Gawker's Hamilton Nolan has a crazy idea: The United States should just put down the entire pension system like it's Old Yeller.
The pension system is unstable because so many pension funds are underfunded, Nolan says. It's unjust because the majority of workers with (at best) defined-contribution retirement plans like 401Ks are expected to support protecting a minority of workers (mostly in the public-sector) with defined-benefit pensions, which as we say, aren't terribly well managed to begin with.
This reality is all too clear in Detroit where, on one side of the ledger, ever-rising legacy costs are poised to gobble up more and more of the city's ever-shrinking revenue and, on the other side of the ledger, pensioners are being asked to accept pennies on the dollar for a retirement income that's only worth just $19K/annually on average to begin with.
There's just no good solution in the current system, for Detroit or anywhere else. Even worse, Nolan argues, progressives who devote so much energy fighting (a likely losing battle) to save current systems for those few able to participate are ignoring the vast majority of Americans who have been shut out completely.
Gawker: As private workers saw their pensions disappear, public workers became the last redoubt of American pension-havers—a happy legacy of the vestiges of organized labor. But of course public pensions come with their own set of problems. Their money goes into a pool that is overseen by politicians who have, for decades, been only too happy to dip into that money in order to fund more immediate projects. (Alternately, in labor-friendly places like Detroit, the politicians were so generous with the pension payouts that they spent it all years ahead of schedule.) Some politicians simply don't care, since the pension bills won't come due on their watch; others, perhaps, succumbed to the magical thinking that they could underfund pensions today, because the investment geniuses on Wall Street would be able to make up the difference tomorrow. That's led public pensions to become some of the best customers of hedge funds, private equity, and other "alternative investments" that charge extremely high fees in return for allegedly higher profits—which, in the long run, do not materialize, due to math. In this, public pensions have behaved like someone who blew their paycheck early in the month, then borrowed money to buy lottery tickets in hope of making it up before the rent came due.
What we're left with is a mess. Private workers resent public workers for having pensions. Public workers try to zealously guard their pensions at all cost. The politicians responsible for shepherding public pension funds have not funded them properly over the years. Now the pension funds are owed huge amounts of money. The retirees, reasonably, want their money. The average person in the public, reasonably, is resentful of getting a humongous tax bill to fund the pensions that are unfunded not because of something the average person in the public did, but due to greedy irresponsible politicians of long ago. A political movement has arisen to slash public pensions. Everyone is mad. And no one's retirement is secure.
In its place, Nolan imagines turning Social Security into a full-fledged national retirement income program. Think of it as single-payer pensions. How do you pay for it, but ending the zero-sum game of corporate welfare.
Gawker: A new report from the Institute for America's Future sets the lack of pension funding in context with corporate welfare from the government, saying that states would be able to fund their pension funds properly if they weren't so busy subsidizing corporations under the guise of "economic development." It's a bit of a cherry-picked comparison, but it does raise a good point: just as we need a federal law banning corporate welfare, the American system of retirement should be federally run, not run by individual state funds. The money that states throw away competing against one another for businesses accomplishes nothing for the nation, in aggregate. Raiding pension funds for that money is a complete waste. The fact that states are prone to do so is reason enough to take the important matter of retirement out of their individual hands, and put it in the hands of the federal government. The last thing retirees need is a competition between states to see who can slash their retirement promises lower, in order to convince companies that locating themselves there would save a few bucks.
It may feel morally righteous to say you stand with Detroit's pensioners, but as a practical matter, it's still a Sophie's Choice for a city in dire financial straits after decades of poor decision-making and bad public policy.
And, sure, a single-payer pension system means politicians and labor leaders like Kwame Kilpatrick and Al Garrett wouldn't have as many opportunities to hob nob with Wall Street big shots, but such a system would allow governments and companies to shed legacy costs while actually ensuring every worker can retire with dignity.
That kind of seems worth it.
