PUBLIC PENSION UPDATE: Baltimore Pension Dispute Illuminates Public/Private Divide.
Severe market downturns lay bare any number of Ponzi schemes, and under-funded defined benefits pensions, public and private, can be justly described as such schemes. The problem with private plans is large enough. The Pension Benefit Guaranty Corp., which insures the pensions of 44 million Americans, said in a report this week that its deficit has tripled in just six months to a record $33.5 billion. Chances are it will have to be added to the growing list of entities to be bailed out by Uncle Sam. But this is trivial compared to the under-funding in public plans, which cover about 22 million workers. The deficits in the latter systems are said to total more than a trillion dollars. And these are not insured.
So, when Mayor Dixon capitulates to Baltimore’s public safety unions, withdrawing a pension reform measure and suggesting there is a need for a “bigger fix,” we are left wondering what that could possibly be. If the public safety unions had their way in blocking this proposal, how will “more comprehensive changes” be enacted? Yet, how can they be avoided?
A “bigger fix” is a code-phrase for “higher taxes so we can continue business as usual.” But here’s why voters aren’t interested:
The gap between the public sector and private business in wages and benefits continues to grow. Last month, USA Today reported federal figures showing that public employees earned benefits worth $13.38 per hour in December 2008, compared to $7.98 for private sector workers.
A full-time government worker receives benefits worth an average of $28,830 per year. A private worker’s benefits are worth an average of $16,598. Yet in this time of recession/depression, the shrinking private sector foots the bill for massive bailouts of public employees. In the nongovernment world, jobs are being lost by the hundreds of thousands each month. Government workers are secure in theirs. As the ordinary American becomes more aware of the disparity and unfairness of the current system, anger builds.
Right now the Political Class is more interested in explaining that anger away than in doing anything about it. But I think a tipping point is in the offing.