Third Way: Its Belief in 401(k)’s Is Not Well Founded; Pensions Are Better for the Non-Wealthy

A common thread of Third Way publications on federal pensions and Social Security is a strong faith in the 401(k)s. Because the private sector switched to them (at tremendous profit to executives and shareholders and tremendous cost to employees), Third Way strongly advocates for them. This move would absolutely come to the tremendous benefit of Third Way’s board of trustees, many of whom have Wall Street interests.

A PBS program, Frontline, outlined the situation in 2006. Having viewed the program, I take a dim view of Third Way’s proposals seeming to favor strongly flawed and expensive 401(k)s to make the Federal Employees Retirement System unaffordable (and ultimately transferred (at great profit) to Wall Street.

A thought: Suppose President George Bush succeeded in privatizing Social Security and then Wall Street crashed, wiping out Social Security funds. What would happen? I say at a minimum that profit-taking Wall Street firms should have all profits disgorged until such time that the Social Security program would have been made whole. If this result is uncomfortable, then Wall Street has absolutely no business handling Social Security or federal pension monies.

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Third Way: Think Tank Advocating for Federal Pension Cuts, Adjustments to Social Security Has Deep, Conflicting Ties to Wall Street

It seems that the theme of the day is how to cut programs that will not affect the lifestyles of the wealthy. The United States is not “broke,” the country has a tax system and can collect more revenue.  Despite having extremely costly wars in Iraq and Afghanistan, the search is on for tough cuts on vital services. Two such proposals involve increasing the contributions that only federal employees pay (about 5%), not other pension participants (in particular Members of Congress). The other involves adjustments to Social Security (raising the retirement age, et al., anything except just raising the cap on FICA).

These devastating proposals are coming from a think tank called Third Way. I had never heard of them, but they are having a outsized voice on policy. Indeed, there are former staffers from the Obama Administration and major Democratic party donors in it.  As a result, I decided to find out who is funding such an organization. I discovered with few exceptions that the organization is governed by wealthy scions of Wall Street. [This post does not cover the staff of the group.]

As the reader can imagine, the tough medicine the group is prescribing will not apply to anyone in the Third Way group. I find this reprehensible at best, unacceptable at the worst.

Third Way Board of Trustees

Name

Title

Firm

John Vogelstein Chairman New Providence Asset Management LLC; Lazard Freres & Co.; Warburg Pincus LLC
Bernard Schwartz Chairman-emeritus BLS Investments LLC; Loral Space and Communications Inc.
David Heller Vice Chairman Goldman Sachs
Dwight Anderson Member Ospraie Management L.P.
Georgette Bennett Member Tannenbaum Center of Interreligious Understanding
William Budinger Member Aspen Institute; Rodel Inc.
Jonathan Cowan Member Americans for Gun Safety, et al.
Lewis Culman Member Cullman Ventures Inc.
John Dyson Member Millbrook Capital Management
Robert Dyson Member Dyson-Kissner-Moran Corp.
Brian Frank Member MSD Capital L.P.
Michael B. Goldberg Member Kelso & Company
Peter Joseph Member Palladium
General Claudia Kennedy (retired) Member First Star
Derek Kirkland Member Morgan Stanley
Ronald Klain Member Case Holdings; Staffer with Vice President Joe Biden; Revolution LLC
Reynold Levy Member Lincoln Center for the Performing Arts
Daniel Loeb Member Third Point LLC
Thurgood Marshall, Jr. Member Bingham McCutchen (lobbyist)
Susan McCue Member Message-Global LLC
Herbert Miler Member The Mills Corporation
Michael Novogratz Member Fortress Investment Group LLC
Andrew Parmentier Member Height Analytics
David Roberts Member Angelo, Gordon & Co.
Howard Rossman Member Mesirow Advanced Strategies Inc; Mesirow Financial Holdings Inc.
Tim Sweeney Member Gill Foundation
Ted Trimpa Member Hogan Lovells LLP
Barbara Manfrey Vogelstein Member Retired from venture capital industry
Joseph Zimlich Member Bohemian Companies

 

Federal Pension: FERS Contribution Proposal Ignores Congress, Others

In all of the discussions concerning the 5% contribution proposal for federal employees’ to pay into the Federal Employees Retirement System, little is mentioned that members of Congress, congressional employees, federal law enforcement officers, air traffic controllers, military reserve technicians and some CIA employees also have agency contributions paid on their behalf.

Federal Government: Current Fiscal Crises Shows the Failings of both the Obama Administration and the Congress

Despite the sentiment of the politicians that they have to address the deficit (difference between revenues and expenses) and the debt (borrowed to pay for expenses beyond revenues), their obsessive focus on federal employees truly demonstrates the failure of the governing structure of the United States.

It does not help that the many members of  the upper levels of our so-called representative government all come from the same high-income, Ivy-League-educated strata of the society that cannot relate to the legitimate issues of the working people. One example of this is that in the discussions involving Vice President Joe Biden and Congress, the only things they can agree on is cutting farm assistance and making low level civil servants only pay a higher portion for the Federal Employees Retirement System (FERS).

The tax system has been ruined by Congress with excessive tax expenditures that overwhelmingly benefit the wealthy and drain off revenues. It has gotten to the point that the tax rates represent a level of taxes that no one pays.

Republicans have the audacity to act like they are fiscally responsible when they declare that the United States is “broke” (it’s not, not as long as it has a system to collect revenue), steadfastly oppose any increase to revenue, believe that cutting all spending will solve the problem of insufficient revenue. The Republican Party’s beliefs stem from the core of their party is wealthy and therefore can pay for all they need and do not wish to pay for the remainder of the society that cannot be “self-sufficient.”

Democrats are no better. I have absolutely no confidence in most of them. Yes, they support some social policy causes, but when it comes to fiscal matters the core of the party are wealthy elites that also do not wish to pay for services used by the majority of the citizenry. While the Republicans parry, the Democrats, generally speaking stay silent (maybe even secretly hoping that the Republicans make some headway). The only time that I have seen the Democrats speak up is when the tides have already turned against the Republicans and they want to ride the waves to victory. They had the Senate, yet lots of policy proposals were left unaccomplished.

With stagnant income and the Congressional intention to shift the burden to those who earn $100,000 or less, the majority of citizens in this should pay close attention to what these politicians do and don’t do.