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08:25 am: Pensions

The situation with the state employees pensions in Wisconsin and other states is deplorable. What’s really terrifying is how poorly people seem to understood the basics of what’s going on, why it matters, and why the proposed solutions have absolutely nothing to do with reality. This is yet another case of cheap misdirection and power grab.

A friend describes it better than I can. Go read her thoughts. I’ll wait. I’ll also excerpt:

It’s pretty straight forward. State unions entrusted the management of their pension plans to the state to manage. The state outsourced it to a company that bought the Wall Street line of fast, easy money. The market crashed. The money taken from the State unions went *poof*. Now the states have, instead of firing the money managers and pressing the Federal Government to force regulations to protect their future obligations, decided to Union-bust.

So the financial burden, in this case, comes from the state obligation to cover the existing pension payments to existing pensioners. The fund (the union’s money, taken from state employee paychecks) was mismanaged and lost a lot of value. The state promised to be a backstop for that fund, since they were managing it. They failed in that management responsibility and can’t afford to be the backstop.

So, bust up the unions. Makes *total* sense.

Union busting is all well and good, done in isolation. A lot of unions seem to have forgotten that while they may need to gather in force in order to match the power of the owners, the path of mutual benefit is superior to the path of mutual destruction. If it’s really the case that a union is just a protectionist mob – then yes – by all means – bust it. Please also go after a monopoly or two while you’re at it.

However in this case, the real culprits are (in approximately this order):

- The wall street greedheads who pawned off known bad debt as “no risk” investment grade “pensioner and fixed income” quality CDOs on the pension fund managers.

- The pension fund managers who bought it, exposing their “no risk, seriously, this is our retirement account” state government customers to the worst sort of bad debt.

- The federal and state officials who failed to regulate any of this.

——— above this line, the individuals involved have already received large bonuses and commendations for their excellent work handling all parts of the crisis, nobody has gone to jail, and nobody has been fired. —–

- The federal and state officials who, at some level, should have been using the two years bought by the Obama stimulus to come up with some sort of plan to raise revenue or cut expenses.

Um, that’s it. I can’t really bring myself to blame the greedy and agressive unions for anything, particularly since they’ve already offered fairly large financial concessions to address the actual budget shortfalls.

Originally published at chris.dwan.org. You can comment here or there.



Comments

[User Picture]
From:amnesiadust
Date:March 2nd, 2011 07:56 am (UTC)

Krugman's extended take

(Link)
Just finished reading Krugman's 2007 book The Conscience of a Liberal, which gives me whole new levels of, um, appreciation for these kinds of shenanigans. Was nice to burn through all that history in more or less one sitting to get the whole picture, instead of just the opinion-column-sized nuggets I'm used to getting. The Wisconsin debacle plus the yahoos who want to kill Planned Parenthood as part of the "budget-balancing" fracas both fit nicely into the picture he paints, in which a very small section of the population wants to party like it's 1899.
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