On Monday (2/21/11), ABC World News wanted to set the record straight on Wisconsin’s budget problems. As host George Stephanopoulos put it, the debate is over
whether pensions and other benefits for public workers are to blame for the crippling budget shortfalls in Wisconsin and other states. Tonight Barbara Pinto has a reality check.
What a relief–this is something that surely screams out for clarification.
The report starts with a quote from Republican Wisconsin governor Scott Walker. ABC‘s Pinto weighed in on his side:
Part of that problem, pension plans for America’s public workers that are under funded by at least a trillion dollars. Finance professor Joshua Rauh thinks the debt could be at least three times as much.
So the problem is a (nationwide) trillion-dollar deficit, or maybe it’s three trillion. What’s the other side of this discussion? ABC doesn’t seem to think there is one. They speak to a “state worker set to retire in December.” Said worker is asked to respond to the Republican complaint that “state workers like you are bankrupting them.”
Pinto mentions that ten years ago most states were in fine shape, but then by 2008 things changed considerably. Governor Walker “wants to control those costs, fixing the budget by breaking the unions’ power to negotiate over benefits.”
A reality check could have pointed out, as the New York Times did (2/19/11), that Wisconsin’s “pension fund is considered one of the healthiest in the nation, and it is not suffering from the huge shortfalls that other states are facing.”
So do those trillion dollar figuresmake any sense? And if everything was fine until 2008, maybe something happened around that time that would explain the current crisis?
Dean Baker of the Center for Economic Policy & Research provides some helpful context– the kind of information you would appreciate in a news report purporting to be a “reality check.”
Baker writes:
There have been numerous media accounts in recent months warning of large shortfalls in public pension funds. Conventional estimates have placed the shortfall at around $1 trillion, while some analyses have put the shortfall as high as $3.2 trillion using a discount rate that implies pension funds will only earn the risk-free rate of return (Novy-Marx and Rauh, 2009). While there are important measurement issues in determining the size of the shortfall, it is also important that the number be placed in some context. Most people, including those involved in policy debates, will not have a good basis for assessing the meaning of a shortfall measured in the trillions of dollars that must be filled over an indefinite period in the future. The relevant context is the size of the projected shortfalls relative to the size of the state economies.
Before going through this exercise, it is worth noting that the size of the shortfall in many of these funds has likely already been reduced as a result of the fact that the stock market has continued to recover from its downturn in 2008 and 2009. On July 1, 2010, the S&P 500 was already more than 11 percent higher than its July 1, 2009 level (from 987 on July 1, 2009 to 1101 on July 1, 2010). Most funds use the stock market’s closing value at the end of the fiscal year as the basis for determining the valuation of their assets. Of course they also use an average, so the valuation would not simply reflect the market value at the end of the fiscal year. However, with the market having already risen substantially from its low (the S&P 500 had risen another 19 percent to 1293 by January 10, 2011), it is likely that pension valuations based on current and future market levels will show smaller shortfalls. In other words, a substantial portion of the shortfalls that were reported based on 2009 valuations have likely already been eliminated by the rise in the market.
Peter, here’s a little more useful intel from yesterday’s DEMOCRACY NOW!:
[L]et me read a sentence from a recent paper by Dean Baker, who concludes, “Most of the pension shortfall using the current methodology is attributable to the plunge in the stock market in the years 2007-2009. If pension funds had earned returns just equal to the interest rate on 30-year Treasury bonds in the three years since 2007, their assets would be more than $850 billion greater than they are today.”
And thisâ┚¬”Âhe quotes David Cay Johnston of tax.com: “The average Wisconsin pension is $24,500 a year, which is hardly lavish. But what is stunning is that 15% of the money contributed to the fund each year is going to Wall Street in fees,” which is why we now ask the question, “Why isn’t Wall Street in jail?”
http://www.democracynow.org/2011/2/22/matt_taibbi_why_isnt_wall_street
Let me make sure I understand this correctly (I’m a student so I don’t know that much).
What Baker is saying is that the pension shortfall that everyone is up in arms about is being inaccurately portrayed by using 2008 and 2009 as a standard when the stock market value was lower. As the stock market value increases, as it has in 2010 and even January 2011, the value of this shortfall would be very little or nothing at all. So why does everyone want to screw the unions over and take away their rights? I believe I read on DN! recently that Sherrod Brown of Ohio who introduced Senate Bill 5 didn’t know how much money the pay cuts / taking away of collective bargaining would save and said it was a personal philosophy. Correct me if I’m wrong.
Also, I live in Ohio and work for my local library which is part of a union. Does anyone know if Senate Bill5 of Ohio affects me? I’m pretty sure it does but I just want to be sure.
And thanks Doug for reposting that. I read that earlier but it makes more sense now. I subscribe to the Rolling Stone and am currently reading that article.
Justin, Brown can euphemistically call it a “personal philosophy” – just as a racist can define his prejudice as such – but the bottom line is that this an assault on anyone who isn’t rich, from union members, public and private, to WalMart workers making jack and industrial farm workers toiling in slave conditions, to those without a job and at the end of their tether.
And so, yes, it will affect you, one way or the other.
We have to see our common interests, don’t we? Unions have to stand with Medicaid recipients, office workers with garbage collectors, students with old folks like me.
It’s the old “We must all hang together, or we will surely all hang separately” thing, isn’t it?
I guess this comes across as preachifying, but whatcha gonna do? In the end, we only have each other, and if there’s any purpose to this life, the only one that makes any sense to me is to treat others like you’d wish to be treated.
Copyright infringement, I realize, but there you are.
I wonder if we have somehow lost sight of the origin of taxes in our country. It is my understanding that we pay taxes for infrastructure and social services, not corporate welfare. I don’t recall ever being asked if the government could use our tax money to buy jobs or subsidize international corporations that are “TOO BIG TO FAIL.” This seems to be a coruption of the social agreement by business and government pressured by the biggest lobby in America – the Chamber of Commerce.
When I am asked (unfortunately NOT by government) if I am willing to REDUCE TAXES TO CORPORATIONS AND THE RICH, I would say NO! NO! NO! If a corporation is legally considered a person in our society, they should pay taxes WHERE THEY EARN THIER INCOME JUST LIKE ANY OTHER WORKING PERSON – BEFORE THEY SEE THEIR PAY CHECK.
Justin, when your governor was CEO of Lehman Bros, Ohio state pensions were sold a bunch of the toxic, mortgage backed securities. It didn’t wipe out the fund, but it put a dent in it. Now that your governor reaped benefits of selling Ohio the toxic securities, he wants to give state workers a second dose of pain.
Wall street takes and takes and takes. Super rich people who can do such things have a pathological relationship with money…and trying to satisfy such hunger is impossible. They’re greedy addicts!
O good olde Governor Kasich. And I quote, “I really don’t favor the right to strike of any public employee, OK? That’s my personal philosophy…I mean, they have good jobs, they’ve got high pay, they’ve got good benefits, a great retirement. What are they striking for?”
And Walker in Wisconsin screwed them over with his tax cuts to the rich, I believe? Something like that. I know I read it somewhere…
Message to ABC’s Pinto: Your “reality check” just bounced.
BTW, speaking of the impact of the Wall Street debacle on pension funds reminds me of what G W Bush recently said was his biggest regret as president, that he failed to privatize Social Security.
Hey i hope the unions can keep their boat afloat. These are our family,friends and neighbors.BUT…they can no longer expect tax payer relief in any way.WE ARE BROKE!!!!!!!!!!!!!!!!!!
WHO THE HELL made us “broke” and where were you when the shovels full of money were going out of our pockets during ALL Repub administrations. Look at the charts, deficits are at there highest during Repub administrations. When Reagan came into office we were the world’s largest creditor nation when he left we were the world’s largest debtor nation. At the very least if you are mad about being broke stop handing over the controls to those who have gotten us there.
Doug, this is from Truthout.org today. I think it kinda of relates to your statement.
[Michael Winship quotes Mark Erlich of the Boston Globe (2/23/11)]: “”A generation ago, non-union workers often welcomed news of improved wages and benefits for unionized employees, recognizing that a rising tide lifts all boats. But … at a time of sacrifice and insecurity, many would prefer to sink their neighbor’s slightly bigger boat while wistfully hoping for a glance at a yacht in a gated marina.”
http://www.truth-out.org/attacks-unions-barking-up-wrong-money-tree68063
So how you were saying that these bills, whether being strictly aimed at busting unions and taking care of the..uhhh..defecit, will affect everyone. Private and public. Union and non-union. And that as workers of all types, as the workers of the world, we must stand up for our right to collective bargaining.
Carol we are broke at the hands of massive government spending.Socialist programs like Fanny and Freddy that precipitated the sub prime mortgage.They are the two main ones for a start.Your reading of the Reagan years is strange indeed.Amazing times.Carter had unemployment through the roof.America weak.Gas crisis.Lost 10 million jobs.GNP down down down down.Reagan got those 10 back plus 20 million more.Ended unemployment.No gas crisis. won the cold war and secured freedoms.Gnp through the roof.Dept was created as you create loans THAT YOU CAN PAY OFF.There is a reason Obama channels Regan lately.There is a reason he was just voted the best prez.Times were great.But all that is history.I used to try at the speeches i gave to explain what would happen when Fanny and freddy failed.People using tired liberal cliches would come at me as you do now.Im sorry…truly sorry but i was right, and you were wrong.You are simply wrong now.As time will prove.
Justin, it’s about more than just workers – union and non-union, private and public, relatively well-off and essentially slaves.
There are many millions without a job, and hanging on by a thread – if they haven’t already fallen into the abyss. Beyond adults, we’re looking at so many kids without a future – “collateral damage” to the Orwellian creed of “fiscal discipline”.
And, of course, old folks (like me, soon enough) who won’t make it if Social Security and Medicare are raped behind the shed. Those programs are inadequate for many as it is, aren’t they?
We all have a common interest in standing together against not only the Walkers of the world, but the Obamas as well – against anyone who, regardless of how many crocodile tears they’re able to summon, is dedicated to the proposition that “The last shall remain so, and I’ll make goddamn sure of that.”
We all need to ask ourselves, “When I’m on my deathbed, am I going to be able to say, ‘Stick a fork in me. I did what I could, and I’m done’?”
I don’t honestly know if I’ll be able to, but I hope I can do what my conscience demands and my courage allows, and never be satisfied with the limits of either.
If I, and you, and everyone else who gives a rat’s ass about others can do that, it just might be enough.
Bring on the silverware.
The middle class has lost buying power since Reagan started his ‘revolution’ in ’81 while the top 1% have become famously more wealthy. If things had followed the right-wing mythology there would have been a trickle down to us commoners. THERE WASN’T! The money stayed at the top.
Not usually noted in the proposed law to gut Wisconsin unions is a provision (section 16.896) that the Governor can give away the state’s public utilities or sell them for any amount he deems fit. These are facilities built and maintained by the citizens of Wisconsin. My state now has privatized utilities charging 40% more than those which were not privatized. The privatization was sold to us on the basis that public utilities were badly run and ‘bidness’ could run things better. They neglected to say better for whom.
Nicely said, Doug, and so true, Justin. This discussion about unions and how they drive wages up occurred here before, and I won’t go into any long-winded discussion of that. (I do that enough.) Suffice it to say, and simply, the Money Power wants to drive wages down, and profits up. They also don’t believe in democracy, and so believe that taxes are always too high (for them).
P.S.: Never despair for the Republic, Don. Even if you know were doomed. It’s three steps forward, and two back. Think of the incredible changes that have occurred over the last sixty years! The forces of reaction and ignorance will lose–they are in power now, but that will change, especially if they keep pushing their anti-democratic will on us.
P.P.S.: Ckrob, you’re form Wisconsin? Keep up with the updates
Ckrob, I’m so happy someone else brought up the failure of trickle down economics. What I fail to understand is how such a failed policy can be such a cornerstone of current policy by Democratic governors.
I’m not an economist, but Dean Baker is, and here’s a li’l sumpin sumpin from him on The Great Discommunicator’s legacy:
The Real Effect of â┚¬Ã‹Å“Reaganomics’
Ronald Reagan promoted the idea that conservatives prefer to leave the economy to the market. Nonsense â┚¬“ we’ve been gulled
http://www.commondreams.org/view/2011/02/07-10
Ignorance is no excuse for being schooled.
This sounds like a” feed the rich to the dogs” party. Hopefully all of you, and all your children ,and their children,and theirs- will realize all their dreams through hard work and perseverance. Hopefully you will all allow your happy children to live, and not be fed to the dogs – putting aside the intrinsic evil of success.Are we really believing that worshipping poverty as the noble savage ,and deriding success will serve us well in the coming times?
The perpetually confused Mikey e writes “Carter had unemployment through the roof…Lost 10 million jobs….Reagan got those 10 back plus 20 million more…[Reagan] Ended unemployment.”
During the Reagan years the unemployment rate fell by 1.6%, from 7.2% in 1980 to 5.5% in 1988.
UH, during the four Carter years, 10 millions jobs were created, not lost, according to the Bureau of Labor Statistics. Jobs at start: 80,692,000; Jobs at end: 91,031,000. Gain: 10,339,000.
Reagan’s eight years created 16,102,000 jobs
‘Trickle down” of course, resulted in its actual goal…..trickle up…..: The share of total income going to the 5% highest-income households grew from 16.5% in 1980 to 18.3% in 1988 and the share of the highest fifth increased from 44.1% to 46.3% in the same years. In contrast, the share of total income of the lowest fifth fell from 4.2% in 1980 to 3.8% in 1988 and the second poorest fifth from 10.2% to 9.6%.
As Carol noted upthread, another great Ray-gun achievement : The United States moved from being the world’s largest international creditor to the world’s largest debtor nation.
And, of course, Mikhail Gorbachev was the main driver in ending the cold war.
Oh sweet dancing Jesus Helen you do not believe what you just wrote, do you?Ok so the Reagan years were years of poverty, and destitution.Bread lines everywhere.Businesses failing.Gnp down.THats why today Reagan is considered the worst president ever,and the peanut (nut(farmer the best.Jimmy Jimmy come back and save us.Years when if not for the love and benevolence and brilliance of Mr Gorbachev we would all be eating cat food.Or dead in a nuclear war. Thank you Jimmy and Mikhail and thank you Iatola Komani(for finally putting us in our place)Hey this liberal History redux is fun.But ya know what…hold it…….oh no…..my nose just grew 6 inches.Come on lets get serious.If you cant locate the endless indications of growth….excuse me…. EXPLOSION of the economy during those years than you need a new fact source.MIlitarily ?????Your crediting the Russians for ending the cold war and not loosing it?Bull bleep
That creditor vs debtor nation is a canard.A misreading of economic reality.THat so called dept was created out of massive and quick uptick in the countries cash flow causing imbalances.Looked at simply we took out loans for a hundred bucks covered by a million in the bank.Fluidity love.The economic push from those years did not end till this collapse.
Are you still in denial why Carter got demolished at the polls?Why Dems are now getting mowed down?
The national debt during Reagan’s 8 years more than doubled, increasing from less than $1 trillion to $2.4 trillion. Bush 41 added another $1.8 trillion in just four years….during a period where the Reagan economy pooped out, which cost the GOP the White House.
———————-
AP
WASHINGTON, Nov. 17, 1988â┚¬” Prime Minister Margaret Thatcher of Britain said today that the policies of Mikhail S. Gorbachev, the Soviet leader, have ended the Cold War.
During an hour-long interview with The Washington Post and Newsweek, Mrs. Thatcher said, ”We’re not in a Cold War now” but in a ”new relationship much wider than the Cold War ever was,” The Post reported in Friday’s issue.
Mr. Gorbachev’s policies have affected East-West relations profoundly, Mrs. Thatcher said, adding that the previous ”minimal relationship” with Moscow that focused on arms control has expanded to include trade, culture and other major issues.
Gorbachev did do a great job of seeing the writing on the wall(that if Russia wanted an arms race we would spend them into oblivion and beat them at every advancement)and he wonderfully folded and walked away from the table.Period.The iron lady devoted books to the amazing man Reagan was.
Reagan’s economy pooped out at the end of Bush jr last term.Due to fanny and freddy and later due to massive bailouts.And if you want to point to the only fault Reagan had(allowing Dems to continue to spend)i will give you that.Now take the next hour to go through how our economy exploded on all fronts.Did you not live at that time?Cant agree with really any of your points.Actually your points were used to run against Reagan.You are re arguing old campaigns.Old elections that had your points trod into the ground.They sound no better today in retrospect
That’s “gusher” up, Ms. Bedd, not trickle up. You’re a trooper, Helen–you keep throwing facts out there, and they bounce of the Wall like Nerf pellets. Persevere, madam.
How many today would not like to beam back to the way the economy was under Reagan?
Tim you and two or three “believers” here should get together and write a book.Here is the title.WHY EVERY GREAT THING THAT HAPPENED UNDER RONALD REAGAN…………DIDN’T! First copy should go to Obama. That fella has been trying to channel Reagan lately for political gain.Much I am sure ,to your consternation.
The Reagan ecomony pooped out in 1990. Do folks somehow forget the July 1990 â┚¬“ March 1991 recession? In response, the first President Bush raised taxes on higher-income people later in 1991.
And Fannie and Freddie did not cause the collapse of our economy in 2008. That was the private sector’s fault.
Ps
And no! The CRA didn’t cause it either.
TimN Says: That’s “gusher” up, Ms. Bedd, not trickle up.
Nah, Reagan’s increase was “trickle up,” Bushco’s increase for the top WAS “gusher up.”
“Poor dear, there’s nothing between his ears.” — British Prime Minister Margaret Thatcher on Ronald Reagan.
“That creditor vs debtor nation is a canard.”
Actually it’s quite important. When we were a creditor nation we were getting more in interest than we were paying out, reducing the national debt. Reagan undid that and started us having to pay interest on the debt we issue which, of course, increases the national debt.