July 3 2012

More Government Isn't The Key To Women's Retirement Security

Forbes.com

Carrie L. Lukas

 

All campaigns have predictable moments:  the conventions, the naming of the vice-presidential nominee, the sense of a comeback for the candidate trailing in the polls.  Since Democrats have made the notion of a “War on Women” a central campaign theme this cycle, we can also safely predict that we will soon hear about the hardship facing senior women.  Oppose whatever women-friendly expansion of Social Security liberals dream up, and you are party to the War on Women.

Conservatives need to do more than brace for the easily-imagined campaign ads showing them pushing granny and her wheelchair over the cliff.  They should arm themselves with information about how current government policy actually makes women less secure in retirement and the reforms that will help women (and men) live better during old age.

Start with Social Security, our country’s federal pension program.  Liberals will point out that women’s Social Security benefits tend to be smaller than men’s, and that women are more likely to depend on Social Security during retirement. They’ll offer a predictable menu of benefit increases for subsets of senior women.

Conservatives shouldn’t fall into a trap of defending our outdated Social Security system. Instead, they should remind voters of the system’s structural flaws, which truly imperil retirement security and require comprehensive reform.

Most fundamentally, Social Security is well down the path of financial trouble.  Given that the program is already taking in less than it has to pay out each year, it’s irresponsible to consider increasing benefits for anyone until the program is made more financially sound.  President Obama’s own fiscal commission warned that our nation’s entitlement programs are a slow-moving train wreck and urged immediate reform.  The President and his Congressional allies’ failure to heed this warning is the real threat to Social Security and to seniors in the long-run.

Moreover, while the Left can point to women dis-served by Social Security, this is a product of Social Security’s antiquated defined benefit system.  Social Security’s benefit formula is a relic of a bygone era when most Americans were a part of a traditional (husband-as-breadwinner, non-working-wife) family.  Today, a minority of Americans live in this family structure.  Most women, married and unmarried, work outside the home. Many never marry, and divorce is common.

Unsurprisingly, as a result, many women lose out under Social Security’s calculations.  Consider that a wife is entitled to either 50 percent of her husband’s Social Security retirement benefit, or to a benefit based on her own earning history.  This means that working wives often end up no better off than women who never worked and never paid into the system.  That seems—and is—unfair.

Yet stay-at-home moms can end up big losers from Social Security too.  A stay-at-home mom has no right to any portion of her husband’s Social Security retirement benefits if they divorce before their tenth anniversary. This means many newly divorced women must start from square one in saving for retirement.

Social Security also fails many single women.  A single-mom, for example, who has paid Social Security’s taxes her whole life, while struggling to make ends meet, will leave her adult children only Social Security’s paltry $255 death benefit.  Her years of work and thousands put into the system will have been for nothing.

Liberals may want to tweak benefit calculations to help some of these groups, but defined benefit systems will always create winners and losers.  In contrast, defined contribution systems (in addition to being much more financially stable since money contributed is actually saved for retirement) are inherently fairer.  They reward women who work and save, while also ensuring that stay-at-home moms receive a fair share of the retirement income generated during their marriage.  Rather than trying to continually massage Social Security’s inherently unstable pay-as-you-go structure, policymakers should be considering ways to transition to a truly funded retirement system.

This doesn’t mean abandoning the Social Security system.  Conservatives can point to comprehensive reform packages that will actually augment the safety net, so that it better fulfills the promise of preventing poverty in old age, but without imposing an economy-crushing burden on young workers.

Democrats may reject the idea of creating savings accounts within Social Security, but they are also likely to lament that fewer women than men have 401ks or access to private pension systems.  Republicans can take up the cause of encouraging more savings (reducing taxes on investments would be a good place to start).  However, they should warn that forcing businesses to offer a new retirement benefit would be counterproductive, making it even harder for companies to create new jobs.

And ultimately, that’s the real key to women’s retirement security, for this generation and those to come:  We need a robust job market and growing economy.  Our high unemployment exacerbates Social Security’s financial problems because payroll taxes are the system’s lifeblood.  The lack of jobs means families are stretched today and unable to save on their own for retirement.  Anemic economic growth drags down the stock market and erodes the value of the retirement savings that Americans have worked so hard to build.

Democrats’ “War on Women” campaign tactic is meant to distract voters from the struggling economy.  Yet a healthy economy is what is needed to improve retirement security for American women, which is why voters should reject this political pandering and demand a sound economic strategy from anyone seeking their vote.

Carrie Lukas is the managing director of the Independent Women’s Forum.

 

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