04.13.10
On the Road to Greece
In the recent report by the RSI, we allude to the case of Greece. And while the U.S. is not exactly in a similar predicament as Greece, it’s a cautionary tale. Markets are spooked by its hefty debt load. An International Monetary Fund official indicated that ‘the wider euro zone could retain social security programs while handling expanded state debt, suggesting pension benefits must be trimmed and higher inflation targets may be an option.’ He continues, ”The way out of debt in most countries is led by a reform of the pension or health care system,” he said, adding that raising the retirement age could be one way of cutting expenditure. Why can’t elected officials and stewards of money get on the same page? Basically this official reflects that the entire euro zone faces or will face the issues of Greece, to a lesser degree however.
Fortunately in the U.S. we have raised the age to receive social security benefits to address longevity prospects, but it won’t be enough. Medicare needs to be age and income-adjusted. We continue to kick the can further down the road. Public sector pensions and benefits have not been rationalized quite enough for continued sustainability for retirees and the taxpayer base. The next five years are very important to redress the imbalances of public sector debt and spending. And if there is to be a pullback in benefits owing to sustainability issues, people need to understand how they must plan or work longer to save for retirement. A politician that could smartly present what the case of Greece represents in a U.S. context might just be a winner. People understand the truth when they see it.
The train that left the station long ago, namely the post-war era of retirement benefits, needs an update that reflects the globalized, competitive world we live in. It would go a long way in restoring confidence in government within an economic model that is sustainable. Didn’t the financial crisis teach us anything about living beyond the collective or individual means?
