As Europe\’s pension systems falter, U.S. must act to spare Social Security the same fate
WASHINGTON – While Europe\’s current retirees are sitting high in the retirement saddle, its young people today may never even see the horse. This is because the government pension systems in many European nations are already bankrupt.
As Europeans work less and retire earlier, the already heavy strain on workers to support current retirees will compound even further unless those governments take immediate steps to reform their pension systems. So far, quick fixes such as raising the retirement age and eliminating cost-of-living increases have been proposed, though European leaders will need to realize that more fundamental, systemic change is required.
"One of the chief flaws with Europe\’s government pension programs, as with U.S. Social Security, is that there are defined benefits, an impossible situation as the ratio of workers to retirees continues to decline," said taxpayer advocate Grover Norquist, president of Americans for Tax Reform (ATR) in Washington. "European governments need to establish a system where workers can choose to place a portion of his or her tax liability, matched by his employer, into private retirement accounts – a defined contribution, instead of a defined benefit. Those benefits will be much greater, and will quit squeezing Europe\’s youth."
In France, every 10 workers currently support 4 retirees, whereas by 2040, without changes to the pension system, every 10 workers will support 7 retirees. In Germany, the pension program is expected to run a $9 billion dollar deficit, while Italy\’s pension program begins each year with a $41 billion shortfall.
Though currently, many workers in Europe retire at around age 60 with famously generous government pensions, that luxury comes at the expense of current workers who finance that retirement out of their paychecks and who will likely have to postpone their own retirement by several years.
"Europe\’s pension system is what Social Security in the United States will become when the Baby Boomers start retiring in a few years," continued Norquist. "President Bush\’s partial privatization plan for Social Security where workers will be given the option of placing a portion of their payroll tax into a privately managed account is necessary in some form if Social Security is to avoid the fate of Europe\’s pension programs."