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.