Peter Dreier responds to Wednesday’s Notes from Northwest post

Occidental professor and Pasadena community activist Peter Dreier responds to yesterday’s Notes from Northwest Pasadena blog post on financial and pension reform.

Here is the response:

Your column
comparing the mortgage crisis and Pasadena’s pension problem is like comparing
apples and oranges. They aren’t the same. The mortgage
crisis is about greedy bankers, private mortgage companies, investment banks,
and rating agencies all engaging in risky and sometimes illegal behavior to
make a profit, often at the expense of unwitting consumers. It is also about
the finance industry using its political clout – campaign contributions,
lobbyists, the revolving door between Congress and K Street – to get Congress
to deregulate the industry so they can engage in these irresponsible practices.  The result, as you point out, is hedge
fund managers, top executives (with Mozillo being a good examples), and others
making exorbitant salaries and bonuses at the expense of their institutions and
the consumers – and, ultimately, the entire economy.  See the Oscar-winning film “Inside Job,” or read Michael
Lewis’ “The Big Short,” for the ugly details.  I’ve written about this in many journal articles and
columns, including these:

The pension
situation is about the shortage of tax revenue to fulfill obligations to
retired government employees. You point out that the 275 Pasadena government
retirees are owed about $4,400/month. That’s $52,800/year. That is a middle
class income, not an exorbitant sum. 
That’s enough to live on but hardly cushy.  Compared with retirement pensions in other countries,
including Canada and Europe, it is quite modest.  It is certainly not on the same order of magnitude of the
bankers, etc ripping off the system to pay themselves millions.  Our pension system may be broken, but
it isn’t because retired government employees are too greedy.   It is absurd that each city,
including tiny cities and poor cities (think Compton or Maywood), have to pay
pensions out of their revenues. 
For the same reason that states now account for most of education
spending, or that the federal government pays for Social Security out of
payroll taxes, it is ridiculous to have a crazy-quilt system where retired
employees of one city get a bigger or small pension that their counterparts
(with the same jobs and skills) in other cities.  Creating a state system like CALPERS was supposed to make
the system more rational, but the state has its own fiscal crisis to deal
with.  Why? The reason so many
cities and states have unfunded pension liabilities is because (a) corporations
and the wealthy don’t pay their fair share of taxes, and (b) economic
free-fall, caused by Wall Street (described above) has created fiscal chaos and
instability in states and cities. 
Retired cops, firefighters and others deserve a decent pension. They are
not, like Mozillo, the hedge fund managers, and the Wall Street bankers,
ripping off the system to make millions at others’ expense.  At some point we may want to raise the
retirement age, or increase the payroll tax so that millionaires pay more, or
some other fixes, but let’s not blame hardworking firefighters, cops, EMTs,
teachers, social workers, secretaries, and other public employees for the
fiscal crisis and the pension quagmire. That doesn’t make it easier for our
City Council and city manager to fix the problem, but let’s not
blame-the-victim either.

That is why your comparison of the Wall Street mess and the pension
problem is off base.

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