There’s been a spate of reporting and commentary attacking public workers for having lavish pensions that are bankrupting various states. CBS‘s 60 Minutes got into the act in December with a report (12/19/10) that was criticized for lionizing Republican New Jersey Gov. Chris Christie (obviously this came before his snow troubles) for his attacks on public workers (particularly school teachers).
The New York Times featured an article by Michael Powell on January 2 headlined “Public Workers Face Outrage as Budget Crises Grow.” The piece focused primarily on these pension plans, some of which “dangle perilously close to bankruptcy.” The article doesn’t adequately explain why this is so, but from the headline and focus of the piece readers are left with the impression that unionized workers are getting cushy benefits. This is somewhat undercut later in the article, when it is noted, “A raft of recent studies found that public salaries, even with benefits included, are equivalent to or lag slightly behind those of private sector workers.” That left one Times letter writer puzzled about why the focus was on workers’ supposed perks.
One of the main criticisms of this kind of reporting, from CEPR’s Dean Baker, is that it fails to account for the impact of the recession. Pension funds are invested in the stock market; a major downturn in the stock market would obviously affect the health of those funds.
The economist Dean Baker of the liberal Center for Policy and Economic Research takes greater issue with my report. He argues that the financial crisis was the original sin, as it caused the stock market to plunge, which in turn upended public pension finance. This, he argues, is the “major cause” of the pension problem.
Mr. Baker is a careful follower of the economy, but this argument may be too easy. In New Jersey, California and Illinois, to name three states, Democratic and Republican legislatures and governors repeatedly ignored their obligation to pay into the pension systems.
Which brings us to today’s papers. The Washington Post and the New York Times both have articles based on a new Census report showing that pension funds experienced huge losses due to the stock market downturn. The Post explains that states’ revenue drops “resulted largely from the big investment losses experienced by state pension funds during the worst period of the downturn.” The Times says much the same, in a piece headlined “Pension Fund Losses Hit States Hard, Data Show.”
Which is another way of saying that critics like Dean Baker were right.