78-15-B4
- Main Page \ Reagan Radio Commentaries \ 1978
| << Previous Broadcast | Next Broadcast >> |
Pensions[edit]
Transcript[edit]There are several ways by which an American can provide for his non-earning years. First, of course, he can earn an income which permits him to accumulate enough wealth to see him through those years. Second, he can invest his earnings in a retirement insurance plan or annuity. But this in turn also requires a pretty high level of earnings. Third, he or she can be a participant in a union or industry-type pension plan in which the employer ends up retiring the worker on a fixed percentage of earned salary. This would also cover public employees, who long ago opted not to participate in Social Security. And of course the latter-- (Social Security) is the retirement plan for a great many. Unlike the other plans the Social Security retirement income is not based on the payroll tax paid over the individual's working years by employer and employee. That was the original idea, but the plan has actually become a pay-as-you-go arrangement whereby today's workers pay a tax to support the workers of yesteryear. Today's workers in turn expect to be supported by a payroll tax on tomorrow's workers. Social Security was predicated on a projection that the number of workers would increase faster than the number of retireees, so the payroll tax would, as time went on, become less of a burden. Unfortunately that was a false projection . Fewer and fewer workers are supporting more and more recipients and the program is trillions of dollars out of actuarial balance. Public employees' pension funds are, to a large extent, unfunded liabilities even though public employees contribute a percentage of their income to such funds. The employer--in this case governments--simply count on future tax funds to pay their part of the obligation. Federal unfunded pension liability is estimated at around $450 billion and growing. States and municipalities are unfunded by almost $300 billion. Curiously, the Federal government, which does not regulate the solvency of its own plans, subjects private pension plans to a tough scrutiny by something called "Erisa". The contributions by employees and employers are invested in America's industry. Indeed, they are an important source of capital to fuel our economy. A survey of the nation's 1600 largest companies reveals they can meet their pension obligations with only three months of pre-tax earnings. Employee pension funds own one-third the equity capital of American industry. Now Secretary Califano has suggested that maybe the answer to Social Security's problem is for it to take over the private funds. That's like the captain of the Titanic telling the passengers to scuttle the life boats and stay on the ship. He even suggests it is unfair for workers who pay both for their pensions and the Social Security tax to have retirement incomes better than those offered by Social Security. In other words, scuttle the fully-funded programs in an effort to bail out Social Security. In Washington, things are getting curiouser and curiouser. |
Details[edit]
| |||||||||||
Added Notes[edit] |
