Fareed Zakaria Shocker: 'Single Biggest Threat to the U.S.'s Fiscal Health' Is Public Employee Pensions
Less than two weeks after Wisconsin's Republican Governor Scott Walker won his recall election, you wouldn't expect a prominent liberal media member to be coming down on public employee benefits.
Yet there was Time magazine's editor-at-large Fareed Zakaria publishing a rather shocking article Friday with the equally shocking headline "Why We Need Pension Reform":
Warren Buffett calls the costs of public-sector retirees a "time bomb." They are the single biggest threat to the U.S.'s fiscal health. If the U.S. is going to face a Greek-style crisis, it will not be at the federal level but rather with state and local governments. The numbers are staggering. In California, total pension liabilities--the money the state is legally required to pay its public-sector retirees--are 30 times its annual budget deficit. Annual pension costs rose by 2,000% from 1999 to 2009. In Illinois, they are already 15% of general revenue and growing. Ohio's pension liabilities are now 35% of the state's entire GDP.
The accounting at the heart of government pension plans is fraudulent, so much so that it should be illegal.
After sharing some of the numbers in California - where public pension funds are actually basing future monetary needs on the stock market growing 40 percent more than it did in the go-go 20th century! - Zakaria demonstrated how the negotiation of these retirement plans is "democracy at its worst":
Public-sector unions, powerful forces in states and localities, ask for regular pay increases. Governors and mayors can dole out only so much in salary hikes because of requirements for balanced budgets or other constraints. So instead, they hand out generous increases to pension benefits, since those costs will hit the budget many years later, when current officials are themselves comfortably in retirement.
As a result, states, cities, and local governments across the fruited plain have to cut back on the very services their citizens are paying taxes for in order to cover the growing cost of their workforce.
In California, spending on employee pay and benefits is up 65% in just the past ten years. That's more than double the rate of inflation.
Worse still, this is highly regressive:
Current workers will have their salaries cut, their numbers thinned and their benefits slashed, all to maintain relatively comfortable benefits for retirees, who are on average richer than the people who are being asked to make these sacrifices. Current residents will watch their services dwindle, so that retirees--again, who are richer on average than they are--can have guaranteed generous cost-of-living increases year after year.
While the public at large suffers, who benefits?
Public-sector unions are strong supporters of the Democratic Party, so their clout has drowned out the voices of the poor, the young, students and average citizens.
As such, the Occupy movement should be targeting public employee unions and not Wall Street, for the former are actually harming the economy and the future of this nation far worse than the latter.
To be sure, none of this is news to most readers. Conservatives have been pounding the desk about the corruption associated with public employee unions for years.
But that a liberal press member like Zakaria would shed light on this so shortly after the Democrat disaster in Wisconsin and less than five months before Election Day is quite remarkable.