Retirement ‘Deficit’ Measured in Trillions

By Joe Mont 10/11/10 – 02:17 PM EDT

BOSTON (TheStreet) — The financial gap between what Americans need for retirement and what they have is $4.6 trillion as a national aggregate and an average $48,000 per person, according to congressional testimony by the Employee Benefit Research Institute.

Jack VanDerhei, EBRI’s research director, was among those testifying at a hearing Thursday, The Wobbly Stool: Retirement (In)security in America, convened by the Senate Committee on Health, Education and Labor. Testimony and video of the hearing on U.S. retirement income adequacy is available online.

EBRI is a research institute based in Washington, D.C., that focuses on retirement and economic security issues. Its analysis estimates how much money will be needed for “basic” expenses (such as food and shelter) and uninsured health care costs in retirement, and what financial resources retirees are likely to have.

The deficit projection assumes no changes to the current Social Security benefit structure. If Social Security benefits were to be eliminated, the aggregate deficit would jump to $8.5 trillion and the average amount would increase to about $89,000.

Ross Eisenbrey, vice president of the Economic Policy Institute, a think tank that analyzes trends in employment and compensation, offered an even more pessimistic view by citing Boston College’s Center for Retirement Research’s estimate that American households ages 32 to 64 have a retirement income deficit of $6.6 trillion. “It is a figure that dwarfs the federal deficit and casts a pall over hopes of them retiring in any kind of comfort,” he said.

A recurring theme of Eisenbrey’s testimony was that, “Congress has made matters worse by focusing retirement policy on high-income households and neglecting low-income workers.”

“While nothing to tout, the financial situation of seniors today might be as good as it will ever get for the typical American,” he said. “Between declining pension coverage and Social Security cuts, it is possible that the next generation to retire will be the first to be worse off than its predecessor.”

Eisenbrey blames, in large part, the shift away from traditional pension plans.

“Most 401(k) participants do not have the financial expertise to manage their investments,” he said. “Many fail to diversify sufficiently and often make poor investment decisions. They tend to have an all-or-nothing approach to risk and, despite the lessons of Enron, many still have funds invested in employer stock. Luck plays an oversized role in whether retirement savings in personal accounts will be adequate. Even 401(k) participants who make relatively conservative investment allocation decisions over a long time horizon are subject to unacceptable risks.”

Eisenbrey urged the Senate committee to “recognize that the retirement income deficit we are leaving for the Gen Xers is at least as serious as the ‘burden of debt for our grandchildren’ that gets so much attention in the media and in political debate.”

“How can it be that after 32 years and trillions in tax subsidies, 401(k)s have worsened, rather than improved, retirement security?” he said. “First and foremost, the design of the 401(k) ensures that its tax subsidies go disproportionately to high-income earners who least need the government’s help in saving, while providing little or nothing to low-income earners, many of whom struggle to meet their daily expenses, let alone save for a distant retirement.”

He cited an analysis by the Urban-Brookings Tax Policy Center that estimated 80% of the tax subsidies for retirement savings go to the top 20% of earners.

“This is government welfare stood on its head,” he said. “There is no rationale for providing a larger tax break to a millionaire than to a Wal-Mart(WMT_) cashier for the same dollar contribution to a 401(k) plan — and nothing at all if the cashier owes payroll but not income tax.”

Phyllis Borzi, assistant secretary of labor for the Employee Benefits Security Administration, also testified. She said that the Department of Labor and other government agencies have several regulatory efforts in the offing intended to boost retirement savings. Among them: reducing barriers to annuitization of 401(k) and IRA plan assets; increasing the transparency of pension fees; improving transparency of target date and other default retirement investments; and reducing conflicts of interest between pension advisers and fiduciaries.

– Written by Joe Mont in Boston.

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D’Alessandro for Democrats; a chance for a new voice

September 6, 2010

Article Courtesy of:  The Boston Globe

IN THE Massachusetts congressional delegation, Stephen Lynch stands out for his lone-wolf stances. He voted against bailing out the financial system, in favor of the Iraq war, and, from vote to vote, was on both sides of the health care debate. In a delegation that prides itself on unity, he often goes his own way. In Boston, where he is one of two representatives to Congress, he has chilly relations with City Hall. In Washington, where most other Massachusetts House members either occupy leadership positions or exert strong pull with the speaker, he operates outside of his party’s leadership. He is a member of Barney Frank’s Financial Services Committee and also serves on the Oversight and Government Reform Committee, from which he chairs the subcommittee overseeing the District of Columbia. For his Ninth District constituents, it’s a far cry from the power and influence wielded by his predecessor, Joe Moakley.

In his re-election campaign, Lynch touts his independence, saying it means that leaders like Nancy Pelosi “don’t take me for granted.’’ Lynch’s challenger, Mac D’Alessandro, a public-interest attorney and union activist, has focused on Lynch’s votes — especially on health care. But an equally important question is whether Lynch’s approach to his duties is paying off for his district. Sometimes, lone-wolf stances can be admirable. But after nine years in Congress, there’s little evidence that Lynch’s independent path has led to much more than a string of frayed relationships. There have been times when constituents cheered Lynch’s willingness to buck the tide; but on other occasions, those same constituents were left scratching their heads.

To his credit, Lynch has been a strong advocate for causes that are important to voters in his district, such as veterans’ benefits and the concerns of organized labor, except on health care. He’s also taken his position on Iraq seriously, visiting the country many times and schooling himself on national security. But there is no doubt that this district was better served in the past by a congressman who sought to gain national clout and deliver for his constituents, and there’s no reason why it can’t again.

D’Alessandro has a ground-level perspective on the district. A graduate of Boston College Law School, he dedicated himself to community activism, first though Greater Boston Legal Services, where he rose to legislative director and lobbied Beacon Hill for job-training programs, and more recently as political director of the Massachusetts Service Employees’ International Union. Clearly, SEIU’s anger at Lynch over health care motivated D’Alessandro’s challenge. But his quarrel with Lynch is also about style and energy: He argues that the district needs a more resourceful advocate, a representative who defines his priorities clearly and sets out to produce measurable returns.

On health care, D’Alessandro faults Lynch as much for failure of leadership as for his unyielding refusal to support the final reform package, despite urgent entreaties from Pelosi, Vicki Kennedy, and his Massachusetts congressional colleagues. From the start of the health care debate, while other representatives were striving to put together a bill that met the complexities of the challenge, Lynch held himself out as a critic. He was the only Massachusetts House member who refused to commit to a public option. But then he voted for a bill that had a public option, and whose near-universal coverage was funded by a surcharge on the wealthiest Americans. When that bill had to be changed to accommodate the Senate, he flipped again, opposing it on the grounds both that it lacked the cost-saving mechanism of a public option and that it was funded by a tax on expensive health plans.

That last vote especially rankled his fellow Democrats, who saw it as a once-in-decades chance to achieve near-universal coverage. The bill also included $11 billion for neighborhood health clinics, of which there are 14 in or near his district.

While Lynch’s votes are individually defensible, collectively they provide a mirror into his politics. When others saw opportunity for historic reforms, he offered skepticism. When others stepped forward to shape legislation, he held back. D’Alessandro would be quite different: More cautious about military interventions, including Afghanistan; more willing to do the necessary work of reforming the economy, even when it involves unpopular fixes like bailing out the banking and housing industries; more eager to be a leader both in extending health coverage and in bringing research dollars to Massachusetts.

Coming into Congress as a freshman, D’Alessandro would be at square one, but ironically would have more favor with his party’s leaders than Lynch. For nine years, Lynch has honorably followed his own path. D’Alessandro is an articulate advocate for working people who deserves a chance to show what he, too, can do. 

Kennedy Death Cuts Broad Health Bill Odds, Hatch Says

By Nicole Gaouette

Aug. 30 (Bloomberg) — Congress is less likely to pass sweeping health-care overhaul legislation following the death of Senator Edward Kennedy, a leading Republican said.

“You’re not going to get this big, broad Democrat spending bill — you’re not going to get Republican support,” Senator Orrin Hatch, a Utah Republican and close friend of the Massachusetts Democrat, said on CNN’s “State of the Union” program.

Hatch said Kennedy’s status as Congress’s leading liberal often convinced Democrats they could support deals he had struck with Republicans. “That’s why Senator Kennedy was so important,” Hatch said. “I don’t know if another Democrat has the same clout in Congress.”

Expanding coverage to nearly 50 million uninsured Americans and lowering health-care costs was Kennedy’s life’s work, colleagues said, and is now President Barack Obama’s top domestic priority. Lawmakers failed to get health-care bills through Congress before the August recess. Obama, who is pushing lawmakers to overhaul a health-care system that accounts for about 18 percent of the nation’s economy, said Aug. 20 that “we’re going to get this done one way or another.”

Hatch said Kennedy provided deep experience on health care, united factions within the Democratic Party and worked well with Republicans.

Kennedy’s Work

“Kennedy could bring together all of the base groups of the Democratic Party,” Hatch said on ABC’s “This Week,” recalling that Kennedy worked on health legislation for more than three decades. “In every case, he fought as hard as he could, but when he recognized that he couldn’t get everything he wanted, he worked with the other side. If he was here, I don’t think we’d be in the mess we’re in right now.”

Kennedy’s illness meant he was absent from Congress for much of the past year, though his staff said he kept abreast of the health debate through frequent phone calls. Senator Christopher Dodd, the Connecticut Democrat who temporarily took over from Kennedy as chairman of the Senate Health, Education, Labor and Pensions Committee, told the panel that Kennedy was watching their debate on C-SPAN television and calling him daily to offer feedback.

Four of the five congressional committees with jurisdiction over health have passed bills that would cost about $1 trillion over 10 years. The Senate Finance Committee has stalled over a number of issues, including whether to create a government-run insurance plan, require employers to provide workers with insurance, and impose new taxes that could range from taxing the richest Americans to levies on generous health plans.

Public Plan

Not all Democrats support the idea of a public plan, which Obama has said would be his preferred way to generate more competition among health insurers. Louisiana Senator Mary Landrieu told CNN she would “tend not to” support a bill that included a public option. “I think we can do it without a public option,” the third-term Democrat said. “Hopefully we can keep working. That’s what Ted Kennedy would want us to do.”

John Kerry, now the senior Democratic senator from Massachusetts and a member of the Finance Committee, said he was confident a health-care bill would be passed and he urged Republicans to avoid being “bound by ideology.”

“When we get reality on the table we can have a good conversation,” Kerry said on the ABC program. “I believe we can do this. I think better judgment will prevail.”

Senate Bill

When the Senate returns in September, it will take up the bill the Senate health committee put together in July, Dodd said on NBC’s “Meet the Press.” He said the bill is “sitting there,” ready to be worked on with the Finance Committee.

“If we can get these bills together and sit down with each other, we can produce a strong, vibrant, vitally needed national health care legislation on accessibility, quality and affordability,” Dodd said.

Health-care costs now account for about 18 percent of GDP, according to the president’s Council of Economic Advisers, and are projected to rise to 34 percent by 2040.

“The country cannot afford this, Dodd said on CNN. “How we get there is the challenge before us.”

Senator Maria Cantwell, a Washington Democrat, said bipartisan cooperation on the issue was crucial. “Doing nothing and thinking that we’re going to get out of this expense is not an option,” Cantwell said on CNN’s “State of the Union.”

“Getting true competition into the system and giving consumers choice is what the Democrats and Republicans should be joining ranks on,” Cantwell said.

Democrats Alone

Democrats including Senator Charles Schumer of New York have said that if Senate Finance negotiators — three Republicans and three Democrats — can’t reach a deal by Sept. 15, Democrats may have to pass the bill on their own.

The majority party could use a legislative maneuver called reconciliation which allows the Senate to pass a bill with 51 votes instead of the 60 typically needed for controversial pieces of legislation.

During the August recess, Finance Committee Chairman Max Baucus convened meetings of the six senators on the committee who are working on a bipartisan compromise.

Any agreement they reach would have to be coordinated with a plan passed by the Senate HELP committee. The three House committees with jurisdiction over health will meld their bills together after lawmakers return from recess. The House and Senate bills would have to be reconciled before being voted on by both chambers.

Protests at Meetings

The Senate adjourned on Aug. 7 and will reconvene on Sept. 8. Many of the town hall meetings lawmakers held to discuss health-care during the recess were disrupted by protests.

Administration officials have urged lawmakers to honor Kennedy by getting health reform passed.

“The best possible legacy is to pass health reform this year,” Secretary of Health and Human Services Kathleen Sebelius said recently. “Hopefully every step along the way they’ll ask themselves ‘What would Teddy do?’”

Dodd said Kennedy’s death will push his colleagues to work harder at passing legislation.

“We don’t have the luxury of wallowing in our grief; we’ve got to get up and get this done,” Dodd said. “We’re going to roll up our sleeves and do what Teddy would have done and get health-care done.”

– With assistance from Jeff Plungis in Washington. Editors: Ann Hughey, Bill Schmick

To contact the reporter on this story: Nicole Gaouette in Washington at ngaouette@bloomberg.net.

‘Yes We Can’ vs. ‘Tell Washington No’:

Public passions seen rising on health care overhaul

Public passions are rising on health care overhaul

WASHINGTON — Booed, jeered and occasionally cheered in a raucous session with the public, a Democratic senator said Monday that other lawmakers can expect the same as they face voters on the divisive issue of overhauling health care.

“I wouldn’t be surprised if that’s the harbinger of things to come,” Pennsylvania’s Sen. Arlen Specter said a day after facing the rowdy crowd in Philadelphia. A House member who was surrounded by protesters shouting “Just say no!” to Democrats’ health plans in Texas over the weekend accused Republicans of organizing the opposition.

“This mob … did not come just to be heard, but to deny others the right to be heard. And this appears to be part of a coordinated, nationwide effort,” Rep. Lloyd Doggett, D-Texas, said in a statement. “What could be more appropriate for the ‘party of no’ than having its stalwarts drowning out the voices of their neighbors by screaming ‘Just say no!’”

With Congress’ monthlong recess looming, lawmakers are encountering growing public doubts about President Barack Obama’s push to remake the system for providing medical care, evident in polls that find confidence in the president’s handling of the issue has fallen since January.

The White House is determined to frame the debate on its terms this month and counter fears about government-run insurance plans, a growing federal deficit, the impact on small businesses, abortion and end-of-life provisions — all issues that have dominated the health care debate. Political parties and special interest groups will add to the cacophony by spending millions of dollars on competing ads.

For lawmakers such as Specter and Doggett, the weekend events captured the public mood and the obstacles for the Obama administration.

At Specter’s forum Sunday in Philadelphia, some chanted Obama’s “Yes we can” campaign slogan, while others carried signs that said, “Tell Washington no.”

Specter and Health and Human Services Secretary Kathleen Sebelius faced an antagonistic, standing-room-only crowd at the National Constitution Center. Specter said he thought political organizations orchestrated some of the commotion, but individuals with serious concerns — some in dire medical conditions — were there as well.

“I do think there’s a big concern in America,” Specter said in an interview Monday. “We heard it yesterday about the growing deficit and national debt.”

Specter is a recent Republican-turned-Democrat who indicated earlier this year that he’s open to a government health insurance plan that would compete with private insurers, an idea backed by Obama and many Democrats.

Four of five congressional committees have approved versions of health care bills, but lawmakers fell short of Obama’s deadline for the House and Senate to vote on bills before their August recess. That sets up a September showdown on the legislation and all sides have moved into high gear.

The House has begun its recess, with the Senate to follow on Friday, as lawmakers continue to work on bipartisan legislation.

Frustrated with the pace of those talks, Democratic leaders promised to push a sweeping health care bill through the Senate whether they get Republican support or not.

Sen. Chuck Schumer, D-N.Y., the third-ranking Senate Democrat, raised the prospect of the leadership crafting a bill to Democratic specifications and using a rare legislative procedure to expedite it.

“We will have contingencies in place,” Schumer told reporters on a conference call. “These plans will likely be considered as a last resort, but they are on the table.” He would not elaborate.

After numerous delays, three Democrats and three Republicans on the Senate Finance Committee are facing a Sept. 15 deadline to wrap up secretive talks and come up with a plan.

“If we cannot produce a bipartisan solution by then, you have to wonder if the Republicans will ever to be willing to agree to anything,” Schumer said.

However, one of the negotiators — Republican Sen. Mike Enzi of Wyoming — said Monday he did not recognize such a deadline, and another, Sen. Olympia Snowe, R-Maine, said: “I don’t like deadlines.”

After those objections were voiced, Finance Chairman Max Baucus, D-Mont., said that senators were looking at a target date internally but “the main thing is we got to get it right.” Baucus said a draft bill would be ready by the end of this week.

Senators have plenty of action on the Senate floor this week, including a vote on Judge Sonia Sotomayor’s Supreme Court nomination, but health care is still a focus. Senate Democrats are lunching at the White House Tuesday and will hear from White House adviser David Axelrod and Deputy Chief of Staff Jim Messina at a closed-door session Thursday.

Schumer said Democratic leaders continue to look at invoking a procedural maneuver that would allow them to pass the health bill with 51 votes instead of 60. That route is viewed as a last resort, in part because it would probably limit the breadth of policy initiatives.

On the same call, Sen. Robert Menendez, D-N.J., accused Republican leaders of trying to hinder bipartisan progress to deny Obama a political victory.

Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell, R-Ky., scoffed at the complaints. He noted that Schumer himself hasn’t committed to supporting whatever the Finance Committee negotiators produce and that other Democrats have also criticized the plan that’s taking shape.

“Seriously, how can any Democrat who doesn’t support what the bipartisan group of Finance members is working on complain about there not being a bipartisan approach?” Stewart asked. “Has Sen. Schumer or anyone in the Democrat leadership offered a bipartisan bill?”

Schumer and many other liberals favor a strong new government-run insurance plan that would compete with private insurers, and all the plans approved so far have included that. But Republicans nearly uniformly oppose a new public plan, saying it would drive private insurers out of business, so the Finance negotiators are looking at a system of nonprofit health co-ops instead.

Schumer said negotiations on the Finance bill were continuing.

“No one’s drawing any lines in the sand right now, but I feel very strongly we need a public option and that fight is continuing,” he said.

Associated Press writer Erica Werner contributed to this report.