The destruction of our public and private institutions due to their exploitation by greedy insiders, the former I have long been familiar with and frustrated by, the latter has been shocking to me in its extent, have much in common. Take this recent article from Bloomberg News. “Americans, it seems, don't want declines of 50 percent or 70 percent in the year-end bonuses paid to those who work at the nation's banks and securities firms, or at least the ones they now own, partly through the government's $700 billion bailout. No, these Americans want Wall Street bonuses to go to zero.” “The industry, however, seems not to get it. Maybe the survivors are in denial. Perhaps they believe that surely since they did a good job this year — presuming they don't work in mortgage securities or derivatives or whatever the real losers are — that they deserve the same bonuses they got during the seven fat years. Or maybe they think if they get just one more good hit, they will have accumulated ‘the number’ they need to retire and never work again.” So who on the public sector side will be looking to make one last score and hit “the number” and never have to work again?” I’ll give you a hint: for some the number is currently 55, for others the number is 62, and the idea is to get a special deal to reduce it, for those anywhere close now, at the expense of the future. Again.
Here in New York, the public employee unions have an idea on how to tackle the budget crisis — “save money” by letting current workers with seniority retire several years early with full pensions! I’ve already seen some public employees writing in to blogs about how this would be a win-win for everyone, and heard union leaders talk about the need for “incentives” in exchange for help with the budget crisis. I know exactly what those “incentives” would be, because the same game plan has been repeated over and over again. And, speaking from experience as a former government worker, I know that many speak openly about their hopes for a severe budget crisis when they are in their late 40s or early to mid-50s, and an early retirement incentive to let them walk out the door early. They know the playbook, and home to score when its their turn.
How can the government “save money” by making an already rich pension plan richer, and having to pay that many more people, in cash, health insurance and other benefits, to sit home even as it also pays others to provide the public services they used to? The truth is it can’t; what it can do is use the pension system to either defer or hide costs in the short run.
If you don't replace the workers, the only hit is the decline of public services, which the rich don't need and the politically powerful get special access to whatever is left. Who cares what happens to the transit system if you drive your SUV to a parking space reserved by placard, or your “ultimate driving machine” to a garage spot paid for the company?
The government and unions also pretend money is “saved” by agreeing to defer funding for pensions and retiree health care into a diminished future. The city got permission to defer pension contributions in the last recession; there are already noises being made to do that again. And what happens when those contributions not made have to be made up with interest? The budget crisis will require that taxes be raised and services be cut. Those deferred pension costs would ensure that when the economy recovered, rather than cut taxes and restore services to what they had been, all the additional money will have already been seized for early retirement. Taxes ratchet up, services ratchet down, and more and more people end in Florida relative to the ones who are working.
The unions also claim money is saved because younger workers are paid less. Bloomberg made that bogus argument after his UFT deal. Of course they are only paid less when hired, and have a “right” to ever rising salaries thereafter, so that, too, doesn’t save any money in the long run. And when the argument is made, no one ever includes the cost of retiree benefits in the calculation.
But as an added kicker, the unions often agree to vastly lower pay and benefits, permanently, for new hires. They are even more likely to do so, now that the state legislature has passed and Governor Paterson has signed legislation making permanent and inviolate the right of public employee unions to receive a share of the salary of every state worker, even if they have cashed in at the expense of those very workers. They no longer have to worry that some future politicians will allow younger workers to stop paying the very organizations that sold them out, over and over again.
And if public employment is no longer attractive, and competent and motivated workers are no longer available, as a result of these “screw the newbie flee to Florida” deals? Again, the only hit is to public services, which the people who matter don’t have to worry about, because they are rich, because they live in the suburbs, because they are heading to Florida themselves.
Perhaps you recall the consequences of cutting the starting pay for police officers to $25,000 to offset some of the cost of the pension enrichments of 2000. But do you recall the Giuliani pension deal of the mid-1990s, a temporary early retirement incentive combined with a de-facto Tier V for new hires (with a higher pension contribution rate for the employees)? Among other things lots of teachers walked out the door early, replaced by a revolving door of the uncertified and unmotivated just as the children of the baby boomers — the baby boom echo — was flooding into the city’s schools. The result was an education system that was so bad that even judges who were appointed by the pols and in on the game had to concede it violated the state constitutions. Because the city’s pensions have only been fully funded due to accounting fictions, we are still paying extra, massively extra, for those who got to walk out the door early in the mid-1990s. And now, mark my words, they are looking for a repeat.
Think of it this way — if earlier retirements and early retirement incentives “save money,” how come the cost of producing a GM car in the United States isn’t much lower than producing a Honda here? After all, GM has a rich pension plan with an early retirement age and has had repeated early retirement incentives over the years, to the point where there are three retirees for every worker. That must have really cut their costs and improved their relations with new workers (who will be paid vastly less under recent deals), huh?
New York isn’t the only place this goes on, and that is one reason that so many states and municipalities are looking at total collapse, and some of them have already sent a letter asking for federal bailouts according to the New York Times. Get your heads around these sentences. “The cities are also seeking loans of an unspecified amount to cover some pension liabilities so they can fully finance their pension systems, the letter says…The credit crisis has ‘all but eliminated/ the ability of cities to borrow in the private capital markets to meet their pension obligations, the letter says.” Borrow to pay for pensions? What does that mean?
It means that some time in the past, politicians cut a deal with public employees (including themselves, by the way) to vastly increase what they get and others have to pay, though pensions enriched far beyond what those others get. Those others would have been outraged if they were forced to pay at the time. But, by making ridiculously excessive estimates of future investment returns (are people ready to accept that they were ridiculously excessive yet?), the cost was deferred to a future when the pols and the public employees figured they would have moved out or died off. In many cases, in fact, the government contributions to the pension plans were reduced, sometimes to zero, even as the pensions were enriched, allowing tax breaks and special spending grants to be handed out even more liberally. These deals were cut all over the country, by Republicans and Democrats alike, often both working together. They generally passed the New York State legislature without a single “no” vote. It still goes on, every session, in the face of disaster.
So provided public services in the past were provided at an extravagant cost that was deferred to the future. And now that the future is the present, the next set of politicians wants to defer the cost of the past to another future by borrowing? Meanwhile, no doubt Silver and Skelos are gearing up for yet another pension “incentive” to “save money.”
The TWU already went on strike for a retirement at age 50 rather than 55; the UFT already cut a deal with Bloomberg to retire at 55 rather than 62. What are they going to want now? Retire at 50? Retire at 45? How about we just shut down the schools and the transit system permanently and allow everyone to retire immediately at half pay? That would save money, wouldn’t it? When public employee labor contracts go to state arbitration, the only factors to be considered are what public employees elsewhere get and what the government agency in question has the ability to pay (meaning the higher your taxes go up, the more they get, because the more they can afford). The arbitrators aren’t asked to take the quality of public services into consideration. They are not allowed to. That’s how the $25,000 police was an “everybody wins” decision.
From Bloomberg News again, speaking about Wall Street. “Why does the salesman get $4 million or $6 million or $8 million? Why does the analyst get $500,000? Why does the secretary get $25,000 or $40,000? How is it possible for some of these people to retire at age 45?” Those are the questions people are starting to ask. How about this question — if I don’t get a pension, if I have to pay for half my health insurance while working, or am forced to work as a freelancer and get no health insurance at all, if I have been hired to do the same public sector work as my predecessors with lower pay and benefits, if I have to pay higher and higher taxes and cut my standard of living more and more, then why do they get to live a life of leisure for 30 or 40 years riding on my back?
Because, it seems, they can, and we can’t stop it. Not when the executives sit on each other’s boards and set each other’s pay. Not when, as one union leader once put it, “we elect our own bosses.” It is the same attitude. It is the same result. And there is no one on the other side. They are on both sides of the table, laughing at those who aren’t in the room. Because everyone else is kept out? Because they haven’t bothered? Because they are stupid and have been successfully defrauded? You tell me.
Seeing how many are angling to make one last score and never have to work again, I gain an understanding as to the persistence of slavery as a human institution. Perhaps it will come back in a new, disguised form. Perhaps it already has.