Bloomberg reports that Congress has included a provision in the annual spending bill that could hurt people who receive pensions. The new law could impact as many as 1.5 million retirees and result in benefit reductions by as much as 50%. The reason, as always, is that the funds will not be able to pay promised benefits. The report does not examine why this problem exists.
Pensions were supposed to be funded and relatively secure. A loss of 50% sounds like the exact opposite of security. What happened to the money that workers invested? What happened to the employers’ contribution, which was supposed to be part of the employees’ compensation? Rather than investigate the problem and fix it, our good representatives in DC are do what they do best: Screwing working people.
Postscript: I've heard radio reports today saying that some "liberal" Democrats and union officials support the new law because getting half a pension is better than getting no pension. I wonder how legislators would feel if their pensions were cut, especially the double dippers who make $150,000 or more a year. Why are so many people disgusted with politics? This story is one good reason, especially when it comes with a bill that promised to backstop risky investments by our too big to fail banks. The investor class is protected. The working class -- let them eat . . . whatever they can find in a dumpster.
The Washington Post has announced changes to its pension plans. Current employees will have to find some way to fund their retirements. What’s worse is what will happen to those who already have retired. Steven Mufson of The Washington Post writes: “The changes will hit hardest at employees hired before 2009 who could plan on receiving pension payments based on their income and years of service. Each of those employees could see scores — or hundreds — of thousands of dollars less over the course of a retirement. More recent hires do not have traditional pension plans.”
I understand that the newspaper business, like other industries, has to adapt to being smaller. A friend of mine who worked for the Chicago Sun-Times had his pension cut. However, if a pension fund was properly funded, why are such cuts necessary? Every time a company or unit of government cuts benefits to retired people, the excuse is one of necessity. What happened to the money that the employees and the company contributed to the fund? Why do retired employees pay the price instead of executives and stockholders? We need to start asking such questions.
Three cheers to Laura Clawson of Daily Kos for informing her readers of this story, which for retirees is more than a story – it’s a tragedy.
Investigative reporter David Sirota has a new home at International Business Times. Today he reports on a trend in city and state government: cut worker pensions while giving aid to billionaires who own sports franchises. Sirota quotes the Emergency Manager [Dictator] Kevyn Orr who calls money put toward the stadium “economic development.” Orr did not address how a reduction in pensions would hurt the economy. Somebody has to sacrifice. It might as well be working people. Their used to doing with less. Billionaires need our help.
Aljazeera America reports that Michigan Governor Rick Snyder is backing a plan that will help Detroit workers save their pensions. That’s great news if it is true. Snyder is the man who brought emergency managers to strip out public wealth from poor cities throughout the state. Now he’s promising $350 million to offset what his own emergency manager in Detroit claims is an $18 billion debt. As Scott Walker in Wisconsin is promising voters big tax cuts, Snyder is trying to show that he really cares about poor people. What is this about? It’s time to run for re-election. If working people are gullible enough to elect leaders that work against their interest, they will get what they deserve.
I live in Chicago, a city where our Democratic mayor fights unions, especially the brave members of the Chicago Teachers Union. Writing in Daily Kos, Laura Clawson introduces us to another “tough love” Democrat, Rhode Island Treasuerer Gina Raimondo. This public servant has been attacking public work pensions in the name of “reform,” which really means screw the workers and pay the bankers. Raimondo is rumored to be a candidate for Governor. Hopefully Daily Kos and other liberal groups will educate workers about who this “Democrat” really is.
I couldn’t sleep last night, so I started going up and down the radio dial, looking for something that might put me to sleep. A conservative talker raged about the need for inner city youth to obey the police. His point was simple: No matter what the circumstance, we must respect the police.
Conservative leaders in Michigan must listen to other right wing radio talkers. According to Laura Clawson in Daily Kos, police and firefighters in Detroit are not getting respect from the conservative governor Rick Snyder and his “Emergency Manager” Kevyn Orr. Neither group is eligible for Social Security, and the city’s bankruptcy will make their pensions next to worthless. Unlike pensions in the private sector there is no Federal system to backstop failed public pension funds. Brave cops and firefighters who put their lives on the line to keep the people safe now face a very insecure retirement.
Even if public safety officers in Detroit received full pensions, they would only average $30,000, much less than peers in cities of a similar size. How can people who say they respect the police (and I assume firefighters) treat them so poorly? Clawson puts it best in the last words of her article: “They kept their promises to the city of Detroit. It must keep its promises to them.” Amen.
I’m on a mailing list from the Chicago Teachers Union, which is a great source of information not heard in the corporate media. Today, I received the following analysis by Kenzo Shibata, the union’s New Media Coordinator:
“Why do Mayor Rahm Emanuel, the Chicago Board of Education and Chicago Public Schools officials blame Springfield for the district’s budget woes? Why is the target of their concern being shifted to state legislators? It polls well but makes little sense. Let’s examine why.
FACT: The Illinois General Assembly has provided Chicago Public Schools with every opportunity to make their budget work by giving the district a 13-year break from paying pensions. FACT: The district has failed to lobby for a more equitable funding formula, search for new revenue streams or reform programs like TIF that could work better for school districts and redevelopment.
FACT: The city and the Chicago Board of Education’s answers to the revenue crisis have been to cut, and this year, the cuts will have a devastating impact on classrooms across the city.
FACT: Pensions are NOT the problem.
The problem is a pronounced lack of leadership from the mayor and his handpicked Board of Education.
The state legislature, beginning in 1995, provided CPS with the tools to plug its budget issues and time find new revenue streams and reform the TIF program. The timeline looks like this:
1995—The Illinois State Legislature gave then-Mayor Richard M. Daley the ability to use the once restricted pension levy for operating costs to ensure balanced district budgets. The school district enjoyed a 10-year “holiday” from making any payments into the pension fund. The fund prior to 1995 was funded above 100 percent. It wasn’t until 2005 when the fund dipped slightly below 90 percent that the district resumed payment.
2010—The Illinois State Legislature gave Chicago Public Schools a pension holiday that provided the district with more pension relief so the classrooms in Chicago would not feel any negative financial impact. CPS also was granted additional federal funding from a stimulus appropriation; the district still laid-off more than 1,300 teachers despite pension relief from the state and an infusion of money from the federal government.
2012—The Illinois State Legislature gave CPS an extension on the deadline to publicly announce which schools were slated for closure. CPS stated that schools needed to be closed because of a looming budget crisis and that closing schools would help stymie the deficit.
2013—The Illinois State Legislature did not move on the moratorium on school closings proposed by Chicago legislators, citing that the state wanted to provide newly minted CPS CEO Barbara Byrd-Bennett with the opportunity to govern the district. In short, the consensus was that the state legislature did NOT want to micromanage the school district.”
Shibata’s analysis leads us to ask again: Did teachers cause this problem? No. Why are they being asked to pay for it, to suffer during their retirement? We need to remember that Detroit is the blueprint. Chicago looks like it could be the next stop on the bankers-rip-off-workers express. We need to stop this train – now.
Ellen Brown writes at the blog Web of Debt. She probably understands the American economy and what is wrong with it as well as anyone, including Paul Krugman. Writing in Common Dreams, she turns her critical eye to Detroit and who will win in the bankruptcy. Brown points out that the city’s debt to banks are based on “swap” rates that favor the banks in the case of debt. Further, the rates are based on LIBOR ratings, which were manipulated. So did Detroit go bankrupt, or was it set up to fail by the people who are first in line to liquidate assets?
Brown goes on to examine the possible fall out of a Detroit bankruptcy. Many cities and counties have problems similar to Detroit. The formula seems to be: Burn the workers to pay the bankers. Brown presents an alternative: Why not have a Bank of Detroit, a proposal first made by Virg Benaro in his run for governor in 2010. North Dakota has had a bank for many years, and it does not need to ask for credit, especially time bombs likes the “swaps” used to finance Detroit.
Ellen Brown is great. She understands that the banking system works too often to hurt the economy of main street. In advocating for local governments to run their own banks, she pushes against the momentum to privatize public assets. The problem is that many politicians, especially Republicans, worship what they call a “free” market. They will not listen to any kind of argument for public investment or common good. Voters need to dig deep and see that if we keep giving in to nonsense stories like the Detroit bankruptcy, the only winners will be the people who have been winning big for the last 30 years: Bankers.
P.S. On a positive note, Brown has a blog post that discusses San Francisco’s attempt to launch a city bank.
Detroit is broke. That’s what the media and the politicians like Governor Snyder tell us. It’s an easy story to tell given the way the city looks. It’s also easy to tell when the politicians and their banker allies only give one alternative. What they don’t say is that unions tried to work out a deal that would have prevented the bankruptcy. The governor and his Emergency Manager (Appointed Dictator) would not talk to them. A cynical person might even think that the governor had some reason for wanting the city to declare bankruptcy.
Common Dreams has reprinted an article by the Nation’s John Nichols that examines how democracy is not working in Michigan’s largest city. Michigan and Detroit voters both rejected Snyder’s Emergency Manager program, only to have the governor revive the program during a lame duck session of the legislature. Nichols interviews experts who point out that several American cities have problems similar to Detroit. As the nation’s industrial base broke down, the federal and state governments responded by cutting funds sent to big cities. Rather than blame local officials as the governor does, Nichols suggests that we look at state government as part of a complex problem.
John Cassidy of the New Yorker looks at the story from the perspective how the city came to the bankruptcy “solution.” He asks the often unasked question: Was this move necessary? Were there alternatives? He points to gentrification in parts of the city. The Emergency Manager, Kevyn Orr seems only interested in giving pensioners as little as possible (as little as 20%) while offering bank creditors (as much as 75%). Cassidy ends ominously by quoting a municipal bankruptcy lawyer who calls Detroit, “a test case.”
The same day Detroit declared bankruptcy, Chicago bond rating was hit with a big downgrade. A couple of weeks later, the city’s school system had its bond rating slashed. Do you see a pattern? The same politicians who failed to fund pensions are now using that action to say pensions need to be cut. They robbed Peter (workers) to pay Paul (bankers). And now they’re asking Peter to pay the bill.
What happens in Detroit will be a test case. If working people don’t wake up, they will pay the bill of the bankers while city workers, including those who have already retired, will have to live on a fraction of the pension they should have received as part of their compensation. Pensions are not welfare. Retired workers are not takers. If Americans don’t wake up to this new make-the-rich-richer scheme, we will all lose.
Bruce Rauner announced that he is seeking the Republican nomination for Governor of Illinois. According to the Chicago Sun-Times, Rauner claims he is not “anti-union.” He then goes on to bash leaders of public sector unions for the state’s pension problems.
Let’s step back and ask why so many public pensions are in trouble. Over several years, union leaders negotiated with both Republican and Democratic “leaders.” The constant trade off was better pensions for lower raises. Politicians from both parties then failed to make regular contributions to the pension fund. In essence, money that was to go to workers via the pension fund was not paid.
Rather than talk about wage theft, millionaires like Rauner put the blame solely on the unions and the Democrats. Public and private sector unions have made concession after concession over the past three decades to save jobs. People like Mr. Rauner ignore these compromises. Instead of calling out mismanagement by public and private sector executives, they pile all blame on workers and unions.
I don’t know how the pension problem in Illinois can be resolved. However, we should be honest about how it came to be and who is at fault. Unions are fighting for a negotiated benefit, part of the compensation their workers have every right to expect. As a business man, Rauner should respect contracts and not use terms like “pay-to-play” unless he also wants to extend that language to sweetheart deals that let corporations avoid millions in tax payments. We need political leaders who will be honest and fair in calling out corruption. Politicians may cut public sector pension benefits, but let’s call that action what it is: wage theft.
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