- ISBN13: 9781594201677
- Condition: NEW
- Notes: Brand New from Publisher. No Remainder Mark.
Product Description
From the bestselling author of Buffett, When Genius Failed, and Origins of the Crash, a wake-up call to the pension and retirement crisis facing America and the road map for a way out
In While America Aged, bestselling author Roger Lowenstein explains how corporations and governments ran up ruinous pension and health-care promises to workers—promises that are now coming due and that will hit America like a tsunami if nothing is done.
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Roger Lowenstein is the author of my favorite books “Buffett” and “When Genius Failed”. His ability to collect the historical facts is amazing: the author gives 575 references to other sources throughout the book. I like this approach very much. This book is also timely and accurate: it is not only a spell-binding economic and political history, the origin and the problems of IRAs, 401(k) and other mechanisms – it is an urgent call to action and a prescription for reform. You will also find what do the precedential candidates of 2008 campaign think about this issue. Besides that, Lowenstein, a regular contributor to many financial periodicals, proposes his own solution. The author recognizes that the workers are entitled to decent security in their retirement – a critical issue as the country ages. He warns that the pension wars that erupted in Detroit, New York and San Diego are only the first. Government and corporations across the country used pensions as a seemingly easy way to curry favor with unions (easy because the expense would be deferred until a later generation). But now, with cumulative retirement deficits approaching $1 trillion, the day of reckoning has arrived.
The author declares that pensions are perfect vehicle for procrastination; in the financial world, they are the most long-enduring promises that exist. The only rival is the federal Social Security system – but there, surprisingly, the commitment is no so airtight. Congress, if it chose, could reduce or cancel Social Security benefits tomorrow. Pensions are forever.
There is a noteworthy example in the book: the young men who went to work for General Motors after World Word II, when GM ruled the roost of American business, were promised pensions and health care benefits that remained in force for half a century. One GM retiree, who died at 111 in 2006, had been collecting pension and retiree health benefits for forty-eight years. When he first went to work, in 1926, GM’s managers could not have had the faintest conception of what the company could or would be paying in benefits eighty years later.
I do also recommend the other books by Roger Lowenstein in addition to his book.
Rating: 4 / 5
Although Lowenstein is a talented writer and the topic of retirement in America is an important one, the narrow focus of this book makes it hard to recommend. Lowenstein skillfully recounts in detail the pension plan difficulties faced by General Motors, the New York City subway system and San Diego.
However, these three stories seem to exist in isolation. He doesn’t spend enough time putting them in the context of other government and private pension and 401(k) plans. Lowenstein seems to have focused on making sure the three stories are easy to read and in this he has succeeded. But in doing so, he has not provided the hard data that a reader needs to really understand the issue. There is not a single chart of table in the book. There are virtually no benchmarks in the book – it’s hard to judge the appropriateness of the pay and pensions described in the book without details of the payroll and benefit costs of other American workers.
Although the stories were good, after reading 230 pages I didn’t feel that I had learned anything significant that I did not know before.
Rating: 3 / 5
I enjoyed reading this book and it gave me an better understanding on how public and union plans can succumb to the pressures to increase benefits now without having to pay for them until later. Gives a good historical perspective of what was going on at GM, in NYC, and San Diego when their pension plans developed their problems.
One thing that is never explicitly stated is that all these governments and unions that crippled their finances by promising generous postretirement medical benefits must be praying for the enactment of universal health care to bail them out of paying for their promised benefits.
I had to take a star off for the final chapter on what should be done going forward. I suppose after an excellent history lesson, Mr. Lowenstein felt the need to tie his three vignettes together, generalize the lessons here to the state of all US pension plans, and come up with a set of solutions. However, the problems facing public and union pension plans are different from those that have put private pension plans in decline. Private pension plans have been hurt by overregulation and by the high cost and volatility that these plans have on a company’s financials under new and evolving accounting standards. A private company can freeze it’s plan (if its not collectively-bargained) and many have chosen to do so to provide benefits with 401(k) plans whose costs are easier to control.
The other failing of the last chapter is that, after keeping his politics mostly in check through most of the book, he starts reciting liberal talking points to come up with his solutions. He lauds Hillary Clinton by name for her solution of providing government-paid 401(k) accounts for low income people, but condemns President Bush (along with the right wing) for exaggerating the funding strains on the Social Security system and proposing to partially privatize Social Security with a 401(k)-based solution. After spending the whole book expounding on the problems caused when current benefit promises rely on future cash outlays, he then brushes off the same dynamic when it applies to the Social Security system.
Rating: 4 / 5
The nation’s pension system is collapsing at the same time its population is aging. In the late 1960s, 60% of Americans were covered by a pension plan; today it is under 20% of those in private employment. Pension funds in the private sector are $350 billion in deficit, and many employers (IBM, Sears, etc.) are freezing their plans to keep obligations from growing further. Similarly, states and localities are hundreds of billions behind on funding, and Lowenstein declines to even get into Social Security’s status or obligations for health care to retired public employees. (In another source Lowenstein estimates a $1 trillion deficit for retired public employees – presumably this also includes health care.)
“While America Aged” covers how we went from almost no pensions in the early 1900s (most worked on farms, and ‘retirement’ consisted of working less while relying more on family members), to a high proportion of coverage (more workers were in industry), to unsustainable benefit levels, using three case studies (G.M., the New York City subway system, and San Diego municipal employees).
In each case, management officials were lulled (and sometimes forced through long strikes) into acceptance by the delayed impact involved. At first few, if any workers were retired, and they were supported by a very large employee base.
In G.M.’s case, the firm also benefited by being the dominant force in the industry – 50%+ market share. Then autoworkers aged, Japanese autos reduced G.M.’s market share, cheap money to encourage home ownership and consumer spending undermined G.M.’s ability to attain adequate pension-fund earnings, and G.M. dug itself in even deeper with unrealistic assumptions on fund earnings and further benefit increases. Thus, from 1991-2006 it poured $55 billion into its pension funds, and only paid $13 billion in dividends.
To date, most corporations continue to minimize the problem, or pass off pension obligations to the government through bankruptcy, especially steel and airline companies. Unfortunately, the PGBC program is in deficit as well, and not designed to also take the burden of municipal pension funds.
New York City’s transit, teachers, sanitation, firemen, and police public employee unions engaged in a “leapfrog” contest during the 1960s. Between them they steadily increased pension benefits through lowering the age of retirement, the proportion of “ending” salary paid upon retirement, changing “ending” salary to just the last year and including overtime (a extra $76 in overtime pay during a retirees final year created $1,100+ in pension liabilities), adding an inflation index provision, and reducing/eliminating employee contributions. These escalating costs for the MTA were hidden through deferred maintenance, state and federal aid, a soaring stock market, actuarial manipulation, and increased taxes. Mayoral egos bent on higher office often facilitated these additions. All this on top of high pay – in 2005 the average high-school educated NYC worker earned $29,000, vs. a public bus driver at $63,000.
Similarly, San Diego in 2005 found itself with a public employee pension fund deficit of $1.7 billion ($6,000/family of our), no audited financials, and a reputation as the “Enron-by-the-Sea.” It had fallen into this through Proposition 13, mayoral candidates aspiring to higher office (eg. Pete Wilson), and union influence on elections and decision-making.
Finally, a 5/19/08 USAToday article contends that state and local retirement obligations total $3.6 trillion, out of a total government retirement debt of $61.7 trillion ($541,472/household), on top of $13.8 trillion in personal debt (mortgages, credit cards, etc.), for a total of $650,644/household.
Rating: 5 / 5
Very interesting and informative book, enjoyed it immensely. However I part company with the author when it comes to solutions. His only idea seems to be tax increases so the public can pay for the rapacious antics of the public sector unions in particular or so the government can bail out the private sector companys that have caved into unions. And heaven forbid that people actually be allowed to control their own retirement funds and investements, the nanny state uber alles.
Rating: 3 / 5