NPI's Cascadia Advocate

Offering commentary and analysis from Washington, Oregon, and Idaho, The Cascadia Advocate is the Northwest Progressive Institute's uplifting perspective on world, national, and local politics.

Friday, July 18th, 2014

Live from Detroit: Detroit, Rocked City: How the Bankruptcy Led to Retirement Attacks that Could Spread Nationwide

This pan­el is mod­er­at­ed by David Siro­ta. Pan­elists include Gwen­dolyn Beasley, Reesa Kos­soff, and Diane Oakley.

Pub­lic pen­sion attacks are hap­pen­ing nation­al­ly and are being dri­ven by the Koch Brothers.

401k plans have not proven to save tax pay­er mon­ey over a Defined Ben­e­fit plan, in fact there are cas­es where state lia­bil­i­ty has increased. Pen­sion plans also encour­age employ­ees with expe­ri­ence, which is good for pub­lic sec­tor jobs such as teach­ers, police, and firefighters.

There are inter­est groups that are inter­est­ed in Defined Ben­e­fit plans to push the invest­ments into more aggres­sive plans. 401k plans have oth­er inter­est groups that want to push invest­ments into cer­tain mutu­al funds, etc. All of this is a move to ben­e­fit Wall Street.

In Detroit, 1 year ago today, bank­rupt­cy was offi­cial­ly filed. Bank­rupt­cy was even­tu­al­ly approved. It was ruled that bank­rupt­cy law trumped the Michi­gan Con­sti­tu­tion mean­ing that pen­sions were not pro­tect­ed from the bank­rupt­cy. The aver­age pen­sion in Detroit is $19K per year.

In the “Grand Bar­gain”, not only would pen­sions would be cut, it meant that health­care ben­e­fits would be cut as well.  $125 stipend was offered for retirees to pay for their health­care, which was not enough. The new plans also had a high deductible which hurt retirees. Detroit also claimed that they did­n’t have enough mon­ey for den­tal and eye care. Detroit promised that by 2028 they will try to restore the retirees’ benefits.

Pen­sions have become under­fund­ed because state and local gov­ern­ments haven’t been pay­ing the con­tri­bu­tions to the plans. The Sanc­ti­ty of pen­sion con­tracts is not being respect­ed which iron­i­cal­ly, big banks claimed that exec­u­tive pay could not be cut dur­ing the bailout because of the sanc­ti­ty of the con­tracts that these exec­u­tives had.

Even though state gov­ern­ments such as New Jer­sey say that they don’t have the mon­ey for pen­sions, the gov­ern­ment spends bil­lions on cor­po­rate sub­si­dies. It is a wealth trans­fer from retirees to the cor­po­ra­tions and the rich.

One of the prob­lems with Detroit is that it entered an extreme­ly com­plex inter­est rate swap. Wall Street won in the deal and Wall Street was first in line in the bank­rupt­cy to get paid.

More infor­ma­tion can be found at the Nation­al Insti­tute on Retire­ment Secu­ri­ty and the Nation­al Pub­lic Pen­sion Coali­tion.

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