GOP, Like Companies, Wants Workers to Carry the Safety Net

In an era when employers are retreating from the guaranteed benefits that once defined the American social safety net, should government accelerate or resist the trend?

That's a critical question surrounding not only President Bush's proposal to restructure Social Security but also Republican plans to rethink the way the nation provides healthcare to the elderly (through Medicare) and the poor (through Medicaid).

Across all these fronts, Bush and other Republicans are looking to limit government's financial exposure and shift more of the risk for ensuring pension and healthcare security to workers and retirees in the name of increasing choice.

That's exactly what employers have done for a generation, replacing plans that guaranteed workers a fixed monthly pension with systems that obligate employers to make only a monthly contribution to investment accounts workers manage themselves. On healthcare as well, employers are replacing programs that provided workers a defined benefit with alternatives that promise only a defined contribution.

Bush and other Republicans want to realign the public safety net along the same principles, while Democrats want to maintain, as much as possible, the defined benefits guaranteed by Social Security, Medicare and Medicaid. As the baby boom generation retires, this argument looms as one of the new century's defining political struggles.

The revolution in private-sector benefits paints the backdrop for this political debate. In the age of global competition, employers are steadily eroding the cradle-to-grave promises of retirement and healthcare security that American business offered during its post-World War II zenith.

"The philosophical move going on is employers are increasingly limiting their obligations," said Robert J. Blendon, professor of health policy and political analysis at Harvard University. "They are passing more of the costs onto individuals and letting them figure out how to deal with rising healthcare costs

The change has most affected pensions. Once employers were typically responsible for setting aside money to pay pension obligations. That burden has largely shifted to employees, who must navigate the financial markets to fund their retirements.

As recently as 1992, more workers were covered under defined benefit plans that promised a fixed monthly pension than plans that provided only a defined contribution to a worker's retirement, such as a 401(k). Now nearly three times as many workers rely on defined contribution than defined benefit plans, according to the nonpartisan Employee Benefit Research Institute.