Beware the pension ‘reformers’
Here in Sacramento—and as far away as Detroit—there’s a buzz about pension “reform.” But let’s take a look at what that really means—and who’s behind it.
Our nation is facing an unprecedented retirement crisis. In a recent Wells Fargo study, more than one-third of the Americans surveyed didn’t think they would ever be able to afford to retire, believing they will be forced to work until they are either “too sick or die.” Because of our current economy, more than 40 percent of the respondents said they weren’t putting away any money for retirement because they were too busy struggling to pay their household bills.
Sure, the recession is to blame for part of that. But the real culprit here is Wall Street, the same folks who got us into the recession in the first place.
More than three decades ago, Wall Street unveiled 401(k) plans. Under these plans, employees make their own decisions about where to invest for their retirement. And what they end up with depends on how their picks perform. When the market cratered in 2008, middle-class Americans lost trillions in retirement savings. Meanwhile, Wall Street rakes in expensive annual “management” fees no matter what.
That’s why it’s no surprise that Wall Street is behind the outcry for reducing the benefits for firefighters, police officers, teachers and other public employees, embodied in a ballot measure being put forward by San Jose Mayor Chuck Reed. The initiative is being bankrolled by a pair of hedge-fund managers and John Arnold, a Texas billionaire who made his fortune at Enron.
Reed’s measure doesn’t just reduce benefits for new employees—it eliminates the vested retirement benefits of all employees. That will only add to our state’s retirement crisis.
What’s the solution? In addition to Gov. Jerry Brown’s changes to the pension system, which are estimated to save $77 billion, more than 600 new agreements have been signed in nearly 400 cities and towns where public employees are paying more for their retirement.
It makes more sense to solve this issue at the bargaining table than at the ballot box.