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Pension Deals Aren't Real Progress, Cont.

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Pension Deals Aren't Real Progress, Cont.

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Robert Cruickshank, who is emerging as an important progressive voice in California (via the organization Courage Campaign and the blog Calitics), provides a thoughtful and detailed criticism of my Prop Zero post last week on what I saw as insufficient rollbacks in pensions.

Cruickshank argues that, particularly in bad economic times, it makes little sense to cut wages or pensions that put money in the hands of workers. He correctly points out that there's not enough money in the economy (which is why Congress passed a stimulus package and is debating "jobs" bills that are designed to create stimulus). So, he concludes:

"Overall the economic situation is that of what Richard Koo called a balance sheet recession - where the private sector is scaling back on spending to purge debt, creating a long-term recessionary environment. The only solution is to increase wages and create more jobs. The absolute last thing you want to do is to slash wages - or pensions, for that matter. Cutting pensions would be like taking a shotgun, aiming it at our feet, and pulling the trigger. It would cause a cascade of economic problems that would dramatically worsen our economic crisis. But that's exactly what some people are now arguing needs to be done."

I'm one of those people, not because I want to take money out of the economy but because I think scarce public funds (Cruickshank and I agree that public funds should be made less scarce, via increased levies on the wealthy and corporations) should go not to retirement benefits of middle-class government workers but to better fund public services, particularly education, that future generations need to prosper.

That said, Cruickshank's argument deserves more attention. His views follow classical economic lines -- when times are bad, government should do more, not less. But that's an argument we, unfortunately, are not hearing (or having) in California, where the gubernatorial nominees of both parties claim that the state's problems would be solved if the government were more frugal.

If only Jerry Brown and Meg Whitman were right. They're not. The hard truth is that California has under-invested in public institutions over the last generation, and the state is poorer -- in both economic and other ways -- for it.

Cruickshank's piece also frames the pension argument in an interesting way -- a way that we don't hear enough about. Like many people on California's pro-labor left, he sees public pensions not as a cost but as an opportunity--a standard that can be used to push private sector wages and retirement benefits up so that more people join the middle class. To this way of thinking, the business community's attack on pensions isn't about protecting taxpayers -- it's about keeping private sector wages and benefits lower.

I think there's at least a grain of truth in that perspective. But to my (admittedly middle of the road) ears, it sounds a bit too much like an irresponsible liberal answer (we can't cut spending because it hurts the economy) to the conservative mantra (tax hikes are always bad because they hurt the economy).

(And yes, that image above is from Saturday Night Live's take on public employees and pension reforms.)

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