Posted
February 8, 2006

As Social Insurance Collapses, Social Insecurity Rises

The yo-yo (your own your own) society diminishes America's future.

It’s pretty easy to blame General Motors for its declining fortunes in the global car market. When gas prices were low, they took the easy path to profits by churning out gas-guzzling SUVs, which escaped the fuel efficiency standards by masquerading as light trucks. They ignored hybrid technology and instead focused their technologists on pie-in-the-sky hydrogen vehicles, which are decades (if ever) away.

But yesterday’s decision to slash pensions and health care benefits for GM’s retirees and salaried workers, following similar cuts for unionized workers, bodes ill for all Americans. The employer-based system that the public has relied on to provide these benefits since World War II is collapsing.

In recent months, bellwether companies like GM, IBM and Verizon have joined the thousands of U.S. corporations, whether headquartered in Silicon Valley or Bentonville, Ark., which no longer provide guaranteed pensions and health care for their employees. Instead, they are turning to a system that provides individual retirement accounts in the form of 401(k)s and capped health care insurance plans supplemented with individual health savings accounts.

In the world that has been slowing arriving over the past two-and-a-half decades, it is every man/woman for him/herself. And if conservatives can get their way on school vouchers, they’ll extend the new social insecurity into childhood.

There is something deeply American about this urge to go it alone. Huck Finn striking out for the frontier, and all that. But it is radically at odds with how the rest of the world is dealing with globalization. The easiest example to cite is Japan, whose Toyota Motors yesterday declared a huge increase in profits and will soon become the largest car company in the world. In Japan, the government pension program (the equivalent of Social Security) picks up a far larger share of retirement income and Toyota workers enjoy the benefits of a national health insurance program.

Today’s Wall Street Journal front page story on the collapse of pension programs in the U.S. carried some useful comparisons. “Employer pension plans are far less significant in continental Europe, and health-care costs are lower in nearly every other country… Health-care systems in some countries, such as the United Kingdom and Canada, are financed through general tax revenue. In Germany and several other European countries, all employers and employees pay for health care through a payroll tax. The per-person health-care tab is smaller, and the systems provide universal coverage,” the business paper of record reported.

But here, employers and the Republican-led government are opting for a system that embraces individual risk sold to the public as individual choice. You get to choose what health care coverage you want or need. You get to manage your own retirement investments. Woe unto you should you bet on a dot.com, or a GM. And if you decided to skip going to the doctor to treat that pain in your side in order to save your health savings account for a rainy day, too bad. That cancer is too far gone to treat.

This emerging social system will create winners and losers, something that America has been very good at over the years. Some people will do well and others will do without. The number of people without health insurance will continue to rise. The number of people in poverty in their old age also will rise, a reversal of a 50-year trend.

In the early 1980s, somebody applied the tag “me generation” to the Baby Boomers. The leading edge of that generation is turning 60 this year. The two men it has sent to the White House so far – Presidents Clinton and Bush – have been the architects of this anarchic social system, or at least allowed its imposition by corporate America unchanged and unmitigated.

Unless a new political force emerges soon to counter its ill effects, our children will inherit a brave new world, one marred by social inequality, social insecurity and a void where concern for the common good should be.