America is sacrificing its future to pay for its past. That’s the argument proffered by writer and CNN television host Fareed Zakaria in a column on CNN.com. Zakaria takes a look at the increasing number of municipalities filing for bankruptcy protection—San Bernadino, CA, being the latest—and analyzes why the number has risen so precipitously in recent years.
Pensions.
That’s Zakaria’s one-word answer.
“At its heart, the bankruptcies you keep hearing about these days aren’t about taxes being too low or spending on city services being too high – they’re about pensions,” writes Zakaria, host of the CNN show “Fareed Zakaria GPS.”
“California’s pension-related costs rose 20-fold in the decade since 1999. This frightening trend is true almost everywhere in America,” he continues. “And it’s simply not sustainable. A recent Pew research survey found that the gap between state assets and their obligations for public sector retirement benefits is $1.38 trillion. It rose by 9 percent in 2010 alone – and it will likely keep rising until these obligations are renegotiated.”
“The truth is America is sacrificing its future to pay for its past,” he says.
Zakaria says the growth in pensions forced states and cities to slash services by cutting jobs. He calculates that state and local governments have 445,000 fewer workers today than they did just five years ago. Nearly half the employees slashed have been teachers—a disturbing trend in a country that claims to value education so much. Public employee unions can certainly point to these same numbers, though they would be loathe to take the blame for the burgeoning costs. Unions will always do what union are supposed to do—protect their members, fight for higher wages and better retirements.
“For decades now, local governments have doled out patronage by increasing pension benefits—these costs impact the budget years later, when the officials who gave the benefits are safely retired themselves. We’re now having to reckon with those choices,” Zakaria writes.
“I’m not saying bankruptcies are a good thing,” he concludes. “But they are a mechanism that allows us to admit an emergency and renegotiate the deals that are, well, bankrupting the country.”
