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America’s Second Civil War : Public Pension Reforms

Posted by Larry Doyle on June 12, 2012 9:14 AM |

Do you hear that echo in the distance? What is that sound we have been hearing since the 2010 Congressional elections and still do today?

I strongly believe the din — which many political, financial and media heavyweights would discount if not outright deny — is a raging undercurrent of civil unrest among the heretofore silent majority.

What is the issue and whom are the silent majority targeting? Public pension costs and the cabal of political and union operatives who have jointly fleeced the American taxpayer for far too long.

Americans have had enough.

We heard this message in 2010 and we heard it just last week in battleground Wisconin.

Why did President Obama and the majority of the national Democratic power base avoid Wisconsin like the plague? They knew the outcome and did not want to bring greater focus upon themselves and their withering cabal by getting on the stump.

I find it particularly humorous to read how Governor Scott Walker ‘survived’ the recall vote.  A 7 point margin in politics is not survival. A 7 point margin is a routing of the opposition. What else did the Wisconsin slaughter accomplish?

It served as a rally call to those in other states to take up the charge and give no quarter in bringing fiscal sanity back to our nation. Do not think for a second that the call is not being heard across the land and deep into Democratic headquarters in Washington.

What are some of the other battlegrounds? The People’s Republic of California as highlighted by the Santa Cruz Sentinel which recently wrote, Clean up Pension Mess:

In San Jose, 70 percent of voters resoundingly supported Mayor Chuck Reed’s proposal to restructure city worker retirement plans, and in San Diego, two-thirds of the voters who cast ballots approved a similar measure.

With these results, the expectation is that other cities in similar spending binds may put up their own pension rollback measures.

This should not be construed as a vindictive strike at public workers, many of whom do not draw excessive pensions. It’s also not a statement that public employees who put their lives on the line should not be recognized, or fairly compensated, once they retire. But clearly, over a decade or more, local and state governments, egged on by public employee unions, began to grant retirement benefits they couldn’t afford. Many of these deals were made without much public notice or opposition.

I have no doubt that those supporting the cabal will pull out all the stops to maintain power and stem the tide of fiscal sanity sweeping the nation. Ultimately, the cabal will be overwhelmed by the wave of Americans whom have simply had enough.

The need for fiscal sanity is LONG overdue. No doubt, there are and will be plenty of others who will look to profit politically and financially from the tide of fiscal sanity BUT ultimately the big winners will be America’s future generations.

That is a group and this is a cause worth fighting for.

March on and keep punchin’!

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • JR

    The benefit programs of public unions have been a disguised wealth transfer mechanisnm for too long….perhaps the best example of the political class making promises they simply cannot keep.
    Like the private sector, the public sector need to right-size its business to provide the services it was hired to provide…and not lump wealth transfer schemes into the bargain.

  • Jim
  • RB

    While I agree with the concerns raised about public employee (many of whom are not union members) pensions, I think you’re over-stating the case based on the result in Wisconsin. As I recall, a high percentage of voters (20 percent? 30 percent) that were polled voted against recall solely because they viewed it as an overly-political response and too soon in Governor Walker’s term. Truth be told, I would probably have felt the same way – whether the Governor were of either party. That tends to make it less a referendum on the Governor and his policies and more on the actual recall mechanism.

    • LD

      Perhaps that may be the case but look at the results in San Diego and San Jose. Those numbers speak long, loud, and clear on this topic.

  • Ed

    Good one!

  • coe

    It strikes me that the union movement, so needed in the formative days of the industrial era, is bleeding the budgets of municipalities and private businesses in a way that is certainly unsustainable…and while many over the last 80 yrs have opted for careers in jobs that are tied to pension fund benefits, I would also make the case that the movement has proven counterproductive in recent times…it has crushed the US auto industry, crippled the airlines, spawned mediocrity or worse in our education system, and is bankrupting our government on the federal, state, and local levels…why should we continue to pay a mid-level 20yr retired employee from the Bureau of engraving & Printing $100K/yr for life – was his contribution to society worth that lifetime prize – look I’m not picking on that case – only illustrates the hypocrisy and unfairness that is saddling us and future generations with unfunded and underfunded liabilities…stop the madness!

  • JR

    It really is amazing…politicians delegate authority to state employees to run things…to carry on the activities of government, including managing a pension plan for employees. But nobody in the whole daisy chain has anything like a “fidcuiary” duty to make the best deal for taxpayers.
    There is no accountability, no one minding the store….until the train goes off the tracks.

  • Bill

    The whole concept of public employee unions is unsound. The original purpose of unions was to address work conditions and pay in the private sector. For the most part, work conditions have never been an issue in the public sector.

  • Peter

    In your call to arms over the cost of pensions paid to public sector workers, do you differentiate between existing employees and future employees.

    My point being that if I have worked for 30 years on the basis of a contract of employment, agreed with my employer, which stated that when I reached retirement age I would be entitled to a pension of US$X, I would, at the very least, feel cheated, if shortly before my retirement my employer informed me that my pension was being reduced to US$0.7X.

    • LD

      Peter,

      I can understand your point but when cities, states, towns, and other municipalities are on the brink of financial armageddon everything needs to be on the table. I believe there are likely some pension agreements that are/were more egregiously and surreptitiously negotiated than others. Additionally there are a LOT of examples of cases where municipal employees have gamed the system just prior to retirement in order to maximize the lifelong pension payouts.

      Not every individual circumstance is the same but the premise of renegotiating past agreements must be seriously considered.

  • LD

    Why is this “civil war” likely to continue playing out?

    Morgan’s Big Secret

    OK, it’s no secret that nation’s public pension funds are in big trouble, holding large “unfunded” liabilities owed to public workers once they retire. But most politicians (New Jersey Gov. Chris Christie is an exception) will tell you the problem is fairly containable, that there are simple fixes — such as raising taxes on the rich or pruning benefits.

    Not so, warns a “strictly confidential” report JP Morgan issued last year. It describes in straightforward, frightening detail how underfunded pensions are huge ticking timebombs for many of the nation’s big cities and states.
    The scandal isn’t simply that most public officials are misleading the public about the enormity of the problem and what steps must be taken to address the matter. As the Morgan report notes, many of the real liabilities are located “off balance sheet,” hidden from the public’s eye, and lax accounting standards let cities and states minimize their enormity.

    It’s also that JP Morgan itself kept the report’s findings a secret except for a few big clients, mostly hedge funds and large institutional investors, who got the inside tip on which states and cities are most likely to default on their debt as their pension liabilities fester.

  • LD

    In today’s WSJ,

    Some officials expect renewed political pressure to end the guaranteed pension benefits that are now received by about eight million retired public workers across the U.S. “Those attacks have occurred prior to the [GASB changes] and I can only anticipate that they will be amplified,” says Thom Williams, executive director of the Wyoming Retirement System.

    Read the entire article, States Face Pressure on Pension Shortfalls

  • divvytrader

    The private sector unions now uniting with GOP to bitchslap the public unions . Young cops and fireman who are first to be laid off so overpaid senior union workers can keep johns also see its a joke .






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