Notebook > Money

One cheer for Tony

Money | British Prime Minister Tony Blair wants to increase Britian's retirement age

Issue: "Bird flu," June 10, 2006

It's difficult to know whether, or how much, to applaud a pension-reform plan unveiled late last month by British Prime Minister Tony Blair.

On the one hand, it contains the single most important element of any serious reform effort, an element missing in President Bush's Social Security proposal last year: namely, it raises the retirement age. On the other hand, the Blair plan dilutes the impact of that reform by increasing the benefits paid out to pensioners.

Mr. Blair wants to hike the retirement age from 65 to 66 beginning in 2024 and then to 68 beginning in 2044. But he also wants pension payments to rise with worker earnings instead of with inflation; since earnings have tended to rise faster than inflation, that means a potentially higher price tag for taxpayers.

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The plan also includes a "National Pensions Saving Scheme" into which workers would pay 5 percent of their salary, if they so choose, and into which businesses would pay 3 percent of each worker's salary. Work and Pensions Secretary John Hutton hopes that this will build "a new savings culture" in Great Britain.

"If we can crack this as a country," said Mr. Blair of pension reform, "we will be doing something probably most countries have not been able to do."

For all the problems with Mr. Blair's plan, it does at least deal with the root of the pension crisis-a crisis entirely of our own making.

Since people tend to blame politicians or bankers or other faceless conspirators for economic problems, it is important to pinpoint the exact reason that the West is heading for severe pension problems: Baby boomers on both sides of the Atlantic did not have enough children.

It takes a sizable workforce to maintain a comfortable retirement for seniors, and the United States will not have enough workers to provide for the huge boomer cohort. Great Britain and other European countries are even more directly behind the demographic eight-ball.

When that reality is coupled with the fact that baby boomers will live longer and healthier lives in old age than previous generations did, the solution to the problem becomes very clear: Raise the retirement age for boomers.

But aside from being entirely reasonable and logical, raising the retirement age is also political poison. So one cheer for Mr. Blair for proposing a reform that the United States and other Western nations will have to consider soon.

Balance Sheet

Wages grew 4.3 percent in New Orleans and Baton Rouge during 2005-much faster than elsewhere in the nation-but that was largely because of rebuilding efforts after Hurricane Katrina. "What's not there are a lot of low-level service sector jobs that fed the tourism industry. And they have been replaced by higher-paid construction jobs, but these aren't the same people doing them," Global Insight's James Diffley told the Reuters news service.

A Treasury Department decision to end a federal tax on long-distance telephone service will result in $13 billion in refunds to taxpayers next year. "So taxpayers won't have to spend time digging through old telephone bills, we're designing a straightforward process that taxpayers may use when they file their tax returns next year," said IRS Commissioner Mark Everson. "Claiming a refund will be simple and fair." The tax began in 1898 as a luxury tax when only wealthy Americans had phones, and the telecommunications industry has been fighting it in court recently.

Middle-income Americans are increasingly going broadband. The Pew Internet and American Life Project reports that broadband usage increased 59 percent between March 2005 and March 2006 for those in the $30,000-$50,000 income range. Overall, 42 percent of Americans had broadband in March, up from 30 percent in March 2005.

Timothy Lamer
Timothy Lamer

Tim is editor of WORLD Magazine.


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