Wow – a double-barrel news day for American pensions and retirement security.
Barrel One, from the Private Sector
First up, everybody’s favorite job creators and patriotic Americans, the CEO class (AKA the ruling class, the bourgeoisie, the capitalist class, MOTUs, bloodsucking vampires). It seems that sending our jobs overseas, smashing the labor movement, and laying us off by the millions isn’t enough for this crowd. No, that would be leaving too much money on the table. So they have to loot our pensions as well. That money didn’t disappear, though; it was magically transformed into profits or, in some cases, executive paychecks. Salon’s Thomas Rogers wrote about it here; his article is based on a conversation with Ellen Schultz, the author of “Retirement Heist”
She draws out some salient points.
First, these pension benefits, at a lot of companies, were negotiated in lieu of cash wages. That is, they were a form of deferred compensation belonging to the employees but managed by the company. It’s not the company’s money, and when they take it, it’s theft.
Second, these corporations knew what they were doing. Court documents show the executives discussing how to disguise the changes so employees wouldn’t know it was happening.
Third, these companies snuck in the changes to their pension plans during the 1990s. Why then? It’s not as if American business was hurting during that decade. I would suspect that it had to do with opportunity. The 1990s were the decade of “rightsizing”, “downsizing”, “streamlining” and “globalization”, all code words for dumping American workers in favor of overseas workers as fast as possible. It was the decade when the white-collar workforce caught the hell that had been hitting the blue-collar workforce since the 1970s. If you’re going to kick millions of loyal people off the payroll, you don’t want to get stuck paying them what you promised them, do you? I mean, what would Wall Street think about that?
Digby covers this with her usual excellence. She goes on to point out that these shenanigans leave the taxpayers on the hook. The 1974 ERISA law created the Pension Benefit Guaranty Corporation, which is supposed to step in when private pensions “fail”. The rate of pension failure has outrun the PBGC’s funding. The fund is facing $102.5 billion in obligations with $79.5 billion in assets. Who is supposed to make up the difference? Why, the corporations, of course! Since they have trillions on hand in cash, that should be no problem.
Barrel Two, from the Public Sector
Next up, our own elected representatives at statehouses across the nation. This is discussed in a cover story in today’s USA Today.
It seems that state legislators in quite a few states have been inserting crafty language into the laws to allow themselves to really clean up on their own pensions (at the same time as they slash pensions for other state employees). A few of the tricks include: calculating their pay as if they worked 365 (or, in one case 372) days per year, allowing retirement at an earlier age, increasing the multiplier on which their pension is calculated, including pay they receive for other work into their state pension, allowing themselves to start drawing pensions while they are still working, basing their pension payments on the salaries they pay state judges, creating extra stipends for holding leadership positions, and on and on. Some legislators get pensions worth 17 times more than their legislative salaries!
Needless to say, none of the dodges engineered by these legislators to benefit themselves are available to “the voters they serve or the workers they direct”. It also goes without saying that these pension payments are on top of whatever consideration these individuals may be receiving from lobbyists, whatever business opportunities may conveniently open up to them as a result of their positions, etc.
And on the receiving end…
I think we’ve been asleep at the switch a little too long in America. In the nineteenth century, the United States was infamous around the world for the corruption of our political system. Generations went into the streets, onto the picket lines, and into the voting booths to change that. We managed to create, by our own efforts, a social contract that obliged our capitalists and elected representatives to behave to a certain standard.
Since Nixon, and especially Reagan, a counterattack has been underway, brilliantly managed and lavishly financed, and these outrages are just a few of its fruits.
So remember all this the next time you hear calls for cuts to Medicare, Medicaid, or Social Security. Remember this when you hear called for shared sacrifice. This is sacrifice, all right, but the only ones sharing it are the American people. Our new master class is doing just fine (thanks so much for asking!)