The Pension Debate is About Much More Than Pensions

“I wish it need not have happened in my time,” said Frodo. “So do I,” said Gandalf, “and so do all who live to see such times. But that is not for them to decide. All we have to decide is what to do with the time that is given us.”
J.R.R. Tolkien, Lord of the Rings

How might one place the challenge of providing adequate health and retirement security to all workers in context? It would not be a stretch to consider J.R.R. Tolkien’s imaginary world of civilizations in conflict, replete with magic and fantasy, great good and slavering evil, passing out of one great age into an unknown future. Because our society has changed in ways unimaginable a century ago, yet what has happened so far will be dramatically overshadowed by what is coming in the next few decades. Never in human history has “what to do with the time that is given us” had more urgency.

Nearly everywhere on earth, human populations are aging. As birthrates fall and lifespans lengthen, the ratio of workers to retirees edges closer and closer to 1-to-1. The phenomenon of falling birthrates is the result of several factors – increasing opportunities for women, increasing per-capita prosperity, and declining infant mortality. Birthrates began to decline in Western Europe and Japan in the 1960’s, closely followed by the United States and the rest of the industrialized world. In the late 1970’s China’s “one child” policy was implemented, and in recent years, with surprising speed, birthrates have declined precipitously throughout the Middle East and Latin America. At this point, the only regions in the world where lower than replacement birthrates aren’t either a long-standing reality or imminent are pockets of Central and Southeast Asia, and sub-Saharan Africa.

The consequences of declining birthrates, occurring faster than anyone thought possible, go beyond requiring new formulas whereby current workers deliver sufficient productivity to adequately support a larger proportion of retirees. It means that the “population bomb” that was supposedly going to explode has fizzled. It means that the prevailing challenge of the 21st century is not how to avoid a Malthusian collapse of resources, but rather is how to continue to generate robust global economic growth in a world where the human population is declining. The magnitude of this challenge cannot be understated. It has never been done.

There’s more. As technology delivers increasingly improved and diverse medical treatment options, the healthcare sector will become a much larger segment of the economy. As a source of new economic activity, this is a good thing. But how will this translate into universal elder care? Who will receive expensive, individualized genetic therapies that cure cancer, repair nervous systems, rebuild internal organs, preserve youth, extend life? To the extent these fantasies become reality, the term “managed care” will become more draconian than ever.

This is the historic, epoch shifting context in which the American debate over retirement healthcare, social security and public sector pensions takes place. America has the world’s largest and most diverse economy, is blessed with abundant natural resources, still leads the world in innovation, possesses the world’s preeminent military, and enjoys domestic stability and security unique among large nations. America’s population, while aging, is nonetheless younger than any other developed nation, thanks both to higher than average birthrates combined with ongoing net immigration.

For these reasons, America – diverse, stable, democratic, and mighty – is the only nation on earth that can possibly hope to midwife a peaceful and prosperous global transition to an aging and declining population. How will nations grow economically when their societies are in demographic decline? How will nations maintain domestic stability when an aging, connected population clamors for access to life-extension treatments that will initially only be affordable to an elite few? How will America’s innate optimism, inclusive democracy, and unparalleled capacity for innovation answer this call?

And in the context of this epochal transition, the debate over how to improve social security and how to make pensions sustainable could define whether or not America will exercise the global leadership that is needed now more than ever. Will pensions be reduced for current and retired workers so that they can be extended, with reduced but common formulas, to all new workers, public and private? Will Americans create a uniform system where everyone earns retirement security and health security under the same taxpayer funded formula, and must rely on their own initiative and savings to earn whatever may exceed those common benefits, or will they continue to live in a three tier society comprised of the super rich, the public sector elite, and everyone else?

The stark question Gandalf posed to Frodo, what to do with the time we have, is indeed applicable today. And Tolkien’s middle earth, wondrous and perilous, is not nearly as far removed from the world that we are creating in the 21st century as it was back in the 1930’s when Tolkien created his masterpiece. How will America’s powerful political factions reformulate how to equitably and sustainably deliver health and retirement security to an aging population in an era of expanding possibilities yet finite economic resources?

Will America’s public sector unions, and the workers they represent, remember they are public servants, and work cooperatively to ensure the American people set an example to the world? Or will they perpetuate the three tier society they have created, partnering with the super rich to protect themselves while at the same time denying comparable health and retirement security to everyone else? Or as Frodo might wonder, will they act like elves, or orcs?

33 replies
  1. Tough Love says:

    Ed, Very thought-provoking article. I particularly liked your 3-rd from last paragraph.

    Consistent with many of my comments to past articles here and elsewhere, I believe Public Sector workers will fight as ferociously as ever from giving back anything of material financial value … which is why I advocate for equally strong taxpayer determination to pass very MATERIAL pension reform (e.g., a hard freeze on existing DB Plans, or a AT A MINIMUM, a 50+% reduction in the pension accrual rate for FUTURE service of CURRENT workers).

    But you introduced something new when you said …”Will Americans create a uniform system where everyone earns retirement security and health security under the same taxpayer funded formula, and must rely on their own initiative and savings to earn whatever may exceed those common benefits”.

    What you seem to be suggesting with respect to healthcare is something I have advocated for for quite some time … Universal Gov’t sponsored (ALA Medicare for all) BASE LINE healthcare, with that baseline determined as being the reasonable portion of AMERICA’s GDP that can be so spent. YES call it “rationing”. The country simply CANNOT afford to give everyone “Bentley” healthcare. Everyone should get this SAME highest baseline level of care affordable to the country.

    Above that, your on your own and must pay for it yourself either directly or via privately purchased insurance. Healthcare is INDEED a commodity, and while those of modest means accept that they will not drive a Bentley, many feel that they are “entitled” to Bentley-level healthcare on someone else’s dime.

    It will be very difficult to make substantive progress on this healthcare issue until this “rationing” is accepted as necessary.

  2. art says:

    As a Tolkein fan and an early recongizer(in the mid 80’s) of the unfairness of public pensions I think this is a great commentary. I challenge everyone to ask the question, “Do you think it is fair that the quality of life up to your day of death is determined by the choice of job you make at age 22″. If you luck onto a teaching job(for ex) you will have a great quality of stress, enough money, health care, being able to retire early enough to enjoy. If you go into IT (and are the 98% who make a normal living 75-90k) you will be stressed, have small pension, health care, and retire too late to enjoy”.

  3. Charles says:

    I did not luck into my career. I accepted 30% less salary for 40 years for an 81% pension and health care. I earned it TL.

  4. Tough Love says:

    Sure Charles, I’m sure (as a Public Sector Civil Engineer) that had you been in the Private Sector YOU would have been the world’s I. M. Pei or Frank Lloyd Wright, just like all the Public Sector IT workers believe that top-line employers like Google would be banging down the doors to hire them.

  5. Charles says:

    You are absolutely correct. The last job I was the Resident Engineer on was
    $35M and the last project I was the Design Engineer on was $480M and it won a natonal award AASHTO. Thank you for being so knowledgeable

  6. SeeSaw says:

    I did not luck into anything either, Charles. I took a part-time job paying $1.85 hr. to help my family’s finances. There was no such thing as a pension in any discussions about my work. I did a good job,and was made full-time after 11 years–real lucky huh? I went on for 30 years and earned a modest pension. How about that!

    Lifetime Health Care is a fable. I get a capped stipend of $532/mo. to pay toward my $900/mo ABC medical insurance premium which is secondary to Medicare. Then, we add my spouse as a dependent and I send my former employer $1341 and change every month to pay for those premiums. Add in our separate premiums for Medicare, and the medical insurance premiums are taking the bulk of my pension. That’s “lifetime” alright!

    Too bad there are no pensions for whining, envy, jealously, and continuous, hateful comments toward CA public workers from TL’s Crow’s Nest up there in New Jersey.

  7. Tough Love says:

    Charles, This isn’t about YOU. Who knows, perhaps you are the very Rare Public Sector workers who earned less that what they would have in the Private Sector (and the MUCH better pension you are receiving made up … in spades … for the cash pay shortfall).

    But even if so, it certainly is not a common occurrence and doesn’t justify the ENORMOUSLY excessive pensions granted ALL Public Sector workers …. including many who are even worth 1/2 of the cash pay they get today.

  8. DR says:

    It doesn’t matter what you deserve or whether you earned it. In many places in the country, the money is just not there to pay for the benefits promised. Is it fair to expect Walmart workers or any other lower paid worker to cover the, what many would call, lavish benefits of public workers?
    The real problem is that the money is just not there, otherwise this continuing argument would not be taking place.

  9. SeeSaw says:

    I am retired–not employed TL. My time on these sites is a very small amount of my day–unlike the hours you inhabit in that Crow’s Nest up there in NJ.

  10. SeeSaw says:

    DR, I will guess that all you think you know is derived from reading these “hit” pieces against public employees–you really know nothing.

  11. Elaine says:

    TL you are all over the place on the public pension sites posting nonstop. And you’ve been at this for all the years I’ve been following the issues.
    Don’t you have a day job? Or are you also retired? It certainly gives the appearance that if you are working your job doesn’t demand much of you.

  12. David Peery says:

    Tough Love!
    I would point out that the pay/benefits earned by municipal employees were “earned”,…not “granted” as you infer.
    As a public safety employee, I know that the pay/benefit packages our members recieve were hotly bargained for by our elected representatives who, for the most part, were simply members of our union(s) who took the time to become self-educated on the subjects of collective bargaining and the tactics and strategies of interest bargaining.

    Our representatives in those bargaining issues were facing professionals representing the municipalities interets whose educations and degrees (at least presumably) were in economics, labor law, collective bargaining law, with additional input from actuaries, investment advisors, and anyone else those municipalities thought neccessary to best represent their interests.

    In the end, both sides sat at the bargaining table and hammered out agreements that both sides either agreed to as written, or, in some instances where appropriate, submitted to binding arbitration. The result? An item we in America call…a contract!

    Those duly agredd upon contracts, signed by representatives from all legally affected parties became codified in law. Those same contracts are then legally binding upon all parties thereto.

    When you state that we “simply can’t afford” to pay for these benefit packages you imply that there is no need to any longer honor legally binding contracts.

    If that’s your view, then who gets to decide which contracts ARE truly legally binding and which may be pushed aside when they become “inconvenient” to one side or the other?

    Perhaps you’d like to share your philosophy with all those Americans whose mortgages are currently underwater?

    The real problem lies in a our current political system. Perhaps the problem is that while we union members have dedicated representatives looking out for OUR interests, the public (of which we are also members) no longer have elected representatives who are looking out for THEIR interests in a meaningfful way.

  13. Tough Love says:

    David Peery, Since this discussion centers around CA issues, can we first agree that CA’s State and City police officers are “reasonably well paid” on a “cash Pay” basis ?

    Starting from that supposition, and because their pensions are SO MUCH RICHER than their Private Sector counterparts (formula-wise, earlier full retirement ages, inclusion of COLA increases, etc.), the Taxpayer paid-for share of the TYPICAL CA 30-year career Police officer’s pension if retiring today, is just about equal in value to the pension of a Private Sector executive with a salary of roughly $350.000 annually.

    Why is the TYPICAL Police office “entitled” to such a Taxpayer-funded pension ?

    So spare me the BS about how you are deserving of and “earned” such a pension. On the contrary, you were “granted” that pension because of the collusion between your Union and our elected officials, a collusion of trading campaign contributions and election support for favorable votes on pay, pensions, and benefits.

    RARELY is there an arms length “negotiation” (where TAXPAYER interests are appropriately represented), an even rarer would be deciders on the other side of the table who are not participants in the same or similar Public Sector Pension Plans and benefit from a continuation of this unnecessary excess.

    And yes, contracts so “negotiated” should NOT be “honored”.

  14. David Peery says:

    Tough Love said:
    “Why is the TYPICAL Police office “entitled” to such a Taxpayer-funded pension ?”

    The simple answer is they deserve it because they negotiated that legally binding contract with their emplyer representatives. If you beleive that the employing agencies were over-generous why not take them to task in a positive fashion that removes the liklihood of repeat actions in future contract negotiations.

    In point of fact, many public safety unions have voluntarily sat down to re-negotiate contracts that are now viewed as unsustainable. But we should all remember that when some of these contracts were being crafted the economy seemed to be headed upward at break-neck speed.
    And lest we also forget, the current recession was NOT brought on by public safety unions. It was brought on by a number of causes, not the least of which was greed on Wall Street and a lack of robust oversight by regulatory agencies.

    to a degree, we all played a part and all deserve a level of blame. While there are a few “bad guys”, many of those caught up in the bubble were relatively uneducated in the finer workings of Wall Street and the various financial instruments that led to the bubble’s inevitable bursting.

    You also stated:
    “RARELY is there an arms length “negotiation” (where TAXPAYER interests are appropriately represented),”

    I will agree with that observation to a degree. That’s certainly not always the case, but it certainly has been in some instances. While labor negotiating teams learned how “the system” worked and chose to use that knowledge to target their contract negotiations efforts one must realize that under current law that was completely legal. THERE is where a portion of the problem lies. And that’s where human nature intrudes as well.

    The issue is one of politics and electoral funding that drives otherwise good people to always opt for negotiated settlements that benefit both organized labor members and their municipal opponents at the negotiating table. When the team across the table is asking for a little political support and leg-work in getting elected/re-elected that immediatley becomes a conflict of interest.
    Find a clear-cut way to remove that conflict and you have the makings of a new democracy from the local level all the way to the halls of Congress.

    That’s why I have repeatedly suggested that we “follow the money.”

    But please, don’t be so short-sighted that you only lay blame upon organized labor. We are caught up in the same issue on a national basis. We ALL need to recognize the depth of the problem and work together to reach a solution we can all live with.
    Name-calling only serves to harden hearts and solidify positions. You would be surprised how many public safety organizations have sat at a table with their employing agencise and tried to seek a reasonable resolution that does meet the needs of all involved. But again,….we were only a small part of the financial problems that have befallen us. Whenwe were negotiating contracts, everyone was being told that this was the new century and that Wall Street and all those fancy financial instruments would lead upward to an ever-expanding economy. All of us were a little to blame for not heeding those quiet voices on the side-lines that were trying to warn us of the potential for economic ruin.

    Let’s try to work together to resolve the issue in a manner that leaves the nation more unified and with more respect for one another.

    thanks for your response.


    So spare me the BS about how you are deserving of and “earned” such a pension. On the contrary, you were “granted” that pension because of the collusion between your Union and our elected officials, a collusion of trading campaign contributions and election support for favorable votes on pay, pensions, and benefits.

  15. David Peery says:

    sorry about failing to remove the last paragraph of the message. It was a quate from your initial response and I was going to respond to it directly but thought better of it.

    Happy Holidays to you and yours.


  16. Tough Love says:

    We could go back and force as to the “cause” of the financial mess and whether the promised pensions are contractual, statutory, or not, but that matters little. The RESULT is that Public Sector “Total Compensation” (cash pay plus Pensions plus benefits) is FAR FAR in excess of that of comparable Private Sector jobs (generally not via much greater cash pay, but via MUCH MUCH greater pensions and benefits).

    Police Officers getting pension equivalent to Private Sector executives making $350K annually …. and you think that’s appropriate ?

    There is simply ZERO justification for this. It is not needed to attract and retain a qualified Public Sector workforce (as evidenced by the sometimes 100’s of applicants for each job opening) and is unjust to the Taxpayers called upon to pay for it.

    Attempts to appease (and tinker around the edges) by reducing pensions and/or benefits only for NEW workers are INSULTING to Private Sector workers where is it not only legal but ROUTINE for employers in financial distress to reduce pension accruals for FUTURE service for CURRENT workers (or freeze the DB Plans completely). Public Sector workers should be treated no worst …. but no better … on the Taxpayers’ dime.

    Happy Holidays (please don’t take my strong advocacy for pension reform personally, as it is not meant to be).

  17. Right to worker says:

    Seesaw, the problem is not that you think you earned a golden parachute for starting work at $1.85/hr. But that to sustain your “brotherhood” you must oppress the majority of citizens with high taxes and excessive regulation to “protect” you own interest. That is not fair or balanced. It’s a criminal racket.

  18. Charles says:

    TL. If you could legally turn back pensions to 1999 levels you could take back 13% of mine. Not 50%. The State paid in about 18% from 1969 to 2009 and no one complained until the last few years after private business stripped their employees of a secure retirement with DB plans and lined their pockets and those of their Wall Street “investment counselors” with the proceeds. And how do you know anything about engineers working for Caltrans? I never saw you when I was driving 4 hours each way to work on my time or working 12/7 on emergency projects for time and a tenth or climbing to work on 800 feet of rope with rocks falling all around me. How can you sit in NJ and say say you know State employees are only worth half their pay? I suppose it is because you don’t dare to hate and beaten blacks and Jews.

  19. Tough Love says:

    Charles, Oh how you twisted my above comment .

    Read it again. Here it is:

    “Charles, This isn’t about YOU. Who knows, perhaps you are the very Rare Public Sector workers who earned less that what they would have in the Private Sector (and the MUCH better pension you are receiving made up … in spades … for the cash pay shortfall). But even if so, it certainly is not a common occurrence and doesn’t justify the ENORMOUSLY excessive pensions granted ALL Public Sector workers …. including many who are even worth 1/2 of the cash pay they get today.”

    I’d wager to say that you know quite a few State workers worth far less than half their cash pay. And yes, I know quite a few in the Private Sector as well. but at least my taxes don’t pay their salaries.

    That being said … do I hear you offering to give back that RETROACTIVE 13% pension increase for which you provided absolutely ZERO services ? Or did you earn it Retroactively … perhaps by going BACK IN TIME and working harder or putting in more hours ?

  20. Charles says:

    I pay extra for goods and services for persons who are worth only half their pay in the private sector. What difference does it make? I can’t avoid paying for that either. You paint with a very wide brush

  21. Tough Love says:

    Charles, When the products of a Private Sector company are unnecessarily inflated due to excessive pensions or ineffective workers you can shop elsewhere, at companies with better financial management and lower prices.

    What alternative do a town’s residents have to purchase police services when their Taxes reflect excessive pension costs ?

  22. SeeSaw says:

    Right to Worker, No, I do not equate my current pension with the fact that I started at a very low wage; my pension is not even close to being what you would call a, “Golden Parachute”, but it was earned with consistant, hard, work, and performing according to the rules. I am very proud of having been able to serve and work with the public for 41 years. I am a people-lover and will always support them, in general. And, I have nothing to apologize for to you, or anybody else, in the private sector, for having a pension.

  23. SeeSaw says:

    I went through $125 in about 30 minutes, at my local supermarket, yesterday, TL. I have this problem–my body requires food for me and the other members of my family to survive. There really isn’t much choice in the matter, because my local supermarket is the cheapest one in the area. I wonder how those executives dare to raise their prices on me like that–we have so much choice–right?

  24. Tough Love says:

    The Private Sector worker with your exact salary history likely gets half your pension ….. and has a lot more difficulty paying for food than you. And in addition, a portion of that person’s taxes helps pay for your much larger pension.

    Doesn’t seem fair.

  25. Tough Love says:

    And that’s an appropriate response ?

    It certainty shows that (as you said), your a “people lover” … as long as those people are PUBLIC SECTOR workers or retirees.

  26. Charles says:

    I don’t have to go back in time. I did work harder and for longer hours. Private workers have been robbed. That is unfortunate but hardly an excuse for robbing others. If I had the 30% of salary I chose to forego for my retirement I most definable would be in spades. How about a trade? Do you have any idea how much money that is?

  27. ERISANation says:

    Pension envy is a growing menace as the posts above show. Unions helped this, in the private sector anyway, by preserving pensions for current members, but agreeing to eliminate them for new hires. In fairness, some unions struck, but most eventually conceded.

    One conclusion seems clear: permit as much immigration as possible, particularly of the young. Us aging boomers will need their tax dollars.

  28. Editor says:

    ERISANation – it is not pension envy that is a “growing menace,” it is underfunded, unsustainable, inappropriately generous government worker pensions themselves that are the menace. They menace our economic health as a nation, they menace our ability to provide government services while keeping taxes manageable for ordinary private sector workers, they menace our ability to regulate the financial sector because they pour hundreds of billions of dollars each year into investment funds with NO moral hazard (since the taxpayers are supposedly on the hook to cover shortfalls), and they menace our unity as a society and our faith in government itself, because they guarantee government workers a retirement annuity that is several times greater than what private sector workers can expect. By personifying the pension debate and suggesting the problem is “pension envy” instead of the pensions themselves, you are emulating a classic – and very effective – tactic of public sector unions.

  29. marincountyman says:

    This is corruption of public service and generational theft..pure and simple. This is not just a moral crisis of the first order, this is the moral crisis of our age. We are collectively endangering our children’s economic futures without giving them the slightest say in the matter. We are doing this systematically and with malice aforethought. Worst of all, we are pretending not to notice. Shame on the unions and their crony toadie union politicians that have sacrificed our children’s future by consuming future budgets for the next 30 years. Los Angeles is predicted to be BANKRUPT by 2014, San Francisco by 2016…San Jose is there now…as entire budgets are swept to pay the new $100k – 300k for life for folks retiring in their 50’s and on the take for 20 – 35 years plus free medical (that does a millionaire make and does not represent “middle class”) these unions have created the new elite – the new bourgeois – by clearly gaming and bribing the system to enrich themselves over our children and future. Pathetic….and shame on the politicians for enabling them and accepting the bribes.

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