A Solution to America’s Devastating Retirement Shortfall

You probably don’t know about it, but you should: there is a huge “retirement savings gap” in America. The gap is the difference between the assets available to families and the assets that they need to retire at age 67 without incurring a significant lifestyle change. A 2013 study by the National Institute on Retirement Security found that among working households ages 25-64 the collective gap is between $6.8 trillion and $14 trillion.

Really more like a gorge than a gap.

This shortfall is distributed among a very broad swath of workers. In fact, the median retirement account balance for working-age households is $3,000. In other words, the typical working family is on a path to severe retirement insecurity.

Some of the causes of this crisis have to do with economic transformations we’ve undergone in recent decades. For one thing, stagnating—and in many sectors, declining—wages make it hard for workers to devote adequate resources to retirement. Additionally, the much-noted transition in the private sector from defined benefit pensions to defined contribution retirement schemes like 401(k) plans has shifted massive amounts of risk to workers, and, in many cases, decreased the value of retirement benefits — especially for workers who don’t begin putting money in their accounts early in their working life.

The typical working family is on a path to severe retirement insecurity.

On the other hand, one cause of the crisis has been around for decades. Throughout the many changes in the American economy, labor market, and retirement system, the share of workers lacking access to employer-based plans has been alarmingly high, usually hovering between 40 and 50 percent. Though workers whose employers offer no plan could theoretically open an Individual Retirement Account (IRA) on their own, the data are overwhelmingly clear that far too few of them do. A number of reasons fuel this phenomenon. First, sitting down and making one’s own financial plans for a retirement that might be many decades away is difficult and counter-intuitive. Second, the array of investment products available in today’s marketplace is complex and bewildering. Finally, low- and middle-wage workers often wind up paying very high fees.

Fortunately, the Illinois Secure Choice Retirement Savings Program, signed into law on January 4^th, addresses several of these problems. Through this legislation, many workers will now be automatically enrolled in a Roth IRA with a 3% payroll deduction. All workers qualify who have worked for a company with at least 25 employees that has been in business for at least 2 years, and offers no retirement plan. Workers may opt out, or select a contribution level other than 3%.

In many ways, this is a modest idea: it doesn’t require employers to fund these accounts, and it doesn’t involve any government subsidy. On the other hand, it tackles some major issues. First and foremost, it directly takes on the problem of access to employer plans. Secondly, by enrolling people by default unless they want to opt out, it will increase participation. Finally, by pooling a huge number of participants into a single program, workers—especially those who have low wages and work for comparatively small firms—will benefit from fees that are far lower than many would have otherwise paid.

The idea of the automatic enrollment IRA for workers without access to employer plans has been around for nearly a decade. It was invented by Mark Iwry, then of the Brookings Institute (now at the U.S. Treasury Department), and David John, then of the Heritage Foundation (now at AARP). It was supported in 2008 by the presidential campaigns of both Barack Obama and John McCain, and has been introduced in dozens of state capitols. However, due to opposition from the financial industry, no state was able to enact a law implementing such a program—until we passed Secure Choice in Illinois.

Interestingly, after years of battling with special interest groups over this legislation, most of the concerns recently expressed are focused on the question of why the law doesn’t go further. Some have asked why the employee contribution level is only 3%, or why it doesn’t escalate incrementally every year. Others point out that by exempting businesses with fewer than 25 employees, we’ll leave too many workers without coverage. These points are all sound. Indeed, the Illinois Secure Choice Program, while a major step, will not entirely solve the problem of retirement security for workers in the state who currently lack access to workplace plans. What’s more, it makes no progress on wage stagnation or most of the challenges associated with the shift to defined contribution retirement plans.

So we still have much more work to do if we are to create truly adequate retirement security for all workers. But after many years of changes in retirement policy that have usually meant bad news for American workers, I’m proud to have played a role in moving our society in a new direction, and I’m energized to build on this momentum and strive for progress in the years to come.

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Martin Luther King Jr. said, “America is going to hell if we don’t use her vast resources to end poverty and make it possible for all God’s children to have the basic necessities of life.”

Today, 150 years after the end of slavery, every other black baby in America is poor. Every third Hispanic baby is poor. Nearly every fourth rural child is poor. All told, there are 14.7 million poor children and 6.5 million extremely poor children in the United States of America. It is a national disgrace that such an unconscionably large number of children are homeless, hungry and living in poverty in a country with the world’s largest economy.

It doesn’t have to be this way.

It is way past time for a critical mass of Americans to confront the hypocrisy of America’s pretension to be a fair playing field while almost 15 million children languish in poverty. Sadly, politics too often trumps good policy, moral decency and responsibility to the next generation and the nation’s future.

Politics too often trumps good policy, moral decency and responsibility to the next generation.

But the Children’s Defense Fund has just released a groundbreaking report, Ending Child Poverty Now, showing how — for the first time — we can massively reduce this scourge. The CDF’s plan would cut child poverty overall by 60 percent, shrink black child poverty by 72 percent, and improve economic circumstances for 97 percent of poor children – all at a cost of $77.2 billion a year, a relative pittance.

By pursuing these policies immediately, we would not only improve the lives and futures of millions of children; over the long term, we would save taxpayers hundreds of billions of dollars annually. Child poverty costs our country about half a trillion dollars a year, six times more than what it would cost to significantly reduce child poverty and improve the future for millions of children, their parents and the country.

In its report, the CDF has identified multiple ways to pay for these changes without increasing the federal deficit, such as closing tax loopholes and cutting corporate subsidies. The report concludes that by investing another two percent of the federal budget to improve programs and policies we already know work – such as parental employment, making work pay and ensuring that children’s basic needs are met – the solution to ending child poverty is within reach.

Children have only one childhood — they can’t wait. It’s time to act with urgency and, together, ensure that all God’s children have the opportunity to reach their potential. If we love America, and we love our children, we must all stand against the excessive greed that tramples the millions of children entrusted to our care.

Read the report at the Children’s Defense Fund website, and sign up to receive updates about how you can fight for a real plan to reduce child poverty by 60 percent right now.

Sargent Shriver, President Johnson’s personal choice to lead the War on Poverty, was once asked which anti-poverty program he considered the most important.

“My favorite is Head Start because it was my idea,” he answered. “But I am proudest of Legal Services because I recognized that it had the greatest potential for changing the system under which people’s lives were being exploited.”

Legal services, also known as civil legal aid, has indeed been a potent anti-poverty tool in two ways. First, through individual case work that enables poor people to gain access to the rights and benefits from state and federal service agencies, health care providers, and schools to which they are entitled. Second, through large, class-action lawsuits and advocacy efforts that change laws and governmental policies that adversely―and overwhelmingly―affect poor people.

With the 50^th anniversary of the War on Poverty in 2014, we have been treated to numerous assessments of the effectiveness of Johnson’s (and Shriver’s) program these past 12 months. It is indisputable that tremendous progress has been made and that much work remains.

To continue progress, civil legal aid must be deployed more broadly in future efforts to combat poverty, and public resources for legal assistance must be increased greatly.

With regard to class action lawsuits, we have seen how civil legal aid has resulted in significant legal victories. In 1970, legal aid attorneys successfully argued before the U.S. Supreme Court in Goldberg v. Kelly that state welfare departments cannot terminate benefits without first providing applicants with a fair hearing. In 1973, California Rural Legal Assistance successfully sued to stop large agricultural operators from requiring migrant farm workers to use short-handled hoes while working in fields. (The short-handled hoes forced workers to stay bent over for long periods of time; field managers required their use because if they saw workers standing up, then they knew that they were resting and not working. After these hoes were banned, back injuries among farm workers dropped by more than 30 percent. ) More recently, a federal lawsuit by Greater Boston Legal Services resulted in changes in policy by the Massachusetts Department of Transitional Assistance which had improperly denied benefits to people living with disabilities.

A look at how civil legal aid case work for individuals struggling with homelessness and/or unstable housing, as well as those who are victims of intimate partner violence, is also instructive.

Civil legal aid yields a measurable―and significant―return on investment.

Numerous programs around the country demonstrate that civil legal services can help poor people keep their housing, or negotiate exits from housing that prevent immediate evictions, and ensure a smooth transition to safe, affordable housing. A pilot program launched in 2009 by the Boston Bar Association showed conclusively that poor people fighting eviction notices in housing court in Quincy, Massachusetts fared much better when they were represented by attorneys. Two-thirds of those with full representation kept their housing; only one-third of those who went through housing court without an attorney were able to do the same. Similar results have been found in New York City, San Francisco, and San Mateo County in California.

Meanwhile, a landmark 2003 study published in Contemporary Economic Policy showed that legal services is one of the most effective ways to help women living in poverty escape intimate partner violence. Amy Farmer and Jill Tiefenthaler, researchers at the Carnegie Mellon Census Research Data Center, were intrigued by a U.S. Department of Justice report noting that rates of domestic violence had significantly declined during the 1990s. They analyzed data from the National Crime Victimization Survey and the U.S. Census to tease out the reasons for the improvement. Their conclusion? Access to civil legal services ensured delivery of protective orders; assistance with child custody and support; and divorce and property distribution that victims needed to begin rebuilding their lives. Civil legal assistance was also critical for resolution of domestic violence-related legal disputes around immigration, housing, and public benefits.

While services provided by emergency shelters, counselors, and hotlines are vital in the short-term, Farmer and Tiefenthaler wrote, services provided by civil legal aid “appear to actually present women with real, long-term alternatives to their relationships.” (It is also interesting to note that between 1994 and 2000, the period during which incidents of domestic violence declined, the availability of civil legal services for victims of domestic violence increased 245 percent—from 336 such programs to 1,441).

Despite these clear successes, many people do not understand what civil legal aid is, and surveys regularly find that most Americans erroneously believe that poor people have a right to free counsel in civil cases. Meanwhile, state and federal funding for legal assistance is well below what it needs to be.

This fall, the Boston Bar Association’s Statewide Task Force to Expand Civil Legal Aid in Massachusetts released Investing in Justice, a report showing that more than 60 percent of those who are eligible for civil legal aid in Massachusetts and seek services are turned away due to lack of resources. (Full disclosure: I am a member of the task force.) The Task Force proposed that the Commonwealth’s investment in civil legal aid be increased by $30 million over the next three years to begin to address the unmet need. Currently, the state invests $15 million annually in civil legal aid.

The irony, of course, is that the civil legal aid yields a measurable―and significant―return on investment. Looking at work solely related to housing, public benefits, and domestic violence, three independent economic consulting firms which did analyses for the Task Force found that every dollar spent on civil legal aid in eviction and foreclosure cases saved the state $2.69 on services associated with housing needs such as “emergency shelter, health care, foster care, and law enforcement.” Every dollar spent assisting qualified people to receive federal benefits brings in $5 to the state. Every dollar spent on civil legal aid related to domestic violence is offset by a dollar in medical costs averted due to fewer incidents of assault.

This summer, Philadelphia resident Tianna Gaines-Turner became the first person actually living in poverty to testify before Congressman Paul Ryan’s Congressional hearings on the War on Poverty. In her strong and moving testimony she spoke of the need for increased state and federal funding to end poverty, saying, “People living in poverty―those who were born into it, and those who are down on their luck―want to get out of poverty. We want to create our own safety nets, so we never have to depend on government assistance again.”

Civil legal aid is a powerful tool. It helps people living in poverty build a foundation of stability so they can create a better future for themselves, their families, and our communities.

When Congress reconvened earlier this month, House Republicans wasted no time in attacking the Social Security program. They passed a rules package that includes language to prevent the House of Representatives from taking a commonsense, fiscally responsible action that would prevent a needless, across-the-board benefit cut of almost 20 percent.

This commonsense step is called reallocation, a simple budgetary fix that temporarily changes the share of the payroll tax dedicated to each of the Social Security trust funds—the retirement fund and the disability fund. It’s a common procedure that has helped the Social Security programs deal with temporary shortfalls in both funds 11 times in the past. The current shortfall to Disability Insurance was long-anticipated—a result of changing demographics which include aging baby boomers and women entering the workforce in greater numbers in the 70s and 80s.

Reallocation offers a sure fix that has worked time and again. That’s why leading aging and disability organizations all strongly oppose the new rule – including AARP, the National Committee to Preserve Social Security and Medicare, Social Security Works, NOSSCR (of which I am the Executive Director) and more. A group of Senators immediately responded by sending a letter to Senate Majority Leader Mitch McConnell, urging him to “forcibly reject” the House Republican rule.

“Holding hostage the Social Security benefits of any American, particularly those of the 9 million Americans with disabilities who are at risk in the coming years, is an untenable proposition.”

Congressional politicking comes at the expense of the millions of Americans who rely on the Social Security Disability program.

The truth is that this Congressional politicking comes at the expense of the millions of Americans who rely on the Social Security Disability program, established over half a century ago to serve as a vital lifeline for those with serious illnesses and disabilities.

One recent story from a beneficiary illustrates clearly how people will be affected if automatic benefit cuts kick in as a result of the House rule. Abby (name changed) was diagnosed with Type I diabetes and started requiring insulin when she was 15 years-old. Even with her health challenges, she graduated from high school and had a successful, decades-long secretarial career.

Although Abby stayed very fit, paid close attention to her diet and managed the disease for 40 years, diabetes began to interfere with her ability to work due to the onset of new complications, including episodes of extreme confusion and passing out due to hypoglycemia. As a result, Abby was no longer able to work and consequently lost her medical insurance. Despite repeated attempts to return to work, she was unable to keep her blood sugar under control.

Abby initially filed for Social Security coverage and was denied. While her case was pending, she had many more blackout episodes and made the hard decision to stop driving for safety reasons. She did not have enough money to pay for a specialist who could get her symptoms under control. She feared passing out in public and having to pay for an ambulance, so she rarely left her home. She passed out on a regular basis, waking up with no recollection of what happened or how long she’d been out.

After two years of waiting, Abby had her Social Security hearing, and, with the help of an experienced Social Security Disability attorney, she was approved for coverage. This life changing decision means that she can now get health coverage, allowing her to see a diabetic specialist. And, she can afford an insulin pump and other supplies she needs on a daily basis.

Abby worked and paid into the Social Security system for decades, and tried to keep working for as long as she could. Her story is one of millions, and shows why we need to protect the program from harmful cuts and politically motivated changes.

Congress needs to enhance and strengthen this vital program for the 11 million individuals who rely on it to help keep them out of poverty. In addition to reallocating money from the retirement and survivors’ trust fund, Congress also needs to fully fund the Social Security Administration. This will alleviate backlogs in processing claims and ensure sufficient funding for program integrity work. People like Abby shouldn’t have to wait two years for basic healthcare.

Social Security has been a hallmark of our nation’s social infrastructure for decades, and its values go well beyond dollars and cents. The program strengthens economic security and dignity for all Americans. It also provides a boost to local economies across the country. We’re calling on the new Congress to take action to preserve and fortify the program – for current and future generations – not by partisan politicking, but through sensible, commonsense reforms to support the American people. Consideration of any changes to this vital system must include the voices and views of people with disabilities as well as all Americans who may need Disability Insurance in the future.

Democrats and Republicans agree Congress should reauthorize the outdated Elementary and Secondary Education Act (ESEA). However, Senate Republicans, led by Chairman Lamar Alexander (R-TN), introduced a draft reauthorization bill earlier this week – titled “Every Child Ready for College or Career Act of 2015” – that would do the opposite. In other words, the needs of the most vulnerable students are least served by Alexander’s bill.

While President Obama pronounced education equality as “the civil rights issue of our time,” Alexander’s proposal turns back the clock and perpetuates existing inequities in education. Here are 5 reasons Alexander’s bill fails disadvantaged students:

1) Opens the door to drastic budget cuts: The bill eliminates the “maintenance of effort” (MOE) provision, which requires districts receiving Title I funding – extra money for schools serving low-income students – to maintain state spending on education at roughly the same level as the previous year. The MOE provision is important because it keeps states honest. It ensures that federal dollars intended to better educate poor children are used for that purpose, instead of displacing general revenue.

2) Diverts funding away from students who need it most: Alexander’s bill allows states to opt out of the current Title I formula and send money out on the basis of the percentage of poor students. The current formula, while problematic for many reasons, targets Title I funding to schools with concentrations of poor students. Alexander’s proposal would significantly dilute the funding, sending it to schools with higher income populations and limiting the ability of the funds to reach students who need it most.

3) Lowers academic standards: After graduating, students will enter a global economy. But will they be prepared to compete? Alexander’s bill requires states to establish a different (read: lower) set of standards for students who aren’t planning to go to college and abolishes the requirement that standards for students who do intend to go to college be internationally benchmarked. By creating a two-track system, Alexander’s bill will limit the life prospects for students living in poverty and in low-income communities. By lowering standards – and allowing states free reign to set them wherever they want – his bill threatens our nation’s future economic competitiveness. A risk that we can’t afford to take when we are 26^th in the world in math.

Alexander’s proposal turns back the clock and perpetuates existing inequities in education.

4) Rolls back school accountability: What happens when schools are consistently and chronically failing students? According to the Alexander bill, not a whole lot. The bill all but eliminates school accountability. While states must develop an accountability system, there are no requirements for these systems, leaving states free to ignore underperforming students and deny them their best hope of breaking the cycle of poverty and rising to the middle class: a good education.

5) Denies parents vital information about student performance: For parents looking to determine where to send their child to school, the Alexander bill takes away one of the most useful sources of data: comparable student achievement results. The bill provides two options for testing – and both options leave parents in the wilderness. The first option allows states total flexibility to decide when and where to assess student progress. The second option retains annual student assessments but allows them to vary by district. This approach would make it difficult, if not impossible, to meaningfully compare student performance across districts. These provisions would also lead to decreased accountability and allow underperforming students to fly under the radar.

Just as important as what is in Senator Alexander’s bill is what is not. We know that the Title I formula is wildly unjust and unequal, providing more than three times as much per pupil spending for poor students in Wyoming than in neighboring Utah, for example. Yet Alexander’s proposal does nothing to more fairly allocate limited federal funds, leaving the overly complex and not well-targeted formulas in place. We also know that high-quality early childhood education is one of the greatest resources for improving long-term outcomes for children living in poverty. Quality early childhood programs have been linked with improvements in employment rates and earnings, reduced dependency on public assistance and crime, and even elevated family well-being. Yet Senator Alexander failed to provide any additional investments in early childhood.

So, how could we improve Sen. Alexander’s ESEA reauthorization bill? To start, an effective reauthorization must include college-and career-ready standards, statewide annual assessments that lead to better, fairer, and fewer tests, meaningful statewide accountability systems, measures that make funding practices fair and efficient, and a substantial investment in high-quality early childhood education. These provisions will help ensure that all students have an opportunity for success.

A Solution to America’s Devastating Retirement Shortfall

We Can Reduce Child Poverty by 60 Percent Right Now

Civil legal assistance saves money and helps people escape poverty

Top 5 Reasons Sen. Alexander’s Draft Education Bill Fails Students

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