"No," said former Fox News journalist Tony Snow, newly appointed as one of George W. Bush’s closest aides, his Press Secretary, when asked recently about his retirement savings. “As a matter of fact, I was even too dopey to get in on a 401(k). So there is actually no Fox pension. The only media pension I have is through AFTRA.”
A 401(k) is a heavily tax-favored account in which workers can save money for their retirement. Typically, employers – including Fox News – match workers’ 401(k) contributions, so setting up a 401(k) is an irresistible financial deal, a true no-brainer. Yet Tony Snow didn’t. Only the union he was forced to join, the American Federation of Television and Radio Artists, has been doing any formal saving and earmarking of his retirement assets.
Snow’s case, I think, holds very important lessons, and not just for the United States. To the extent that the Bush administration has a coherent philosophy for domestic policy, it is the idea of the “ownership society” – the belief that intermediary institutions, whether governments, unions, or the benefits departments of companies, should get out of the business of providing social insurance. Instead, individuals should rely on their own assets to provide them with financial security in retirement or in case of serious illness. Give people the incentives to plan for their future, ownership-society advocates argue, and they will.
In the future, Snow will have to stand up at the podium in the White House briefing room and advocate the various components of Bush’s ownership-society proposals. He will have to praise Health Security Accounts – and argue that people won’t stop going to the doctor for preventive care even if their HSA-tied insurance plan doesn’t pick up any of the bills. He will have to praise privatization of Social Security – and argue that individuals will make prudent and wise investment decisions with this baseline tranche of their potential retirement resources. And he will have to praise the decline of unions and the shedding of benefits by firms – and argue that individuals will make better choices than union experts or firms’ benefit departments.
The assembled reporters will look at him, and they will recall that when he was offered an unbelievably good financial deal, he was too “dopey” to take advantage of it. And they might reasonably conclude that his failure to channel some of his Fox News salary into a 401(k) account is a very powerful argument against the words coming out of his mouth.
This is not to say that the issues are simple or that there are easy answers. America has many people who do not set up 401(k) accounts, despite enormous incentives to do so. It also has people who do set up 401(k) accounts and then invest them badly – for example, Enron workers whose 401(k) money was overwhelmingly invested in company stock lost not only their jobs when the company went bankrupt, but also their pension assets. There are also well-known examples of highly corrupt union pension funds, such as the one bilked for years by the leadership of the Teamsters.
Finally, there is the example of politicians like George W. Bush, who enacted a government program that promises comprehensive drug benefits to the elderly and mammoth profits to pharmaceutical companies. His administration may preach the virtues of individual responsibility, but its program makes no provision for how and where the government is going to secure the resources needed to finance its promises.
In short, there are psychological and moral failures at all levels – individuals, firms, unions, insurance companies, and governments. Difficult problems of institutional design compound the difficulty of reforming social-welfare programs. America must also deal with the potential for corruption, both illegal in the case of the diversion of Teamsters’ pension resources and legal in the campaign contributions provided by the pharmaceutical lobby to complaisant members of Congress.
These problems are not America’s alone, for they are inherent to all efforts to privatize social welfare. As Americans and others look at this Gordian knot of public policy problems, we should learn one thing from the example of Tony Snow: the vision of an “ownership society” espoused by Bush is simply not plausible. If it were, his new press secretary would not be describing himself as “dopey.”