Often times in American politics complicated fiscal issues will be boiled down to anecdotal evidence that serve as the most extreme vivid case example of the narrative a particular campaign is trying to push. Whatever policy position your opponent takes is sure to have at least one instance of waste, excess, abuse, or corruption just as whatever policy you support is sure to have some little guy desperately trying to make ends meet while the current system tries to keep them down. These isolated cases are used by ideologues to elicit a specific emotional reaction from voters in order to sway public opinion. By design, these examples are almost always outliers. That doesn’t mean the truth always falls right in the middle, sometimes the data shows that one narrative or the other is much closer to the truth of things. But you’re never going to find that out if you allow yourself to be swayed by sentiment rather than facts. Now it has always been my mission to focus on these facts and explain them, to the best of my ability, with detached rationality but given how intensely poisoned the debate on this particular issue has been by partisanship I felt the need to remind us all that we need to look past the noise and make decisions based on the facts. In this edition of Its The Economy Stupid we’re going to break down one of the stickiest financial issues in state politics: Public Sector Pensions.
Let’s begin by establishing a little working knowledge of what exactly a public sector pension is and how they have traditionally worked. A pension is a fund that that is earned/paid into over the course of a persons employment that they men draw upon once they have retired. Public Sector Pensions refers to those pensions paid out to workers who held jobs in the public sector: teachers, police officers, those who work at various federal, state, and local agencies. In America, the idea of public sector pensions dates all the way back to the revolutionary war when veterans were given stipends following their discharge from the Revolutionary Army. Pensions fall into three categories; defined benefit, defined contribution, or hybrid plans that combine the two. Defined benefit means that that terms of your pension have been guaranteed by the government based on the length of a person’s career and the salary they were paid during their working years. A Defined Contribution pension involves an individual investing in their own retirement and their employer matching that investment using whatever contractual parameters the two parties have agreed to. Public Sector Pensions almost always fall into the defined benefit category of pensions which so often times make them the targets of political attacks.
Let me elaborate. Because the benefits public sector employees are paid out from public funds they are more than just people’s retirement benefits they are also a matter of public policy. In addition, those defined retirement benefits are often negotiated by public sector unions on behalf of their members. And unions have always been inherently political entities in American life and depending on which side of the aisle you work for busting or backing unions can win you a lot of goodwill with your constituents regardless of the actual facts of the case. So one group will defend unions and their pensions even if there are instances of graft and real budgetary concerns and one group will attack them all as lazy, corrupt bureaucrats and financial burdens no matter how many good and decent public servants they screw over.
Which is why I prefer facts over narratives (and yes I know how ironic that is for a writer of fiction to say). And the truth is that while people might moan and complain about footing the bill for direct benefit plans almost every study done over the last ten years says that switching new hires over from a direct benefit plan to a direct contribution plan would either cost the government either same amount of money per employee or in some studies cost even more and almost always results in reduced benefits. Which means if you hold the position that you want to switch from direct benefit to direct contribution what you’re really saying is that you want to pay more money so other people can have less money when they’re old. Which makes no sense and is just kind of mean. But don’t take my word for it. There is plenty of data out there. Do your own research.