“Is the New York Times Awakening to Reality?”

Sydney M. Williams

Thought of the Day

“Is the New York Times Awakening to Reality?”

February 29, 2012

Not likely. However, it is interesting that two pieces appeared in yesterday’s New York Times, in apparent unawareness of one another; both focused on the oncoming tsunami of underfunded government pensions. This is a problem the Times’ editorial staff has chosen to downplay, as it blindly has taken the side of profligate unions against their more realistic opponents.

On the front page, Danny Hakim, in a commendable article, exposes some sleight of hand within the State of New York’s public pension community. He writes that the State, local governments, and other public employers are collectively borrowing $750 million this year and at least a billion dollars next year to help fund their pension obligations. And, they are borrowing the money from the $140 billion pension fund to which they owe the money! It is an act of such foolishness that it could well have been an article in The Onion.

The other piece, an editorial on pension reform, praised Governor Cuomo’s pending pension reforms, while omitting the fact, as reported by Mr. Hakim, that the State is borrowing $575 million from its own retirement fund this year, and plans to borrow another $782 million next year. Some reform! The editorial, in true “Onion” fashion, suggests the State of New York learn from the examples of Illinois, New Jersey and Vermont, at least as it pertains to lifting the retirement age and increasing worker’s contributions. According to the PEW Center on the States, Vermont has minor funding problems, Governor Chris Christy has taken some tough, but necessary steps, but Illinois? PEW ranks the state dead last, in terms of funding its pension liabilities. “Publius Forum”, a self-described “freedomist blog”, reported yesterday that Governor Pat Quinn, in last week’s budget address, made only passing reference to overhanging pension reform: “Once again,” the blog noted, “Governor Quinn has failed to lead the charge for pension reform.”

But to return to the incredible subject of the loans: Is it fiscally prudent for the board overseeing the $140 billion fund to lend hundreds of millions of dollars to its most profligate members? If these municipalities were in sound financial shape, there would be no need to borrow from themselves; thus, are not these risky loans? Why should the prudent support the imprudent? What are the consequences, in both economic and moral terms? If this is not kicking the can down the road, I don’t know what is! This is not robbing Peter to pay Paul. This is robbing Peter to pay Peter. The absurdity reminds me of Christopher Buckley’s 2007 novel Boomsday, in which Cassandra Devine suggests, tongue-in-cheek, that baby boomers be given incentives to kill themselves at age 70 – an idea that gains wide acceptance, not only among millions of citizens (including some baby boomers), but on the part of Presidential candidate, Senator Randolph Jepperson who plans to ride this “voluntary transitioning” all the way to the White House.

This is a subject on which I have written many times, most recently on February 8, 2012, “Retirement & Pension Plans – A Wake-up Call.” In that piece I quoted a Wall Street Journal article of a year earlier, which stated that underfunding at state and local levels was a trillion and a half dollars. Meredith Whitney may have been early in predicting the bankruptcy of hundreds of municipalities, but I find it hard to believe that her general thesis is not correct. Imagine what the costs of this debt will be when interest rates – which they will – revert to normal! Harrisburg, PA; Jefferson County, AL; Vallejo, CA, and Central Falls, RI have all filed for bankruptcy in the past couple of years. Unless the economy recovers strongly, property prices increase dramatically, or interest rates decline further there will likely be further bankruptcies.

California faces a pension deficit that analysts put anywhere from $300 million to $500 million, a number that grows each year. Governor Jerry Brown has proposed a twelve point plan to address the concerns, a plan that includes sensible proposals like raising the retirement age for public employees (other than police and firefighters) from 55 to 67 and the introduction of 401(k) plans. It would also end absurd practices like “spiking” (the giving of pre-retirement employees’ raises to boost pensions) and “air time” (the ability of employees to buy credits for years they have not worked.) In the end, what the unions have done, with their excessive demands, is to hurt the very people they purport to protect. And, most Democrats and mainstream media have gone along with this hoax.

Politicians can pretend the problem will go away, and keep the promises coming to ensure their re-elections; newspapers like the Times can ignore the tough and unpleasant truths; union leaders (and members) can live in their Walter Mitty worlds of make-believe, but the people – the taxpayers – are beginning to realize that what was promised by politicians and union leaders, in terms of health and retirement benefits, is not much different than the assurances Bernie Madoff gave his investors.

For twenty-eight years Stephen Reed served as mayor of Harrisburg, PA. He bears most of the responsibility for the ruin in which the city finds itself, though those who voted for him can’t avoid responsibility. Jason Smith, who ran against Mayor Reed in 2005, commented recently on the ugly end they are facing, but the necessity of it. “We can’t,” he said, “live in delusion forever…at some point you have to say what is reality.” No. The New York Times doesn’t get it; at least their editorial staff does not.