Pension Reform Requires Mutual Empathy, not Enmity

Attending a high school reunion after more than a few decades ought to be a memorable experience for anyone. Hopefully the occasion is filled with warmth and remembrance, rekindled friendships, stories and laughs. But as our lives develop and we build our adult networks based on shared values and common professions, a high school reunion offers something else; a unique opportunity to meet people we knew very well and still care about, whose lives all went in completely different directions.

My high school classmates chose a diverse assortment of careers. Some became engineers, some went into sales, some are entrepreneurs; some work in high-tech, some in aerospace, others in construction. And some are teachers, some are police officers, and some are firefighters. Without any exceptions I could observe, all of them made conscientious choices, all of them worked hard, all of them were responsible with their savings and investments. And now they’ve reached the age where whatever retirement plans they made are unlikely to change much.

How to ensure government pensions are not blown up by the next sustained market downturn is a complex challenge, complicated further by ideological divisiveness and political opportunism. On one side are powerful financial special interests in the form of the pension systems, and their government union allies. On the other side are poorly organized taxpayer activists whose grassroots strength, combined with fiscal reality, attract support from increasing numbers of local and state politicians. But caught in the middle are the people who served in government jobs, the overwhelming majority of whom did those jobs well, and have earned the right to retire with dignity. It’s personal.

Figuring out how to make government retirement benefits financially sustainable should be part of a bigger conversation, which is how all Americans are going to have the ability to retire with dignity. It is part of a conversation even bigger than that – how to nurture sustainable economic growth while coping with an aging population, environmentalist considerations, globalization, debt/GDP ratios at historic highs, and mushrooming new technologies that present unprecedented potential to eliminate human jobs. All of these mega-trends are this generation’s challenge, all of them are urgent, all of them are personal.

It’s easy to solve all of these challenges if you are willing to ignore reality and hew to an ideological pole-star. Libertarian answers to social and economic policy issues inevitably advocate privatization. Socialist theorists inevitably advocate state ownership. But both of these ideologies, in their most orthodox forms, are utopian. Libertarians envision a stateless, humane society based on personal liberty and private ownership. Socialists envision a stateless, humane society based on common ownership. If these extremes are so absurd, why is the center so uninviting?

It’s a long way from Silicon Valley to utopia, but in that fabled land, anchored by what was only referred to as San Jose back when we were high school students there, thoughtful futurists abound. Some think we shall all become independent contractors, linked by technology to virtual employment opportunities all over the world. They believe secure full time jobs will wither away entirely, and everyone will thrive as free agents in a wired world. Others think automation will eliminate so many jobs, and create so much abundance, that guaranteeing a minimum income to everyone will be feasible and necessary, whether they work or not. The conversation taking place among the Silicon Valley elite regarding the political economy of our future is helping to define that future as much as their innovative new products. It’s a conversation worth listening to without ideological blinders.

My classmates who chose careers in public service, just like my classmates who pursued careers in the private sector, are starting to retire. Just like everyone else – our friends, our families, our neighbors – they want answers, not ideology. They want constructive solutions, not controversial schemes. Is there enough room in the political center to permit a conversation that sticks to facts and practical solutions, or will the professional chorus of perennial opponents crush them, abetted by all those millions who are comforted by inflexible ideologies?

One ideologically impure, centrist way to save defined benefits would be to borrow concepts from Social Security. Reformed defined benefits would be (1) awarded according to progressive formulas, where the more someone makes, the less the pension benefit is as a percent of their final salary, (2) there is a benefit ceiling which no individual pension can exceed, (3) pension contributions in the form of employee withholding can be increased without commensurate increases to overall salary, (4) annual pension accrual multipliers, going forward for active workers, can be reduced depending on the system’s financial health, and (5) when necessary, pension benefits to existing retirees can be reduced, in order to maintain the overall financial health of the system. Often that can be as little as skipping a COLA.

When political professionals, volunteer activists, policymakers, commentators, analysts, or anyone else influencing the pension debate speak on the topic, they should imagine the following situation: With every word, they are looking into the eyes of two close friends or family members, two people nearing retirement, one of them about to collect a government pension, the other a taxpayer who will rely on Social Security supplemented by a lifetime of personal savings. People who didn’t create the financial challenges we collectively face. People we love.

*   *   *

Ed Ring is the executive director of the California Policy Center.

14 replies
  1. Avatar
    William Monnet says:

    Ed, many thanks for this thoughtful essay. I could not agree more, and could not have said it so well. Pension reform advocates (like myself) need to get out more often. We need to talk to and understand the perspective of citizens who work in the public sector. And we need also to develop sets of practical reforms that our elected leaders can implement. It is not sufficient to just demand change.

  2. Avatar
    Tough Love says:

    ED, I agree with your observations and suggestions as outlined in #s 1 to 5 in your next-to-last paragraph.

    But a current financial expectation (or promise …. never extended to participants in PRIVATE Sector pensions Plans), even if an unfair financial “advantage” is a very tough thing to give up. I believe that the Public Sector unions/workers would (HAVE, and WILL) fight with every ounce of their being to not give in to even one of your suggestions.

    It IS called GREED. Changes must be FORCED upon them.

  3. Avatar
    Equal Time says:

    After reading your 10 point anti-public sector union manifesto a few days ago, this rather melancholy and almost compassionate piece shows up. Based upon that 10 point and many other of your posts, this is either an attempt at bait and switch or you are off your meds. Reminds me of a piece you did a ways back expressing the need for understanding toward our public safety workforce – that olive branch was uncharacteristic, as is this one. I don’t buy it for a minute.

  4. Ed Ring
    Ed Ring says:

    Equal Time – The position of our organization is that public sector union reform is a bipartisan issue, as are the related issues of pension reform and education reform. Our organization also stops short of embracing orthodox libertarian prescriptions for every social and economic challenge. These two points ought to suffice as evidence we’re not simply trying to issue “manifestos” and provoke those with whom we disagree.

    If you read the editorial commentaries in UnionWatch, hyperbole is the exception. In general, we endeavor to communicate with measured reason and offer facts and logic that support our position. While we include empathetic points in nearly all of our material, here are – just from the past 18 months – examples of work explicitly reaching out beyond the boundaries of those stereotypes our critics would like to permanently assign to us:

    Public Sector Union Reform Requires Mutual Empathy, June 2015

    A Challenge to Moorlach and Glazer – Build A Radical Center, June 2015

    Libertarians, Government Unions, and Infrastructure Development, May 2015

    Pension Reformers are not “The Enemy” of Public Safety, April 2015

    Raise the Minimum Wage, or Lower the Cost of Living?, March 2015

    Conservatives, Police Unions, and the Future of Law Enforcement, January 2015

    California’s New, Big, Nonpartisan Political Tent, December 2014

    California’s Emerging Good Government Coalition, November 2014

    The Challenge Libertarians Face to Win American Hearts, October 2014

    Reinventing America’s Unions for the 21st Century, September 2014

    The Looming Bipartisan Backlash Against Unionized Government, August 2014

    Two Tales of a City – How Detroit Transcended Ideology to Reform Pensions, July 2014

  5. Avatar
    SeeSaw says:

    The first three items in your 5-point plan are covered by PEPRA 2013, a statute passed by the Legislature. Learn to live with getting a few of your desires and don’t expect everything! Points 4 and 5 would take a constitutional amendment–I do not want to go that far–once you have thrown the baby out with the bath water, it takes more than anyone’s life-cycle to refill that tub.

  6. Avatar
    Tough Love says:

    You try it when the OTHER side get soooooo much more (on YOUR dime) and won’t give up even 5% of their advantage.

  7. Avatar
    Tough Love says:

    Sorry, but waiting 25+ years for all those excluded from these PEPRA provisions (i.e. those hired before PEPRA) is a non-starter.

    ALL of the changes (and MUCH MORE) need to apply to the future service of all CURRENT workers.

  8. Avatar
    Richard Rider says:

    An otherwise fine article, but I take issue with the characterizing of the libertarian viewpoint. Yes, we libertarians favor privatization over government-provided services whenever possible. But that’s hardly a Utopian position.

    In my San Diego County, every city but the Big One has privatized its trash collection. Some cities do the contracting, and pay for it with taxes. Others leave it to the property owners to pick their own garbage service and pay direct. These cities face no unfunded liability for their trash operations. The city of San Diego definitely does. Is that privatization choice Utopian?

    Every city in America likely privatizes (contracts out) some city operations. Some a little, some a lot. Libertarians favor dramatically expanding this option. Is that Utopian?

    Now, if we want to quibble over whether or not the POLICE should be privatized, that’s a great distraction favored by the unions. It’s hard to imagine that being an acceptable choice. But just about EVERY other state and local function CAN be privatized — though, practically speaking, it’s unlikely most jurisdictions are yet ready to take that step with firefighting — if ever.

    Sandy Springs, GA — a city of 100,000+ people — has privatized all functions except police and firefighting. They get these services (and pay with taxes) for about half the cost of surrounding communities that use government employees and departments. Sandy Springs has NO unfunded liabilities for providing these privatized services. Is that Utopian?

    The “100% privatization or it’s a failed policy” fallacy is supported by VERY few libertarians (the tiny anarchist wing — and even they likely favor partial privatization). But that’s the fallacy the unions and Big Government advocates focus on — ignoring the thousands of successful private operations serving cities, counties, school districts, states and even the U.S. government.

  9. Avatar
    Rex the Wonder Dog! says:

    ET- you need to phone home, because your “entitlement mentality” is reeking from every word you write…

  10. Avatar
    Rex the Wonder Dog! says:

    TL, why don’t you just start to ramming your head into a brick wall? That will give you less brain damage than trying to reason with seesaw. Seesaw is your typical undereducated trough feeder who hit the employment lottery jackpot with her government workfare job, just like firewhiners and GED cops.

  11. Ed Ring
    Ed Ring says:

    Richard – there are as many facets to privatization as there are to libertarian ideology. We probably agree on the virtues of privatizing much of what currently rests in the hands of local government. But selling off publicly owned real estate to make pension contributions is a terrible idea. It is being coerced onto the citizens of Pacific Grove, and it only buys time while doing nothing to solve the underlying problems they’re having with financially unsustainable pension obligations. In general, this solution – selling off public assets to make raise cash to send to CalPERS and other pension systems – is being advocated by reputable libertarian organizations. One may lean libertarian without having to lean that far. It’s a terrible idea.

    Regarding libertarians being utopian, in context, the point was this: “…both of these ideologies, in their most orthodox forms, are utopian. Libertarians envision a stateless, humane society based on personal liberty and private ownership. Socialists envision a stateless, humane society based on common ownership.”

    And you state “The ‘100% privatization or it’s a failed policy’ fallacy is supported by VERY few libertarians (the tiny anarchist wing.” I think we’re in agreement there. We both described utopians. Which leaves the question for those of us living in the real world, where to draw the line?

    We need a more nuanced debate within the libertarian community on these questions. Because as it is, every time the government unions succeed in pushing through another “fee for service,” they can rationalize it under libertarian principles. So every mile we drive and everywhere we go is monitored, the timing and quantity of every drop of water we consume or kWh of electricity is monitored, because that’s how the free market accurately prices consumption of services. We pay $.50/kWh during “peak” and $.10/kWh during “off-peak” because that’s the “spot price.” This is a failure to develop and maintain first-world infrastructure masquerading as libertarian “market based” solutions. So, for that matter, is the entire debacle called “carbon emission trading.”

    Do libertarians really want to provide ideological cover for this, when the hidden agenda, of course, is to have the entire inflated government overhead paid for by taxpayers via income tax and sales tax and property tax, then have the actual consumption of services paid for again via “free market mechanisms” in the form of endless fees?

  12. Avatar
    Tough Love says:

    Quoting ….”But selling off publicly owned real estate to make pension contributions is a terrible idea. ”

    I agree wholeheartedly.

    NJ’s Governor Corzine tried that a few years ago with the NJ Turnpike, and thankfully he couldn’t get it through.

    A State (or City) asset is really no different than cash and these assets (theoretically) belong to ALL of NJ’s Taxpayers, NOT just NJ’s insatiably greedy Public Sector workers.

    When pension and benefit promises are grossly excessive (by any reasonable metric) and negotiated in collusion with Elected Officials (BOUGHT with Public Sector Union campaign contribution) and NOBODY at the bargaining table rightfully looking out for Taxpayer-interests, those Taxpayers have every right …. even an obligation ….. to resist paying for that (50+%) share of these excessive promises that would not have been granted in the absence of that collusion.

    Selling TAXPAYERS-owned assets to generate the cash to make such UNJUST payments is absurd.

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