Good Pensions Weren't Unsustainable - They Were Stolen

An acquaintance who has a good job with a private company and a 401K plan asked why the pension account for state employees is underfunded. The tone of voice implied that public employees weren't contributing their share.

It went to keep your taxes low, motherfucker. All the money taken out of state employee paychecks for a defined benefit pension is still there. But the state hasn't deposited its share for more than a decade now.

Every budget year, the legislature looks at the amount of money the state constitution requires it to deposit in the state employee retirement plan, and realizes that it can't write that check unless it raises taxes. So it just blows off the obligation to state workers.

Without consequences. What are state employees going to do to them, after all? Foreclose on the Capitol?

Kevin Drum explains that the same dynamic destroyed private-sector pensions:

This is a pretty common reaction, but in fact, the arithmetic of decent pensions actually works out just fine. Corporations didn't give up on defined benefit pensions because they couldn't afford them any longer, they gave up on them because that allowed them to spend more money on executive salaries. After all, if overseas competition were really the big problem here, then you'd expect to have seen a long, steady decline in corporate profits and corporate compensation. But we haven't seen that. Profits have boomed and compensation has stayed high. The difference hasn't been in the level of compensation, it's been in the distribution of compensation. The executive suite has done fine. The rest of us haven't.

Read the whole thing.