For 26 years I have been an economist researching the pension system. Along the way I formulated some policy implications from the research -- which is the matter-of-fact job of a career academic in modern departments of economics. I have studied pensions my entire adult life. My 1984 dissertation from University of California at Berkeley was very uncool -- stagflation was the hot area. My work’s subtitle was, “Towards a National Retirement Income Security Policy.“
Fast forward two plus decades and I testify on October 7, 2008 in Congress about what should be done about the nation’s eroding retirement income programs. I was invited after an op-ed  of mine on the subject ran in The New York Times on September 27, 2008.
My testimony  dealt mostly with 401(k) plans, but also other defined contribution plans like those offered by TIAA-CREF. Some of those plans were declining sharply, some between 20 to 50 percent, because of the market collapse and people’s retirement dreams were evaporating in the worst labor market in 20 years. My book -- When I’m Sixty-Four: The Plot against Pensions and the Plan to Save Them  (Princeton University Press, 2008) -- had just been published and I was in Congress telling legislators what should be done to bring stability to our nation’s troubled retirement system. A policy economist’s dream. No? Yes -- but only if the academic understands the new forces of gravity caused by the blogosphere, coupled with the power of a fierce presidential election, the anxiety generated by a crashing economy, and the ordinary force of the lobbying efforts of a well-established industry sector -- in this case the 401(k) industry.
I learned something that you don’t learn as a professor. If you are going to question a long-standing profitable tax break for a powerful industry, get an E-bay account and bid on a “thick skin.” In the weeks following my testimony I received more than 20 e-mails a day (most I answered) and about that many Google Alerts. Sen. John McCain alluded to my testimony at campaign rallies in the last days of his failing bid for the White House. I was interviewed by many legitimate reporters. A fraction of the e-mails I received were respectful -- all were filled with fear. The least offensive of the non-respectful e-mails are similar to the one I reprint below, but none were as funny. Most were obscene and threatening.
From: ADAM H---------
To: Teresa Ghilarducci
Sent: Nov 7, 2008 4:47 PM
Subject: 401K policy
Dear Ms. Ghilardt:
I think your Socialist ideas regarding 401K plans are absolute trash.
Get a f****** (asterisks added) new hairstylist.
I wrote back:
Wait. I spend a lot of money on my hair. Maybe too much? What's the matter with my hair? At least my plan is better. I want people to have access to a safe place to save their retirement money. My plan calls for 401(k)s to exist alongside a government program that lets people save in a system similar to what members of Congress and other federal employees' have. You’ll get better and safer returns than most people get with their 401(k)s.
What's wrong with that? The hair is a separate issue.
Three weeks after my testimony, and a week before the election, I got my first clue about where the buzz was being created about my plan. I went to a well-organized, exciting conference on Life-Cycle Saving at Boston University. Zvi Bodie, the nation’s leading finance economist, gathered industry leaders and academics to discuss issues in American’s retirement income security system. I sat at the table of gracious, well-dressed, and extremely knowledgeable financial industry executives, people I have grown comfortable with during my stints as a pension trustee. They stunned me by asking if my ears were burning, because I was much discussed at a previous week’s conference on 401(k) plans. What happened was that Rush Limbaugh had given a garbled version of my testimony on his Web site  (complete with my photograph). In my book (and in Congress) I proposed the government set up a new plan, which would supplement Social Security, an additional place Americans could save for their retirement.
Only 50 percent of workers have pensions at work. This rate of coverage has been stagnant since the 1970s. Many people don’t know how hard it is to save. In order for an average earner to supplement Social Security benefits at the most basic level, she would have to save 5 percent out of every paycheck for 40 years. Because it is hard, I proposed the government give a tax credit of $600 (indexed for inflation) for everyone towards his or her contribution. 401(k) plans would still exist. But the truth didn’t stand a chance in the hyper-desperate time around the presidential election. The ire of the industry came when I proposed to pay for the tax credits by scaling back dramatically the tax deduction for 401(k) plans, deductions that were expanded greatly under the Bush administration. Without the tax deduction the 401(k) industry knew it would have to lower fees and provide a better, safer, product, and that is when it started a full-court media blitz against me. 
I made several mistakes. I had adopted the habit of a teacher who answers any request for knowledge. The University of Notre Dame -- where I taught for 25 years -- encouraged us to respond to all media inquires. Also, over the summer, I eagerly accepted all requests to be interviewed about my new book. In mid-October, I agreed to two live radio interviews (and didn’t check out their Fox affiliations nor the style of the show). In one interview the host thanked me for my time and after I hung up, he told his national audience he hoped I would stop ruining his country. Another host asked me if I wanted to change the tax deduction into a tax credit (a tax deduction means that the higher the tax bracket you are in the larger your tax subsidy is). A person in the 39 percent bracket gets 39 cents from the government for every dollar saved in a 401(k) and a person in the 15 percent tax bracket gets 15 cents). I said, ironically, I wanted to spread the wealth. Radio hosts don’t do well with irony – and so my play on the debate over what Barack Obama had told Joe the Plumber was largely missed by the public. Then I got a moniker from a blogger on “Capital Commerce “ which prompted my worried 71 year-old mother to call from California. Blogger James Pethokoukis identified me as "401(k) Foe Teresa Ghilarducci, the Most Dangerous Woman in America."  (Yes, I am having a bit of fun with the "most dangerous" tag.)
But the legitimate press got the story right and called the discussion of what I proposed an “Urban Myth.” Here is reporting from MSNBC Nov. 7, 2008 John W. Schoen:
"Hearing on 401(k) plan grows to urban legend (MSM preparing people for government seizure of 401K!) There is no proposal in Congress to take away your 401(k) savings account. In any case, the stock market has already done a pretty good job of wiping out several trillion dollars worth of 401(k) savings without any help from Congress. At that hearing, one of the witnesses, Teresa Ghilarducci, an economics professor at The New School for Social Research, made an interesting observation…. The government spends as much as $80 billion a year in tax breaks to subsidize 401(k) savings plans. In her opinion, that money could be better spent offering a tax credit for a revised retirement plan that would guarantee a minimum income stream to people who saved for retirement So maybe it's not such a bad idea to start listening to new ideas."
Aren’t new ideas what academics are supposed to come up with?
Even after the election I am still material for radio entertainer Rush Limbaugh, who among many roles often poses as a policy wonk.
RUSH: Do you know what's going to happen to you? We don't know what's going to happen, but do you know what the Democrat plan for your 401(k) is?
CALLER: I believe it has something to do with circling the bowl.
RUSH: (laughing) Circling the bowl. You mean like flush it?
RUSH: But seriously, how much do you know about it? You've just heard about it, or you want me to repeat what you know to other people?
CALLER: Please repeat, because like I said, since I knew I wasn't going to vote for Obama, I said, "I don't need to worry about it."
RUSH: Let me give it to you very briefly. So far, this is not Obama yet, but this goes straight to my point about all of the idiots on our side |. So one of the big incentives for having a 401(k) came under assault. Then that same committee two weeks later brought in an economist from the New School in New York called Teresa Ghilarducci. I'm having trouble with her name, and not on purpose but her idea is even worse, Darcy. She wants to basically eliminate the 401(k), …. “
But, if the right wing pays enough attention, the mainstream media will begin to correct some of the blogosphere’s exaggerations.
I am grateful that veteran reporter, Robert Powell, for MarketWatch, wrote that Barack Obama must fix the nation's retirement system.
“It's starting to look like a train wreck of immense proportions. The government will be spending billions of dollars in the decades to come bailing out average Americans who don't have enough set aside to pay for basic living expenses if something isn't done now. What is that something? Ghilarducci suggests combining the best features of a 401(k) plan with the best features of traditional pension plans to create what she calls a guaranteed retirement account (GRA), a type of cash-balance pension plan (that many employers now offer) or sovereign wealth fund.”
Fortunately for me, the president of my university, Bob Kerrey, is a public figure and a former policy maker himself, so he is well used to this sort of treatment and is more than supportive. So what will I do the next time I am called to testify? My footnotes of supporting studies will move to the text -- otherwise my views look isolated and can be picked off like a young zebra separated from the pack. I will talk to Fox only on my terms and I will be fully prepared for an attack when I venture into the blazing sun of the blogsphere and CSPAN. I will continue to publish peer-reviewed research, to be sure; but,next time, before I head out for a wild ride from refereed journals to Rush Limbaugh I’ll have an arsenal of spurs and switches.
Teresa Ghilarducci holds the Bernard L. and Irene Schwartz Chair of Economic Policy Analysis at the New School for Social Research.