By Bob Plain - in Rhode Island's Future
See
more at: http://www.rifuture.org/rolling-stone-on-ri-looting-the-pension-funds.html#sthash.ba3G8uyo.dpuf
When Wall Street broke
the American economy, the Pew Center for the Public Trust told Rhode Island and
others it was the retirees’ fault. So we cut their salaries and transferred the
savings to the same sector that broke the economy in the first place. That’s
how renowned Rolling Stone journalist Matt Taibbi describes the Ocean State’s
2011 pension cuts.
The blockbuster
article accuses Raimondo of transferring wealth from local retirees to Wall
Street tycoons, which has become an increasing narrative about the rookie
general treasurer since Ted Seidle exposed her reliance on hedge funds.
Today, the same Wall
Street crowd that caused the crash is not merely rolling in money again but
aggressively counterattacking on the public-relations front. The battle
increasingly centers around public funds like state and municipal pensions.
This war isn’t just about money. Crucially, in ways invisible to most
Americans, it’s also about blame. In state after state, politicians are
following the Rhode Island playbook, using scare tactics and lavishly funded PR
campaigns to cast teachers, firefighters and cops – not bankers – as the
budget-devouring boogeymen responsible for the mounting fiscal problems of
America’s states and cities.
It also ties together
the Pew Charitable Trust and former Enron trader and Engage RI financier of
working together to overstate the “unfunded liability.” This is
especially interesting because legislators, experts and reporters all relied on
research done by the Pew Center during the lead up to the pension legislation.
In 2011, Arnold and
Pew found each other. As detailed in a new study by progressive think tank
Institute for America’s Future, Arnold and Pew struck up a relationship – and
both have since been proselytizing pension reform all over America, including
California, Florida, Kansas, Arizona, Kentucky and Montana. Few knew that Pew had
a relationship with a right-wing, anti-pension zealot like Arnold. “The
centrist reputation of Pew was a key in selling a lot of these ideas,” says
Jordan Marks of the National Public Pension Coalition. Later, a Pew report
claimed that the national “gap” between pension assets and future liabilities
added up to some $757 billion and dryly insisted the shortfall was
unbridgeable, minus some combination of “higher contributions from taxpayers
and employees, deep benefit cuts and, in some cases, changes in how retirement
plans are structured and benefits are distributed.”
What the study didn’t
say was that this supposedly massive gap could all be chalked up to the
financial crisis, which, of course, had been caused almost entirely by the
greed and wide-scale fraud of the financial-services industry – particularly
with regard to state pension funds.
A study by noted
economist Dean Baker at the Center for Economic Policy and Research bore this
out. In February 2011, Baker reported that, had public pension funds not been
invested in the stock market and exposed to mortgage-backed securities, there
would be no shortfall at all. He said state pension managers were of course
somewhat to blame, but only “insofar as they exercised poor judgment in buying
the [finance] industry’s services.”
In fact, Baker said,
had public funds during the crash years simply earned modest returns equal to
30-year Treasury bonds, then public-pension assets would be $850 billion richer
than they were two years after the crash. Baker reported that states were short
an additional $80 billion over the same period thanks to the fact that
post-crash, cash-strapped states had been paying out that much less of their
mandatory ARC payments.
So even if Pew’s
numbers were right, the “unfunded liability” crisis had nothing to do with the
systemic unsustainability of public pensions. Thanks to a deadly combination of
unscrupulous states illegally borrowing from their pensioners, and unscrupulous
banks whose mass sales of fraudulent toxic subprime products crashed the
market, these funds were out some $930 billion. Yet the public was being told
that the problem was state workers’ benefits were simply too expensive.
It concludes:
The bottom line is
that the “unfunded liability” crisis is, if not exactly fictional, certainly
exaggerated to an outrageous degree. Yes, we live in a new economy and, yes, it
may be time to have a discussion about whether certain kinds of public
employees should be receiving sizable benefit checks until death. But the idea
that these benefit packages are causing the fiscal crises in our states is
almost entirely a fabrication crafted by the very people who actually caused
the problem. It’s like Voltaire’s maxim about noses having evolved to fit
spectacles, so therefore we wear spectacles. In this case, we have an
unfunded-pension-liability problem because we’ve been ripping retirees off for
decades – but the solution being offered is to rip them off even more.
It’s well worth a read
if you still don’t understand how Raimondo used pension cuts to enrich Wall
Street or if you still don’t understand how the the 1% wants pension funds to
fuel their continued economic growth.
Bob Plain is the editor/publisher of Rhode Island's
Future. Previously, he's worked as a reporter for several different news
organizations both in Rhode Island and across the country.