At some point somebody has to take the loss. I figure it will be the pensioners. Even if you do manage to force the losses onto the bond holders the bond holders are likely somebody’s pension fund, so a Detroit pensioner maybe gets paid while some other pension fund has an increase in unfunded liabilities.
20 years down the road when this pension things has been washed out pensioners will look back in hindsight and realize that accepting promises for deferred compensation from people that aren’t going to be around when they want to collect was the dumbest thing they ever did. Many public sector employees got trapped in a job they didn’t particularly like to guarantee themselves a comfortable risk free retirement. It’s starting to look like that risk free retirement was a myth. They’ll likely be wishing they had a defined contribution plan they managed themselves.