— Poor people get absolutely nothing.
— Wealthy people who would have had large savings anyway get a nice tax cut that offers no meaningful incentive effect.
— For people in the middle, the quantity of subsidy you receive is linked to the marginal tax rate you pay—in other words, it’s inverse to need.
— A small minority of middle-class people manage to file the paperwork to save an adequate amount and then select a prudent low-fee, broadly diversified fund as their savings vehicle.
— Most middle-class savers end up either undersaving, overtrading, investing in excessively high-fee vehicles or some combination of the three.
— A small number of highly compensated folks now have lucrative careers offering bad investment products to a middle-class mass market based on their ability to swindle people.
Individual choice may be fine for buying shoes and sandwiches, Yglesias suggests, but not for retirement savings.
Baker, meanwhile, notes that wondrous new technology breakthroughs have been a pretty steady feature of history for the last 200 years. And, he argues, the creation of a “401(k) World” has little to do with technology—it is a result of policy choices.
Other countries, some of which are dong much better than the United States by most measures (e.g. Germany, Denmark, Canada), have much more extensive social welfare states, providing not only better retirement security, but national health care coverage, and substantial support for child care.
Friedman, Samuelson, Yglesias, and Baker are columnists, and columnists come with points of view and do what columnists do. (Felix Salmon, of Reuters and CJR’s The Audit, also has some choice words yesterday for Friedman, on the topic of what his 401(k) vision means for working people.)
But there are enough table-setting kinds of articles—about cutting entitlements, lowering expectations, looming poverty in retirement—to warrant serious treatment by the vaunted mainstream media. By this I mean reporting and analysis. It would be great to see the press really tackle issues like retirement security and the adequacy of the safety net , so that at least ordinary folks have a shot at understanding and shaping the ongoing debate about their future.
Such journalism might draw on the insights of Thomas Edsall in The New York Times Economix column. Edsall argued that the conservative political class recognizes the days of shared growth, with the US leading the world economy, are over, and that the wealthy are keenly aware that political threat to their status and comfort could come from rising popular demands for policies of income redistribution. That could come in the form of better Social Security and Medicare benefits, not worse; better childcare programs, more services for the elderly, and national health insurance coverage. Such things are not possible in the 401(k) world, which anticipates that every man is out for himself. But maybe there are other choices?
Other writers, like Michael Lind, writing for Salon, and Josh Barro for Bloomberg News, and even Yglesias are starting to talk about raising Social Security benefits to meet a growing need for retirement income.
Statistics from the Center for Retirement Research show that 53 percent of households are at risk of not having enough money to maintain their living standards in retirement, and a new study by the Employee Benefit Research Institute finds that 57 percent of American workers have less than $25,000 in household savings and investments, excluding their homes. A broad discussion of the adequacy of government retirement benefits is in order.
And all this is fodder for mainstream media journalists to explore how the great American middle class is doing in Thomas Friedman’s 401(k) world, with the idea of helping us all decide whether it’s the world our democracy should choose.
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