Give and Take: Pension Reform

The NY Times "Your Money" section looks at the painful choices facing states considering pension reform and the pensioners who are in the cross hairs. The Times is looking at Colorado, but it could be virtually any other state in the union, especially over-extended Blue States: Battle Looms Over Public Pensions

There’s a class war coming to the world of government pensions.

The haves are retirees who were once state or municipal workers. Their seemingly guaranteed and ever-escalating monthly pension benefits are breaking budgets nationwide.

The have-nots are taxpayers who don’t have generous pensions. Their 401(k)sor individual retirement accounts have taken a real beating in recent years and are not guaranteed. And soon, many of those people will be paying higher taxes or getting fewer state services as their states put more money aside to cover those pension checks.

Consider what’s going on in Colorado — and what is likely to unfold in other states and municipalities around the country.

Earlier this year, in an act of rare political courage, a bipartisan coalition of state legislators passed a pension overhaul bill. Among other things, the bill reduced the raise that people who are already retired get in their pension checks each year.

This sort of thing just isn’t done. States have asked current workers to contribute more, tweaked the formula for future hires or banned them from the pension plan altogether. But this was apparently the first time that state legislators had forced current retirees to share the pain.

Sharing the burden seems to be the obvious solution so we don’t continue to kick the problem into the future. “We have to take this on, if there is any way of bringing fiscal sanity to our children,” said former Gov. Richard Lamm of Colorado, a Democrat. “The New Deal is demographically obsolete. You can’t fund the dream of the 1960s on the economy of 2010.”

But in Colorado, some retirees and those eligible to retire still want to live that dream. So they sued the state to keep all of the annual cost-of-living increases they thought they would be getting in perpetuity.

Incredibly, the Times analyzes this in class war terms, with public sector employees on one side and voters on the other. This is the essence of the Codevilla analysis that has swept the Right. Nice to see the Times taking it mainstream. I'm sure they didn't mean to.

Technically, we here at Free Will have no patience for public sector union members demanding their "fair" share. Still, I'll pause and note that, if you are, say, a 75 year old retired teacher, you have a legitimate complaint about how the rules are suddenly changing after your active working life has ended. But, we know how any attempt to reform pension would go down. The media would be filled with weeping 80 year old blue-haired women being consoled by former students who say "Ms. ____________ changed my life." In fact, I would urge any would-be pension reformers to figure out a way to leave the pensions of true retirees alone. By true retiree, I mean someone over the age of 65 (and really America's de facto retirement age should go up, too), or who is permanently disabled or otherwise unable to work. Otherwise, pension reform is self-demagouging.

Because, here's the thing. Not all of these retirees are what you would call "retired." Oh, sure they're not working, but that doesn't mean they can't. The Times notes that the average retirement age for Colorado teachers is 58. 58! Those are able bodied people who - if they were in the private sector - would still be working. It's easy to imagine today's 58 year old living for quite a while. 15 years? No problem. 20? Sure. 30? It's within the realm of possibility. 40? Hey, the generations that smoked, drank and ate red meat have been living into their 90's. The acturial fact is that many of these "retirees" are going to have retirements that could easily exceed the lengths of their careers. You're telling me that, because someone taught math for 30 years starting at age 25, that taxpayers should be supporting them for another 30 years? I just don't see the moral or fiscal case for that.

The union position is that they were promised these pensions, that they made career plans and financial decisions based on them, and it's not fair to change things now. And, I agree it's not fair. But, you know what also wasn't fair? As part of its bankruptcy re-organization, United Airlines was able to default on its pension obligations, the largest such default in American history. I don't remember hearing too many tears being shed over that. But, dare to suggest that public sector pensions - or those of favored private unions like the UAW - be reduced? May I fit you for a tar and feather tuxedo, sir?

It's a strange kind of fairness that liberal shibboleths have lead us to. Unions are supposed to ensure a more equal distribution of wealth, so that labor benefits from the wealth it creates. But, clearly some unions are more equal than others, and some are deserving of a higher level of fairness than others.

Meanwhile, here's something for Colorado's teachers, and people like them to chew over. You dutifully voted for Democrats all of your adult lives. For all the talk of "society" promising you these pensions, the fact is that it was Democrats who made these promises, while demonizing anyone who objected. And, you were happy to go along with that. But, now you are getting older, and in many cases, entering your last decades, and these same Democrats are making noises like those of Richard Lamm - a guy who thinks you have a "duty to die," btw - saying, gosh, you teachers are going to have to start sacrificing. Hey, they got your votes already. Why should they care now?