(Brian, you’re arguing a claim that was never made. The claim was that the financial crash is the primary cause of the pension crisis. This is fact. It is inarguable. If not but for the financial crash, there would be no pension crisis. The end.)
I disagree. The pension crisis was the result of piss poor decision making on the part of city hall and the people elected to run the pensions.
Investments go up and down, this is investing. Risk is what gives return, and risk involves the possiblity of loss.
When times were up, benifits got raised without raising contributions, something that was very popular. Problem was, then times came down, and $$ was needed to make up for the increases. Rather than paying the $$, which would be unpopular because taxes would go up or services down, city hall severly underfunded the pension, and since they needed the union blessing to do so, bought off the unions with even more increases (future increases also not paid for), which the unions happly went along with. Well the bill came due when overly optimistic return assumptions didnt pan out. But rather than admit the fact, and make hard decisions, the penisons went swimming in subprime and CDO crap (adding risk) to goose returns. The bet failed in 2008 and now the question is “who pays?”
Both of the above quotes seem to completly miss the role of the public employees in this process. As if Wall Street has been the one and only bad guy in the whole thing. The unions sit on the pension boards, they spend alot of money and work very hard to get politicans elected. THey pay lots of money to consultants and managers, they are not ignorant investors. The unions went along and agreed with everything. They are the only ones who voted directly (tax payers only vote for their represinives, not on the increases itself)on the increases that took the system down. Their culpability in every step is in no way less than anyone on Wall Street.
As for public fervor, part of it is the percived “unfairness” of the situtation. The “if I cant have it you cant either”. But part of it is the real unfairness. I have family that spend their careers setting up private pensions, and what public employees have would be flat out ILLEGAL in the private sector. Private pensions generally count 3-5 years of last salary, not the 1 last year public servents get. Plus they dont get to “goose” their pensions with sick time accrued, or taking overtime, or that last second promotion they stay in for just long enough to qualify for higher payments (the whole point of 3-5 years). And if they ruin the system or the company goes under (which has happened to alot of companies like autos, airlines, etc etc) private workers get a penalty in greatly reduced benifits paid for by other pensioners, not tax payers. Public worker dont loose a dime.
Sure, part of the anger is misplaced from politicans to union workers, but part of the anger is rooted in the truth that public pensions ARE better (for the worker) than private retirment plans, and private workers have to pay for it.
