Over the past half-dozen years, former Enron billionaire John Arnold has spent up to $50 million for research and communications aimed at eliminating guaranteed pensions for public sector workers.
Much of this money has gone to pillars of liberal America, such as the Pew Trust, the Urban Institute (recipient of almost $15 million), and even public television (which gave $3.5 million back as reported in The New York Times, LA Times, and by the PBS Ombudsman).
Given this background, when I read this New York Times story on public pensions today, the first thought that popped into my head: did I miss a contribution from the Arnold Foundation to The New York Times?
The Times story by Mary Williams Walsh relied on research and quotes from the Urban Institute’s Richard Johnson, funded by Arnold. Johnson specializes in studies that use overgenerous assumptions about the returns to nontraditional pensions (401(k)-style savings plans and Cash Balance plans). These assumptions make it seem like most teachers benefit from the end of guaranteed pensions. But the assumptions are inconsistent with the facts showing that traditional pensions have higher returns, lower fees, and lower-cost annunities than 401(k)-style savings accounts. As well as Johnson, The Times story cites five other researchers, all on the same side in the public pension debates. So much for journalistic balance.
More insidious, Walsh’s story fuels the narrative that the public sector pension issue is a case of a transfer from younger workers (and taxpayers) to older workers (to pay for unfunded pensions) — what self-proclaimed free-market think tanks like to call “intergenerational theft.”
Actually, the crisis of public sector pensions is another aspect of the rising economic inequality that exists in every state. Despite this inequality and record corporate profits, states give away enormous amounts of revenue in unaffordable corporate tax breaks. Most states also have low tax rates on those with high incomes — and fail to capture needed revenue achievable by taxing the top at higher rates. This double whammy of low top-end tax rates and expensive corporate giveaways means states don’t have the money for education, infrastructure, and other essential services — or to make required contributions to public sector pensions. The failure to make those contributions is the main reason pension systems end up with significant debt.
Here’s another way to see that economic inequality, or what you could call “intragenerational theft,” which is the real problem faced by workers of all ages, including young teachers, nurses, firefighters and private sector workers of all stripes. I’m going to use numbers from Pennsylvania, but the basic idea generalizes. In Pennsylvania, the richest 5% received about three quarters of the increase in income in the state between the late 1970s and 2012-13 (the latest state numbers available). As a result, the bottom 95% receive about $50 billion less in income each year than if the increase in Pennsylvania income was distributed the same way as 1979 income. Even though Pennsylvania is a state with a big pension debt, that $50 billion is almost as big as the cumulative debt of Pennsylvania’s two big state pension plans (about $57 billion), which can be paid back over 30 years. To be sure, paying back that debt is a genuine public policy challenge. But the real threat to the future pensions of young teachers, and to the future wages and benefits of all young workers, private and public, is that the benefits of economic growth in future decades will be as skewed to the top as they have been since 1979.
If John Arnold would put his money, and Mary Williams Walsh her journalistic energy, into calling attention to economic inequality, maybe they could actually help young teachers. At the moment, whatever stories they tell themselves, they are distracting policymakers and the public from the real source of economic struggle for the middle class. They are also diviiding workers public and private, young and old, from one another. And if Walsh has no interest in anything but propagating a distorted, Arnold-financed world view, perhaps it’s time for The New York Times ombudsman to take a closer look at her reporting.