You read that right. If they can get away with it, they’re going to steal (loot) public worker pensions. What public workers were promised, they won’t get.
This is terrible news, and according to David Cay Johnston, they’re all in on it. By “all” he means “Courts, legislatures, and corporations … all working in concert not to pay the full benefits owed.”
That’s a powerful conspiracy, and a conspiracy it is. Here are the details. Johnston, writing in the new Newsweek (my emphases):
Anyone in a public-sector job looking forward to retiring in comfort should look carefully at what is going on in Detroit and Springfield, Ill. Sherlock Holmes would call it the case of the missing pension money.
News leaking out this week from the Motor City tells how the enormous gap between the pensions workers earned and the money set aside to pay for them will be closed. By stealing from the workers.
Courts, legislatures, and corporations are all working in concert not to pay the full benefits owed. For decades, political and business leaders failed to set aside the right amount of money each payday to cover the pensions workers earned and, in some cases, covered up the mismanagement of pension fund investments.
In other words, they failed to pay into the pension funds as they promised, and they’re trying to get off the hook for it. As Johnston notes:
This is nothing short of theft, as pensions are simply deferred wages, that is, money that workers could have taken as cash in their regular paychecks had they not opted to set it aside.
The mechanics are working like this:
In Detroit, a federal bankruptcy judge handling the city’s Chapter 9 case held Tuesday decided he could safely ignore a Michigan Constitution provision barring any reduction in pension benefits to already retired public sector workers. Judge Steven W. Rhodes went beyond asserting the supremacy of federal law over state regulations, ruling that the pensions workers earned were a mere “contractual obligation,” no different from any other bill the city owes but lacks the money to pay.
As Johnston notes, if that stands, look out everywhere a public entity wants to dodge pension payments. As he points out, the same thing is happening in Illinois. In both cases, the entity responsible for making payments to the pension funds were remiss — they under-contributed. Now that they’re broke, they’re trying to skate. If they succeed (they well might), workers will suffer.
And you thought only the banksters were looting us. Nope. As Johnston reminds us, it’s all of them — “Courts, legislatures, and corporations” working “in concert.” Our Betters, here to serve … themselves, at your expense.
A pension is deferred wages, not a bill that comes due
Pensions really are deferred wages. At contract negotiation time, when union and management reach a wage agreement, they first agree on total dollars. The union then decides how they want to allocate those dollars. Their choices are — as current wages, as deferred wages (payments to the pension fund), or as health insurance and other benefits. Remember, though; the first agreement is on total dollars. That’s the wage agreement.
It’s against the law to steal wages. But I guess we’ll be finding out whether that’s still true. At one time, it was against the law for a brokerage firm to steal customer funds. Now, not so much, if you’re a member of the protected “lord and master” class. As Johnston correctly points out, this is “eroding trust in democratic government and the rule of law.” There’s much more about that in Johnston’s article; please do click through. The looting of pensions is pervasive.
Maybe one of these days we’ll be the “lords and masters” — and then we could take our own money back. What do you think? Would the impoverished American people go for that? I guess that jury’s still out.
Pension theft adds to the retirement crisis
Of course this comes at the worst possible time, when millions of workers are facing retirement on terms that will put them into poverty.
The Retirement Deficit
… Not too long ago, pensions also routinely delivered retirement security. But our corporations have cut back on traditional pensions. In 1980, 89 percent of Fortune 100 companies guaranteed workers a “defined benefit” at retirement. The rate last year: only 12 percent.
Companies have replaced traditional pensions with 401(k)s, and many firms don’t even match employee 401(k) contributions. The predictable result? The nation’s “retirement deficit” — the difference between what Americans have saved up for retirement and what they need to maintain their standard of living once retired — now totals $6.6 trillion, says Boston College’s Center for Retirement Research.
Look at that number again. The “retirement deficit” is $6.6 trillion. That equals millions of our brothers and sisters, fathers and mothers, living the rest of their lives in poverty. And at a time of great national corporate wealth, almost all of which is going to the “1% of the 1%” — where all the wealth and power in the country, in fact the world, now reside.
What that means, in practical terms is this:
David Koch, worth more than $35 billion, wants you to have less so he can have more.
So do the Walmart heirs, who own more than do 40% of the rest of us combined.
That’s why, as David Cay Johnston said at the start of this piece, that they’re all in it together, corps, legislators, judges, politicians of all stripes. They’re all part of the club, the one with no one else in it. Some of them talk like you’re in it, but you’re not.
As a friend once remarked: At drug recovery meetings, they often ask you to name your “drug of choice.” Sometimes the drug of choice is just “more.” Sound like our betters, the ruling class? Does to me.
Our lords and masters, addicts all. In charge till we stop them and take away their candy. They aren’t going to stop on their own, and with the sweet deal we’ve already handed them, they won’t go quietly.
UPDATE: I recently spoke with David Dayen about pension theft on Virtually Speaking Sundays. You can listen here. Dayen is particularly well-informed on the subject. We also touched on how the Very Serious People have just discovered income inequality, and included the latest from that neoliberal wet dream, Fukushima. Tune in if you can.
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