Tag Archives: public pensions

People vs. People

Fec points to a piece at Naked Capitalism that takes the unions and President Obama to task for creating the environment that led to voters in two California cities, San Jose and San Diego, voting overwhelmingly to cut city employees' pensions:

This is not a Republican initiative – the San Diego Mayor is a Democrat.  And pension cuts like this are happening nationally, mostly with full support from voters in the Republican Party and a good chunk of the Democratic Party as well.  The union representing city workers, of course, went to the courts rather than pursuing a strategy of engagement with the public.  These unions will probably end up losing the fight, because they have no ability to persuade voters that they represent anything but a self-interested group of insiders.

The states and localities suffering from budget crises are having problems because Wall Street blew up the economy, and in many cases, ensnared these municipalities in extremely bad deals.  The wealth of taxpayers was and is being transferred to banks.  In 2008, the choice before Bush, and then Obama, was clear.  They could hand taxpayer resources to Wall Street and oversee a series of budget crises in states and localities, with the opportunity for later privatization of public assets and the breaking of public sector unions.  Or Bush, and then Obama, could crack down on Wall Street, and make sure that bailout monies went to states and localities, and, with record low interest rates, spur tremendous investment in new energy, infrastructure, and education initiatives.  It was a choice.  Bush picked Wall Street.  Obama also picked Wall Street, with public sector unions supporting Obama like turkeys cheering on Thanksgiving.

Now voters are making their own choice.  Once again, this is a direct consequence of how Barack Obama has led the Democratic Party and redefined liberalism, into a party and an ideology that is defined by wage cuts, foreclosures, debt, and acceptance of dramatic political and economic inequality.  Voters don’t want to pay for a government and for government workers who they perceive as out of step with their interests.

Maybe. Another consideration is that people tend to not like seeing people that they perceive to be peers, or even worse, people lower in class benefiting at their own expense:

Instead of opposing redistribution because people expect to make it to the top of the economic ladder, the authors of the new paper argue that people don’t like to be at the bottom. One paradoxical consequence of this “last-place aversion” is that some poor people may be vociferously opposed to the kinds of policies that would actually raise their own income a bit but that might also push those who are poorer than them into comparable or higher positions. The authors ran a series of experiments where students were randomly allotted sums of money, separated by $1, and informed about the “income distribution” that resulted. They were then given another $2, which they could give either to the person directly above or below them in the distribution.

In keeping with the notion of “last-place aversion”, the people who were a spot away from the bottom were the most likely to give the money to the person above them: rewarding the “rich” but ensuring that someone remained poorer than themselves. Those not at risk of becoming the poorest did not seem to mind falling a notch in the distribution of income nearly as much. This idea is backed up by survey data from America collected by Pew, a polling company: those who earned just a bit more than the minimum wage were the most resistant to increasing it.

It's awfully hard for the average person not to be resentful of a public employee, someone who is ostensibly your employee, pulling in a livable wage and "Cadillac" benefits while everybody else has watched their IRA evaporate in the heat of the Great Recession. It's even harder to accept that their taxes might have to go up to cover deficits that are caused in part by those benefits, so it's not surprising at all that people would vote to cut those same benefits.

Sure, the "macro" politics described in the Naked Capitalism piece played a role in creating the environment that led to the recent votes curtailing public pensions, but it would a mistake to ignore the role of "micro" politics in these results. Let's face it – people don't like seeing their neighbors doing better than they are.