The Public Pension Outrage and Alan Greenspan’s Pension
Monday 16 August 2010
by: Dean Baker, t r u t h o u t | Op-Ed
In recent weeks, there has been a serious effort by the
conservatives and even many centrists to whip up anger
at public sector workers over their pensions. The basic
story is that public sector workers get better pensions
on average than their private sector counterparts. At
the same time, most state and local pension funds have
large shortfalls, implying that additional government
revenue will be needed to keep them solvent.
This is supposed to make people really angry at public
sector workers. The right-wing noise factory has been
whipping up the hostility at public employees, sensing
that they may have another ACORN on their hands. A New
York Times columnist even called on retired public
employees to give back pensions for which they worked
and have solid legal claims.
We should recognize the attack on public sector workers
for what it is: a sleazy case of scapegoating that it
is intended to divert people’s attention from the real
villains in this economy, the Wall Street boys and the
inept economic policymakers who took the economy to
ruin and seem intent on leaving it there.
The basic facts are straightforward. Adjusting for
education and experience, public sector workers
actually get paid slightly less on average than their
counterparts in the private sector. It is likely that
the lower pay is largely or fully offset by a better
benefit package, but it is likely that the difference
in benefit packages between public and private sector
workers is not as large as it may seem.
First, it is important to realize that public sector
workers are far more likely to have a college or
advanced degree than the population as a whole. While
most workers have little by way of a defined benefit or
defined contribution pension, most workers with college
or advanced degrees can count on being entitled to at
least a modest pension income in retirement.
Second, many public sector workers are not covered by
Social Security. This means that whatever they get from
a government pension will be the bulk of their
retirement income; it will not be a supplement to their
Social Security benefits. With this in mind, the
$22,000 pension that an average retired public employer
received in 2007 hardly seems excessive.
This doesn’t mean that there are not some workers who
game the system and some categories of workers who may
not get too much. (Firefighters and police tend to do
best. Of course, these people regularly risk their
lives on the job during their working years.) In short,
the idea that we have a whole class of public employees
enjoying plush retirements is nonsense that can be
readily dismissed with a quick look at the data.
So, let’s get our eye on the ball. Fifteen million
people are not out of work because of generous public
employee pensions. Nor is this the reason that millions
of homeowners are underwater in their mortgages and
facing the loss of their home. In fact, if we cut all
public employee pensions in half tomorrow, it would not
create a single job or save anyone’s house.
The reason that millions of people are suffering is a
combination of Wall Street greed and incredible
economic mismanagement. As we know, the Wall Street
boys are back on their feet, with profits and bonuses
again at record levels, thanks to the trillions of
dollars in bailout money handed to them by the
government in the fall of 2008. If people want to be
angry at someone, the multi-million dollar bonuses
going to hotshot traders at Goldman Sachs and J.P.
Morgan might be a better target than a retired school
teacher’s $3,000 a month pension.
The other appropriate target for the public’s anger is
the people running economic policy, who failed to
prevent this entirely preventable disaster. While there
are many people who should be unemployed for this
colossal failure (none are), the culprit in chief is
Alan Greenspan, arguably the worst central banker of
all time. He insisted that everything was just fine
even as the housing bubble expanded in size to more
than $8 trillion at its peak. Did he think the bubble
would just keep expanding forever or did he really
believe that the economy could lose $8 trillion in
wealth without any serious fallout?
This is where we can talk about public pensions. While
Mr. Greenspan has retired as Fed chairman and,
therefore, cannot be fired, by my calculations he gets
something like $160,000 a year as a pension from the
government. There is probably no one less deserving of
their pension than Mr. Greenspan. If there is any
retired public employee in the country who should be
returning a pension, it is Mr. Greenspan.
What do you say, Mr. Chairman?
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