Phillip Longman Tries to Explain in Retrospect What the Rest of Us Warned About Years Ago

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Tuesday, 04 September 2012 04:59

It's often said that in Washington an intellectual is someone who discovers what everyone else has known for two decades. Hence we get Phillip Longman's extremely confused piece in the Washington Monthly.

Ostensibly the piece is explaining how we got to a situation where tens of millions of baby boomers and Gen-Xers face retirement with almost nothing other than their Social Security and Medicare. However it detours to stop almost everywhere along the way, starting with the end of the baby boom. Somehow slower population growth is bad news, although it is difficult to see why. Do you feel the need for more traffic congestion, greenhouse gas emissions, more crowded parks and beaches? Do we have labor shortages? Yes, Social Security taxes might be 1-2 percentage points higher than if baby boom birthrates had continued in perpetuity, but if this is the biggest problem the country faces then we are in way better shape than it seems.

Then we get a visit to the 401(k) world which Longman does not quite get right. The 401(k) was sold as a supplement to traditional pensions. The idea was that many workers did not have defined benefit pensions, so the 401(k) was presented as a way that they too could save for retirement. It was not presented to Congress or the public as the replacement that it eventually became.

Of course people were ripped off in the fees for these plans, a point that some of us have been making for two decades. They also got caught up in the stock bubble. Yes, this was also a point that many of us made at the time. When people thought the stock market would just keep rising (an assumption that was explicit in all the privatization proposals put forward in the 90s, including Clinton's plan to put Social Security money in the stock market), they did not save enough. They got killed when the market crashed.

They also foolishly listened to experts like Alan Greenspan who told them in the last decade that house prices would just keep rising. This meant that they did not save because their house was doing it for them.

Now they are hitting retirement with nothing. Longman says he doesn't know what to do. Well there is no shortage of proposals for publicly managed pension plans that could even have a defined benefit. Getting the dollar down to a more competitive level could create millions of new manufacturing jobs, hugely improving the state of the labor market. It should not be that hard to fix our health care system, every other country has done it. If our leaders are not up to the task, we can always go the trade route.

Okay, Phillip Longman tells us he doesn't know any answers. That is perhaps not surprising since he apparently never saw any of these problems coming, but that really should not bother the rest of us.

 

Addendum:

This piece is actually part of a Washington Monthly symposium that contains many ideas that are well worth considering.