Labor & Employment Law

Dean Baker: Debts Should Be Honored, Except for Working People

By James Parks

Dean Baker

If you work for a living, then you expect to be paid what you are owed and on time. But if some members of Congress have their way, public employees will be denied the pensions they worked years to earn.

In a Point of View column at the AFL-CIO website, Dean Baker, co-director of the Center for Economic and Policy Research (CEPR), says certain members of Congress are working overtime to draft a law allowing states to declare bankruptcy. 

According to a New York Times article, a main goal of state bankruptcy effort is to allow states to default on their pension obligations. This means that states could tell teachers, highway patrol officers and other government employees that their contracts no longer mean anything and they will not get the pensions they were expecting, Baker says.

Baker says the crowd pushing state bankruptcies is made up of some of the same people who rewrote the personal bankruptcy laws to require working people buried under a mountain of debt to pay their credit card bills, some retroactively. They also argued that homeowners who were under water should pay their mortgages.  

State governments are legally obligated to pay retirees the pensions they worked for just like any other debt. What?s different now, Baker says, is that the money from public employee pensions goes to working people, not some big Wall Street bank.

While the airwaves are full of stories about public employees retiring with six-figure pensions, the reality is that the average public employee pension is not that lucrative. In New York State, for example, it is $18,300 a year.

It?s true, Baker says, that many public-sector workers often have pensions and a lot of private-sector workers don?t. But study after study shows these public workers paid for their pensions with lower wages than their private sector counterparts, Baker says.

It is tragic that so many private-sector workers cannot count on a secure retirement, but it won?t help them to make workers in the public sector equally insecure.

The picture here is very simple, Baker says:

The rules get changed whenever it is necessary to make sure that money flows upward from ordinary workers to the rich. In 21st century America, upward redistribution seems to be the guiding principle.

Click  here to read Baker?s Point of View column, “Debts Should Be Honored, Except When The Money Is Owed to Working People.”

Full post as published by AFL-CIO NOW BLOG on February 06, 2011 (boomark / email).