October 10, 2014
Apparently the Washington Post editorial board is partying over the fact that bankruptcy judges are imposing cuts in the pensions of retired public sector employees in Detroit, Michigan and Vallejo, California. An editorial in today’s paper noted these cuts and told readers:
“Yet in many jurisdictions the balance has tipped too far in favor of public-employee benefits, largely because neither public-sector unions nor the politicians whose campaigns the unions support have any incentive to budget more realistically. Unsustainable pensions helped cause the recent wave of municipal bankruptcies that has touched cities as different as Detroit and Vallejo, Calif.”
Okay, so the balance has tipped too far in favor of public-employee benefits and is “unsustainable.”
So those retired public sector workers must be living really well. In Detroit the average non-uniformed public sector employee gets a pension of $18,500 a year. This goes along with an average annual wage for active workers of $42,000 a year. At the Washington Post this is apparently an imbalance where things have gotten too tilted for public sector workers.
Detroit obviously did have serious financial problems. There are many problems of poor city management and corruption that can be blamed. But the pay of public sector workers probably does not seem out of line to most people.
Of course one of the major causes of Detroit’s financial problems is that the trade deficit, which is in turn driven by the over-valued dollar, has made U.S. products less competitive internationally. But we are not likely to hear much discussion of the dollar and the trade deficit at the Post; better to blame retirees with pensions of $1,500 a month.
The practice of blaming public sector workers is deeply rooted at the Post. A few years back the Post ran a major front page article about the excessive pensions in California. Its lead was the retired city administrator of Vernon, California who was getting a pension of $520,000 a year. One had to read far into the jump page of the article to find that this person had given himself four different city jobs and was under indictment for fraud. It’s not clear what this had to do with the pensions of California workers, but the Post obviously felt it advanced their story.
One final point is worth mentioning. The Post celebrated judges’ rulings that federal bankruptcy law trumps state constitutions, thereby allowing them to cut pensions in spite of constitutional prohibitions on cuts.
There is an important aspect to this argument that the Post ignored. Cities are creations of states. States decide whether their cities can go into bankruptcy. In many states they are not allowed to file for bankruptcy. If a state constitution prohibits the reduction of pensions, and federal bankruptcy courts have the power to cut pensions, then it might be possible to infer that the state constitution prohibits cities from filing for bankruptcy.
The Post wouldn’t like this argument since it might interfere with their argument that public sector workers should have their pensions cut, but they should at least accurately present the case of public sector workers to their readers.
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