It’s been a consistent theme of this blog that the basic bargain of the blue social model—lifetime employment at a single employer, with benefits tied to that employment and the promise of a defined-benefit pension upon retirement—has broken down, and that figuring out a way to replace it is one of the central challenges and opportunities of our time. Transitioning to a new model that is compatible with the economic realities of the twenty-first century will be a long and intensive process, but one of the key areas for reform is retirement: Creating a system that allows people to save adequately and invest responsibly in portable accounts so that they can retire with dignity without the guarantee of a lifetime pension.
We are pleased to see the Obama administration taking some incremental steps in that direction. The Washington Post reports:
Millions of workers struggle to save for retirement in part because it isn’t easy enough to open an account or to have the money automatically deducted from their paychecks. But they could soon find themselves with more options.
On Thursday, the Labor Department unveiled a rule that should make it easier for states to launch their own retirement plans for private-sector workers who don’t already have access to savings accounts through their jobs. The rules, which were requested last year by President Obama, provide a clearer road map for states who want to provide such plans but needed more federal guidance. The department also announced a proposed rule that would open the door for large cities to create their own plans.
Thus far, many of the efforts to experiment with post-blue model retirement plans have come from Democrats. Blue states like Oregon, California and Illinois have taken the lead in setting up voluntary, portable retirement accounts, and now the Obama administration’s Labor Department is encouraging others to follow suit.
It’s easy to understand why Republicans might be wary of such efforts. Incompetent government efforts to manage the retirements of millions of public employees have ended in total disaster: State pension budgets are now trillions of dollars in the red. So it is critical that voluntary worker retirement accounts stay voluntary, and that the funds remain in control of employees and private institutions, not state governments or union officials. The role for the state must be to set up the architecture for a new system, not micromanage or regulate it to death, and conservatives are right to be vigilant of efforts to overreach.
At the same time, conservative resistance to any state participation in the savings and retirement system is likely to be self-defeating. The end result of the status quo is not likely to be some libertarian paradise, but a Bernie Sanders-style expansion of Social Security and other government benefits, as economic insecurity pushes American workers into the arms of politicians promising to recklessly double down on the blue social model, arithmetic be damned. So ceding this issue to Democrats is probably not smart politics in the long run.