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WWL>Topics>>12-11 12:10pm Garland, losing federal pensions

12-11 12:10pm Garland, losing federal pensions

Dec 11, 2013|

A federal court has given financially strapped cities an opening to ignore their constitutions and reduce pensions for public workers. Cities and states can now backtrack on their promises. Question: who will become a low paid city worker in the future, if pensions aren't guaranteed? Garland was joined by Senior Fellow with the Cato Institute, Mike Tanner.

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Automatically Generated Transcript (may not be 100% accurate)

The current this this is -- and the thing to think I didn't see coming. Over the years are a number of rental lot about pension problems -- Different cities. Having trouble all over the country funding pensions. And we're gonna have John Kennedy undersea treasures. 1235. And I think Jones can -- I think quarter remember -- for. It would don't have much of problem here. But what caught my side Chicago's have a problem we don't know about Detroit Californians -- problem Florida's urban problem. And a number of other states and cities or around the country even the military. Having problems with the pensions blocked. A bankrupted structure I think in Detroit. Of rule last week that pension benefits could be reduced in the bankruptcy proceeding it's. Now that that sounds like kind of Badillo we'll of course take care no. Most states. Have been in the constitution. That pensions or unassailable. In that benefits Walt Williams -- the states of -- rather. Raised taxes -- budget cuts -- whatever but there's a constitutional. Guarantee. And maybe I'm reading it wrong but from what I've regret saying this decision. Gives distressed cities that they as we get a more trouble with a penchant. The leverage to backtrack on the promises. And won my first questions when I've -- I think understand this. Well I can gonna take a low paying federal or state port city. Job. When most of the policeman and student workers that I don't know. Certainly didn't take the word for the pay one of the reason took to decide from liking what they're doing. Is retirement. Good pensions good -- So sit well personal offering on an expert Steve from reading this right. In to reflect concerns have been any validity and as usual it turned liked him. Senior fellow with the Cato Institute might -- I got that caught all made. Of get a refrigerator in your room. Mortgage matures a decision big gold goes -- gumbo Cintron live with -- us and. Our debt down mighty good they've got -- pretty soon it's remarkable road port so. One -- this judgment correct. You dead did back Michigan actually what this state that it has been a state constitutional amendment that says that tension spurt. State and municipal employees is aren't violent. I cannot be reduced but the judges held that federal bankruptcy law trumps the state constitutional law. And therefore -- bet that he creditors. There who are pensioners are going to be treated just like any other creditor. Or anyone else that the density of Michigan Detroit owes money to. Does this set precedent does that or there are other cases that the drugs and looked back on and says. Per this decision does what -- my decision. They're that the federal bankruptcy law it's pretty all inclusive and it's really written in a way that does. Bars states from interfering in federal bankruptcy. The constitutional amendment question it was a little bit unique. Because as of Michigan that you haven't had a whole lot of bankruptcy didn't state that had these cup potential amendment. But the way the federal bankruptcy laws written it pretty much trumps everything. So. What what was saved the people that aren't thinking. About gore and into government work. Where the -- policemen. Whether it be -- working in congress. You have -- if they can no longer be reassured at all of pinch. Well we we should say that pit exit the private sector are all the time right now. Tensions -- not -- violence -- bankruptcy proceedings Pat Buchanan Richard mentioned that you're in the private sector. And the cup did you work for goes bankrupt. Back and we can stated that is really rare situation relatively few statements that he actually built through. Chapter seven bankruptcy. Which is what's in what's taking place in Detroit you really have to be in bad shape. To do that yet to prove that you were unable to function as a municipal entity with your current revenue in Detroit it was extraordinary. Police response times for example over an hour because they can't actually operate police cars they can't they can't keep them running well with the money they have. It's kind of an unusual situation. Not exactly blaring. -- the page headlines Detroit ruling threatens promises and assumptions Chicago. Pursues -- to change pension funding budget negotiators looking at cuts in military pensions. But it seems to be recurring and and multiply and story about tensions around this country are there under funded in trouble. Or in this case a federal judge will -- about Detroit of course. He ruled that the pension benefits could be reduced in bankruptcy proceedings. And whole -- some of the people of some of the people I'm reading. That that's gonna go give -- go ahead to distressed cities leveraged to back out of their promises. Even those that haven't within their constitution. Michigan being one of them. Rip Michael Tanner who often called -- in the -- complicated subject senior fellow with the Cato Institute. My gut tell me -- should -- correctly. I think you said committee event. Garland does this is a problem but. Not too many states have this written into the constitution. Not committees to users say it's going bankrupted this time so. This might be an isolated thing did that really might not affect a lot about the city's other states is that correct. Well in terms of the reductions. Sort of the way they're going through it in Detroit however. We are going to the reduction in the end it's -- pensions for state and municipal employees go forward or at least. State and municipal employees being required to pay a lot more into their programs in the future across the board simply because. Most cities and states cannot afford to continues. Pay as defined benefit type of pension. With minimal employee contributions that have been going on now. Arab and reading the economist play as solid financial time and pulled -- several articles. Talking about chronic under funding at a multiplicity of cities around this country in the her bread. The -- and Richard rabbit shoot a rabbit she former lieutenant governor New York. Who's conducting the search product or try to sustainability. Of these pensions and he says. Every incentive in every citizens in every system. Here's the kick the can now on the road and everybody is doing. The unions in the sitting -- contracts have been abrogated in bankruptcy. Sort of the bankers soon. An -- from the house subcommittee. Well reported 97 he's describing a -- and wild west. When the federal government was running dozens of plants. No one seemed to know about in the states and cities have more than 7000 overlapping plans. It it sounds like a lot of plans or in trouble or potentially in trouble though -- not. Oh absolutely. If you look down the road almost every major American city. Is in trouble and several states Illinois perhaps the in the worst -- of any state in the union. But but several other states are teetering on the brink of well. -- and when I look at. Of military tensions. Represent huge under on unfunded liability against unfunded and mountains. By the government. -- -- take -- long hard look -- -- cutting down on those benefits -- the benefits they've -- now. Apart -- correctly average military benefit. 121334. Dollars per individual per year not a whole lot of money. It is. If you if you're young person in -- wanna give in the government or being a policeman being in the military. Do you look at this and say all right. Michael give give me an assurance. That distinction they're talking about news it's -- -- -- Well I think you have to look at it compared to the private sector where private sector pensions are also being reduced. Base pay for most government work is fairly low -- Most government work does not depend on it based pay the -- figure in overtime. Job security. Of that healthcare benefits to which you contribute much lower them. The private sector and the apparent habit that you do get your contribution is much like that would have to contribute in the private sector. The reality is that most government workers are actually paid more than similarly educated people the private sector. -- Did tell me -- -- wrong 1974. You talk about businesses. Pension law was enacted set up a federal pension insurance program. Acquired companies and promised pensions to bomb them and also give the government power -- penalize the company is that they build upon their benefits so. There there is a mechanism in their attitude to assure that is or not. Bet that that there right there is federal pension guaranty corporation which some 25. Billion dollars believe in the red right now. Coming out of the recession. That's -- -- be bailed out as well. Beers also media companies are basically you can go to jail if you make promises. There's such a pageant system that you can't keep. But that doesn't protect your the company a lot of business. Very famous case up in Pennsylvania Bethlehem steel when they closed down. They're they're workers lost everything. It was it did is is probably. Not and how does that this but it just popped in my mind I've done several shows. On student loan. Kids all over the country in deep trouble with huge problems when -- 5000 to 202000. They can't go bank. Our -- we kind of flirting with the national morale when we're setting up because we're kid -- just getting started -- gonna be the backbone of the country. Can't go bankrupt but the syndicate. We're happy I did there's a little they do that would get. That government seems to be able to get out of debt the view that the private sector camps are certainly YouTube about. And don't forget battle is that student graduating with debt student debt alone. Load that there are actually the average student who's gonna have about 300 to 400000 dollars in government debt that they goes well. -- that she and I hope we get that. Help me here lip lips. Forget the ruling of federal drug -- Litsch forget that. There's a difference from two in the -- federal system and via public system. Let's just say. The policeman that I've talked to where and when I've said to them why -- do this job cuts. All the -- getting Google love them or not will pave the all -- With a pension and retirement benefits. Is is is. -- those people I've I've got friends that are retired teachers. And their very comfortably retired ten all of those people rest sneezing eight or. When the porn star running out of -- what do you do. Well no they can't read speed the and one of the things that they -- demanded that the date it's fully formed funding -- pension. A lot of problems does that state have taken advantage sort of been having it both ways what they do with the promise that extent the pension benefits. In order to make the police -- the public employees happy. But -- they don't contribute to those tensions enough money. They actually pay the benefits in the future. So that they don't operate taxes. People now so what -- in the beginning is does it -- admirable way and ultimately the bill comes due. And I haven't been putting money in the pageant system but velvet cap the pay out that the pensions. The other big look at it how many people are getting attention for pensions -- all that high. In Detroit for example the average pension is only around 33000 dollars a year that there have a debate that's not a huge amount of money. The problem is that they hired everybody and their brother of the stadium of the city employees for years. And they have lots and lots of people that are collecting pensions. And in that I think you just mentioned that throw -- what you wanna do is make sure you're state. There's actually funding the petitions. But everything about Detroit Atlanta slowed when when this began. Becoming public knowledge. What they did they -- okay were reaching our legal borrowing limit. Are brought in for a natural advisors and they were able to structure a deal to make it appear. As if it didn't add to the city day. In the when they broke their perspectives. The description of the constitutional pension protection. May just seem to -- the city was simply complying with a mandate. So if you have financial advisors. Can -- To -- Even the professionals. Can't see how how can we be assured that yes our state pension funds are being. What -- right there are certainly ways to the -- these games in effect. You know if you -- will recede in Greece that was the big problem that brought on the whole European crisis as it turned out that Morgan Stanley the mother. Investment firms that help the Greek government tied the actual level there indebtedness they had detonated it at all and -- indicated -- government came candidate found -- how much they actually -- That's what precipitated global crisis so there so so you've really got to trust your government to some degree. And that's -- the -- the whole article. Don't know that that they're a little bit limited there I guarantee. Michael always a pleasure to have the show with thank you so much with the -- Michael Sanders senior fellow with students who libertarian. Organizational organization don't like big government so. When -- liberal conservative water -- -- you you can hear this and what their thoughts are but that's I think goes I have. Partisan concerns and and I think although Michael. I think. Downplayed. My concerns about what may be coming and certainly hit the expertise to do that. And I'm about to enter his intelligence on the so -- I think it all goes back to more and more and more very simple thing I've done. Multiple shows over this over the last couple years trust. Simply asking the question who. Do you trusts. And I would submit when he's at a point where there's hardly anybody you or anything that you do. We're having intimate much legal problems and we conceive right now or -- wrong gimmick called 260187. Total pre. Anywhere in the country it's 66 hated non zero it's evident -- attacks and 77.

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