Friday, October 18, 2013

The Plot Against Pensions

You will hear many allegations that states in America are going bankrupt because of their pension obligations to public employees. These claims will inevitably be used to argue that states must renege on their pension promises to retirees. The “ pensions crisis” language is being
employed to create a misleading portrait.

According to estimates, “The gap between states’ assets and their obligations for public sector retirement benefits (is) $1.38 trillion” over 30 years. As the Center for Economic and Policy Research notes, this gap was not caused by benefit increases, as conservatives suggest. Data prove that most of it was caused by the stock market decline that accompanied the 2008 financial collapse.

To put those numbers in perspective, remember that the 30-year $1.38 trillion pension shortfall is just $46 billion a year. In most states the shortfall is less than 0.2 percent of projected gross state product over the next 30 years. States lose roughly $40 billion a year thanks to loopholes that let corporations engage in offshore tax avoidance. Additionally, a New York Times analysis recently found that “states, counties and cities are giving up more than $80 billion each year to companies” in the form of subsidies—many of which create no jobs.  Contrary to pension-cutters' assertions, they are so flush with cash that they spend a combined $120 billion a year on corporate handouts—almost three times the total pension gap.

Perhaps the most famous illustration of the pervasiveness of this deceptive argument comes from Detroit, Michigan. When the city recently declared bankruptcy, much of the media and political narrative around the fiasco simply assumed that public pension liabilities are the problem. Few noted that both Detroit and the state of Michigan have for years been spending hundreds of millions of dollars on wasteful corporate subsidies. The very same political leaders pleading poverty to demand cuts to municipal pensions were simultaneously promising to spend more than a quarter a billion dollars on a professional hockey arena. In Rhode Island, the state government slashed guaranteed pension benefits while handing $75 million to a retired professional baseball
player for his failed video game scheme. In Kentucky, the state government slashed pension benefits while continuing to spend $1.4 billion on tax expenditures. In Kansas, the state government slashed guaranteed pension benefits despite being lambasted by a watchdog group for its penchant for spending huge money on corporate welfare “megadeals.”  In California the Annual Pension Gap is $3.7 BILLION yet the  Annual Tax Subsidies to business is $45 BILLION -  just three
years of that annual expenditure is more than the entire 30-year, $112 billion public pension shortfall in the state. The Orlando Sentinel evaluating a report by Florida’s Department of Economic Opportunity found that the state “promised more than $1.7 billion in tax credits, rebates and other
types of cash incentives” to companies, and that “the lion’s share of the awards ...have yet to report
any jobs.” In all, The New York Times estimates that the state spends almost $4 billion a year on
so-called incentive programs.

The  National Association of State Retirement Administrators says: “The idea of imminent [public pension] insolvency is a gross distortion.”  McClatchy Newspapers declared that “there's simply no evidence that state pensions are the current burden to public finances that their critics claim.”

By pretending public pensions are the primary cause of state budget problems allows Big Business to distract attention from—and therefore prevent cuts to—their corporate subsidies and welfare. It also allows them to embed language in pension “reform” proposals that transfers worker retirement money into alternative investments—the kinds that incur expensive hedge fund fees and enrich Wall Street. The primary objective is to convert traditional defined-benefit  pension funds that guarantee retirement income into riskier, costlier schemes  that reduce benefits and income guarantees, and subject taxpayers and  millions of workers’ retirement funds to casino-style economics. Operating in state legislatures far away from the national media spotlight, billionaires can launder their ideological agenda through seemingly nonpartisan foundations, with devastating legislative consequences for millions of families. It is a plot that uses pension money to enrich the already rich.

Taken from this article here

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