First, they came for the pensions of private-sector workers. And they won. Now, as in Detroit and Illinois, they’re after the pensions of public-sector workers. And they’re winning.
In the case of private-sector workers, the radical shift from defined-benefit to defined-contribution retirement plans has transferred all the risk to workers (who are forced to have the freedom to choose the appropriate investment strategy, in a financial casino they can barely understand and over which they have no control) and boosted the retained earnings of large employers (who no longer have to shell out as much for workers’ pensions). Public-sector unions were able to hold out a bit longer but now they’re being hit—in this case, by cuts in their contractually agreed-upon retirement funds.
What’s the problem? As Matt Taibi explains (in his inimitable fashion), Wall Street is ultimately behind the looting of American public-sector workers’ pension funds:
This is the third act in an improbable triple-fucking of ordinary people that Wall Street is seeking to pull off as a shocker epilogue to the crisis era. Five years ago this fall, an epidemic of fraud and thievery in the financial-services industry triggered the collapse of our economy. The resultant loss of tax revenue plunged states everywhere into spiraling fiscal crises, and local governments suffered huge losses in their retirement portfolios – remember, these public pension funds were some of the most frequently targeted suckers upon whom Wall Street dumped its fraud-riddled mortgage-backed securities in the pre-crash years.
Today, the same Wall Street crowd that caused the crash is not merely rolling in money again but aggressively counterattacking on the public-relations front. The battle increasingly centers around public funds like state and municipal pensions. This war isn’t just about money. Crucially, in ways invisible to most Americans, it’s also about blame. In state after state, politicians are following the Rhode Island playbook, using scare tactics and lavishly funded PR campaigns to cast teachers, firefighters and cops – not bankers – as the budget-devouring boogeymen responsible for the mounting fiscal problems of America’s states and cities.
Not only did these middle-class workers already lose huge chunks of retirement money to huckster financiers in the crash, and not only are they now being asked to take the long-term hit for those years of greed and speculative excess, but in many cases they’re also being forced to sit by and watch helplessly as Gordon Gekko wanna-be’s like Loeb or scorched-earth takeover artists like Bain Capital are put in charge of their retirement savings. . .
Now, though, states all over the country are claiming they not only need to abrogate legally binding contracts with state workers but also should seize retirement money from widows to finance years of illegal loans, giant fees to billionaires like Dan Loeb and billions in tax breaks to the Curt Schillings of the world. It ain’t right. If someone has to tighten a belt or two, let’s start there. If we’ve still got a problem after squaring those assholes away, that’s something that can be discussed. But asking cops, firefighters and teachers to take the first hit for a crisis caused by reckless pols and thieves on Wall Street is low, even by American standards.
And, as reported on Thursday, “First came the State of Illinois, now comes the City of Chicago.”