Friday, December 26, 2008

While America Aged - Roger Lowenstein

There are a few things you know about a Roger Lowenstein book before you start reading. It will be well researched, it will be eminently readable, and it will be insightful. While America Aged does not disappoint on any of those fronts.

I bought the book a little while back, but did not start reading it till last week. Somehow, in the middle of the mortgage and subprime led financial meltdown we are in the midst of, reading about an entirely different financial time bomb felt a little anachronous. I am sure the publishers and author felt some of these misgivings as well. Clearly, Lowenstein has spent years researching the potentially explosive issue of pension debts. Which is why it is somewhat awkward that just as he gets ready to publish a strong call to action, he finds the economy in the midst of a very different storm, and his recommendations feel like so much shouting against the wind.

That said, While America Aged makes a compelling case that "America is sitting on a retirement time bomb". The approach Lowenstein takes is to draw three detailed case studies. He explores General Motors and how pension obligations have brought a once great company to near bankruptcy. He then explores the historical context for the New York subway system's pension obligations and how things led inexorably to the recent subway strike. In the third case study, he lays out the extraordinarily corrupt and cynical dealings in San Diego and how they led to the ruin of that city's finances. Each case study is compelling drawn, with strong individual personalities at the center. While reading each story, one has the uneasy feeling of watching a devastating train wreck happen in slow motion, over decades.

Here is what Brick and Rope can promise - once you read these three stories, you will feel sick in your stomach. You will be convinced that most pensions are an unsustainable promise this generation makes at the expense of future generations. And you will know that where such promises have already been made for decades past, there aren't any easy answers.

Lowenstein does not necessarily take a 'neutral' stance on the issues here. It is clear that he considers the 'no tax increases' position of parts of our population too ideologically rigid. He positions himself in favor of tax increases of some sort to fund pension and retiree healthcare obligation of cities and states. Without actually using the phrase 'universal health care', he also expresses support for a structure where the government actively subsidizes healthcare for all age-groups (not just the over 65 population covered by Medicare). And he argues for this subsidy to be on a sliding scale according to income.

These are politically charged recommendations, and I was happy to see that Lowenstein took a stand, rather than present a 'on the one hand, on the other hand' kind of list that a more traditional academic might present.

The problem is, as Lowenstein freely admits, that while there are some solutions for the retiree health care issue that have been proposed, there isn't any easy answer for the pension issue. Where cities, states or corporate entities have made unwise promises to their employees in the past, there is no easy way to keep the promise without causing pain to taxpayers (either directly through higher taxes, or indirectly through bailouts).

I found myself in agreement with most things Lowenstein presents in While America Aged. The one exception in my mind was his representation of unions. Unions and their negotiation tactics over the last few decades have caused a lot of the pension problems we find ourselves in right now. That said, in talking through them, I found that Lowenstein takes too starkly negative a view of unions and their contributions over this period. While I agree with some of his assessments, I found his language in dealing with union personalities (with some exceptions) too strident and negative.

That is a minor complaint on what is for most parts a compelling 'caution - danger ahead' kind of book. My one wish - I hope Lowenstein has shifted focus to the macro-economic mess of 2008 and is researching a book on what led us here. Sign me up for that book now!


  1. Having not read the book, I can't really comment too much on this post, but I would like to comment on this notion that somehow the elderly population is about to explode all at once. Uwe Reinhardt explains this much better than I do here: To sum up though, the aging of the US is a very gradual process. Compared to most other developed nations, we are a very young country. So really to control for our gradually aging population, we need to make incremental changes, not huge ones (I don't beleive in this incremental change rule to already broken systems like our health care one).

  2. I think that is true. But "there are suddenly too many elderly people" is not really the argument around the need for pension reform. Pension funds need to get reformed because CEOs and Union heads in the past have had exhorbitant commitments for the future without the most basic math of how those commitments would be funded. And when the funding falls below the commitment levels, there are no pretty options - you either renege on past promises; or pony up the money now (to the severe detriment of your present - witness the Big Three); or you cry for help from Uncle Sam.