A defense of state workers in Wisconsin has been circulating in the last couple of days. The gist of the argument is that the state does not contribute one penny to employee pensions–it all comes from the workers themselves. This is nonsense, but interesting nonsense. Let’s take a look at it.
The author, David Cay Johnston, alleges that because wages are part of the total collective bargaining agreement, and that workers choose to defer part of their compensation to the future, taxpayers pay zero toward pensions. Does he mean that workers do not factor in the amount they expect to contribute to their pensions into their bargaining? That would be strange, now, wouldn’t it?
If, as Johnston argues, this is just a decision about how much of one’s salary to put aside for the future, then why is it an issue at all? After all, Scott Walker, the governor, is just asking them to accept less in take-home pay and put more into their pension fund. The total is the same, right? That is not a “pay cut,” as he alleges.
Oh, it doesn’t work that way? So if pensions are underfunded, a fact no one denies, then the increased contributions to make up the difference should come from…somebody else. That wouldn’t happen to be taxpayers, would it?
He further claims that Wisconsin workers are being asked to take a “pay cut” so that “the state of Wisconsin can use the money to fill the hole left by tax cuts and reduced audits of corporations in Wisconsin.” For all his ranting about journalists’ responsibility to provide a full context and get the facts straight, this is the height of hypocrisy. The implication is that our tax problems are caused solely by tax breaks (no doubt to the rich) and those horrible tax-dodging corporations. Countless respectable people believe quite the opposite–that not enough tax breaks and parasitism towards business are the culprits. Playing by his own rules would require Johnston to acknowledge that.
Workers do not want to put enough in to fund the system from what they take home now and would rather have taxpayers foot the bill when it comes due. They are not bad people for wanting more. They are doing what most human beings do–enjoying the power they have. In this case, they have that power because the rules of negotiation are crooked.
Johnston knows this perfectly well, I’ll wager. One of his defenders, Rick Ungar, was forced to admit as much as commenters to his blog objected to this sophistry.
Because the pension plan is a defined benefit plan – requiring the state to pay the agreed benefit for however long the employee may live in retirement- if the employee lives longer than the actuarial plan anticipated, the taxpayer is on the hook for the pay-outs during the longer life.
Ungar quickly covers by saying that this is not the problem it seems, since:
…if the market continues to perform as it has been performing this past year, don’t be surprised if the funding crisis begins to recede. If it does, what will you say then?
Well, Rick, I will say that OJ didn’t do it and all dogs go to heaven.
For all my disgust with Johnston and Ungar, I will give them one thing. They know who really caused all this–the state itself. The state pension systems are broken. At some point, probably sooner than expected, no one is going to get anything. Our elected officials have put us on the hook for schemes they know full well can’t work. By giving state workers what they want instead of what they can reasonably have, they have ensured that many good people will retire, and die, poor.