Debts Should Be Honored, Except When the Money Is Owed to Working People

Police direct traffic in the government
 district of Dallas, Texas. (Photo:MasonCooper)

This seems to be the lesson that our nation's leaders are trying to pound home to us. According toThe New York Times, members of Congress are secretly running around in closets and back alleys working up a law allowing states to declare bankruptcy.

According to the article, a main goal of state bankruptcy is to allow states to default on their pension obligations. This means that states will be able to tell workers, including those already retired, that they are out of luck. Teachers, highway patrol officers, and other government employees, some of whom worked decades for the government, will be told that their contracts no longer mean anything. They will not get the pensions that they were expecting.

Depending on the specific circumstances, they may find their pensions cut back 20 percent, 30 percent, perhaps even 50 percent. There would be no guarantees if a state goes into bankruptcy.

There has been a concerted effort to bash public-sector employees by either highlighting the few instances where pensions actually are exorbitant, or just making things up. Untruths about Goldman Sachs, General Electric, or any other major company rarely appear in the media and are usually quickly corrected when they do. However, exaggerations or outright fabrication are a standard practice for those who report on state and local budgets when it comes to public employees.

The public has been bombarded with stories of public employees retiring with six-figure pensions while still in their early 50s. There may be some instances of such inflated pensions, but that is far from the typical story. If we look to New York State, the hotbed of bloated public budgets, we find that the state's main retirement system pays an average pension of$18,300 a year. For many workers, this is their whole retirement income since they were not covered by Social Security.

This is the general story of public pensions. Public-sector workers are often better situated than their private-sector counterparts, in that they even have pensions. But study after study shows that these workers paid for their pensions with lower wages than their private-sector counterparts. It is tragic that so many private-sector workers cannot count on a secure retirement, but it won't help them to make workers in the public sector equally insecure.

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