Coming Boomer pension cuts: what impact on economy?

[Joanne98]

October 12, 2010 — Over the last two decades, pension cutbacks have left relatively few private sector workers with defined benefit pensions plans. Now, with health and pension funds for state and local government employees said to be facing massive funding shortfalls, many are describing the guaranteed retirement benefits paid to teachers, police officers, street cleaners, and other public workers as overly expensive and sclerotic. These pensions, the argument goes, are unrealistic — they are throwbacks to another era that must now be curbed.

As Andrew G. Biggs, the chief expert on pensions at the American Enterprise Institute, a conservative think tank, puts it, government workers are enjoying the good life off their neighbors’ backs, relying on their employers’ questionable accounting practices to downplay taxpayer liabilities. “There is no reason public-sector employees should receive retirement benefits that are either larger or more secure than those received by private-sector workers,” Biggs wrote in an April 2010 essay on retirement policy.

Consumer spending accounts for 70 percent of economic activity, according to government figures. By 2015, Boomers will account for 40 percent of that consumer spending.One might imagine that policymakers would want to consider thoroughly the societal consequences before adopting (or failing to adopt) measures to effectively put a stake through the heart of the defined benefit plans that many public sector workers have depended upon for their retirement. One might likewise imagine that the impact of past and prospective reductions in the retirement benefits of private sector retirees would weigh heavily in any decisions about the future of pensions. In fact, however, an important question has been notably absent from the debate: With 78 million Baby Boomers heading into retirement over the next 20-plus years, how will cuts in guaranteed monthly pension benefits to both public and private sector workers — in addition to those that have already been implemented — affect the ability of future retirees to engage in economy-sustaining consumer spending?

http://remappingdebate.org/article/coming-boomer-pension-cuts-what-impact-economy