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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Thievery 101

Mark Sircus

IMVA 

Taxpayers, senior citizens, and everyone who is even near approaching retirement are facing their own Waterloo. Bondholders are going to be competing with the pension beneficiaries for scarce government resources on the local, state, and federal level for there is just not enough money to pay everyone their due. Already Social Security is failing the elderly by not keeping up with inflation, but that is just a whiff of what is yet to come.

Big U.S. cities and counties are being put in a headlock by unfunded public pensions as they face a $574 billion funding gap. The gap at the municipal level would be in addition to $3,000 billion (3 trillion) in unfunded liabilities already estimated for state-run pensions, according to research from the Kellogg School of Management at Northwestern University and the University of Rochester. The financial demands of unfunded pension promises come as state and local governments grapple with years of falling tax revenue related to the recession.

The government has to do something so they will probably do what they do best—steal from the common man and give it to the rich. Until the very end when the system just collapses in on itself, we will see evermore-desperate plans to save the sinking ship. Actually, according to some, it is really not a rescue attempt but just efforts to give the “rats” more time to abandon ship, leave the country, get into gold, build underground shelters, and have more fun at everyone else’s expense.

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