There is a lot that could have been learned from the Reagan administration, but unfortunately, nobody did. The economic theory behind the Reagan Revolution, trickle-down economics, doesn’t work. Giving money to rich people doesn’t mean that any of it will go to people further down the line—but essentially that’s what the government, administration and Congress are trying to do with the bailout. The theory is that if they give money to banks, the banks will lend it to people who want to do business, and everybody will be happy again. So far, they’ve managed to give money to banks, but that’s as far as it has gotten. The happiness part is very far away.
The economic disaster has affected everybody, or close enough. (You can spot the ones who haven’t been hurt, at least not seriously, by their pictures appearing in front of congressional committees asking for government money. If you haven’t asked for a bailout, you’re hurting.) But one of the most obvious problem areas, not counting unemployment, loss of savings in other areas, business failures and a general economic malaise that at least rivals the Great Depression, is the loss of somewhere between 2 and 4 trillion dollars in retirement savings.
The difference between retirement savings and home values, although in many cases they were identical, is that the retirement savings were to be spent within the next 10 to 20 years. People who were retired, or nearing retirement, can’t replace that money.
A 20-year-old has a chance to save for the future. A 60-year-old is out of time. Some people may be able to work for a few more years, but basically, that money can’t be replaced. The Baby Boom generation, estimated at 76 million people, will wind up spending their old age depending increasingly on public assistance to compensate for the savings lost in the past 15 months.
Younger people can hope for a miracle—something between cold fusion to eliminate energy costs, and one of those e-mail notices of lottery winnings being legitimate—but retirees and those closing in on retirement—don’t have a prayer. A few will get by, a bit worse off than they would have been, but millions of people will be a drag on the economy for generations to come, possibly moving in with their children, possibly forced into homelessness.
Any attempt to stabilize the economy has to assure that the retirees are able to survive independently. Saving the economy depends not on bailing out the corporations at the top, but making sure that the people at the bottom have money to spend—and hopefully that the money isn’t devalued by wild inflation. That’s tricky.
Several recommendations have been made, most of them good. Obviously Social Security has to be stabilized and the required withdrawals from 401(k) and 403(b) accounts can be delayed so that people won’t be forced to take loses that force them into poverty. But another important step would be a comprehensive review of Medicare, with a particular focus on Part D, the so-called prescription benefit plan that was designed with the insurance companies in mind. This is a fairly recent addition to traditional Medicare, a tack-on which can safely be addressed separately from a comprehensive review of health care financing, which will take longer and be, if anything, more acrimonious.
While the insurance companies have done a fine job of lobbying, and showing the faces of elderly people who have benefitted from Part D, it’s fairly obvious that incorporating the benefits of Part D into traditional Medicare would offer equivalent benefits at significantly lower cost to the beneficiaries. The objections are the usual—government versus private enterprise, and television commercials showing people talking about how they’ve depended on Medicare D. It might be worth incorporating D into traditional Medicare just to improve the television networks’ ad revenue.
There are other, more legitimate objections. Folding Part D into traditional Medicare would increase efficiency, and lead to layoffs in the private insurance companies that provide these services. Given the need to assure income security for the largest number of people, these layoffs on top of the already rising number of layoffs will be damaging, and increasing the efficiency of medical billing will reduce the need for coding clerks and billing clerks in medical offices and hospitals. Increased efficiency, which would have been good in good times when the market could absorb additional workers, is simply harmful in bad times. It’s a particularly cruel trade. The insurance and financial industries have already taken major cuts, and most of those jobs have no more chance of coming back than the retirement savings of the elderly.
There are no good answers, but unless we, as a society, address the needs of those whose retirement savings have been wiped out, there’s no hope of recovery for decades to come. The Depression Era song comes back—“who will take care of you? How’ll you get by? / When you’re too old to work and you’re too young to die.”
Sam Uretsky is a writer and pharmacist living on Long Island, N.Y.
From The Progressive Populist, December 15, 2008
Subscribe to The Progressive Populist