October 10, 2013
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As state legislatures prepare for their upcoming sessions, you will
no doubt hear a lot about public pensions. More specifically, you will
hear allegations that states are going bankrupt because of their pension
obligations to public employees. These claims will inevitably be used
to argue that states must renege on their pension promises to retirees.
This is what I've called the
Plot Against Pensions
in a report I recently completed for the Institute for America's
Future. Engineered by billionaire former Enron trader John Arnold,
championed by seemingly nonpartisan groups like the Pew Charitable
Trusts and operating in states throughout America, this plot is not
designed to strengthen pensions or to save taxpayer money, as its
proponents claim. It is designed to slash public employees' guaranteed
retirement income in order to both protect states' corporate welfare
and, in some cases, enrich Wall Street.
Consider the math of state
budgets. According to Pew's estimates, "The gap between states' assets
and their obligations for public sector retirement benefits (is) $1.38
trillion" over 30 years. As the Center for Economic and Policy Research
notes, this gap was not caused by benefit increases, as conservatives
suggest. Data prove that most of it was caused by the stock market
decline that accompanied the 2008 financial collapse.
Of course,
regardless of cause, a $1.38 trillion shortfall sounds like an
emergency. But it is a relatively tiny problem -- one that may require
small changes, but does not require radical schemes to entirely
eviscerate retirement benefits. That's because, as CEPR points out, in
most states the shortfall "is less than 0.2 percent of projected gross
state product over the next 30 years."
To put those numbers in
perspective, remember that the 30-year $1.38 trillion pension shortfall
is just $46 billion a year -- and "just" is the operative word in
comparison to the amount states give away in the form of corporate
subsidies.
According to a 2013 study by the U.S. Public Interest
Research Group, states lose roughly $40 billion a year thanks to
loopholes that let corporations engage in offshore tax avoidance.
Additionally, a
New York Timesanalysis recently found that
"states, counties and cities are giving up more than $80 billion each
year to companies" in the form of subsidies -- many of which create no
jobs.
State and local governments, then, aren't bankrupt. Indeed,
contrary to pension-cutters' assertions, they are so flush with cash
that they spend a combined $120 billion a year on corporate handouts --
almost three times the total pension gap.
That's why, as the
National Association of State Retirement Administrators, says: "The idea
of imminent (public pension) insolvency is a gross distortion." It is
also why McClatchy Newspapers declared that "there's simply no evidence
that state pensions are the current burden to public finances that their
critics claim."
Why, then, are public pensions being targeted by
an Enron billionaire, the Pew Charitable Trusts, corporate front groups
and right-wing activists? Because pretending public pensions are the
primary cause of state budget problems allows greedheads and ideologues
to distract attention from -- and therefore prevent cuts to -- their
beloved corporate welfare. In some cases, it also allows them to embed
language in pension "reform" proposals that transfers worker retirement
money into alternative investments -- the kinds that incur expensive
hedge fund fees and enrich Wall Street.
Lost in the
debate, of course, is the simple fact that promises to workers are
sacred - workers base career decisions on them. In the public sector
sphere in particular, many workers traded the possibility of higher
private sector wages for the promise of stable retirement benefits in
the future.
For this reason, a plot that uses pension money to
enrich the already rich should be called what it is: not just tragic or
unacceptable, but downright immoral and inhumane.
David Sirota is a
best-selling author of the new book "Back to Our Future: How the 1980s
Explain the World We Live In Now." He hosts the morning show on AM760 in
Colorado. E-mail him at
ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at
www.davidsirota.com.
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