Can it be the New York Times worries it may lose the fact-free deficit hysteria propaganda market to the Washington Post? Today’s Times has its leading front page article suggesting public employee retirements benefits are so out of control and breaking the backs of state budgets that we may need a Constitutional Amendment to push States into bankruptcy. That way, the poor states can renege on their promises to public employees, defy their own state constitutions, and just for giggles, break the backs of employee unions.
The two-column, front page headline hides the responsibility for this propaganda hit piece in the passive voice:
. . . which is followed by the subheading, “Traditional Bankruptcy Is Not an Option, but Versions of It Gain Support.”
The editorial viewpoint in this “news” is then reinforced by the first five paragraphs, all above the fold, making it appear that responsible policy makers are hard at work trying to solve this very hard problem before it forces defunding of essential public programs. Just marvel at the dishonest journalism:
Policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.
Unlike cities, the states are barred from seeking protection in federal bankruptcy court. Any effort to change that status would have to clear high constitutional hurdles because the states are considered sovereign.
But proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid.
Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care. Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides.
Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout. Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors.
So who are these heroes, these responsible “policy makers” and unnamed “proponents” and “members of Congress” who are quietly thinking about ways to save the Republic? Well, it’s the same gaggle of budget deficit hysterics who have systematically lied about the debt and the “crisis” in Social Security. The article eventually cites Sen. John Cornyn, House Republicans, and the paragon of fiscal virtue, Newt Gingrich! Those would be the same budget arsonists who gave us two unfunded wars ($1-3 trillion), an unfunded drug benefit (another trillion), Bush tax cuts (more trillions) and want extensions of the same (trillions and trillions) . . . forever!
It is not until we get inside the paper that the Times bothers to ask an employee rep what he thinks about this nonsense. And buried in a later paragraph, the Times barely mentions a report by the Center on Budget and Policy Priorities, but with little about what the CBPP says that might rebut the deficit/pension hysterics. It’s doubtful most readers will bother to check, even if they’ve read this far.
Enter a certain Nobel economist, who, unable to post much because he’s traveling, gives us this short note:
Probably no posting, unless we get stranded in some airport somewhere.
If you want something to read, look at Iris Lav’s debunking of myths about state and local finances
Huh. So what does the economist want us to read? Well, only that same CBPP report, where honest folks have politely but utterly debunked the entire premise of the Times front page and pension hysteria propaganda. The CPBB report is well written and should be read from beginning to end, but here are a few highlights:
A spate of recent articles regarding the fiscal situation of states and localities have lumped together their current fiscal problems, stemming largely from the recession, with longer-term issues relating to debt, pension obligations, and retiree health costs, to create the mistaken impression that drastic and immediate measures are needed to avoid an imminent fiscal meltdown.
The large operating deficits that most states are projecting for the 2012 fiscal year, which they have to close before the fiscal year begins (on July 1 in most states), are caused largely by the weak economy. . . . [i.e., the US could easily fix that, as they did partly in the stimulus act]
Unlike the projected operating deficits for fiscal year 2012, which require near-term solutions to meet states’ and localities’ balanced-budget requirements, longer-term issues related to bond indebtedness, pension obligations, and retiree health insurance — discussed more fully below — can be addressed over the next several decades. It is not appropriate to add these longer-term costs to projected operating deficits. Nor should the size and implications of these longer-term costs be exaggerated, as some recent discussions have done. Such mistakes can lead to inappropriate policy prescriptions.
What follows is a point-by-point debunking of all the fact-free gibberish from deficit hysterics that’s repeated on the Times front page. Samples:
Some observers claim that states and localities have run up huge bond indebtedness, in part to finance operating costs, and that there is a high risk that a number of local governments will default on their bonds. Both claims are greatly exaggerated. [followed by further historical data and rebuttal] . . .
Some observers claim that states and localities have $3 trillion in unfunded pension liabilities and that pension obligations are unmanageable, may cause localities to declare bankruptcy, and are a reason to enact a federal law allowing states to declare bankruptcy. Some also are calling for a federal law to force states and localities to change the way they calculate their pension liabilities (and possibly to change the way they fund those liabilities as well). Such claims overstate the fiscal problem, fail to acknowledge that severe problems are concentrated in a small number of states, and often promote extreme actions rather than more appropriate solutions. [followed by more factual rebuttals, including an explanation how misrepresenting or manipulating the assumed discount rate can make a more manageable $700 billion deficit look like a scarier $3 trillion deficit ]. . .
– States and localities have managed to build up their pension trust funds in the past without outside intervention. They began pre-funding their pension plans in the 1970s, and between 1980 and 2007 accumulated more than $3 trillion in assets. There is reason to assume that they can and will do so again, once revenues and markets fully recover.
– States and localities have the next 30 years in which to remedy any pension shortfalls. As Alicia Munnell, an expert on these matters who directs the Center for Retirement Research at Boston College, has explained, “even after the worst market crash in decades, state and local plans do not face an immediate liquidity crisis; most plans will be able to cover benefit payments for the next 15-20 years.”  States and localities do not need to increase contributions immediately, and generally should not do so while the economy is still weak and they are struggling to provide basic services. . . . [more follows]
Once again, the same intellectually dishonest deficit hysterics who have been conning the public and the media into believing we face imminent financial crisis that can only be solved by cutting Social Security, are pulling the same con about public pensions. The con is to get states to renege on commitments, some embedded in state constitutions (so much for conservative reverence for the 10th Amendment!), to fund public pension/retirement programs that employees worked, paid, and bargained for, while claiming we have no choice. It’s a lie.
It’s shameful that the New York Times is not reporting this straight but has instead published a blatantly misleading propaganda piece on the front page of its news section.