The Wealth Shift in America Runs Counter to our Constitution’s Purpose

 

We the people of the United States created our Constitution and empowered Congress “to form a more perfect union, establish justice, … promote the general welfare, and secure the blessings of liberty to ourselves and our posterity.”

A book by Pulitzer-prize winning journalist Hedrick Smith entitled, Who Stole the American Dream?, indicates to me we’re falling short of that vision for the middle class. Our upcoming presidential election could make it worse.

Smith quotes Yale political economist Jacob Hacker in his book, The Great Risk Shift: “Hundreds of billions of dollars in safety net costs were shifted from companies to employees without any offsetting increase in the typical worker’s pay. This fundamental transformation… is at the root of American’s rising anxiety about their economic standing and future.”

Smith cites retirement plan shifts. In 1980 US employers with more than 100 employees funded retirement plans for 84 percent of their workers. By 2006 employers financed 36 percent. The remaining employees had nothing or contributed to 401K plans.

Smith interviewed Brooks Hamilton, a Dallas based pension analyst for 50 years after his appearance on ABC’s Frontline. “According to Hamilton the lifetime pension system cost employers from 6-7 percent of their total payroll, but they spent only 2 to 3 percent on matching contributions for 401k plans. There was a huge shift in costs from employers to employees-hundreds of billions of dollars.”

Smith’s book describes the shift in healthcare costs. In 1980 those employers provided full insurance coverage for 70 percent of employees. By the mid-2000s the number of fully covered workers was 18 percent. The remainder received a portion or nothing.

Smith said, “From 1948 to 1973 the productivity of all nonfarm U.S. workers grew by 96.8 percent and the hourly compensation rose by 93.7 percent. From 1973 to 2011, productivity of the U.S. workforce grew 80.1 percent, but wages plus benefits rose only 10 percent. So while productivity was rising, hourly wages, adjusted for inflation, were essentially flat. Three decades of getting nowhere.”

Kevin Drum, in Mother Jones, March-April, 2011, published a table by Hacker and co-author Paul Pierson showing the 2005 average shortfall in income if wages and benefits had kept pace with productivity gains. Median household incomes ($50,899 from census data) would have had an extra $10,100. Households with incomes less than $100,757 would have had three-quarters of a trillion dollars more to spend and save every year.

Competing proposals to avoid insolvency in Medicare have deadlocked Congress. Current law and administration proposals are competing with plans by Romney and Ryan that would increase costs for individuals.

In March, 2012 the independent Congressional Budget Office compared Ryan’s 2013 budget with two plans under current laws.

The CBO said all plans could cause  “reduced access to health care; diminished quality of care; increased efficiency of health care delivery; less investment in new, [or] high-cost technologies. In addition, beneficiaries might face higher costs, which could in turn reinforce some of the other effects.” It said Romney-Ryan’s cuts, “would of necessity be a great deal stronger … because spending would be so much lower.”

The highly respected independent Paul G Petersen Fouindation reviewed reviewed all the plans including Ryan’s newly proposed spending cap.

It said, “With this cap in place, the reform would slow the growth of Medicare spending over time compared to current law.”

Most Americans are anxious about their financial future. Metropolitan Life conducts research annually called The Metlife Study of the American Dream. The 2011 study says, “Three-quarters of Americans say they are taking actions on their own to build their safety nets. Most Americans do not feel they have an adequate net, overwhelmingly cit[ing] living paycheck to paycheck as the number one issue preventing them.”

Our middle class’s economic anxiety and increased burdens convince me our government has not fully met our constitution’s directive: “to form a more perfect union, establish justice, … promote the general welfare, and secure the blessings of liberty to ourselves and our posterity.

Voters should reject the Romney-Ryan plans and demand Congress fulfill our Constitution’s call for justice and liberty.

About Russellsclearskies

Writing to poke fun at a retired klutz like me who's curiously exploring the absurdities and complexities of the good life. .
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3 Responses to The Wealth Shift in America Runs Counter to our Constitution’s Purpose

  1. Sandy Covey says:

    As always, a very intelligent and enlightening article. I’m so glad you write these. I do have a couple of questions and just need to clarify: 1) I was a bit unclear about Hamilton’s quote about “all plans.” Did that include the President’s Healthcare Reform or just Ryan and Romney? Also, the figures of 6-7% that employers paid, was that before they switched to paying the 3% to 401K’s. I assume that is what you were saying, but have learned not to assume these things. Best wishes to you and Karen, Sandy

  2. Sandy, thanks for helping me clarify the article. First Hamilton comment on the costs of pension plans. You are right, employers were paying 6-7% of payroll costs for pensions and saved money by cutting their payroll costs to 3% with 401(k) plans. The CBO analysis of “All plans” for Medicare did include the President’s and the plans from Ryan and Romney. Jim

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