Wed, Mar

The Pension Debate is Small and Boring

COMMENTARY - People in Sacramento have a real talent for turning what could be big, interesting debates into narrow, tit-for-tat snooze fests. The latest example of this capital city myopia is the pension debate.

Each day, that debate gets narrower, with very little discussion of the nature of pensions themselves.

On one side, those skeptical of pension benefits and their costs accuse public workers and their unions of selfishness and trying to bankrupt the state. The union side responds with its own ad hominem attacks, questioning the financing and political ties of the groups that support the pension skeptics.

This is frustrating to watch, because the pension debate should be big. It touches on virtually every significant economic debate in the world today, among them the challenges of longer life spans, the nature of innovation and job creation, the structure of the public sector, the regulation and performance of the financial services business, and the welfare state.

But in California, the debate drives right past those big sights and goes right to the narrow question of "are the public employee unions evil incarnate, or the last defenders of economic justice against anti-tax predators?"

It's past time to broaden the pension debate - and use it as a way to have conversations we've been avoiding about how to rebuild the California economy. Here are three ways we can do it.

1. Don't limit the conversation just to public workers and public compensation.

Most of us don't work in the government. But the only time private sector pay and retirement benefits come up in the discussion, it's as a comparison point in the argument over whether the public sector pay and benefits are too generous.

We also need to ask whether private sector pay and benefits - particularly among less-skilled and less-educated Californians -are too low, and how the state should respond, if at all. It's not possible to duck the question, even if one is ideologically inclined.

That's because low pay among private sector workers can become a long-term obligation for government, which will have to step in and do more for those workers when they grow old and sick.

2. Stop focusing so much on what people are getting now in deferred compensation and pensions, and more on what all of us need to be doing to have retirement security.

One thing that all the pension studies show is that retirement security is not what it should be even for many upper-middle-class people in the private sector. So the question we should be asking is not just: are public workers getting too much in pensions or retiree health care? The question should be: what do people need in retirement benefits to have security, and what role can government take in providing that?

My colleagues at the New America Foundation have done quite a bit of thinking about how to build a sustainable pension system for public workers that minimizes risk so that private workers could be a part of it as well.

3. Put a price on long-term obligations of all kinds.

One good thing about the pension debate is that it has focused public and media attention on the long-term costs of promises made today. But pensions are one of the many promises that governments and other institutions make today for which we don't have a good handle on the long-term costs.

Now is the time to use the pension debate to develop long-term accounting models that show what a spending boost or tax cut today will mean in the very long term, and force us to account for that cost.

Those numbers need to be as easy to find as the various predictions of California's unfunded pension obligation.

A debate of this scale would be embraced by the public, which is wrestling with many of these questions in their own lives. But first, the media and policymakers have to seize the debate back from the professional political complex that has narrowed it, to our mutual, and long-term, detriment.  

(Journalist and Irvine senior fellow at the New America Foundation, Fellow at the Center for Social Cohesion at Arizona State University and co-author of California Crackup: How Reform Broke the Golden State and How We Can Fix It. This column appeared first at foxandhoundsdaily.com) -CW

Vol 9 Issue 38
Pub: May 13, 2011