Lutar & Rider debate public employee reps
Last month Lani Lutar (CEO, San Diego County Taxpayers Association) and yours truly debated the pension morass with two public employee labor union defenders. We were invited to speak before a hostile but largely civil audience — a small CA state convention of (mostly) retired county employees meeting at the Kona Kai Club.
All the usual points from both sides were brought up. I think we did fine, though (surprise!) few were convinced — though some older retirees under the less generous pensions understood our points.
The other side had PowerPoint slides they popped up on big screen as the debate progressed. It was the standard union playbook propaganda.
But two of their points were of particular interest.
1. The standard union pension apologist pitch is that “everything was fine until the market collapsed in 2008-09.” But one of our two opponents apparently lost that page from his playbook. As an official on the Orange County pension board, that’s a sensitive subject for him. He put up slides showing that over longer periods of time the pension funds have earned in excess of the 8% presumed rate of return by roughly 1% — a largely correct assertion (depending on the time frame selected). He tried to say the problem was underfunding — not investment returns.
And to no small degree he was right on both counts. I thanked him for putting to pasture the “stock market collapse” canard. I don’t think that was what his audience wanted to hear.
I went on to explain that the BIGGEST factor driving this problem was the RETROACTIVE pension increases — with no uptick in funding. These jumps created instant pension fund deficits — everywhere. I went on to assert that this shortcoming is GENERIC — found almost universally in public (and most private) “defined benefit” plans. This truism knows no geographic or political party bounds — it is a worldwide phenomenon. Hence the only viable solution is to take defined benefit plans “out behind the barn and kill ‘em with an axe.” (stolen and modified from P.J. O’Rourke’s PARLIAMENT OF WHORES)
2. The second pro-government employee point of interest is that local spending by government employees helps drive the economy (with the “proving” PowerPoint slides on screen). They used the hoary “multiplier” pitch that each dollar spent by a government employee creates three times (mas o menos) the economic activity. And both the speakers AND the audience were rather vociferous in insisting that this is a major reason to pay public employees well — and to hire more. Indeed, it might be said that this was their biggest point.
Of course, it’s the classic Broken Window Fallacy. As I pointed out, if the county employee booty were instead in the hands of the taxpayers, the same multiplier effect (if any) would occur. I think that galled them more than anything else we had to say.
Of course, if perchance you don’t know what the “Broken Window Fallacy” is, get thee to this objective link.
I also STRONGLY recommend the small, readable classic “Economics in One Lesson,” by Henry Hazlitt. This little gem details modern day examples of government broken window fallacies. It’s a fine “bathroom book,” as no chapter is longer than six pages, and each chapter is self contained.
Lani and I made few new friends, but we DID get to look at their playbook — giant, ugly warts and all.