The United States is ready to make some changes, and topping my wish list for public and private leaders in 2012 is that they recognize this fact.
Of the major lessons learned in 2011, none may be more important than the issue of national solvency. Solvency has become not only a matter of fiscal sanity, but also one of competitive necessity.
We are not alone. The Great Recession tested the strength of economies around the world. As so vividly revealed in 2011, many nations are struggling to resolve sovereign debt issues. Ultimately, global capital markets demand that nations compete on these terms, and they will.
In the United States, resolving the debt issue will impact our economy and quality of life. While change is likely, solvency is also a necessary underpinning of a secure, national retirement system.
A first step in this effort is to make Social Security solvent. In my view, this is the most attainable of our long-term budget goals, and the most important if we intend to keep the promise of a public program that is relied upon by millions of Americans. Let’s get this done.
There are other important considerations for our retirement system that I would put on a wish list for the agenda of public and private leaders this year:
- Protect all existing savings incentives while we grapple with the debt issue. Some budget hawks on Capitol Hill have proposed limiting or eliminating tax provisions that encourage workers to save for retirement. Retirement savings are a core element of our economic future and we need to preserve — and expand — savings incentives.
- Continue the growing trend of adopting automatic enrollment in defined contribution workplace savings plans. Other automatic provisions such as auto escalation of contributions should also be more broadly adopted. These provisions have added to the success of the defined contribution system and should become the norm.
- Support ways to extend 401(k) coverage. Today’s defined contribution workplace savings system, delivered predominantly through 401(k) plans, reaches more than 83 million workers (U.S. Department of Labor, 2008). But there are many millions more without access to a workplace savings plan. We need to encourage the extension of 401(k) plans and strengthen the system.
- Pass the Automatic IRA legislation. The auto-IRA was a bipartisan idea and reflects what should be a bipartisan consensus. We should be doing everything we can to expand workplace savings coverage for the millions of workers who lack it.
These ideas alone would represent a full agenda for 2012. But I think America is up to the task. Following a year of extraordinary global geopolitical change, extreme market volatility, and historic economic challenges, America is ready to make some changes and find solutions to its challenges.