On Saturday Sen. Tom Harkin of Iowa, chairman of the Senate Committee on Health, Education, Labor and Pensions (HELP) announced his intentions to retire after completing his fifth term in 2015.
Like Senator-elect Elizabeth Warren, Harkin comes from a humble background, making him more sensitive to the financial stress facing most Americans than most of his colleagues, at least in the GOP. His father was a coal miner, his mother died when he was ten and he and his five siblings were raised without hot running water or a furnace. It's also very likely that Harkin's passion about helping Americans with disabilities stems from challenges faced by his deaf brother. When Harkin introduced the Americans with Disabilities Act into the Senate he delivered part of a speech in sign language so his brother could understand it.
The good new is that Harkin believes America faces a retirement crisis, saying "Pensions have gone by the wayside. Savings are down as people are just scraping by, so the only thing left is Social Security."
What's baffling is that Harkin's pension remedy is not to mandate that employers cough up higher contributions to 401(k) accounts to make them walk, talk and quack like regular pensions but to simply give all Americans access to a puny plan. As I've pointed out in a previous post, the measly employer contribution rate of 3 percent of pay is the reason why most Americans have only accumulated one-fifth of what they need to retire.
When last July Harkin announced legislation to make "bold changes to the private retirement system and Social Security" the changes were minor. Employers who don't offer a 401(k) plan would have to set up a retirement plan in which employers would have to make "modest contributions" to employee accounts. Our employer contribution rate is a fraction of that of other countries; for example it's 9 percent in Australia, nearly 12 percent in Denmark, 8 percent in Hungary, 6.5 percent in Mexico and 7.3 percent in Poland. Why simply require employers with no plan to offer an even less generous plan?
In addition, Harkin's changes to Social Security would boost payments by a mere $60 a month. As a reporter for Reuters observed, Social Security has already been "puny-fied" as a result of reform passed in 1983 that delays the "Normal Retirement Age" to 67 for people retiring in 2022, cutting monthly benefits by about 13 percent, according to the National Academy of Social Insurance.
In all fairness, the modesty of Harkin's proposal is most likely driven by the Tea Party's bloodless coup of Congress, making serious reform unlikely. The finger of blame should actually be pointed at the media, who can't be bothered to cover the biggest financial crisis facing Americans. As someone who has been trying to reform retirement for the past two decades, I know first hand how frustrating it is to tackle the media's indifference; only one of the journalists I've contacted, Eleanor Laise of the Wall Street Journal, has written about it. Even more outrageous, few reporters covered Harkin's announcement of his legislation -- when I did a literature search I found only the Reuters article. If the media had covered it, the crisis might have galvanized Americans to reach out to their Congressperson to enact change.
There's not much we can do about the media but we need more Senators to pursue serious reform. Here's hoping that Elizabeth Warren gets appointed to the HELP Committee, even if she can't chair it. Like Harkin, Warren comes from humble beginnings, which most likely explains her pro-consumer initiatives that led to establishment of the vital Consumer Financial Protection Bureau. Her father, a janitor, suffered a heart attack when she was twelve, leading to many medical bills and a pay cut because he couldn't do his previous work. Warren wound up working as a waitress at her aunt's restaurant to help make ends meet.
Even if Warren doesn't end up tackling the pension crisis, let's hope that Harkin holds hearings on it before his term expires.