“Fiscally squeezed state and local governments simply began reneging on their pension responsibilities.” (Photo: Bill Fugliano/Getty)
Hedge fund billionaires have been feasting off the futures of public employees — and the publics they serve.
By Sam Pizzigati / 07.27.2018
Single butterfly flapping its wings, chaos theory tells us, can wreak social havoc. Those flaps could alter the course of a tornado two weeks later. A big deal if your home happens to be in that tornado’s new course.
Now if a single butterfly could wreak such havoc, imagine the damage a few flaps by America’s super rich could wreak. We don’t have to imagine, suggests a new report from the Center for Retirement Research at Boston College. We just have a trace the recent history of America’s pension funds for state and local government employees.
Our story starts decades ago, in the middle of the 20th century, an era in the United States much more equal than today. One prime driver of that greater equality: high taxes on high incomes, as high as 91 percent on joint return income over $400,000.
A good many of America’s rich took these stiff tax rates as a direct personal affront, and they labored and lobbied mightily to “reform” the tax code. By “reform,” they meant cutting taxes on the nation’s most financially favored. Eventually, they succeeded.
This “success” — the tax rate on top-bracket income dropped from 91 percent to 28 percent in the quarter-century after 1963 — didn’t just put more dollars into the pockets of rich people. The tax cuts for America’s rich would end up taking dollars away — decades later — from average Americans.
Let’s follow the flapping. The initial tax cuts the rich started winning over the closing decades of the 20th century put a budget squeeze on state and local governments all across the United States. With revenues pinched, once-routine budget outlays — like dependable and adequate funding for government employee pension plans — suddenly came to be seen as budget extravagances.
Up until then, public employee pension plans had always been conservatively managed affairs. Government bodies made annual contributions to these plans, and the plans put these contributions into rock-solid investments that promised a regular if modest return. Nobody involved made grand fortunes off this pattern. Everybody involved could look forward to a secure retirement.