Solutions to the System

Beyond Robert Reich

I have done a lot of reading about the causes of the situation we are in. But I also wanted to think about solutions. What follows are some nuggets from Robert Reich (not just his book but also his Substack). But I also tried to weave in suggestions from real conversations with people about our experiences and things that we would like to see change. When I say we, I mostly mean people like myself who had parents that experienced the previous economy and the economy that we have now.

I always come back to my mom’s job at AT&T. Her job included a defined pension that was guaranteed income for life, strong union protections, and employer-backed health benefits for life. My mother worked there her entire life, starting as a telephone operator when she was young.

Things changed and this was not the system I found. Some people around me still had pensions but I didn’t. Pensions were mostly replaced by 401k plans. Our job security was much lower. I saw layoffs and she didn’t. They got generous early retirement packages which is not the same as a severance package. Healthcare became more fragmented. It was still sort of tied to employment. My generation absorbed more risk, market risk in our retirement portfolios, longevity risk and healthcare risk via the future stability of our systems from the ACA to Medicare.

Her system provided security first, growth second. My system provided growth first, security second. The thing that hurt my generation’s employment experience is also what supports our retirement assets. That’s the challenge when we look for solutions. Now one could ask, was that old system sustainable? The old system worked very well for a specific time and group, but it had limits that made it hard to sustain as the whole economy changed.

Even if the old system wasn’t fully sustainable, we didn’t have to replace it with this much individual risk. That’s what Robert B. Reich was getting at. We could make retirement less dependent on individual luck. I can tell you that I was lucky and managed to avoid those horrific layoffs, particularly the ones after the 2008 financial crisis. Others, in some cases, people who sat right next to me at work, got laid off and lost out on a lot of the growth that I experienced. Because I survived those layoffs, I was able to double down on putting money into my retirement accounts. Knowing there was no guarantee, I did just that. It worked out.

What I wishe we could do is to bring back some risk-sharing and reduce the extremes. We could lower the cost pressures that create so much of our modern anxiety. We made choices to get here and if we had a functional government, we could make choices to fix it without tearing it all down.

Social Security may be the easiest problem to fix. The shortfall is real, but it’s not huge relative to the economy. Lifting the payroll cap would help right away. Only income up to around $160K (last I checked) is taxed for Social Security. Raising the cap or removing it entirely doesn’t touch benefits for current retirees and wouldn’t hit the middle class. We’re talking a 1% split between employer/employee over time, a barely noticeable paycheck impact, and huge long-term stabilization of a popular system. What I don’t think works is raising the retirement age because that unfairly penalizes people who work physical jobs.

Medicare is a little more complex. The U.S. doesn’t just spend more on healthcare, we pay more for things that others get much more affordably. The real solutions are around how much we spend and should not require cutting care. We need to address healthcare inflation. I won’t pretend to have the answers but I believe there are answers.

We want to make the future sustainable but not at the expense of those who now rely on their 401ks for retirement. There are the things that if done too aggressively could hurt markets and retirement accounts. Any big tax increases, especially increases in capital gains taxes could impact a subset of retired folks that don’t have the time to recover. Taxing unrealized gains is one idea but if it were to be applied too widely, it could trigger stock market issues. This is why the left sometimes scares retirees but at the same time, the right brings political chaos and that is even scarier.

The least disruptive path and closest to what has worked before (in the post WWII era) is to reduce risk without stopping growth. Universal healthcare decouples jobs from survival. A stronger unemployment system and portable benefits might help. These ideas shouldn’t hurt retirees directly. It just makes life feel more survivable for those that are still working and it might lower the desperation that fuels political fragmentation. We must stop being distracted by culture wars while the rich destroy our economy for their own personal gain.

Instead of attacking wealth, we could give people access. We could shift how capital is owned, not whether it exists. Worker ownership, profit-sharing models, retirement expansion that fits current employment models, are all ideas that could all help. You don’t need to destroy the system to make things fairer. Change incentives for CEOs, campaign finance reform, undoing Citizen United, anti-lobbying measures, and stronger antitrust enforcement all might help. With AI bearing down on us, threatening to take another round of jobs, we better figure something out in a hurry. Social Media and AI have both been built on top of our data, we should have ownership. We just need to use our imagination.