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Old January 12th, 2011, 08:25 AM   #1
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By Steven PearlsteinWashington Post Staff Writer

Tuesday, January 11, 2011; 10:16 PM




The day of reckoning for public employees unions is here




In July 2009, economist Barry Bluestone wrote an op-ed article for the Boston Globe warning that his state's public employees unions were on the same path to economic and political decline as the United Auto Workers was back in the mid-1980s.



Voters, he warned, would no longer accept wages and benefits for government employees that had grown more generous than their own. They would no longer pay for public services whose costs were growing half again as fast as the cost of services in the private sector.



Nor would the public tolerate continued union resistance to efforts to improve the quality and efficiency of government services. Through tax caps, outsourcing and charter schools, governments were already finding ways to circumvent public employees unions and limit their political power. Unless the unions moved quickly to strike a new "grand bargain" with government officials and taxpayers, Bluestone wrote, they would soon face an even more painful "day of reckoning."



Barry Bluestone is not just any economist. He is the son of Irving Bluestone, a legendary UAW negotiator, a reliably liberal, union-friendly scholar who has spent a career studying the declining fortunes of the American working and middle class. And since his op-ed, things have only gone from bad to worse in terms of the financial distress now faced by all levels of government. The "day of reckoning" that Bluestone forewarned has now arrived.



A recession-weary public is now well aware of New York firefighters who retire after 20 years at half pay, of California prison guards who rake in $120,000 a year and of New Jersey teachers who pay little or nothing for health insurance. A parade of actuaries and economists has stepped forward with estimates of unfunded retiree obligations for state and local governments that now top $1 trillion.





Reflecting the frustration with the lack of progress on school reform, no less a liberal than Davis Guggenheim, director of Al Gore's "An Inconvenient Truth," is now out with "Waiting for 'Superman,' " a scathing critique of teachers unions. Rahm Emanuel, running for mayor of Chicago, has vowed to cut pension benefits not just for future city workers but current ones as well. And in solidly Democratic New Jersey, Republican governor Chris Christie has become something of a folk hero for taking on his state's once-formidable public employees unions.All the while, public employees unions and their leaders remain in a defensive crouch, refusing to accept any responsibility for looming service cuts and tax increases. Many are launching last-ditch political efforts to hold on to what they still have, but so far their appeals to working-class solidarity have largely fallen on deaf ears.



The better approach for public sector unions would be to acknowledge that the status quo is unsustainable and take up Bluestone's suggestion of a new "grand bargain."







Such a bargain inevitably begins with a freeze on current wages in exchange for future increases when the economy improves. Going forward, unions might propose tying overall compensation to the rhythms of the business cycle, making up in good times what is lost in bad.



Rather than continuing to fight reform of work rules and protecting underperformers, unions could trade those away for across-the-board bonuses for service improvements and a guarantee that employees get a sizable share of any productivity gains.



To preserve health benefits for retirees, active workers will need to accept greater cost sharing on their health insurance policies, which will not only reduce the cost to government in the short run but slow the growth in premiums for everyone over the long haul.



And on pensions, the unions ought to get real about the dismal state of their defined-benefit plans and use their assets to finance a new arrangement. Start with enrolling government workers in Social Security. Supplement that with a defined-contribution plan that could be taken to a new job, would give workers some flexibility in how their pension money was invested and would automatically be converted into a fixed-benefit annuity upon retirement.



Such an arrangement would give governments the budget certainty they need to meet pension obligations without the financial risk of market fluctuations. It would also put an end to the extensive gaming of the system in the final years of a public employee's career during which made-up disabilities and excessive overtime are sometimes used to inflate monthly pension checks.



Given the political and economic realities, these kinds of wage and benefit changes are inevitable. Not coincidentally, they are also pretty much where things stand in the private sector. Rather than resist at every turn and have the conditions dictated under duress by someone else, public employees unions would do better to accept unpleasant realities, embrace the future and hammer out more favorable terms while they still have some leverage.



As Bluestone would point out, there are hundreds of thousands of former autoworkers who would probably be a lot better off today if only their once-mighty union had been willing to look forward rather than backward and focus on what could be rather than what once was. The question now is whether public employees and their unions will learn from those mistakes, or whether they are determined to repeat them.



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Old January 12th, 2011, 08:35 AM   #2
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I hope so. The political clout of those unions, which generated these generous and unaffordable pensions, needs to be chopped down to size. Otherwise, the insane are running the asylum.
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Old January 12th, 2011, 09:36 AM   #3
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The unions didn't put the auto workers out of business it was our expensive healthcare and greedy corporations wanting to off shore our jobs for cheap labor MAINLY. Unions were one of the reasons why this country flourish for decades. We need to bring them back. increase the unionization rates.
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Old January 12th, 2011, 11:38 AM   #4
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Careful what you wish for republicans. Most republican governors are not paying pensions to anyone in theirs states. How long before the republican get rid of social security and companies get rid of retirement accounts?
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Old January 12th, 2011, 11:50 AM   #5
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Originally Posted by Mrs. CJ Parker View Post
Careful what you wish for republicans. Most republican governors are not paying pensions to anyone in theirs states. How long before the republican get rid of social security and companies get rid of retirement accounts?


The percentage of active workers in traditional pension plans has been dropping.

Active workers Retirees

1988 69% 31%

1996 55% 45%

2004 45% 55%



SOURCE: PENSION BENEFIT GUARANTY CORP.




An October 2009 a study by the General Accounting Office reports that only 29% of businesses with fewer than 25 workers (which make up 65% of all U.S.businesses) offered a retirement plan to employees, according to data from the Census Bureau's Current Population Survey.

http://www.businessweek.com/smallbiz...416_733220.htm







Why should public workers enjoy perks which are rapidly disappearing in the corporate world?



Also private sector workers who invest in 401K's and lose out when the market drops, have to grin and bear it.



Public sector workers seem to think they can make up their difference by increasing our taxes



I am outraged!
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Old January 12th, 2011, 02:53 PM   #6
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Well, Jon works for the state - professor at a state university. His pension is part of his CONTRACT. They can't just take it away without being in breach of contract.
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Old January 12th, 2011, 08:28 PM   #7
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Well, Jon works for the state - professor at a state university. His pension is part of his CONTRACT. They can't just take it away without being in breach of contract.


All contracts can be revisited, and any disgruntled and dumbstruck university professor (or even regents) can howl and threaten to sue, and many will have to do just that. Google News a search on University of California pension reform. The bottom line is that when the money runs out, suing a bankrupt system for the lifetime goodies you have come to believe was sacrosanct is the same as suing your crack dealer for shorting your dime bag. In the end it is called "welcome to being just like the rest of us."
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Old January 17th, 2011, 09:59 PM   #8
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All contracts can be revisited, and any disgruntled and dumbstruck university professor (or even regents) can howl and threaten to sue, and many will have to do just that. Google News a search on University of California pension reform. The bottom line is that when the money runs out, suing a bankrupt system for the lifetime goodies you have come to believe was sacrosanct is the same as suing your crack dealer for shorting your dime bag. In the end it is called "welcome to being just like the rest of us."


It seems strange replying to my own post, but I got to thinking about Tristan's comment about contracts. We are living in a time when contracts are treated today in the USA the way liberty and property were treated in Europe in the 1930's. We have demonized institutions and have done such a good job that when government decides that certain institutions' contracts must be voided for the common good, many of us quietly applaud. After all, they are not coming for us...



The sacrosanct mortgage contract (which gives any and all banks the courage to lend) is now viewed as something that should be scrapped in the cases of those who are about to lose their homes to foreclosure. Many openly advocate that banks should simply reduce the amount owed by as much as half (!!) and then refinance to a low fixed rate to "keep them in their homes." Who cares if those mortgage contracts were legal. banks are greedy and the people need relief!!



So, all you who think your Cadillac retirement plan with your gold-plated guaranteed medical coverage is safe because it is part of a contract... I must ask you: Who will be left to speak up when they come for you?
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Old January 18th, 2011, 05:36 AM   #9
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Yeah, just like those Wall St. execs that had their contratcts re-done and their bonuses taken away for their complete and total screw up of the financial system and their companies. Oh wait..... We couldn't deny them their money, it was a business contract and the government has no right to insert itself there. ha!
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Old January 18th, 2011, 06:04 AM   #10
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Yeah, just like those Wall St. execs that had their contratcts re-done and their bonuses taken away for their complete and total screw up of the financial system and their companies. Oh wait..... We couldn't deny them their money, it was a business contract and the government has no right to insert itself there. ha!


"(Jš), just like those (XXX) that had their (XXX broken) and their (XXX) taken away for their complete and total screw up of the financial system and their companies. Oh wait..... We couldn't deny them their money, it was a business contract and the government has no right to insert itself there. h(eil)!"



First they came for the Jews,

and I didn't speak out because I wasn't a Jew.



Then they came for the Communists,

and I didn't speak out because I wasn't a Communist.



Then they came for the trade unionists,

and I didn't speak out because I wasn't a trade unionist.



Then they came for me

and there was no one was left to speak out for me.




- Pastor Martin Niemoller



So, Tables, what part of your life is secured by a contract that you think is unbreakable? 401K? Pension? Home? Property? Social Security? Anyone? Bueller? Bueller?



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