This article is as clear as anything I’ve read about the ticking time bomb of pensions. It breaks out the unfunded pension liability for 9 major US cities that represent just the tip of he iceberg. It’s a key reason so many private sector union manufacuring jobs were outsourced to overseas labor. Private sector union pension funds are vastly underfunded, too. I believe this is an issue that will topple governments at all levels.
The numbers are out and the problem is staggering. Northwestern University’s Kellogg School of Management estimates that the states have roughly 3.3 trillion dollars in unfunded pension liabilities. Then you need to add another 574 billion dollars to represent the unfunded pension liabilities of all the counties and cities within the 50 states.
This number is continuing to grow. If we shut off the faucet right now, these would be the numbers. The big government mentality, that strange impulse to think that a single entity can both regulate and conduct a given business without massive inefficacy and outright theft, is the culprit behind this latest financial gaffe. While both national political parties are guilty of putting their hands in the cookie jar, this big government philosophy is only openly espoused by the Democrats. It should be no shock that all almost all of the nine cities with the most underfunded pensions have been utterly dominated by the Democrat mayors for decades. Check it out:
Current Mayor: David Bing (Dem 2009)
Streak of Democrat Mayors: unbroken since 1962
Unfunded liability: $6.4 billion
Unfunded liability per household: $18,643
Solvency horizon: 2023
Current Mayor: Stephanie Rawlings-Blake
Streak of Democrat Mayors: unbroken since 1967
Unfunded liability: $3.7 billion
Unfunded liability per household: $15,420
Solvency horizon: 2022
#7 New York City
Current Mayor: Michael Bloomberg (Independent since 2007, before that, Republican)
Preceded by Republicans since 1994
Streak of Democrat Mayors before 1994: unbroken since 1946
Unfunded liability: $122.2 billion
Unfunded liability per household: $38,886
Solvency horizon: 2021
Current Mayor: John Peyton (Republican in office since 2003)
Preceded by Ed Austin Jr. who switched his party from Democrat to Republican during his 1991-1995 term in office
Streak of Democrat Mayors before 1993: unbroken since 1888!
Unfunded liability: $4 billion
Unfunded liability per household: $12,994
Solvency horizon: 2020
#5 St. Paul
Current Mayor: Chris Coleman (Minnesota Democratic–Farmer–Labor Party in office since 2006)
DFL has dominated St Paul since 1972, sometimes running as DFL/Democrat.
Streak of Democrat Mayors before 1972: unbroken since 1926.
Unfunded liability: $1.4 billion
Unfunded liability per household: $13,686
Solvency horizon: 2020
Note: These numbers refer to St. Paul’s largest pension, a teachers fund.
Current Mayor: Mark Mallory
Streak of Democrat or Charty Party Mayors: unbroken since 1971
Unfunded liability: $2 billion
Unfunded liability per household: $15,681
Solvency horizon: 2020
Current Mayor: Thomas Menino
Streak of Democrat Mayors: since 1902 (with only two exceptions, totaling 6 years collectively)
Unfunded liability: $7.5 billion
Unfunded liability per household: $30,901
Solvency horizon: 2019
Current Mayor: Richard Daley
Streak of Democrat Mayors: unbroken since 1931
Unfunded liability: $44.8 billion
Unfunded liability per household: $41,966
Solvency horizon: 2019
Current Mayor: Michael Nutter
Streak of Democrat Mayors: unbroken since 1952
Unfunded liability: $9 billion
Unfunded liability per household: $16,690
Solvency horizon: 2015
The ironic part is that one of the DNC’s staunchest allies will probably take the nastiest hit in this fiscal crisis. Unions, some of the most vocal supporters of the Democrat’s philosophy, are about to get stomped on by the same bloated, big government concepts that they have overwhelmingly supported for decades. They somehow believed that the big government thieves who keep taking more and more of our taxes to do less and less work would exempt the unions from their wholesale fleecing of America.
(Well, some of them are getting out of the new Health Care initiative, but that’s a whole other story… )
As we all know, government workers get paid higher wages and receive much better benefits than their private counterparts. Why is this? Unlike a business which must turn a profit in order to survive, some governments can spend pretty much whatever they want. There are no market forces are at work in the public sector. For instance, the private sector in the United States has lost roughly 8 million jobs since the financial nee housing collapse. The public sector has grown by half a million.
Then enter the unions. A business that cuts a bad deal with a labor union will end up going bankrupt. While it would seem that a union would not want to cut a bad deal with the entity that supports it, some unions don’t seem to mind ramming a business into the ground that their members need in order to survive (UAW anyone?). However, with a state or local government there doesn’t seem to be any issue at all. Government is a bottomless pit of money (or at least a bottomless pit of peons who are forced to pay ever rising taxes), right?
Wrong. Governments are fundamentally different from private companies. Don’t take my word for it, though. Listen to FDR, the king of the welfare state and staunch supporter of the right to unionize. “All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations.” “The very nature and purposes of Government make it impossible for … officials … to bind the employer … The employer is the whole people, who speak by means of laws enacted by their representatives.”
The National Labor Relations Act (or Wagner Act), passed under the watchful eye of FDR in 1935, specifically excluded public sector employees from unionizing. FDR is right: collective bargaining does not work with the government. A government has almost no leverage in such deals, and because of this they are at a significant disadvantage in dealing with a labor union. A government cannot relocate or significantly change their function. Also, a government is essentially a monopoly. You and I have no choice but to use the government for certain things. If the price of some government service gets too high, my only option is to not purchase the service. This would constitute not paying my taxes, which isn’t really an option at all, unless you really like living in a jail cell.
Once you add the typical mentality that a state or city can’t go broke you get elected officials that think taxes create an endless piggybank that they can use to curry favor with organized labor. Everyone wins… until you see your state is drowning in debt.
So now all the idiotic spending needs to come to a halt, one way or another, and unions are going to get the worst of it. 32.5% of public employees are unionized. In fact, as of 2009 there were more union employees working in the public sector than the private. As unions drove private enterprises out of the United States there was only one refuge left.
These “too big to fail” entities like states and cities are on the edge of actually failing now, and you can bet that they will throw everyone under the bus if given the opportunity. Raising taxes isn’t going to cut it. The states are all now trying to figure out ways to get out of their bloated union contacts. There’s even talk of a few states filing for bankruptcy, though there is no legal precedent for doing so. But really it isn’t a question of whether all these government entities are going to find a way to cut labor costs, just how.
At the end of the day the little guy is going to get screwed yet again. Lack of foresight on both sides has spelled ruin for not only governments, but all for those employees as well. Morons in the government cut ludicrous plans with unions which they could never honor, and the unions were glad to take them.
If the unions are smart they will renegotiate for more competitive wages, but I’m guessing they won’t. Aside from the fact that their bad deals will ultimately end up costing them more money in taxes (they do live under the governments they’re robbing), the Unions stopped being about helping individual workers a long time ago. Once upon a time they did great things, but those days are long gone. Unions are a business now and all they really care about is profit, no matter who it ends up costing. Tragically, this time, it is costing everyone, and dearly.
Check out what’s going down in Europe regarding private pensions being used to keep governments afloat. Creepy.