The New York Times has picked up the pension-reform banner, promoting the issue to the lead story on the front page of the June 20th issue.
If, as the Times reports, some of the reformers want to cap pensions – that is, go for the folks at the very top of the pile – it’s worth discussing. But most of the “reform” ideas involve either cutting the take-home pay of existing employees, cutting the take-home pay of pensioners or making sure that future workers don’t get as much of a pension.
The problem with that is simple: We’re in a deep recession. And the last thing we need to do is cut paychecks and encourage people not to spend money.
Let me quote from a brilliant blog post on Calitics.com from the always insightful Robert Cruickshank:
Cutting pensions would be like taking a shotgun, aiming it at our feet, and pulling the trigger. It would cause a cascade of economic problems that would dramatically worsen our economic crisis…
And yet the solution being proposed – slashing benefits – will do absolutely nothing to make state government fiscally solvent. It will mean there’s less money available to spend, meaning less sales tax revenue. Less consumer activity means there’ll be less jobs available, meaning less income tax revenue. With fewer jobs available, and wage stagnation, and now the added financial burden of paying the costs of retired family members that used to be borne by the pensions and other state services that have been cut, younger folks won’t be able to sustain the economy. Retirees and baby boomers will have to sell their homes for the cash, and in a recessionary environment where the young aren’t able to afford the present market value, home values will spiral downward, causing further economic ripple effects as well as reducing property tax revenues.
… The notion that ‘everyone needs to give back’ just doesn’t make sense given our economic distress. We’ve already given back too much. We gave back our wages. We gave back our ability to afford health care and housing and transportation. We gave back the robust public sector services that created widespread prosperity in the 1950s and 1960s. We gave back affordable, quality education. And too many of us have given back our future.
No, it’s time for someone else to give back. It’s time for the wealthiest Californians, and the large corporations, to give back. For 30 years now they have benefited from economic policy designed to take money and benefits from the rest of us and give it to those who already have wealth and power.
We are now experiencing the predictable outcome of such policies – the worst recession in 60 years, an intractable downturn. The way out isn’t to worsen the crisis by slashing pensions. The way out is to return to the sensible tax rates of the 1950s and 1960s and make the rich pay.
That’s what I’m talking about.