The Insecure American


May 31, 2015

The Insecure American

by Paul Krugman

http://www.nytimes.com/2015/05/29/opinion/paul-krugman-the-insecure-american.html?_r=0

Dr Paul KrugmanAmerica remains, despite the damage inflicted by the Great Recession and its aftermath, a very rich country. But many Americans are economically insecure, with little protection from life’s risks. They frequently experience financial hardship; many don’t expect to be able to retire, and if they do retire have little to live on besides Social Security.

Many readers will, I hope, find nothing surprising in what I just said. But all too many affluent Americans — and, in particular, members of our political elite — seem to have no sense of how the other half lives. Which is why a new study on the financial well-being of U.S. households, conducted by the Federal Reserve, should be required reading inside the Beltway.

Before I get to that study, a few words about the callous obliviousness so prevalent in our political life. I am not, or not only, talking about right-wing contempt for the poor, although the dominance of compassionless conservatism is a sight to behold. According to the Pew Research Center, more than three-quarters of conservatives believe that the poor “have it easy” thanks to government benefits; only 1 in 7 believe that the poor “have hard lives.”

And this attitude translates into policy. What we learn from the refusal of Republican-controlled states to expand Medicaid, even though the federal government would foot the bill, is that punishing the poor has become a goal in itself, one worth pursuing even if it hurts rather than helps state budgets.

But leave self-declared conservatives and their contempt for the poor on one side. What’s really striking is the disconnect between centrist conventional wisdom and the reality of life — and death — for much of the nation.

Take, as a prime example, positioning on Social Security. For decades, a declared willingness to cut Social Security benefits, especially by raising the retirement age, has been almost a required position — a badge of seriousness — for politicians and pundits who want to sound wise and responsible. After all, people are living longer, so shouldn’t they work longer, too? And isn’t Social Security an old-fashioned system, out of touch with modern economic realities?

Meanwhile, the reality is that living longer in our ever-more-unequal society is very much a class thing: life expectancy at age 65 has risen a lot among the affluent, but hardly at all in the bottom half of the wage distribution, that is, among those who need Social Security most. And while the retirement system F.D.R. introduced may look old-fashioned to affluent professionals, it is quite literally a lifeline for many of our fellow citizens. A majority of Americans over 65 get more than half their income from Social Security, and more than a quarter are almost completely reliant on those monthly checks.

These realities may finally be penetrating political debate, to some extent. We seem to be hearing less these days about cutting Social Security, and we’re even seeing some attention paid to proposals for benefit increases given the erosion of private pensions. But my sense is that Washington still has no clue about the realities of life for those not yet elderly. Which is where that Federal Reserve study comes in.

This is the study’s second year, and the current edition actually portrays a nation in recovery: in 2014, unlike 2013, a substantial plurality of respondents said that they were better off than they had been five years ago. Yet it’s startling how little room for error there is in many American lives.

We learn, for example, that 3 in 10 non elderly Americans said they had no retirement savings or pension, and that the same fraction reported going without some kind of medical care in the past year because they couldn’t afford it. Almost a quarter reported that they or a family member had experienced financial hardship in the past year

And something that even startled me: 47 percent said that they would not have the resources to meet an unexpected expense of $400 — $400! They would have to sell something or borrow to meet that need, if they could meet it at all

Of course, it could be much worse. Social Security is there, and we should be very glad that it is. Meanwhile, unemployment insurance and food stamps did a lot to cushion unlucky families from the worst during the Great Recession. And Obamacare, imperfect as it is, has immensely reduced insecurity, especially in states whose governments haven’t tried to sabotage the program.

But while things could be worse, they could also be better. There is no such thing as perfect security, but American families could easily have much more security than they have. All it would take is for politicians and pundits to stop talking blithely about the need to cut “entitlements” and start looking at the way their less-fortunate fellow citizens actually live.

A version of this op-ed appears in print on May 29, 2015, on page A23 of the New York edition with the headline: The Insecure American

4 thoughts on “The Insecure American

  1. It will be a matter of time when Malaysia will have to deal with problems of an aging population and review our social policy. Let us hope our economic policy pundits can address this matter now since we will face the challenge of funding pensions, Socso and the EPF.–Din Merican

  2. So long as interest rates remain depressed with threats that Banks may actually make you pay for keeping you money with them the middle class will not see the light of day. In some countries banks are already charging you for keeping your money with them while in others the interest rate is so low that it does not matter. But the funny thing is that when the banks make loans they charge from 4-8 % depending on their client.

    In the developed and developing world the middle class as we know it is being eroded largely due to hostile policies by governments. Further, the advent of technology and the internet has made many middle class jobs redundant. Young people who are forced to take large student loans find out that upon graduation they do not have the right degree and have to take on jobs that are well below their qualifications. Wages are kept low by allowing migrant workers, their wages becomes the new minimum wage, to come in and take on jobs that “citizens do not want to do”- The Dirty, Dangerous, Difficult jobs. Parents with some means have no choice but to subsidise the wages of their adult children who are waiting to inherit the only house the parents own.Where is this all leading to is anybody’s guess.

  3. PS. One of the reasons for disruption is the advent of Sovereign Funds. In most economies throughout the world the Sovereign Funds have become major players in the economy by default. Even large corporation prefer to do business together with them rather than try to undercut them. Private equity is no match for these funds because the Sovereign Funds have the additional advantage of the regulatory mechanism. We are slowly going back to the days of the East India Company when parent used to tell their children that even if you become a chicken farmer make sure that the chicken belong to the Company( Government).

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