Blue Model Blues
Republicans Helped Create the Pension Crisis

For two decades leading up the the Great Recession, state and local governments across the country, under continuous pressure from deep-pocketed public sector unions, moved to steadily increase already-generous pension benefits for government workers, appeasing a powerful constituency while hiding the implausibility of their promises with accounting gimmicks.

The economic crisis of 2009 rattled the foundations of this Ponzi scheme. Five municipalities—along with Puerto Rico—have been forced into bankruptcy, with more almost certain to follow, as the combined shortfall approaches three-and-a-half trillion dollars. In response, GOP lawmakers have led efforts to beat back public sector unions and bring pension benefits back in line with states’ ability to pay.

But who engineered this epic fiscal crisis in the first place? One might assume that it was tax-and-spend Democrats, eager to grow government and do the bidding of unions, math be damned. In fact, according to a new study by political scientists at Stanford and UC Berkeley that should blunt Republicans’ self-righteousness about their party’s allegedly superior fiscal prudence, the creation of unsustainable state and local retirement systems was a thoroughly bipartisan affair. It wasn’t until the Great Recession forced pensions to the top of the agenda that the parties’ stances began to meaningfully diverge:

Prior to 2009, Democrats voted almost universally in support of benefit increases—but so did Republicans. Specifically, Democrats supported benefit increases at a rate of 98%, and Republicans went along, supporting increases at a rate of 93%. After the scope of conflict expanded, Democratic support remained about the same (98.5%)—but Republican “yes” votes plummeted to 69%.

Why didn’t Republican lawmakers do more to protect the solvency of state pension systems in the 1990s and early 2000s, before disaster struck? The study notes that Republicans had little incentive to pick a fight with unions before conservative activists made belt-tightening a priority in the wake of the Great Recession. Moreover, Republican politicians relied on the votes of pensioners, who are older than the general population. Finally, the logic of defined-benefit pensions—make promises now, pay later—always encourages politicians to kick the can down the road.

Republican politics at the state level—at least when it comes to pensions—appears to have been driven less by limited government ideology and more by interest group maneuvering and self-interested political calculation. Both parties have powerful incentives to adhere to blue model thinking.

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