7 Chilling Facts About Retirement in America That Should Make Obama Tremble Before Cutting Social Security and Medicare
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While we’re on the subject, it may interest you to know that the President will receive a pension that will start at around 200k per year after his second term, and it will go up from there. That’s just the beginning – other perks include travel, office expenses, and so on. And yet he is preparing to make it more difficult for those Americans without pensions to survive. Something wrong with this picture?
3. The 401(k) catastrophe: It’s high time to face it: the 401(k) experiment, which started in the 80s, has been a complete disaster. 401(k)s don’t even come close to providing the retirement security promised to workers. To expect Americans to morph into finance experts who can evaluate mutual funds and stockmarket choices may be one of the most absurd legacies of the last three decades. And, as Helaine Olen outlines in her book Pound Foolish: Exposing the Dark Side of the Personal Finance Industry, people trying to save for retirement have become a prime target of hustlers who push mutual funds with hidden fees and needless charges which pile up and rob the contributor of hard-earned money.
And lest we forget, Enron, like many other companies, put strong pressure on employees to invest in the company’s stock. Result? Many employees lost most of their life savings when the company blocked workers from selling its stock held in 401(k) accounts, just as the stock price was taking a downward plunge.
401(k)s are volatile, complicated, expensive, and inadequate. Social Security, on the other hand, is simple, fiscallly sound, and prudently managed.
4. Political games don’t wash: Social Security raiders tell us that the program needs to be “fixed,” with very little to back up their claims. There is nothing wrong with the program now, so they forecast – and let’s remember how good these same people were at forecasting the financial crisis – some kind of future crisis.
Here are the facts: According to the trustees of the Social Security trust fund there might be a shortfall in revenues against predicted claims in 2033 if economic growth is not good. You could reasonably argue that a tweak ought to be made a couple of decades down the road when we actually know how things stand, like making the rich pay Social Security taxes on the money they make over the current low ceiling of just over $100,000.
There is no justification for doing anything now, and the raiders know it. So they make things up. Economists Thomas Ferguson and Rob Johnson note this in their article, “ From New Deal To Raw Deal: The Real Economics Of Cutting Social Security.” They observe that Peter Orszag, the former head of the Obama administration's Office of Management and Budget, who now works at Citigroup, has admitted that Social Security has nothing to do with any budget crisis:
“The first yellow flag is Orszag's frank acknowledgment that Social Security features barely at all in any putative budget short fall: ‘Social Security is not the key fiscal problem facing the nation. Payments to its beneficiaries amount to 5 percent of the economy now; by 2050, they're projected to rise to about 6 percent.’”
Orszag knows the truth, but because he is aligned with the interests of financiers, he comes up with a stunning justification for making cuts:
“As Orszag frankly confesses, ‘even though Social Security is not a major contributor to our long-term deficits, reforming it could help the federal government establish much-needed credibility on solving out-year fiscal problems.’"
In other words, politicians have to cut Social Security not because it has any negative impact on the budget, but to prove to the markets that they can. How’s that for logic?