Over the past couple of decades, American companies and American state and city governments have descended into financial purgatory just the way, in The Sun Also Rises, Mike Campbell says he went bankrupt: “gradually, and then suddenly.” A deadly combination of generous pension and health-care packages and years of passing the buck has left institutions like General Motors, Ford, and New York City struggling to fulfill old promises. Companies and governments did an exceptionally good job of evading their impending problems for as long as possible. But actuarial reality has now caught up with them. And, as Roger Lowenstein demonstrates in his vivid and scathing new book, While America Aged, the havoc that reality has already wreaked is nothing compared to what’s in store.

Retirement benefits are, at first glance, a somewhat unlikely source of crisis. They are, to begin with, a relatively new innovation—while American Express introduced the first corporate pension in 1875, it wasn’t until after the Great Depression that pensions became widespread. And in principle, pensions should be relatively simple to pay for: it’s no surprise that workers get old, so you can roughly calculate how much you need to set aside every year to pay what you’re going to owe. Unfortunately, as Lowenstein shows in engaging detail, in their short life span, pensions have become a remarkably destabilizing force, metastasizing out of control. Corporations have responded with a massive rollback—less than 20 percent of companies now offer traditional, defined-benefit pensions. But they’re still on the hook for all their past promises, to the tune of hundreds of billions of dollars, while governments have found it essentially impossible to get rid of pensions or even to trim them back.

So how did this happen? The simple, and true, answer you get from Lowenstein’s book...

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