An OVERVIEW of what Bush's proposals will mean to retirement in the future.
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by
Christy Harvey, Judd Legum and Jonathan Baskin
with Nico Pitney and Mipe Okunseinde
ECONOMY
From the New Deal to the Raw Deal
Franklin Roosevelt's New Deal promised Americans "cradle-to-grave security." Today, President Bush and big corporations are set to unravel that promise, replacing it with a Raw Deal. Under the guise of the "Ownership Society," President Bush is helping companies foist costs and risk onto American workers. This weekend, the Washington Post reported the retirement safety net is coming unraveled and, for many American workers, making ends meet in retirement is going to be a lot tougher. Economists and financial planners have long compared retirement security to a three-legged stool comprised of Social Security, employee pensions and personal savings. Today, thanks to President Bush and his corporate cronies, all three legs are in jeopardy.
LEG ONE SOCIAL SECURITY: The first leg of retirement security is Social Security. President Bush's new plan to privatize Social Security will mean a benefits cut for many Americans. (No wonder so many Americans are against his plan.) Under the Bush plan, millions of American workers will see their Social Security checks shrink dramatically. According to the Center on Budget and Policy Priorities, under Bush's plan, by 2055, Social Security benefits for medium earners "would drop 66 percent, or two thirds, compared to the current benefit structure." Instead of seeing $1,844 a month, someone making $36,600 a year would receive a mere $626. The cut is even higher for middle-class Americans making a little more: under the Bush plan, workers making $59,000 today will see their Social Security benefits slashed by 87 percent in 2055. That means instead of a monthly Social Security check of $2,441, their benefit would be just over $300. (Here are more details on how the president's plan will hit American workers.)
LEG TWO PENSIONS: The second leg of the retirement stool pension plans is also being sawed off. Traditional pension plans offered workers guaranteed security in their retirement. As Newsweek points out, they offered "an income you can't outlivea critical point as lives grow long." But according to the Christian Science Monitor, "The nation's private pension system is fraying and at risk of unraveling altogether." Today only 20 percent of Americans have a traditional, defined-benefit plan; that's down "50 percent from just 20 years ago." And more and more companies are defaulting on their pension plans. (For an example of how this works, just look at the United Airlines fiasco.) Of those plans, "more than 75 percent are underfunded." When a plan fails which 192 did last year alone it's dumped on the Pension Benefit Guaranty Corp, the government insurer that's supposed to guarantee workers some benefits if their company goes under. The PBGC today is facing a deficit of nearly $30 billion. (American Progress's Christian Weller has some ideas of ways to fix the pension crisis.)
LEG THREE PERSONAL SAVINGS: The third leg of retirement security is personal savings. Americans' personal savings rate was below 1 percent this year. (Compare that to the 12.3 percent personal savings rate of 1950.) Much of the money Americans make today goes toward breaking even. People are making less the American workforce took an across-the-board pay cut this year when the growth in wages trailed inflation for the first time in 14 years. The value of the minimum wage is down; unemployment is up; and more Americans have fallen into poverty. (For a look at the state of America under President Bush, check out the Center for American Progress's Quarterly Taxpayer Report.)
HEALTH CARE: The squeeze will be particularly intense for employees who have to spend more precious retirement dollars on their health benefits. In 1988, 66 percent of companies with more than 200 employees offered health benefits to retired employees; according to the Kaiser Family Foundation, last year that plummeted to only 36 percent. Employers have cut 5 million workers from their insured rolls from 2001 alone. And those remaining are stuck with higher bills, as businesses are passing along expenses by "nearly doubling the amount that employees must kick in for a typical family plan to $222 a month."