Pensions

The situation with the state employees pensions in Wisconsin and other states is deplorable. What’s really terrifying is how poorly people seem to understood the basics of what’s going on, why it matters, and why the proposed solutions have absolutely nothing to do with reality. This is yet another case of cheap misdirection and power grab.

A friend describes it better than I can. Go read her thoughts. I’ll wait. I’ll also excerpt:

It’s pretty straight forward. State unions entrusted the management of their pension plans to the state to manage. The state outsourced it to a company that bought the Wall Street line of fast, easy money. The market crashed. The money taken from the State unions went *poof*. Now the states have, instead of firing the money managers and pressing the Federal Government to force regulations to protect their future obligations, decided to Union-bust.

So the financial burden, in this case, comes from the state obligation to cover the existing pension payments to existing pensioners. The fund (the union’s money, taken from state employee paychecks) was mismanaged and lost a lot of value. The state promised to be a backstop for that fund, since they were managing it. They failed in that management responsibility and can’t afford to be the backstop.

So, bust up the unions. Makes *total* sense.

Union busting is all well and good, done in isolation. A lot of unions seem to have forgotten that while they may need to gather in force in order to match the power of the owners, the path of mutual benefit is superior to the path of mutual destruction. If it’s really the case that a union is just a protectionist mob – then yes – by all means – bust it. Please also go after a monopoly or two while you’re at it.

However in this case, the real culprits are (in approximately this order):

– The wall street greedheads who pawned off known bad debt as “no risk” investment grade “pensioner and fixed income” quality CDOs on the pension fund managers.

– The pension fund managers who bought it, exposing their “no risk, seriously, this is our retirement account” state government customers to the worst sort of bad debt.

– The federal and state officials who failed to regulate any of this.

——— above this line, the individuals involved have already received large bonuses and commendations for their excellent work handling all parts of the crisis, nobody has gone to jail, and nobody has been fired. —–

– The federal and state officials who, at some level, should have been using the two years bought by the Obama stimulus to come up with some sort of plan to raise revenue or cut expenses.

Um, that’s it. I can’t really bring myself to blame the greedy and agressive unions for anything, particularly since they’ve already offered fairly large financial concessions to address the actual budget shortfalls.

2 comments to Pensions

  • Evan

    Great post as always, Chris. One proposed edit to your list: I would move the officials who failed to regulate to the top. As long as the financial laws provide incentives for greedy, unethical behavior, the system will select for greedy people to take advantage.

  • Jane McCracken

    As a former State Employee, my pension was always considered to be factored in as part of my salary and benefits that I earned for working for 33 years at ridiculously low wages compared to the responsibility I had for protecting children and vulnerable adults from abuse, neglect, and exploitation. I’ve seen some posts on other sites that claimed that State employment guaranteed low stress jobs with guaranteed employment. I’d like to see some of those with ideas like that last a year as a Children’s Protective Service Worker working 10-12 hr. days, being called out at 2 AM in the morning to pick up children from the police,have their lives threatened by mentally ill people, and put up with lawyers/courts that made deals to put children back into questionable homes, and then have them say these jobs were cushy, with little stress. Unions are the only protection that workers have against unfair treatment. That’s all anyone wants… to be treated with dignity, respect, and earn a decent living. This is what Unions do best.

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