Sirota and Taibbi: Exposing the Agenda to Fleece Billions from Workers' Retirement Savings
Photo Credit: Shutterstock.com/Africa Studio
Stay up to date with the latest headlines via email.
Since the once-great city of Detroit filed for bankruptcy, Americans everywhere are in a panic. Is my city next? Is my state facing financial disaster? From Wisconsin's controversial Gov. Scott Walker to New Jersey's Chris Christie, politicians all over seem to be telling us the answer is yes. The fiscal end is nigh, these leaders say, if America doesn't act soon to slay one of the last great budgetary dragons held over from the entitlement age: our allegedly outmoded, unsustainably expensive system of state and municipal pensions.
In the new fable, state and municipal workers are presented as the welfare queens of our age, historical anachronisms living fat and happy in the competition-free panacea of public service, and shamelessly living off the tax dollars generated entirely by the innovation of America's true workforce - its go-getting private-sector employees, who long ago stopped expecting their bosses to give them real health and retirement plans.
To them, the old-fashioned defined-benefit pension plan, the one that guaranteed a unionized state worker extensive health benefits and a sizable monthly retirement check until his (invariably too-distant) death, is the glaring budgetary inefficiency of our age, the first place we must turn to make the fiscal cuts if we don't want to become the next Detroit.
Pension reform advocates have cited these tales to make their legislative pitches. In state after state, politically active billionaires such as former Enron executive John Arnold, finance-sector think tanks like the Manhattan Institute, and foundations viewed as centrist, such as the Pew Center on the States, have all pushed to cut public workers' guaranteed retirement income, transform pensions into 401(k)-style individual accounts, and turn over the management of pension money to, well, people like the hedge-fund CEOs on the board of the Manhattan Institute. Such reforms are then portrayed as benevolent and transparent initiatives to protect taxpayers and balance budgets.
To a lot of Americans, these purported pension solutions seem logical because the underlying stories about public pensions are compelling. Most Americans know a retired cop or teacher collecting a pension check. Few know a hedge fund CEO.
But are those stories true? It is a particularly important question for California, as Arnold begins financing a ballot initiative campaign to radically alter the state's pension system.
When we evaluated the ubiquitous pension narratives (Taibbi for a lengthy feature in Rolling Stone and Sirota for a report for a progressive think tank, the Institute for America's Future) we both found the same three problems.
One was that the legend of the lazy, budget-devouring public-sector employee as the cause of America's fiscal crises has in many cases been carefully manufactured by Wall-Street-funded organizations. Their goal is to pretend that modest retirement benefits are the cause of pension shortfalls. They promote this story even though data show that stock market declines from fraud in the financial services industry were most responsible for those shortfalls.
The second problem is that the pension initiatives put forward by these reformers and the conservative politicians they back often propose moving America's public pension money into labyrinthine and extremely expensive "alternative investment" programs. This is done in the name of saving taxpayer money, even though these "alternative investments" involve fees paid to billionaire money managers that are often nearly as high as the cuts to public worker benefits. In many cases, that means little real savings for taxpayers and less income for retirees - but a huge payout to Wall Street.
The third and most disturbing thing we both found is that many states have gone to extraordinary lengths to hide the details of these pension reform plans. That means public workers are kept in the dark about where their money is being invested and about how much of their dwindling nest egg is being blown on fees for high-risk Manhattan hedge funds and private equity firms.