There are legitimate debates about public policy issues. Those discussions do not have to be turned into demonizing the other side as Al Gore stylized regarding Global Warming and Paul Krugman now personifies regarding our massive deficit and debt. We had one of those discussions the other night which we all should explore.
The debate we had was regarding the financial crisis facing the City of Los Angeles due to retirees’ health and pension benefits. This crisis is not exclusive to Los Angeles. Most municipal and state governments face similar challenges. In addition, it is agreed that the largest budget challenges facing our federal government centers on the Social Security, Medicare and Medicaid programs.
All parties agreed that unless the programs were revamped they would bring Los Angeles to its financial knees. There was no discord on the issue. Where the difference was focused was on whether the benefits should be revised for all employees or just new hires. Los Angeles is a perfect example of what has been done. The elected officials restructured these benefit programs for future employees and left the existing employees’ benefits alone. Interestingly even this change has become controversial as union leaders are fighting that change and the issue has become prominent in the mayoralty election.
The argument was made in support of changing the benefits for future employees only. It is fairly simple and straight forward. There are agreements in place and those agreements need to be honored. That is a fair and reasonable argument. It is maintained by many fine-thinking people. We just consider it wrong.
The argument for restructuring current employees’ retirement programs is multi-faceted and more nuanced. Yet they are just as substantial. Here are a few of the points:
1. Making changes for future employees exempts many employees who are in the 20’s for example. Assuming those employees work for the government until they retire (after 20 to 30 years of work) we will be supporting most of these people for the next sixty years. Thus, the government will be in financial crisis until they are off the rolls. Changing future employees’ benefits does nothing to solve the financial crisis for at least the next generation.