Free Markets, Free People

“We are altering the deal. Pray we do not alter it further.”

Over at Instapundit, I see a hard line from a government worker threatened by all this talk of cuts that might be necessary for underfunded pensions:

I’ve been reading your blog for years and I appreciate your nuanced brand of conservatism. But lately, your attack on public pensions has me concerned. Look at it from my perspective:

When I graduated from law school and applied for a job at a Federal agency almost 30 years ago, the deal was simple: “We won’t pay you as much as you might make in the private sector, but you’ll get reasonable pay, great benefits including a generous retirement system, and a reasonable work life.” I took the deal.

{insert various moaning about the sacrifices he has supposedly made here, including such onerous burdens as working at metal desks…}

Apparently though, some people, in and out of government, are no longer happy with the deal. Complaints and warnings about government pensions and pensioners abound. Typically, the narrative is something along the lines of: “Greedy Retired Bureaucrats Still Feeding at the Public Trough as Taxpayers Suffer!”

Well, if you’re concerned about unfunded government liabilities, I agree with you. If you think that government employee pensions are too generous, I’ll listen to what you have to say. But if you just don’t like the deal the government made 30 years ago and want out, I’ll see you in court.

Legally speaking, this guy probably has a point. However, he appears to be missing a much bigger point. The legal right to collect money from a party means nothing if the party simply cannot pay. Both states and the federal government have made promises that they almost certainly can’t pay.

It sounds as though this guy, like many who haven’t thought very deeply about the matter, just assumed that he could find a way to banish such risks from his career. He bought into the fantasy that somehow, some way, government is different.

In the long run, it’s not. Every organization has limits on how it can spend money and the promises it can keep.

Private companies find out pretty quickly when they have reached those limits. For government entities, their monopoly on force and the resultant range of options to collect more money lengthens the feedback cycle, so it takes them longer to realize their mistakes. That just means they get in bigger trouble before the crisis comes.

Employees have been getting shafted by organizations that lost the ability to keep their promises for hundreds of years. I’d like to see this guy tell some Enron folks about his troubles. I don’t think he would get a lot of sympathy.

Yes, legislators have made stupid, stupid promises. In theory, that’s the citizens’ fault because they elected the stupid, short-sighted legislators. However, the citizens are not likely to accept that abstract responsibility. They are going to look at the high tax rates and poor government services in bankrupt states and decide to go elsewhere, as many in California and Michigan have done in recent years.

Almost everybody is going to lose in the debt crisis to come. I’m sorry that someone like Insty’s correspondent, who chose job security over adding value in the more risky free market, now finds out that the security is illusory. That’s life. Those of us in the private sector have always known it. It’s about time government workers understood that you can’t take risk out of life, and that sometimes life isn’t fair.

They also need to prepare themselves for a backlash that’s been building for decades. Government workers, in my experience, work hard and perceive what they do as valuable. This guy seems to be clearly in that camp. However, private citizens have a completely different perception. There’s a reason we have the cliche “good enough for government work”.

When you’ve had a cushy thirty year career with no worries about losing your job, don’t expect a lot of sympathy about your woes from people beset with job insecurity and burdened by high taxes and meddling bureaucrats. Especially when they don’t see what you do as particularly valuable. Drafting and defending new regulations may be hard work, but it doesn’t necessarily add value to society.

This divide in viewpoints is going to come to a head in many places and many ways in the next couple of decades. I know many government workers feel entitled; heck, that kind of entitlement psychology is what leads a lot of them to government work in the first place. However, believing in that entitlement so strongly that you are prepared to thrown your fellow citizens under the bus isn’t going to make the coming conflicts easier.

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19 Responses to “We are altering the deal. Pray we do not alter it further.”

  • Pensions … what are pensions ?
    Pensions are no harder to find than … you fill in the blank

  • Most pensions require you to work until retirement age.  Gov’t is different.  Military can retire at 20 and i think civil service is 30.  Most military and civil service retirees can still have another career after retirement if they enter into the job out of high school or college.  While that can defuse some of the risk of gov’t insolvency i would expect the gov’t to at least honor something of there commitment.  Reduced benefits are better than no benefits.

    • I believe civil servants is 20 as well.  The ideal it seems is to have 20 & 20 at two different jobs and double dip pensions.

    • Military Retirement is earned after 20 years of service (50%of base pay) and graduates up to 30 years (75%) that is paid for the rest of your life.  Some may complain st this but you also have to understand the physical hardship that is earned after 20 years of active service.  To get some understanding of this, in 1975 GAO did a survey of how long the average military retiree drew his/her pension – the answer was a fraction over 5 years.

      Civil Service pensions are a bit trickier.  30 years service at age 60 gets you approximately 30% of you pay (averaged over a 3 year period) under the new FIRS retirement system.  (The old system got you approximately 2% per year to a max of 75% – and under the old system [CSRS] you did not pay into Social Security nor get its benefits.  The old system went away approximatley 1990.)  You can get less of a pension if you have 30 at age 55 (i.e. there is a penalty for the early out).  You can also get a partial pension by having over 5 years service at age 60. 

  • While I’m not for walking away from any contractual obligation, it happens every day in America for various reasons we (the law) recognize as perfectly sound.
    Bankruptcy is a very careful, rational, and rule-based process (or it was until Obama).  One of its functions is to obviate contracts that cannot be met, and to do it in a manner that weighs all the competing interests involved, and metes out what is available by way of assets to those with a claim.
    As an aside, Billy, I haven’t had your experience of hard-working government employees.  Oh, to be sure I know some, and I’ll allow there are many.  But I never knew what “slow” meant until I got behind a civilian base employee truck on a military base.  Damn.

  • What is the difference between reduced benefits for a retired government worker and reduced Social Security or Medicare benefits for a retired non-government worker ?  Nothing.

    • What is the difference between reduced benefits for a retired government worker and reduced Social Security or Medicare benefits for a retired non-government worker ?  Nothing.

      Except that the private employee ought to have additional retirement benefits in addition to Social Security/Medicare.  The CSRS employee doesn’t.  They also don’t get a social security check in addition to their CSRS pension check.

  • This is what immediately came to mind when I read that post:
    http://www.theatlantic.com/business/archive/2010/09/the-heroic-sacrifice-of-underpaid-elites/62367/
    Is it only me, or does 150K plus benefits sound pretty much right or even too high for a lawyer working for government?  A look at household income says that is in the top 6% of household income.
    http://en.wikipedia.org/wiki/Household_income_in_the_United_States
    (That seems a little high myself – not sure if my wiki stats are good or not.)
    If my stats are not off, it seems fairly reasonable or even too generous for someone with a law degree to make that much. Am I drinking too much beer or do people really think they deserve to be in the top 5% just by being a lawyer for the government? I would say that such a position should put you firmly in the top 20% quintile but no more than that.
     
     

  • “We won’t pay you as much as you might make in the private sector, but you’ll get reasonable pay, great benefits including a generous retirement system, and a reasonable work life.”
     
    The deal was that you get crap pay an ok pension, ok benefits, and an almost certainty you’d keep your job until pensionable age almost no matter what.
     
    The crap pay has become better than the private sector, the ok pension and benefits have become better than the private sector.  They’ve altered the deal and now that disparity between public sector payouts and private sector payouts are coming to light, they’re nervous they may get the delayed ‘haircut’ the private sector has already gotten and still getting.

    • Not sure about the pay, but the pension is still only equivalent.  Any one who came about after the mid eighties is on a 401k-style plan with matching funds just like the private sector.

  • On the Federal level a lot of the problem could be relieved by a hiring freeze and simply doing away with COLA for a few years, then re-introducing it at a slightly reduced rate. There is a lot of evidence the way COLA is figured overstates inflation anyway.

    The states are another matter, some of them have created an economic Armageddon for themselves.

  • From what I have heard and seen, only a few attorneys make millions of dollars. I believe most atorneys, certainly the ones I have known, are  not rich by any means. According to the USAJOBS site, federal gov’t. attorneys earn from about $50K to about $117K.  This is comparable , according to Payscale.com et al., to the national average. This guy needs to stop watching television.

  • Its amazing how some people think that the government doing something is alright just because its not their ox being gored. They’re all GM bond holders now.

  •  But if you just don’t like the deal the government made 30 years ago and want out, I’ll see you in court

    >>>> You have my sympathies.

    That said…..see you there.

  • Its looking more and more likely that this is a problem (like foreign debt) that is going to have to be “solved” by inflation/currency devaluation.   If the government resorts to printing money, it can generate a few years of double digit inflation that will render any defined benefit an insignificant expense. 

  • Billy,
      I have to disagree that they can’t be met.  The US gov’t has a gun to the head of the taxpayers (and not current, but soon to be taxpayers) of this country.  The obligations CAN be met.  The federal government can print the money.  When a business goes under, it can not pay.  The government CAN pay.  There will be political resistance to the tax rates required to pay, but it can be done. 

    I think the solution is simpler.  The goverment can pay all those fat pensions.  But it can also tax them.  Brutally.  I would suggest that each level of government pass a tax on all payrolls and pensions paid for at the lesser of:
    A) 50% on all income above the US median household income
    B)  the percentage required to balance the budget, contribute to the pension funds, and pay off 20% of all debt maturities.  (not total balance, just 20% of what matures in that year, 80% can be rolled over, 20% paid off)

    B is roughly the equivalent cutting up the credit cards and paying the minimum balance.  The (fed) government legally must pay those pensions.   The states should probably have a bankruptcy process.  But in either case…they are legally required to pay, and they can pay, and should pay.  But it is a pre tax number.  It is time the moochers feel the burden they place on the rest of us. 

  • Because that wasn’t clear, those taxes would be paid on the dispersals of that level of government.  In other words, NJ would tax 50% of all salaries and pensions paid for by the state.  A county would tax all the payments by the town.   That would address the snowbird issue of so many northeastern civil ‘servant’ retirees moving to South Florida to escape the taxes necessary to support those generous northeastern leftist governments.  NYC bureaucrats don’t retire in NYC….the taxes are too high.