By PHILIP BEARD and TONY WHITE
Philip Beard and Tony White are retired professors from Sonoma State University.
From Wisconsin to Sonoma County there has been an avalanche of news reports and personal statements implying that the retirement benefits of public employees are responsible for the current budget crises and cuts in public services.
Blaming public employees or their unions for this crisis, however, distracts from focusing on the real causes, thereby preventing a rational discussion leading to effective remedies.
The recession and budget crisis are the result of irresponsible investments made by major financial institutions and a failed policy of deregulation since President Ronald Reagan. Lacking effective oversight, financiers created risky instruments, reaped excessive profits and rewarded their CEOs with generous bonuses.
The downward spiral in the housing market not only put lenders at risk with a record number of bank failures, but meant less credit for consumers, millions of foreclosures and a depressed housing market.
The decline in economic activity created a shortfall in government revenue, producing a budget crisis, compounded by the extension of tax cuts. It was a loss of revenue, not government spending or pensions, which caused the crisis. Although foreclosures continue and unemployment hovers around 10 percent, Wall Street firms and major banks are enjoying record profits and paying CEOs huge salaries and bonuses.
Even though they received millions of dollars from taxpayers, they have refused to renegotiate with homeowners whose homes are under water and facing eviction and are sitting on cheap capital rather than investing in the economy and creating jobs.
Since 70,000 public employees have already been laid off in California, the anger expressed toward public employees is misdirected. As with many other households in Sonoma County, they are having to cope with unemployment and foreclosures.
Although many news reports have focused on county administrators, their high salaries and benefits are the exception. According to CalPERS, the average state retiree pension is $25,000 and half of them receive less than $16,000, which they generally spend in the local economy.
According to a University of California study, the average public employee is older and has more education than those in the private sector, but they earn 7 percent less compensation than private sector workers, even when benefits are included. That wage gap is narrower today, after three decades of wage suppression in the private sector. Although they receive lower monthly wages, public employees make monthly contributions to their retirement funds and receive part of their compensation after years of service in the form of pensions. Since these payments are derived from the investment of these funds, public workers are funding their own pensions.
The problem is not that public employees have greater benefits; the problem is that the labor movement, which brought about decent salaries and benefits for American workers and helped to create the middle class, has been eviscerated by union-busting tactics and the outsourcing of jobs to Mexico, China and India.
Therefore, the real shame is not that public employees have pensions but that corporations either ignored their pension obligations or declared bankruptcy and pressured employees to provide for retirement through 401(k)s.
Now, millions of American families have not only seen their major investment, their home, threatened but also watched their 401(k)s lose value. Because of the decline of manufacturing in the United States, the service sector has become the fastest growing area of union membership. Since those unions tend to support Democrats, corporations and their right-wing allies have targeted public employees and their unions, blaming them for the crisis while promoting less oversight, tax cuts for the rich and lower corporate tax rates.
Blaming public employees for the current economic crisis pits worker against worker and weakens public support for labor unions, while deflecting anger that should be directed against American banks and corporations, along with government officials and politicians from both parties who ignored warnings and insisted on deregulation.
If these tactics are successful, not only will income disparity worsen but an opportunity to reform Wall Street and banking will have been squandered.