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The Real Story Behind the Detroit Pension Fight and What it Means to America's Future

Is Detroit the canary in the coal mine for the 99 percent?

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5. Big money politics and corruption are major culprits. As Thomas Ferguson has noted, pension underfunding and corruption go hand in hand: areas which have seen pension crises tend to have high rates of corruption, as measured by such indicators as the number of public officials who wind up in prison. Pay-to-play schemes are rampant, and reports of bribery, such as those revealed in Detroit, are common. Even in the absence of corruption, big money politics has a major influence over how pensions are managed and allocated — a major reason why campaign finance reform is urgent. As Ferguson observes, local and state politicians are relying more and more on Wall Street and other anti-pension business interests.

6. Cutting pensions is a choice, not a necessity. As Johnson and others have noted, there seems to be a discrepancy in how the sanctity of contracts is viewed in America. When it comes to the bonuses of AIG executives after the financial crisis, we were told by experts and pundits that contracts must not be broken, and that taxpayers should foot the bill to avoid breaking this fundamental trust. But in Detroit or Chicago, we are told that the contracts of pensioners are not really worth the paper they're written on. The difference? AIG executives are powerful and well-connected. Pensioners are not.

There are resources to meet pension obligations, if only politicians could make decisions in the interests of ordinary people, rather than the 1 percent who do not wish to see their taxes raised. Johnson further notes that where pension shortfalls exist, they are far smaller than giveaways to corporations.

7. Decisions made now have far-reaching implications. Johnson finds that among the key themes in the pension discussion are what our choices say about the dysfunction in America politics and the kind of society we are creating for the future.

High-quality workers are attracted to decent-paying jobs and promises they can rely upon. When you cut the pensions of teachers, for example, you can’t attract the highly educated workers needed to fill these jobs, and the quality of education suffers. This means that it’s not just public workers who suffer when their pensions are cut, but the children who rely on schools and the businesses that rely on a well-maintained, thriving city. It is also likely, Johnson warns, that overall compensation in the private sector will be driven down, and inequality exacerbated if public pensions are chopped. All of these factors, he points out, only serve to increase the instability of the overall economy and society.

Stiglitz added an important consideration: that once any major pension system is revised shotgun-style, employees everywhere will doubt the value of their contracts and over time leave in droves. How does that bode for America's future?

Detroit is a city being looted and stripped bare. If we decide that those who are weak and vulnerable will be sacrificed to protect the wealthy and the powerful, then no one is safe. When promises are made, but then broken, a “train wreck is set up,” as Johnson puts it, and emergency manager Kevyn Orr appears to have his foot on the gas.

Johnson ends his pension study with a lyric from the great jazz artist Gil Scott-Heron, who wrote a haunting song about a partial nuclear meltdown that occurred in Detroit in 1966:

“That when it comes to people’s safety

Money wins out every time.

And we almost lost Detroit this time, this time….”

If we don’t do the right thing in Detroit, Johnson warns, we might just lose America this time.