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Pension Despair
Pension Reform Is About Sustainability

Detroit’s collapse has made serious pension reform a national story once again, and very real change in how these things are administered across the country is now a distinct political possibility. This is causing  angst among those who are generally happy with the status quo, and they’re taking to the media to make their arguments. Over at the New Yorker, Vahuni Vara’s piece is a case in point, arguing that cutting pensions may not save cities much money in the long run, as they will be forced to raise employee pay in order to retain qualified employees:

It’s not a trivial matter. In January, researchers at the Center for Retirement Research at Boston College looked at teacher compensation to figure out how compensation cuts for new hires might impact teachers’ decisions about where to teach. (Teachers make up more than half of the state and local workforce and are among the most highly paid workers.) They considered public data on teachers’ pay and pensions; they also looked at the average S.A.T. score at a teacher’s undergraduate institution.

They found that school districts that pay better—including deferred compensation, such as pensions—generally attract teachers from universities with better S.A.T. scores. Cutting compensation is “not costless,” the authors wrote: “it will almost certainly result in a lower quality of applicants for one of the nation’s most important jobs.”

Emperor Augustus’s new pensions were expensive: he paid for them partly out of his own pocket, but also, to the disgruntlement of some subjects, with new taxes. Detroit and other cities should recognize that cutting pensions—unless this is offset by better compensation elsewhere—could also be expensive, in the long run.

This is the go-to argument when any group’s sweetheart deal is imperiled by reform. And when you think about it, it’s really a dodge.

One of the main problems with public pensions is that the long time frame gives politicians an incentive to cater to unions by increasing pension benefits, knowing that it will take years for the costs to become apparent. Raising salaries by a similar amount would still be expensive, but it would force cities and states to confront the costs immediately rather than waiting until the bills come due decades later. If politicians are forced to explain to voters why they are raising taxes or cutting services to increase employee salaries, they will be more hesitant to make promises their cities can’t afford. The cost of hiring qualified people to do important jobs cannot be more of these shenanigans. The question of what it would take to retain qualified people is quite separate from the question of how to clean up the system.

Moreover, we don’t see the push toward pension reform as a bad thing for public workers, and we certainly don’t wish to see pensions eliminated—we just think they need to be replaced with defined-contribution plans. The key problem with today’s public pensions system isn’t that workers are getting too much per se; it’s that cities have set up their systems in such a way that they are simply unsustainable and unaffordable, which is disastrous for everyone involved. Defined-contribution pensions may be less appealing as a perk than the generous defined-benefit plans many workers currently enjoy, but they’re certainly much better than seeing your benefits slashed at the last minute because your city is broke. Pension reform isn’t just about saving cities money. It’s also about making retirement plans for public workers more secure and reliable.

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  • Kevin

    Some public sector workers okay will need to be

    • Andrew Allison

      Kevin, I don’t think that public sector workers’ compensation will need to be increased to retain them. If they have half a brain they know they’re already being overcompensated. But if reducing their pay and benefits does cause them to leave and be replaced by lower-cost workers, so much the better.

  • Anthony

    It is most definitely a dodge. “For years, state and local governments have been playing imaginative (think scoop and toss) or patently dishonest (skimming retiree pension funds to meet other costs) games with there pension funds.”

    “I think the major domestic issue in the United States in the next 10 years is going to be, how do we pay for promises that this society made to the people who lent us money and the people who work for us” (on municipal level).

    • Andrew Allison

      I think the major domestic issue in the United States in the next 10 years is going to be how little of what we promised to the people who lent us money and the people who work for us we can pay.

  • Corlyss

    I suppose the question is worth asking, but it’s also deserving of a hearty guffaw. The only thing this White House “carefully considers” is 1) how to expand the welfare state; 2) how to expand the number of voters enslaved to the Democratic largess that’s destroying the nation; 3) how to destroy the Republican party from now until the end of time.

    • Evan Seitchik

      Democratic partisans are encouraged when they see people on the right thinking like this. Why? Because the Democrats aren’t trying to destroy the Republican Party, they’re watching the Republican Party destroy itself–or avoid destruction by reform. The more Republican leaders commit to pleasing voters with views like these, and the less they commit to finding real conservative solutions to reducing economic inequality, the closer they come to the brink.

      • vepxistqaosani

        Evan, no one cares about “economic inequality” except progressives, with a limited exception for the disdain (if not downright hatred) with which Tea Partiers, and some Occupiers, view both crony capitalists like Rubin, Emmelt, Soros, Buffet, and Gates, and the Federal Reserve’s ongoing and very successful plot to further enrich politically connected Wall Streeters and further impoverish everyone else.

        • FriendlyGoat


      • Corlyss

        I’ve given some thought to your observation about “thinking like this.” People who think as you do fail to realize that the two parties do not view politics and the engagement in it quite the same way. Dems/Progs/Libs view politics as a war with a take no prisoners approach. For them, it’s life or death, “surrender or starve.” For Republicans and libertarians, with our emphasis on freedom and individualism, politics is a means to improving the efficiency of government without making government the be all end all of anyone’s live, not a matter existential survival. That’s part of the problem in the disconnect between how the two fight for constituencies. We don’t take it so seriously as to believe in a scorched earth result, but the Dems/Progs/Libs do, especially since the Clinton impeachment, about which the latter bunch consistently characterized it as an convulsive punishment for sex, as if the Republicans were reincarnations of the Puritans pinning the Scarlet Letter on a sleaze bag of a national leader. That is not what the Clinton impeachment was about. Instead it was to answer the question whether the American people believed a president who lied under oath was fit for the job. It was a worthy question, if misguided in the pursuit of an answer. We know now that the American public doesn’t care about lying under oath, at least as the lying pertains to allegedly private activities of the bedroom (we’ll set aside for the moment the issue of manipulation and exploitation of women in a lesser power relationship with an abusive official since women have advertised for almost 20 years that they are unconcerned by such activities by a Democrat). The Dems/Progs/Libs have completely abandoned their façade of gentlemanly political concerns with the nation ever since 1998 and their raw naked power ambitions have seized control of their movers and shakers. The problem is Republicans are still conducting themselves as if it were 1963 and the parties shared common goals for the success of the nation.

    • Pete

      True, the only enemy Obama and the Democrats see are those opposed to their parasitic coalition.

  • CiporaJuliannaKohn

    The United States and Iran have no shared interests or values.
    Iran is a totalitarian Islamist theocracy and a premier terror state. Iran has terror proxies and has been engaging in genocide in Syria. Iran’s terror activities started with the seizure of the American Embassy and the holding for hostage of its diplomats. Iran has also been waging a proxy war against Israel for decades.
    Iran has had an illegal nuclear weapons program for decades. It is under numerous Chapter VII UNSCR’s which prohibit it from engaging in any nuclear or ballistic missile activities.
    It is inconceivable that Iran would give up its nuclear weapons program. What it might do is agree to some reduction in uranium enrichment or temporary halt to construction at Arak. However, any deal of this nature will leave Iran with the essentials of its nuclear weapons program.
    Any deal that will not satisfy the Sunni states and Israel will further inflame the region and lead to war. Such a war would most likely force American involvement, but on terms which would be set by others.
    There have been a few occasions when the United States allied with an adversarial state. This was the case during WWII when the US and the USSR were allied in the fight against Nazi Germany. However, the alliance fell apart as soon as the war ended.
    Iran’s ideological posture precludes it from having an honest relationship with the United States. Iran will not give up its hegemonic ambitions, its use of terror, or its nuclear weapons program. Iran wants nuclear weapons for nuclear blackmail and nuclear terror. ISIS is a direct result of Iran’s actions in Syria and Iraq. A nuclear Iran would unleash a nuclear race in the region.

    • hass

      Everyone is tired of this nonsense and the Nazi comparisons. And not even the US claim that Iran has had a nuclear weapons program. This sort of over-the-top rhetoric does not promote US interests.

      • Beatrix17

        She’s not comparing Iran to the Nazis. You misread her post.

      • Enemy Leopard

        Beatrix17 is correct. You entirely misunderstood the analogy. In the future, you might read a bit more carefully before declaring something “nonsense.”

  • Anthony

    Is it rapprochement or an arms control deal that’s being considered as current strategy? Political/domestic vs. foreign strategic analysis WRM certainly gives issue additional spots for tension; however, your assertion that closer media scrutiny is warranted remains on target.

    • Thirdsyphon

      It’s extremely hard to get factual reporting on the status of ongoing secret negotiations between governments. Unless you have a very good source (or are being played like a fiddle), most “media scrutiny” on the topic will take the form of talking heads bloviating about it, which I think we have enough of already.

      • Anthony

        Yes, sure right but I think WRM was referencing insiders.

  • Dan Hossley

    If Obama’s objective is to “get some kind of deal”, then he lost the negotiation before it began. All Iran has to do is keep rejecting Obama’s offers. The only recourse for Obama is to sweeten his offer in hopes of “getting a deal”.

    The only thing Obama could do that more inept is to announce when he is going to give up “trying to get a deal”.

    • Fat_Man

      Obama could not negotiate a 3 year old’s birthday party. The Mullah’s will take him to the cleaners and he will come home waving a sheaf of papers and saying he has achieved peace with
      honor, and that he believes it is peace in our time.

  • xonk

    Obama has always taken a wishful thinking view of foreign affairs and is continuing to do so. Our ‘partners” and enemies know this and use it to gain advantages just as Iran is doing right now. Obama’s policy of Wishful Thinking has created the situations in Ukraine, Libya, Syria and given China and Russia the green light to power grab without fear of reprisal just as his original ‘red line’ gave .Assad the green light to wipe out his citizens via conventional weapons. Iran will achieve their nuclear ambitions and I think the author is correct in suggesting that they may delay it a bit in order to recover economic and regroup political strength before doing so by chumming up to the US. Obama is going to give Iran the win just as he unwittingly gave it to Assad by folding.

  • Dan Greene

    “Would a nuclear deal open the way to a renewed Iranian drive for regional supremacy? The Sunni-Shi’a war now embroiling the Middle East is in part a war of Iranian power expansion.”

    What is this “drive for regional supremacy?” Sounds like a false premise to me. And no, the Sunni-Shia war is a US-Israeli reaction–a Plan B–to the the collapse of the effort to redesign the Middle East to their specifications, and effort that commenced with the US invasion of Iraq in 2003.

  • Angel Martin

    Professor Mead, what happens when Iran “agrees” to a deal and then reneges on its commitments?

  • hass

    So basically, if the Iranians want nukes we should sanction them, and if they don’t want nukes we should still sanction theM? Iran is a MAJOR regional power and has been for much longer than the US has existed. Getting along with them, is simply getting along with reality. If some of our allies don’t like it, then we should be reevaluating our alliances.

  • jonathan

    Yes – “hope is not a plan” and speculating whether the WH has been engaged in sober & deliberative decision-making is fanciful to put in mildly as a dozen foreign issues let alone a dozen or domestic issues belies that notion. All we can do is pray.

  • JohnnyAngel Advocacy Group

    Mead makes some valid arguments, but misses on Iranian stated “goals” as professed many, many times by the imperial rulers. That is the destruction of Israel ! As of now, the US and Israel are allies in the region and no amount of discussions will change Iran’s view on the destruction of Israel. I am surprised Mr. Mead either avoided or mistook Israel’s role in this BIGGEST “thorn in their side” in the region. Without considering the friendship that Israel has had with the US and the consequences for their security needs, this is indeed the most important aspect of any agreement and stability in the Mideast.

  • Beatrix17

    America had two major enemies in the 20th century, the Nazis and the Communists. We went to war against the Nazis, and beat them in 4 years. We allied ourselves with the Communists, which helped us win WW2, but led to 50 years of wars, battles, billions spent on armaments, while we watched Russia
    kill millions of her people, and win over strategic areas of the world and use them against us.

    Iran not really a problem right now. Her power comes from oil, our need for which will dissolve sometime this century probably through scientific advancements that makes better use of other resources or discovery of a low cost replacement. The main point of negotiation with Iran is to give the Obama administration the appearance of some kind of major achievement.

  • Andrew Allison

    Obama has a strategy????

  • John Wondra

    Before he took office, Obama sought Iranian and Syrian appeasement as his preferred approach; only to meet with rejection and disdain.
    Even so, this administration’s focus has remained oblivious of the greater implications as Iranian influence and support for the region’s largest threats (Syria, Hamas, Hezbollah) grows while we dither..

  • bruceamcallister

    Nor is unqualified and admittedly uninformed skepticism an alternative plan. To pose a nuclear deal with Iran as an ill-considered danger is to reveal oneself as willing to believe anything, so long as it is not to Obama’s credit.

  • Hussam Imtiaz

    National Council of Resistance of Iran, a broad coalition of democratic Iranian organizations, groups, and personalities, was founded in 1981 in Tehran, Iran on the initiative of Massoud Rajavi, the leader of the Iranian Resistance. For more info visit

  • bannedforselfcensorship

    We paid them to join the talks. Now we are paying them again to delay the talks.

    I guess once all the frozen funds run out, and we have lost that leverage we shall see what will happen.

    The fact that talks are scheduled to re-start in November is not heartening. That sounds like Obama begging for the final cancellation to occur after and not before mid-term elections. I guess that’s 1.8 billion in frozen funds is worth holding the Senate.

    Honestly, if some deal can be pulled off, great, but the signs are not boding well.

  • halpap

    No. Next question.

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