If you thought that the Affordable Care Act, aka Obamacare, completely solved the health insurance problem for the United States, then you will probably be happy with some of the types of reforms that are being crafted to address the retirement crisis.
But if you find disturbing the Congressional Budget Office's estimate that in 2019, when the ACA is fully implemented, 22 million Americans will still be without health insurance and that there will be a deep inequality of plans for those who have it, you might be wary of what likely retirement reform will look like if it follows a parallel course.
Retirement, like health care, is an exceptionally profitable industry in the United States.
The sine qua non of corporate-supported retirement reform, like that of health care reform, is that it must not reduce the profits of the existing system. To get real backing from those who pay the lobbyists, it must increase those profits. The ACA thus gave health insurers more business through the subsidized exchanges.
But policy wonks know that profitability has its limits. Some people are too poor to be profited off. Hence, to cover more of the uncovered, the ACA had to expand Medicaid from the poor to the near poor. The government would cover the unprofitable, being careful to leave the profitable business to private insurers with the exchanges.
The financial services industry has profited handsomely from the conversion of traditional pensions to 401(k) private accounts since 1981. But it, like the health insurers, knows that the profitable system is running into public opposition as it has become clear that many are uncovered by workplace plans, and that those with 401(k)s are not getting the retirement incomes they assumed would be forthcoming.
Retirement reform is thus creeping on to the Washington agenda and the financial services industry wants to make sure that such reforms, if they occur, do not harm its bottom line.
If the type of health care reform we had received would have been solely dictated by what was most effective, we would have, as the wonks knew, received a single-payer system rather than the ACA.
If we want the most effective retirement reform -- one that covers the entire working population and ensures for retirees preservation of their preretirement standards of living -- we would have an expanded Social Security. It is the approach that wins hands down over 401(k)s in maximizing coverage and return on contributions.
According to former Treasury Secretary Lawrence Summers, no wild-eyed progressive reformer even by Washington standards, "Social Security is effective, in large part because it is efficient. More than 99 cents are paid in benefits by Social Security for every dollar that is paid in by workers and employers. Few, if any, private systems -- anywhere in the world -- come close to matching this efficiency."
But the legislative strategists know that the financial services industry will not stand for such a reform if it diverts retirement savings from Wall Street to government control. Hence many, even liberal, legislators are quick to publicly justify reforms as being based on "privately managed" plans. It's an assurance bordering on a request for permission addressed more to the financial services industry than the public.
So, if you thought the ACA did the job, you will probably think that these "privately managed" retirement plans will do so also.
If you didn't, you should support those legislators who are courageous enough to craft and support retirement reform bills that put the priority on retirement security rather than drumming up new business for the financial services industry.
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