The Public Pension Outrage and Alan Greenspan’s Pension
Truthout, August 16, 2010
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In recent weeks there has been a serious effort by the conservatives and even many centrists to whip up anger at public sector workers over their pensions. The basic story is that public sector workers get better pensions on average than their private sector counterparts. At the same time, most state and local pension funds have large shortfalls, implying that additional government revenue will be needed to keep them solvent.
This is supposed to make people really angry at public sector workers. The right-wing noise factory has been whipping up the hostility at public employees, sensing that they may have another ACORN on their hands. A New York Times columnist even called on retired public employees to give back pensions for which they worked and have solid legal claims.
We should recognize the attack on public sector workers for what it is: a sleazy case of scapegoating that is intended to divert people’s attention from the real villains in this economy, the Wall Street boys and the inept economic policymakers who took the economy to ruin and seem intent on leaving it there.
The basic facts are straightforward. Adjusting for education and experience public sector workers actually get paid slightly less on average than their counterparts in the private sector. It is likely that the lower pay is largely or fully offset by a better benefit package, but it is likely that the difference in benefit packages between public and private sector workers is not as large as it may seem.
First, it is important to realize that public sector workers are far more likely to have a college or advanced degree than the population as a whole. While most workers have little by way of a defined benefit or defined contribution pension, most workers with college or advanced degrees can count on being entitled to at least a modest pension income in retirement.
Second, many public sector workers are not covered by Social Security. This means that whatever they get from a government pension will be the bulk of their retirement income; it will not be a supplement to their Social Security benefits. With this in mind, the $22,000 pension that an average retired public employer received in 2007 hardly seems excessive.
This doesn’t mean that there are not some workers who game the system and some categories of workers who may not get too much. (Firefighters and police tend to do best. Of course these people regularly risk their lives on the job during their working years.) In short, the idea that we have a whole class of public employees enjoying plush retirements is nonsense that can be readily dismissed with a quick look at the data.
So let’s get our eye on the ball. Fifteen million people are not out of work because of generous public employee pensions. Nor is this the reason that millions of homeowners are underwater in their mortgages and facing the loss of their home. In fact, if we cut all public employee pensions in half tomorrow it would not create a single job or save anyone’s house.
The reason that millions of people are suffering is a combination of Wall Street greed and incredible economic mismanagement. As we know, the Wall Street boys are back on their feet, with profits and bonuses again at record levels, thanks to the trillions of dollars in bailout money handed to them by the government in the fall of 2008. If people want to be angry at someone, the multi-million dollar bonuses going to hotshot traders at Goldman Sachs and J.P. Morgan might be a better target than a retired school teacher’s $3,000-a-month pension.
The other appropriate target for the public’s anger is the people running economic policy, who failed to prevent this entirely preventable disaster. While there are many people who should be unemployed for this colossal failure (none are), the culprit in chief is Alan Greenspan, arguably the worst central banker of all time. He insisted that everything was just fine even as the housing bubble expanded in size to more than $8 trillion at its peak. Did he think the bubble would just keep expanding forever or did he really believe that the economy could lose $8 trillion in wealth without any serious fallout?
This is where we can talk about public pensions. While Mr. Greenspan has retired as Fed chairman, and therefore cannot be fired, by my calculations he gets something like $160,000 a year as a pension from the government. There is probably no one less deserving of their pension than Mr. Greenspan. If there is any retired public employee in the country who should be returning a pension, it is Mr. Greenspan.
What do you say, Mr. Chairman?
Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.