The funds for retirement for many workers will come from a variety of sources including Social Security (a publicly run defined benefits plan), private defined benefits plans, defined contribution plans, and even bank accounts. Just as FDIC and FSLIC were designed to provide insurance for bank accounts, PBGC was designed to provide insurance for private defined benefits plans. The National Review ran a very good discussion of the problems facing PBGC by John Boehner. I wish we had more principled conservatives in Congress such as Mr. Boehner.
On the general issue of economic security and how some in the GOP are proposing ways to undermine the protections of Social Security, see Jonathan Cohn who echoes some of the wisdom on these issues that have been provided by Mark Thoma. Alas, the National Review had to run a weak attempt to rebut Mr. Cohn from Michael Cannon:
Which would you rather have, freedom or security? … Social Security privatization, school vouchers, and deregulating healthcare would expand the menu of choices available to ordinary people … From whom would you rather buy bread: a government monopoly, a private monopoly, or one of a number of competing grocery stores? It’s really not much of a contest. The government and private monopolies would have consumers right where they want them … In essence, health-insurance regulation is a product.
Insurance is not the product, it’s the means to pay for the product. The health care debate is complicated and not all liberals are advocating socialization of prescription drugs and doctors. But it would be hard to argue that the current market system in the U.S. provides health care efficiently. Also notice that Mr. Cannon fails to address the issue of equity, that is, how to address the health care needs of the poor.
I also noticed he spent very little time on retirement savings. The government monopoly canard belongs to George Will who seems to think we would get a better deal from private brokers even though their only potential advantage – lower transaction costs – does not fit what most observers see as the facts. In the Cato & Club-for-Growth view, the issue is all those extra expected returns from stocks as they ignore the extra risk from holding stocks. What this crew fails to appreciate is that households can already pursue higher expected returns in their private defined contribution plans to combine with the low risk, modest returns from bonds held in the public defined benefits plan we call Social Security. Of course, Mark Thoma would remind us of longevity risks, which are one of the reasons why putting some of one’s retirement savings into a defined benefits plan might be optimal. In theory, the private sector could provide such mechanisms, but for some reason – private markets have not done so.