Category Archives: Pension Plans

Greece:  Suicide or Murder?

Pundits from the left, from the right and from the center cannot stop reporting about Greece’s misery. And rightly so because the vast majority of her people live in deep economic hardship. No hope. Unemployment is officially at 18%, with the real figure closer to 25% or 30%; pensions have been reduced about ten times since Syriza – the Socialist Party – took power in 2015 and loaded the country with debt and austerity. In the domain of public services, everything that has any value has been privatized and sold to foreign corporations, oligarchs, or, naturally, banks. Hospitals, schools, public transportation – even some beaches – have been privatized and made unaffordable for the common people.

While the pundits – always more or less the same – keep lamenting about the Greek conditions in one form or another, none of them dare offer the only solution that could have rescued Greece (and still could) – exiting the euro zone; return to their local currency and start rebuilding Greece with a local economy, built on local currency with local public banking and with a sovereign Greek central bank deciding the monetary policy that best suits Greece, and especially Greece’s recovery program. Why not? Why do they not talk about this obvious solution? Would they be censured in Greece, because the Greek oligarchy controls the media as oligarchs do around the (western part of the) globe?

Instead, foreign imposed (troika: IMF, European Central Bank (ECB) and European Commission (EC) — the latter mainly pushed by German and French banks and the Rothschild clan — austerity programs have literally put a halt on imports of affordable medication, such as like for cancer treatments and other potentially lethal illnesses. So, common people no longer get treatment. They die like flies; a horrible expression to be used for human beings. But that’s what it comes down to for people who simply do not get the treatment they humanely deserve and would have gotten under the rights of the Greek Constitution; however, they simply do not get treated because they can no longer afford medication and services from privatized health services. That is the sad but true story.

As a consequence, the suicide rate is up, due to foreign imposed (but Greek government accepted) debt and austerity, annihilating hope for terminally ill patients, as well as for pensioners whose pensions do no longer allow them to live a decent life and especially as there is no light at the end of the tunnel.

Now, these same pundits add a little air of optimism to their reporting, as the right wing New Democracy Party (ND Party) won with what they call a ‘landslide’ victory on the 7 July 2019 elections; gathering 39.6% of the votes, against only 31.53 for Syriza, the so-called socialist party, led by outgoing Prime Minister Alexis Tsipras, who represents a tragedy that has allowed Greece to be plunged into this hopeless desolation. The ND won an absolute majority with 158 seats in the 300-member Greek parliament. Therefore, no coalition needed, no concessions required.

The new Prime Minister, Kyriakos Mitsotakis (51), son of a former PM of the same party, in his victory speech on the evening of 7 July, vowed that Greece will “proudly” enter a post-bailout era of “jobs, security and growth”. He added that “a painful cycle has closed” and that Greece would “proudly raise its head again” on his watch.

We don’t know what this means for the average Greek citizen living a life of despair. What the “left” was unable to do – stopping the foreign imposed (but Greek accepted) bleeding of Greece; the strangulation of their country – will the right be able to reverse that trend? Does the right want to reverse that trend? Does the ND want to reverse privatization, buy back airports from Germany, water supply from the EU managed “Superfund”, and repurchase the roads from foreign concessionaires, or nationalize hospitals that were sold for a pittance and – especially – get out from austerity to allow importing crucial medication to salvage the sick and dying Greek, those who currently cannot afford treatment of their cancers and other potentially deadly diseases?

That would indeed be a step towards PM Mitsotakis’ promise to end the “painful cycle” of austerity, with import of crucial medication made affordable to those in dire need, with job creation and job security – and much more – with eventually a renewed Greek pride and Greek sovereignty. The latter would mean – finally – it’s never too late to exit the euro zone. But, that’s an illusion, a pipe-dream. Albeit  it could become a vision.

If the ND is the party of the oligarchs, the Greek oligarchs that is, those Greeks who have placed literally billions of euros outside their country in (still) secret bank accounts in Switzerland, France, Lichtenstein, Luxemburg and elsewhere, including the Cayman islands and other Caribbean tax havens, hidden not only from the Greek fiscal authorities, but also impeding that these funds could, crucially, be used for investments at home, for job creation, for creation of added value in Greece. If the ND is the party of the oligarchs, they are unlikely to make the dream of the vast majority of Greek people come true.

Worse even, these Greek oligarch-billionaires call the shots in Greece not the people, not those who according to Greek tradition and according to the Greek invention, called “democracy” (Delphi, some 2500 years ago) have democratically elected Syriza and have democratically voted against the austerity packages in July 2015. Now, that they are officially in power, they are unlikely to change their greed-driven behavior and act in favor of the Greek people. Or will they?

Because, if they do, it may eventually also benefit them, the ND Party and its adherents — a Greece that functions like a country, with happy, healthy and content people, is a Greece that retains the worldwide esteem and respect she deserves — and will, by association, develop an economy that can and will compete and trade around the world, a Greece that is an equal to others, as a sovereign nation. A dream can become a reality. It just takes visionaries.

Back to today’s reality. The Greek Bailout Referendum of July 5, 2015, was overwhelmingly rejected with 61% ‘no’ against 39% ‘yes’, meaning that almost two thirds of the Greek people would have preferred the consequences of rejecting the bailout, euphemistically called “rescue packages”, namely exiting the euro zone, and possibly, but not necessarily, the European Union.

Despite the overwhelming, democratic rejection by the people, the Tsipras government reached an agreement on 13 July 2015 – only 8 days after the vote against the bailout with the European authorities for a three-year bailout with even harsher austerity conditions than the ones rejected by voters. What went on is anybody’s guess. It looks pretty obvious, though, that “foul play” was the name of the game which could mean anything from outright and serious (life) threats to blackmail, if Tsipras would not play the game and this to the detriment of the people.

President Tsipras’ betrayal of the people resulted in three bailout packages since 2010 and up to the end of 2018, in the amount of about €310 billion (US$ 360 billion). Compare this to Hong Kong’s economy of US$ 340 billion in 2017. In that same period the Greek GDP has declined from about US$ 300 billion (€ 270 billion) in 2010 to US$ 218 billion (€ 196 billion), a reduction of 27%, hitting the middle- and lower-class people by far the hardest. This is called a rescue?

The democracy fiasco of July 2015 prompted Tsipras to call for snap elections in September 2015, hélas – he won, with a narrow margin and one of the lowest election turnouts ever in Greek postwar history; but, yes, he ‘won’. How much of it was manipulated – by now Cambridge Analytica has become a household word – so he could finish the job for the troika and the German and French banks, is pure speculation.

Today, the ND has an absolute majority in Parliament, plus the ND could ally with a number of smaller and conservative parties to pursue a “people’s dream” line policy. But they may do the opposite. Question: How much more juice is there to be sucked out of broken Greece? Of a Greece that cannot care for her people, for her desperate poor and sick, cannot provide her children with a decent education, of a Greece that belongs into the category of bankruptcy? Yes, bankruptcy, still today, after the IMF and the gnomes of the EU and the ECB predict a moderate growth rate of some 2%?  But 2% that go to whom?  Not to the people, to be sure, but to the creditors of the €310 billion.

Already in 2011, the British Lancet stated “the Greek Ministry of Health reported that the annual suicide rate has increased by 40%”, presumably since the (imposed) crisis that started in 2008. From this date forward the suicide rate must have skyrocketed, as the overall living conditions worsened exponentially. However, precise figures can no longer be easily found.

The question remains: Is the Greek population dying increasingly from diseases that could be cured, but aren’t due to austerity- and privatization-related lack of medication and health services and of suicide from desperation? Is Greece committing suicide by continuing to accept austerity and privatization of vital services, instead of liberating herself from the handcuffs of the euro and very likely the stranglehold of the EU?  Or is Greece the victim of sheer murder inflicted by a greed-driven construct of money institutions and oligarchs, who are beyond morals, beyond ethics and beyond any values of humanity? You be the judge.

• First published by the New Eastern Outlook – NEO

A Wall Street Boost for Social Security

The aging of America is putting the squeeze on Social Security. About 10,000 baby boomers turn 65 every day and the number is heading even higher. Ready or not, our retirement system faces its first major overhaul in decades.

Lawmakers should listen to Warren Buffett before they settle on any new payroll tax or benefit schedules. “I’m a card-carrying capitalist,” Buffett says, “I believe we wouldn’t be sitting here except for the market system.”

Social Security should become a card-carrying capitalist too. It should invest part of its $2.8 trillion trust fund in the stock market, specifically in broad-based, low-cost index funds.

Call it a Wall Street boost for Social Security. It could make the coming overhaul less costly for workers and employers alike. It would effectively give tens of millions of low- to middle-income workers their first share ever in the market. Lastly, it’s the smart thing to do: research has shown the reward easily justifies the risk.

Trust fund dollars have always been invested in ultra-safe government securities. The idea of seeking higher returns by putting some of the money into stocks has been proposed before, but it’s never gone anywhere.

The coming reform (the first since 1983 and only the second ever) gives Congress a chance to begin making up for lost time.

And for lost opportunities too. By mid-March of 2019, the S&P 500 had risen by more than 300 percent from its financial-crisis low in March 2009. According to Goldman Sachs, the index’s annualized gain of over 15 percent represents one of its best decades ever.

The huge bull run didn’t add a penny to the Social Security trust fund. In fact, the fund’s return over the same decade was lower than usual: many of its holdings were paying (and still are) abnormally low interest rates.

All the more reason to make sure a stock market boost becomes part of the overhaul. Let’s give the trust fund its first chance for substantial gains. Let’s keep pushing back the year the fund runs dry. The program’s trustees now estimate it’ll happen in 2035. If Congress doesn’t act before then, benefits will have to be cut by roughly 25 percent.

Both parties are well aware of the crunch. As usual these days, they’re gridlocked on what to do.

Republicans think the problem can be solved with just two words: stingier and shorter. Their proposals would hit future recipients with the double whammy of lower benefits and a later retirement age (an idea Buffett has also floated).

Democrats have lined up solidly behind a bill that goes in the opposite direction. It increases payouts by two percent and sweetens the formula for cost-of-living adjustments (COLAs). The money to pay for it would come from higher payroll taxes, especially on the biggest earners.

Payroll taxes are currently not collected on wages greater than $132,900. The Democratic bill would tax all earnings over $400,000. The rate itself (levied on both workers and employers) would rise 0.1 percent per year from 2020 to 2043, going from the current 6.2 percent to 7.4 percent. The system’s actuaries say these changes would keep the fund solvent into the 2090s.

All well and good, but adding a Wall Street boost could make the reform even better. The tax increase could be smaller. The trust fund’s solvency could be extended into the 22nd century. Millions of workers without workplace retirement plans could reap some of the same stock market gains as workers who have them.

Alicia H. Munnell lives and breathes retirement policy. It was her calling card for a top job in the Clinton Administration. Since then she’s been a professor at Boston College, where she founded and directs its Center for Retirement Research. In 2006 she co-authored the definitive book Social Security and the Stock Market.

It’s a probing, scholarly work. It doesn’t minimize the risks, including the political risks of putting the government in charge of investment decisions. It cites hundreds of facts, including these:

After all, stocks yield 7 percent after inflation and bonds only 3 percent.

Two types of government pensions in the United States already invest in equities with no apparent ill effects,” the Thrift Savings Program for federal employees and state and local pension funds.

Adding the Social Security trust fund to the list would make that three. As Warren Buffett knows, it’s really no more than a bet on the future of America. If that’s not a good bet, what is?

• This article first appeared at www.nydailynews.com

Making the Golden Years Golden for All Americans

Congress created individual retirement accounts (IRAs) in 1974. Four years later it added 401(k)s. A third variety, Roth IRAs, won approval in 1997. Together the accounts dominate America’s private retirement system.

Today we’re a hugely unequal society. Updating our private system could reduce inequality, and help make the golden years golden for all Americans.

Let’s begin with the millions of workers we’re not even giving a chance:

The 1974 bill aimed to provide a workplace retirement plan for all private-sector employees not otherwise covered. Forty-three years later over 70 million workers, mostly low- to middle-income, still lack a workplace option.

They deserve at least two. One would be a broad stock market index fund like the S&P 500. For savers who put safety first, the other would be a bond fund holding only Treasury debt. Enrollment would be automatic with an opt-out provision. Pre-tax contributions would be made via payroll deductions. Gains would accrue tax-free, taxes payable on withdrawal (the same as all current accounts except Roths).

States could set up accounts on their own (as Oregon already has), but Congress could do the job in a single stroke. Both 2008 presidential candidates, Senator John McCain (R-NV) and Barack Obama, endorsed a federal Automatic IRA plan. Obama later included the idea in a budget outline, but it never went any farther.

It should have. Well into the 21st century, private retirement accounts should be a worker’s right: they should come with the job, period.

Now let’s add more luster to the golden years with smarter retirement account rules.

Congress should lower the age for required minimum distributions (RMDs) from the current 70 1/2 to 65. That would dovetail with the Medicare eligibility age and with common sense and the common good. An aging population is putting Medicare and Social Security in a fiscal bind. Revenues from the new rule should be dedicated equally to the two programs.

Taxable required distributions aren’t a penalty; they’re a payback to the Treasury for decades of pre-tax contributions and tax-free growth. It would help all seniors if the payback started sooner. (No, RMDs won’t exhaust retiree savings. It takes voluntary withdrawals far larger than the required minimums to do that.)

Moving on to fairness, it’s important to remember that tax breaks redistribute income. Those who get them count on other taxpayers to make up the revenue shortfall (or else there’s simply less to go around). Retirement breaks flow lopsidedly to the well-off. Putting it all together, there’s a strong case for the GOP idea of a sharply lower cap on annual 401(k) contributions.

Would anyone lose any sleep if the current $18,000 maximum were cut to $10,000, to $7,500? It’s one thing to help workers who need help. It’s another to over-subsidize the retirement savings of the haves, and lose current tax revenues in the bargain.

Lastly, we should wind down a fiscal deception.

Congress should remove Roth IRAs, Roth 401(k)s and Roth rollovers (conversions of other accounts into Roths) from the retirement mix. Existing Roths should follow the rules that govern all other plans: required distributions, taxable at ordinary income rates. If that can’t happen, at least stop offering Roths and require (tax-free) distributions from current accounts.

Fiscal hawks should cheer the reform, which would guarantee lower federal deficits in future decades. Roth contributions are taxable, so the Treasury takes in more money initially. But the gains are permanently tax-free, leading to multi-billion-dollar losses in the long run (and retirement accounts are primarily about the long run).

Fairness would also get a boost. It’s inequitable to exempt Roths from required distributions and taxes on gains.

Len Burman is a tax expert and former director of the nonpartisan Tax Policy Center. In 2006, analyzing the repeal of the $100,000 income limit on Roth conversions, he called it an “especially insidious” fiscal gimmick. Roth accounts, he wrote, are a downstream disaster: “The revenue losses…are exceedingly poorly timed. They reduce federal revenues at the same time that the baby boomers are aging….[The accounts] will place a large and growing portion of the tax base off limits…just when our children and grandchildren will most need tax revenues.”

Roths were a flimflam from the beginning, “a conscious, contemptible manipulation of the budget rules;” so said John Buckley, former chief Democratic counsel to the Committee on Ways and Means. The Treasury would be billions better off without them.

Let’s use our smarts and our hearts. Let’s make retirement accounts the last, golden part of the American Dream.

P.S. In April 2012, the House Committee on Ways and Means held a hearing on tax reform and tax-advantaged retirement accounts. I filed a statement at the hearing recommending that required minimum distributions begin at age 65 instead of 70 1/2. Here’s a link to the statement.