The following is an interview with Mitchell A. Orenstein, editor of Pensions, Social Security, and the Privatization of Risk.
Q: Is Social Security going to be there when I retire?
Mitchell Orenstein: Surprisingly, the answer is yes. After years of Republicans like Ralph Reed telling us that Social Security won’t be there when Americans retire, that the system is in deep crisis, etc., it turns out that they were entirely wrong. The 2008 financial crisis revealed that Social Security benefits are relatively stable and reliable. It’s your 401(k) that may not be there for you when you retire. The problems of Social Security are relatively small and fixable compared to the massive problems affecting the individual retirement accounts system. And yet, with the decline of company pension plans, more and more Americans will be forced to rely on their savings in these 401(k)-type accounts.
Q: Your book presents several options for pension reform in the United States; which do you think is the best one?
MO: As editor of a book presenting multiple options for reform, I have tried not to pick and choose among the reform ideas offered by the various chapter authors, all of whom are major experts in the field. Gary Burtless’s idea of expanding enrollment in better-regulated 401(k) type accounts, Alicia Munnell’s idea of a new tier of retirement security, and Teresa Ghilarducci’s proposal for guaranteed retirement accounts are all worth considering. My hope is that policymakers and the general public will think for themselves about the reform options on the table and that they will take international examples into account as well. In my own chapter, I argue for looking more closely at reforms in Australia, New Zealand, and the UK, all of which have pension systems similar to our own and have adopted or proposed some form of quasi-mandatory or mandatory workplace pension coverage.
Q: Given the recent stock market performance, why would anybody invest their pension money in 401(k) accounts?
MO: Good question. A lot of us are wondering why we thought stocks were such a great investment. The irony is that this is probably a great time to invest in stocks, at least compared to a few years ago. The best time to contribute to a funded pension is probably when the market is down, even though for understandable political economy reasons people are less likely to believe that investing in the stock market is a good idea at such times.
Q: The Obama administration has a lot on its plate. Is it going to consider pension reform as well?
MO: I believe so. We have seen in recent weeks and months that this administration has an ambitious reform agenda. The Democrats have a large majority in Congress that may not last. Also, Lawrence Summers and Peter Orszag are well-known pension reform advocates. I would be very surprised if they do not put forward a substantial reform to rebalance Social Security and possibly introduce a quasi-mandatory employee pension savings system on top of that. The White House chief of public administration is an author of Nudge, a book that among other things advocated quasi-mandatory pension savings, meaning automatic enrollment in a 401(k)-type account with an opportunity for individuals to opt out if they have other priorities. We know that people are much more likely to save under such circumstances.
Q: Is this a book for the general reader? What audience are you addressing in this book?
MO: We want this book to appeal to policymakers in Washington, D.C., and experts on pension reform but also to the average educated reader. As experts we have a lot of experience writing for other experts. It is sometimes harder for us to write for a general audience. We have taken care to avoid jargon, write in plain English, and make the ideas and numbers accessible to a wide audience. The editing is fantastic, and the chapters relatively short. We hope that students will read this book in class and that policymakers who want a quick introduction to the best reform ideas for the future will read it as well. A lot of people—regular citizens—in the United States are very concerned about their pensions. That’s why Congress has held so many hearings about pension reform recently, inviting several of our authors into the discussion. As we saw in the Social Security debate in 2005, the general public is a major component in these debates. People seek out expertise and formulate their own ideas about reform rather than following what politicians tell them to do. They are interested in and mobilized around this issue. Their future is at stake, after all.