Pension Cutbacks: The New Normal or Fightback?

We should be as wary now of the mainstream media as Marx was in 1871 when he wrote the following: “The daily press and the telegraph, which in a moment spreads its inventions over the whole earth, fabricate more myths in one day…than could have previously been produced in a century.”

And so, for example, we read in the Wall Street Journal that “Detroit’s road to financial ruin started decades ago with city leaders agreeing to generous pension benefits.” The recent Detroit bankruptcy judge’s decision that municipal union contracts for retiree pensions can be broken because of the city’s $18 billion deficit plays into the general media-induced perception that a group of overpaid, selfish individuals have singlehandedly brought down this once proud and vibrant Motor City. If we dig into the story, look at some history and context, a very different perception appears.

First, the average Detroit public employee receives a pension of about $19,000 a year. If we did the math and figured out what this means based on a 40 hour work week, it would come out to about $9.50 an hour. Generous?

Second, is Detroit really $18 billion in the red? According to Demos’ Wallace Turbeville, about a third of that debt reflects money owed to the Water and Sewerage Department, but that department serves some three million people all over southeastern Michigan, a region and population far bigger than Detroit with its 714,000 residents. Did Detroit’s unelected emergency manager, Kevyn Orr, appointed by Michigan’s right wing governor, add those billions into the total simply to present a more dire picture, and build a stronger case for worker givebacks?

Certainly the loss of the auto industry, the decline in population, and the Great Recession have hurt the city, in ways similar to deindustrialized communities across the Midwest and Northeast. In addition, according to Turbeville, about a third of the city’s revenue losses simply come from state cutbacks, courtesy of a conservative governor and legislature.

Finally, we learn, not from the Wall Street Journal, but from Demos, that the city was harmed by purchasing complex borrowing instruments from the big banks, termed swaps, that sharply increased the payments owed by Detroit. As Turbeville puts it, “A strong case can be made that the banks that sold these swaps may have breached their ethical, and possibly legal, obligations to the city in executing these deals.”

And so, rather than accepting the mainstream perspective of the overpaid public employee causing the demise of Detroit, we can make the case that Detroit’s city workers are more accurately victims of the right wing attack on government employees, aided by powerful banks and corporations.

With this perspective, the assault on public pensions can be viewed as part and parcel of the broad-based war on workers — from the stagnation of the minimum wage, to layoffs of government workers, to cutbacks in food stamps, to halting benefits for the long-term unemployed, and to numerous state attempts to end public employee collective bargaining.

The attack on pensions is not limited to Detroit and can’t simply be attributed to Republicans. A bipartisan group of Illinois legislators recently passed a bill that cut state workers’ negotiated pensions, a bill that Democratic Governor Pat Quinn called a victory. Chicago’s Democratic Mayor Rahm Emanuel hailed the state bill as a model for his city.

And on the federal level, the budget compromise engineered by Democratic Senator Patty Murray and Republican Paul Ryan and supported by President Obama –the bill that left long term unemployed workers without any relief– weakened both civilian and military employee pensions.

The movement to gut public employee pensions follows the successful decades-long effort to eviscerate private employee pensions. Since 1978 when 401(k) pensions became legal, the private sector has shifted the risk onto its employees by terminating defined benefit pensions and substituting 401(k)s. The 401(k) leaves the investment burden to the individual worker and the vagaries of the stock market, benefits the banks, and ends up yielding much less to workers than pensions with a defined benefit. Not surprisingly, the Wall Street Journal report cited previously concludes that Detroit should shift its pension obligations to a 401(k).

One danger of the continuing onslaught on worker pensions, both private sector and public, is that smaller pensions and even the end of pensions may be considered the “new normal,” and not something to be fought over. Another media outlet, one with an arguably more liberal voice than the Journal, illustrates this. In referring to the federal pension cutbacks, NPR notes that “these kinds of changes…have been happening at the state and local level for some time.” After a brief discussion of Detroit, one NPR commentator asks, “are these cuts really necessary now” since the economy is in “recovery”? Neither commentator answers the question, perhaps believing to do so would violate the network’s alleged stance of objectivity. Rather they go on to conclude that the trend toward cutting pension benefits will “definitely” continue. So we are left with the new normal and the implication that there is nothing we can do about it. On this issue, no difference can be found between the Wall Street Journal and NPR.

The reality, outside of the mainstream media, however, shows some pushback to the “new normal.” In Cincinnati, for example, voters recently turned down a right-wing initiative initiated by the American Legislative Exchange Council (ALEC), a proposal that would have mandated a city worker shift to 401(k) pensions. While out of state conservative money came in to back the ALEC measure, massive grass-roots organizing by labor, a faith-based coalition and an alliance of retirees handedly defeated ALEC at the polls, 78% to 22%. While ALEC

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won in several other cities, opponents have brought successful legal challenges in Tucson and Los Angeles, keeping the proposal off the ballot. In many states, including Indiana, New Mexico, Virginia, and California, public sector unions have gone to court to fight attempts to lower contractually-mandated pension benefits.

The battle over pensions is not going away. Beyond the US, in Europe, the European Union and national governments hack away at public pensions as part of their ongoing austerity program. Workers from England to Greece have reacted against the cutbacks with huge demonstrations and strikes. In the US, the fightback has been mostly local, city and state-wide. If President Obama and the Democrats go after another guaranteed worker pension –Social Security– as he has threatened to do in 2014, we may see the movement to maintain and strengthen retiree benefits gain even more support and move to a national stage.

As the struggle continues, it pays to remember, contrary to the Wall Street Journal, that government employees have not caused local and state budgetary problems, but are being scapegoated nonetheless. And, contrary to NPR, givebacks by workers who have been hammered by the Great Recession, need not constitute the “new normal.”

 

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