David Coates

Chapter 5: Introduction

The recession hit pensions and pensioners hard. It led the administration to estimate that the Social Security fund would be exhausted four years earlier than previously thought – that is, by 2037 (this in The New York Times May 13 2009). It put the public pension schemes for teachers, police officers and other government employees into serious jeopardy – collectively they lost $1 trillion of assets in the market, leading Pricewaterhouse Coopers to estimate that, 15 years from now, they will have less than half the money they need to pay pension benefits (this in The Washington Post October 11 2009).

And the value of employer-based pension schemes and privately purchased pensions plummeted, leaving many pensioners with insufficient income to sustain their expected style of life. In 2008 only 44% of private sector workers were even in an employer-sponsored plan, and most of those 401(k) plans were neither adequate nor secure. Low income workers were particularly vulnerable. Only 28% of full-time workers in the bottom quarter of the income distribution were in such plans. The US Stock Market “lost more than half of its value between October 2007 and March 2009, draining more than $2 trillion from defined contribution plans. With two-thirds of account balances in equities, the average participant saw a third or more of his or her retirement savings evaporate in little more than a year. Though the market has since rebounded, account balances are still well below their peak at time of writing.” (Monique Morrissey, Towards a Universal, Secure and Adequate Retirement System, Retirement USA, October 21 2009, p. 11: at www.retirementusa.org) Social Security recipients will receive no COLA in 2010.

David Coates holds the Worrell Chair in Anglo-American Studies at Wake Forest University. He is the author of Answering Back: Liberal Responses to Conservative Arguments, New York: Continuum Books, 2010.

He writes here in a personal capacity.

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