new paper released Wednesday. By increasing the public portion of the American retirement system, we can spend the same or less on retirement as a share of the economy while making the system as a whole much more progressive and stable.

We propose a two-part, or “double-decker,” plan to expand Social Security. In addition to maintaining the current Social Security program, we would add a universal flat benefit for all older Americans. This benefit could be set at a level to meet the goal of replacing 60 percent of income for a middle-income earner in combination with the existing Social Security program.

Social Security is already far more important to retirees than many understand. The poorest 40 percent of elderly earners get about 84 percent of their income from Social Security. Those in the middle-income quintile (40th to 60th percentile) rely on Social Security for almost two-thirds of their income.

Retirement investors have struggled with a Jekyll and Hyde economy these past two years, where Dr. Jekyll lives very well on Wall Street while Mr. Hyde runs roughshod over a terrified Main Street.

On Main Street, the jobless rate tops 9 percent and 14 million residential mortgages are underwater – a figure Deutsche Bank thinks will hit 25 million, or 48 percent of all home loans, before the housing bust ends.

On Main Street, the economy hasn't respond to ultra-accommodative monetary policy. Near-zero interest rates don't matter because because there's so little demand for credit to hire people or to buy post-bubble real estate.

- David H. Webber is a Boston University School of Law professor. The opinions expressed here are his own -

Like a well-armed, well-trained army standing idly by while the citizens it is supposed to protect get crushed, public pension funds have done little to protect public employees from the well-financed corporate attack on their rights.  It’s time they join the fight.

Public pension funds invest the retirement savings of public workers, with total assets of around $2.7 trillion.  One out of 10 U.S. corporate securities is owned by public pension funds — in other words, owned by public employees.  Skillful use of this shareholder power could swiftly and decisively push back the power of corporate lobbies and help fend off attacks on workers.

Congress needn't be cruel to be kind in cutting the U.S. budget deficit while saving popular programs like Social Security and Medicare.

That's not to say that taxes don't need to rise, deductions pared and giveaways to corporations eliminated. That all needs to be considered, although the recent deficit commission report doesn't do the dirty work in an equitable manner. It places far too much emphasis on paring Social Security benefits, a system that works and won't be in deficit mode for several decades.

There's plenty of pain to go around in the deficit commission's proposal. The most compelling trade-off is based on the idea that lowering personal income-tax rates will achieve some long-term economic stimulus. That thinking hasn't worked in the past and won't work now.

Ken Lewis started at Bank of America 40 years ago, working his way up from junior credit analyst to the CEO suite. His employment contract at the nation's largest banks obviously predates the government's bailout of Bank of America. Yet pay czar Kenneth Feinberg may have a say on whether he cashes in on retirement benefits and accumulated compensation worth $125 million.

Some argue it is simply inappropriate for Feinberg to try to tackle Lewis' retirement package.

"A fair reading of the situation would be he is getting what he is entitled to and game over," said Alan Johnson, a Wall Street compensation consultant.

George Magnus is Senior Economic Adviser, UBS Investment Bank, and author of “The Age of Aging: How Demographics Are Changing The Global Economy And Our World”. Any opinions expressed are his own.

The election of Barack Obama as president of the United States has unleashed a welcome torrent of optimism during hard times. Aside from an especially demanding domestic policy agenda, the new president will also have his work cut out to rebuild the authority of and respect for U.S. leadership in the global community.

The G20 meeting in Washington on November 14-15, billed as the forum for rebuilding the world’s financial architecture, could not be happening at a more important time. We should be under no illusion, however, that results will occur in a week, despite the expectations. Anyway, the G20 has the more pressing issue of countering global financial instability and the global recession.