American values demand that Congress boost retirement benefits rather than shrinking them to satisfy deficit hawks, Sen. Elizabeth Warren (D-MA) said on the Senate floor Monday afternoon. “We should be talking about expanding Social Security benefits, not cutting them,” Warren said.
Warren left the policy details for the end, focusing instead on history to show that the experience of being an American worker has gotten ever harder while providing less and less economic security. When wages flattened out and life got more expensive in the 1970s, “Working families didn’t ask for a bailout,” Warren said. “They rolled up their sleeves and sent both parents into the workforce. But that meant higher childcare costs, a second car, and higher taxes. So they tightened their belts more, cutting spending wherever they could.” As a result, she noted, working families have less to spend (adjusting for inflation) than they did a few decades ago, leaving less ability to include retirement savings in their budgets.
As economic security faded for working Americans, a secure retirement also grew more elusive. Employers started to back off pension promises, and the shift from classic pensions to 401(k) investment plans “that leave the retiree at the mercy of a market that rises and falls” meant that Social Security became a more and more crucial pillar of workers’ retirement planning, Warren said. Compared to classic pensions, which provide a fixed retirement income, 401(k)-style plans reduce retirement income for about a quarter of all participants. The shift to 401(k)s has made inequality worse over recent decades because they favor the wealthy, and the fees investment firms charge to manage the plans gobble up about a third of total returns over the course of the typical participant’s career. Almost two-thirds of the workforce is currently racking up debt faster than retirement savings, and even before the recession such “debt savers” made up nearly half of all workers.
“Add all of this up – the dramatic decline in individual savings and the dramatic decline of guaranteed retirement benefits and employer support in return for a lifetime of work – and we’re left with a retirement crisis,” Warren said.
If “crisis” seems like a strong word, consider that more than half of the people in the country are currently projected to see a significant drop in their standard of living once they retire. Working-age Americans are currently $6.6 trillion short of what they’ll need to have saved in order to maintain the standard of living in retirement — an amount that is larger than the entire economy of Japan — according to Warren.
Despite that crisis, Social Security has been repeatedly threatened with reductions in budget negotiations over the past three years, with cuts usually coming in the form of a change in the formula used to calculate benefit levels. Warren rejected that proposal, calling instead for shifting to a formula progressives favor for measuring senior citizens’ cost of living that “would generally increase benefits for our retirees, not cut them.”
“The suggestion that we have become a country where those living in poverty fight each other for a handful of crumbs tossed off the tables of the very wealthy is fundamentally wrong,” she said.