Thingish Things

Double-Edged Sword

Written By: William F. B. O'Reilly - Mar• 12•11

The union-controlled Democratic Party is trying to turn lemons into lemonade in the wake of their Wisconsin Waterloo.

The New York Times today reports that the Democrats plan to use the Wisconsin fight as a rallying cry for fundraising and Party organizing in 2012.  They especially hope to lure away from Republicans unaffiliated  voters who handed the House of Representatives back to the GOP in 2010.

It’s a smart play in the short term, but I think it will backfire in the long run.  Here’s why:

Polling has been mixed on how the American public views public sector unions and their collective bargaining privileges (has anyone really thought about them before now?) But even if a majority of Americans today agree that public employees deserve to bargain collectively for pension and work benefits   — and I’m not convinced they do – the ongoing debate will only highlight the extent to which state pension funds are underfunded.  That underfunding is a relatively unknown problem that arguably threatens the country’s future more than the federal deficit (states can’t print money.)

It is estimated that state pension funds are now owed a collective $3 trillion.  That money is constitutionally guaranteed to state workers who have far more lucrative retirement plans than the average private sector American who has to pay for them. Paying it will soon begin crowding out popular discretionary spending programs like school funding, senior services, parks, healthcare benefits, etc.

Last week, as a local board member the American Association of Political Consultants,  I helped host nationally-noted pollster John McLaughlin at a small gathering at my office in New York.  In the course of the evening, John walked through political trends occurring throughout the nation, followed by a question-and-answer session.

I asked him a question I’ve been wrestling with professionally:  “How to do you engage  voters who, virtually in the same breath, says they want government spending reduced, but oppose almost every budget cut?”

The pollster’s answer: “Educate them about the extent of the problem.”

That’s exactly what a Democratic-Party-led campaign over public employee union “rights” will do.  It will educate Americans about the extent of state debt – and the  disparity between their own retirement plans and those they are shouldering for public employees.

There is a cardinal rule in law: Never raise a question to which you aren’t sure of the  answer.  There is a cardinal rule in public relations: Never repeat a negative.

The Democratic Party is about to violate both.






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  1. Your Friend says:

    I still feel like the question of why the pensions are underfunded is going unasked, by you and a good deal of the rest of the media. 400 people in this country have more money than the bottom half of the country, over 150 million people, combined. And a good number of those 400 people made significant money on the backs of fake investment vehicles. Even more honestly, the 100,000 rich people right below those top 400 made their money on these fake investments. And what investor category bought more ultimately worthless mortgage-backed securities than any other? No surprise here, state pensions.

    So, super rich people sell a pile of steaming sh*t to teachers, bank the profits, then turn their backs as the state pensions that shelled out all of the money they just banked gets flushed down the toilet. Then our brilliant government (right and left) bails out the rich guys, but now that the poor people who got screwed need to be bailed out, that same government is nowhere to be found (right and left). What’s good for the goose is good for the gander. That phrase runs through my head like a mantra, but apparently it should just be flushed down the toilet too, because it’s clearly not true when it comes to the haves and the have-nots in this country. Doesn’t all this pretzel logic make you pine for the fine sands of Mauritius?

    • The pensions are underfunded because the assumed rate of return state and local governments use is totally out of whack with reality. They use the high rates to rationalize the over-generous benefits they extend to union employees. Every year the gap grows larger.

      • Your Friend says:

        Not true. The link below is clearly from your side of the aisle, but even Josh Barro says that the assumed rate of return is typical and holds true over the long-term. He goes on to agree with you on almost all other points, but he isn’t arguing against my point. (I’m actually fine with 401(k) style fund for these pensions, tied to the market as mine is. I’m not sure the unions would buy that, but they should.) Yes, everything looks down now because of the market slide, but the funds that are in the worst shape are the ones that bought excessively into the MBS market. Why did they do that? Because they were sold a bill of goods, told that the returns would be great and they would end up with extra money. So just like every investor, they were snookered by greed. But who manages those pension portfolios? Not teachers, fat cats who sit just down the hall from the idiots who designed the MBS market.

        As usual, we’re arguing about the same thing, just from different perspectives. Government and Big Business are two sides of the same coin, they are both out to steal money from us for questionable services and the sooner we acknowledge that the better. We’re like the two heads on a Siamese twin arguing about what to do with our mutual body for the night. So the double-edged sword is less the fine line that unions and dems are walking and more the inability for the two sides of the aisle to agree with each other on anything. The nightmare of the Siamese twin.

        • There have been some really good studies on this. It’s not just the assumed rate of return, but the discount rate as well. The Government Accounting Standards Board allows wildly optimistic numbers to be used. Mary Williams Walsh of the New York Times has written extensively on this.

          But if you’re okay with 401Ks, we’re simpatico on this one. That’s all I’m looking for on the union side.

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