We Are The American Dream, Part Two

Atrios links to this article in the Huffington Post about people cashing in their 401(k)s in order to make ends meet in this Brave New World of ours:

Aside from stagnant wages, soaring unemployment and plummeting home values, the major tragedy of this recession is the havoc it has wreaked on the retirement incomes of millions of Americans who have planned and saved their entire lives, only to watch that money drain out of their accounts much sooner than they anticipated…

With rapidly dwindling savings and fewer opportunities for jobs than their younger counterparts, many older Americans are facing a very uncertain economic future.

“This is the undiscussed explosive bomb in all this, is all the pension benefits, all the 401(k) money that’s been drained out by workers trying to stay afloat until they find a job,” Rep. Jim McDermott (D-Wash.) told HuffPost. “There are a lot of people who, when this is over, are going to have nothing. They will have lost their house, they will have used all their pension money.”

What’s missing from the piece is the fact that most people’s 401(k)s had already lost much of their value when the market tanked in 2008:

But the stock market downturn has exposed 401(k)s biggest flaw for all to see — all the investment risk is borne by the individual. Just before the stock market crash, more than 70 percent of the assets in 401(k) plans were in the stock market, according to figures from the Federal Reserve. Stock prices have plunged by more than 40 percent from the market’s peak in November 2007.

“For too many Americans, 401(k) plans have become little more than a high stakes crap shoot,” said Congressman George Miller (D-Calif.), who chaired a Feb. 24 hearing of the House Subcommittee on Health, Employment, Labor, and Pensions. “If you didn’t take your retirement savings out of the market before the crash, you are likely to take years to recoup your losses, if at all. We are realizing that Wall Street’s guarantees of predictable benefits and peace of mind throughout retirement was nothing more than a hollow promise.”

When I was laid off in February of 2009, I liquidated my 401(k) and my wife liquidated her IRA, so we could pay off our bills and get out from underneath the mountain of debt we had accumulated.*  As a result our taxes this year were ridiculously high, and now that both of us are out of work, we’ll have to start over from scratch when we eventually become employed again.

Of course, there are people in much worse shape than us:

Marguerite DiGaetano, 58, says she is confident that after two years of solid unemployment, despite having worked her whole life, she will never be able to retire.

“I think the person who invents the cubicle where you can discreetly hang your walker where it doesn’t trip anybody, that person will be very popular with the baby boomers,” she said. “Who’s gonna be able to retire at 65? That’s only seven years away. Not me. I’ll be working until I die.”

In addition to creating a new hobo class of permanently unemployed or unemployable people, the Bush Depression has destroyed the expectations of millions of people that they would have a comfortable retirement, and that their children would do as well as, if not better than, they did.  Maybe those expectations were unreasonable to begin with, but they certainly held true for most Americans, once WWII ended and the middle class began to grow and prosper, for quite a few years.

Reagan’s election began the slow, steady, inexorable decline of the middle class, and the enrichment of the plutocrats and their enablers.  The gap between the haves and have-nots began it’s comically exaggerated growth, reaching truly ridiculous proportions.  The S&L crisis and the housing and tech bubbles prefigured the bankster bailout and mortgage meltdown of 2006-08.

Meanwhile, the rich were taxed less and less, and the biggest corporations not at all in many cases.  And we are now at the point where the American Dream is just another bullshit slogan.  Somehow “Work ‘Til You Die!” doesn’t seem quite as catchy as “Only in America!”

So, is this what “American Exceptionalism” is all about?  Fuck Yeah!

*Not that the debt was anyone’s fault but our own, but jeez: it’s not like we were living like kings.  We were both high-salaried “professionals,” living in a modest 3-bedroom, 1-bathroom house in a suburb of San Francisco; we had one fairly new car and one old one; our high-school age son had his own particular set of expenses; and we had acquired a number of toys, gadgets, and appurtenances that gave us something to look forward to when we got home from our soul-crushing 9-to-5 jobs.  We had two cats, one of whom became sick and cost us thousands of dollars in vet bills.  We had been on exactly two vacation trips in  twelve years.  We ate out occasionally, went to movies in the theater infrequently, and splurged on a good bottle of wine every so often.  But it did not feel like we were living so wildly beyond our means that we needed somebody to come and take away our credit cards.

UPDATE:  TBogg highlights the story of Peter Barry Lawrence, a senior citizen who has come up with his own unique strategy for coping.  Talk about your Original Gangster.

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This entry was posted in Eat the Rich, It's the Stupid Economy, You Assholes, Unemployment Blues. Bookmark the permalink.

3 Responses to We Are The American Dream, Part Two

  1. StringonaStick says:

    Sad to say, the whole bleed the middle class dry thing is a feature, not a bug. Before economic globalization, the rich in the US needed the workers both to make the things that were making them rich, and to buy a lot of it (Ford and his idea that workers needed to be able to buy his cars comes to mind, even if he was a Hitler-lovin’ antisemite). Since all money runs around the world in electrons now, and the factories are much more profitable when placed in countries with no worker’s rights or environmental regs, the simple fact is that the US rich don’t really need an expanding, prospering middle class anymore. Once US workers are willing to work for Vietnamese wages, the jobs will come back home; what’s left of them anyway. I sometimes muse about how high energy costs may make shipping over the oceans cut too far into the bottom line, but it won’t be before the middle class is either (1) crushed, or (2) gains some political knowledge and will power.

    But with a name like Commie Atheist, you already knew all that. What I really want to rant about though is what a cynical, hollow promise the whole rise of the 401(k) thing is/was. One of my careers was as an at-home stock trader, and I learned a lot by reading and interacting with professional traders (I managed to use the intertubes to weasel my way into a few places I sure couldn’t get into now). I got into a long email war with a hedge fund trader who was taking me to task for even assuming that retirement is a right; he was of the opinion that it was something the US couldn’t afford anymore. Of course he’s rich enough that it won’t be an issue for him, just the stupid proles and who gives a shit about them anyway, amirite?

    401(k)s were just how corporate Murika figured out who to entirely off-load their worker’s expectation of having a pension; no more obligations for them, and all the risk assumed by the worker. When you look inside the 401(k) machine as a trader, you learn things like how most have charters that require them to be nearly fully-invested in the market at all times; I talked to plenty of 401(k) owners who told me that their mutual fund managers “would get out of the market if they saw a crash or bear market coming”. When I’d point out that the very legal documents that create each mutual fund prohibit them from doing that, I got a lot of bovine, blank looks. You know, from my current perspective, I can’t really blame them for being so disengaged and helpless; when you have a job, a life and everything else going on, who has the hours it takes to get into the weeds on Wall Street and monitor that too, or even to obtain the education and training needed to have a clue about what to do. The system is set up to keep them fully invested no matter what, to not know how it all works, and to trust that the market always goes up over the long run. I strongly suspect that too many people look at their parents with their nice, reliable, permanent pension,, and just assume that will happen for them too. As for that in the long run canard, if you bought in before the 1929 crash, you only got back to even in the mid-1950’s; the 2000 and 2006-8 crash are the equivalent crashes in my POV; most people won’t be getting back to even in the lifespan they have left, much left have enough to retire on thanks too the wonder that is Wall Street and the 401(k).

    Pro traders laugh (off the record of course) about 401(k) money being “slow meat” and thus easy pickings since they buy/sell inhuge blocks at specific times of the day, so they are easy to shoot at. That was before the new High Frequency Trading programs came into being (computerized algorhythms that execute tiny trades to first find the bid/ask spread on a large block like mutual funds buy or sell, and then in microseconds exploit that information and suck up all the money in between the two – trust me, it works, and when it is done billions of times a day, those fractions of a penny add up to a LOT). This kind of extreme efficiency means less profit for mutual funds, and big profits for hedge funds and GoldmanSach’s trading desk.

    So, here we are. The middle class was led into the stock market with all that “be in charge of your retirement” and “over the long run” ad copy just as stock markets were undergoing structural changes that guaranteed the mutual funds would always be behind the 8 ball, and the hedge fund world and fellow hedge traders GoldmanSachs, etc would be in position for an ever bigger increase in profits because they have technologies that mutual funds not only don’t have, but are legally prohibited from having. In all cases, this is due to one thing, and rethugs love it so much: deregulation; specifically financial deregulation (Clinton, you should be spanked very, very hard for letting Glass Steagall be overturned). The whole fucking mess is really a large lottery where we all think the odds are even and that most of us will win; enough middle class people have prospered here and there via stocks to create that illusion, but the House always wins, period. And we aren’t part of the House.

    Too long, sorry!

    • Nah, not too long, especially with the points you’re making. Hey, if you ever want to write a guest post here, let me know!

      My father was a union janitor for 30+ years, and retired with a decent pension to supplement his SS checks. You’re right, 401(k)s were a scam cooked up by employers to offload their responsibilities to their employees. At least with mine, my employer did a matching contribution (which was piddling), so they were somewhat invested in me. But I still lost a ton of what I had accumulated when the market tanked.

      I didn’t realize, though, how gamed the system really was, as you explain. And Clinton really was the best Republican President since Eisenhower. One of the reasons I could never really embrace Hillary as a candidate, in spite of the fact that I really did want to see a woman President. Just not her.

      • StringonaStick says:

        I could write a guest post on this stuff, but as my husband says, I can depress the hell out of an entire room with this stuff, so careful what you ask for!

        The 401(k) thing is such a quintessential American product, sold to us using that Murikan myth that anyone can be rich if they work “hard enough”; the dark side of that myth is of course that if you aren’t rich, then you’re a slug who doesn’t deserve any help. That dark side is getting pushed harder and harder as the economy gets tighter, and I suspect it is part of the anti-immigrant garbage that is percolating up from the wingnut fever swamps currently. It will certainly be used as one of the weapons that will be deployed in their attempt to kill Social Security; resentment always works in the USA.

        One of the many problems with 401(k)’s that I didn’t mention above is that people are now expected to have the training of a pension fund manager in order to properly tend to their nest egg. This means things like recognizing the need to diversify, and also to change the percentage of money in your “high, med, and low risk” investment categories as you get closer to retirement. I have met very, very few individuals who have even heard of this idea, much less knew they needed to be in charge of implementing it themselves. Once again, the assumption is that someone,, somewhere is taking care of all that for you, all you do is keep up that monthly contribution and life will turn out grand; it is amazing what a good advertising campaign and corporate collusion can accomplish.

        The reality is that the middle class was sold this pig in a poke as an easy, no worries retirement system; I even remember true believers saying how this was so much better because they’ll be so much richer than they would be with an old fashioned, paternalistic pension. Experience has shown over and over that the vast majority of average workers are much better off with a defined-benefit pension plan, and those are growing rarer by the minute. Corporations though, are growing richer by the minute; hmmm, I wonder if there is a connection here?

        Even those state employee pensions aren’t safe now. I live in Colorado, and the state has decided to try to retroactively reduce the future benefits of state workers who have not yet retired. The state employees PERA is fighting this, and every state with an underfunded pension plan (meaning every state except Alaska) is watching the outcome to see if they can do this too. It isn’t like the public is going to be all that sympathetic to the plight of those lazy gubmint workers, is it? Once again, the wealthy divide us in order to maintain their power (thanks Fox News, they couldn’t have done it without you!).

        I also have to wonder at what point people will start to fight back. Social Security and Medicare are clearly in the crosshairs now; will the middle class that has had their 401(k)’s slaughtered really stand by as the Right marches to kill that last bit of the New Deal? So far I have to answer “yes”; what’s it going to take? Apparently hot button social issues still provide enough fog for the corporate political minions (both parties) to keep moving us down this road, or is it just that American Idol is so much more important to everyone’s future? Gawd, I get frustrated sometimes.

        President Clinton was indeed a closet Republican, and that was why I couldn’t support Hillary either; I’m female and would love to see a female president but I agree with you: not her.

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