Columnists are given considerably more leeway than reporters, but serious newspapers still expect their pieces to bear some relationship to reality. This is why the Ron Lieber’s column warning of a class war (“The Coming Class War over Public Pensions”), with government workers as the new “haves,” may leave many readers wondering about the New York Times.
We have just seen the Wall Street crew get trillions of dollars of loans and loan guarantees to protect their multi-million dollar salaries and bonuses. The government routinely gets taken left and right by Halliburton and other defense contractors. Doctors and drug companies use their political power to ensure that they can charge far above competitive market prices.
With all these millionaires and billionaires getting even richer at the public’s expense, why would there be a class war over public pensions? Clearly this is Mr. Lieber’s desire, but so what?
Lieber does his best to whip up the hysteria — near the beginning of the article he describes the pension shortfall: “At stake is at least $1 trillion. That’s trillion, with a ‘t,’ as in titanic and terrifying.” Since we’re doing the alliterations with “t,” how about throwing in “two” as in a shortfall that is less than 2 percent of projected state and local government spending. Current spending is close to $2 trillion a year. If we assume that a shortfall must be filled over a 30-year period, then this would imply a gap that is less that 2 percent of projected spending over this period. That is not a trivial sum, but it is not obviously “titanic” or “terrifying,” at least to adults who do not scare easily.1
The piece does eventually point out that most public pensions are not especially large and that in many cases these pensions are also substitutes for Social Security (many state and local workers are not part of the Social Security system), but that information only appears near the bottom of the piece, long after the call to class war.
The reality is that public pensions are better than private pensions, but this is largely because most private sector workers have little or nothing by way of pensions. With a few notable exceptions (police and fire pensions, along with those of IMF economists, tend to be very generous), most public sector pensions do not provide retirees with an especially high standard of living.
It is more than a little bizarre, and arguably more than a little offensive, that the NYT would publish an explicit call for an attack on the pensions of millions of workers who never earned more than $40,000 or $50,000 a year. This is in a country where people like Erskine Bowles (the co-chair of President Obama’s deficit commission) get $350,000 a year serving as a director of a company (Morgan Stanley) that only exists today because of the generosity of the Fed and the taxpayers when they rescued it in its time of need. (What does a director of Morgan Stanley do to get $350,000 a year?) Of course, the full-time Wall Streeters can pocket 100 times as much.
Mr. Lieber obviously wants to direct public anger at school teachers and custodians rather than the people who hold real power and wealth in this country. It is a pathetic and disgusting exercise and the NYT should be embarrassed to provide Mr. Lieber with the ink and electrons for this effort.
1 If the economists who make projections knew arithmetic, then the pension funds would not be facing these huge shortfalls. These “experts,” all of whom draw high salaries in their working careers and much higher pensions than public employees (think of people like Harvard Professor Martin Feldstein, Boston University Professor Laurence Kotlikoff, and Steve Goss the Chief Actuary for Social Security), all asserted that stocks would average 7.0 percent real returns even when the market was at its bubble peaks. If the market had performed as they had projected, then these pension funds would be just fine today.
Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of False Profits: Recovering from the Bubble Economy. He also has a blog Beat the Press, where he discusses the media’s coverage of economic issues. This article was first published by CEPR’s Beat the Press blog on 6 August 2010 under a Creative Commons license.