Tuesday, August 10, 2010

Paul Krugman Is Tone Deaf

Paul Krugman has an article on his blog claiming that state and local government workers are not overpaid relative to private industry. He admits that pay rates are higher but justifies that by saying that government workers are older and better educated. How, precisely, does advanced age and a college degree enhance the value of a garbage truck driver or a Parks Department grounds maintenance worker?

Apparently he got a lot of disagreement in the blog comments, because he responded to those comments,

Two points: first, the fact that state and local governments haven’t been making large enough contributions to pension funds says nothing, one way or the other, about whether workers are overcompensated. Bear in mind that, as Cohn notes, many government employees don’t get Social Security. Second, a “trillion dollar liability” needs to be placed in context: state and local governments spend $2.8 trillion per year. Compare the pension liability with total spending over, say, the expected remaining lifetimes of those workers, and it’s a real problem but not inconsistent with my point that these compensation issues have been grossly overstated.

The Social Security that I am receiving, Dr. Krugman, is not about what “governments have contributed” to some pension fund. It is a return based on what I myself have paid into the pension fund from which I am now drawing. I paid into that fund all of my working life, more than forty years, and I am receiving back less than $20,000 per year. I don’t think that public service employees miss the Social Security that they “don’t get” and which, bear in mind they didn’t pay into, given that they are receiving, from the contributions made by taxpayers rather than by themselves, more than $70,000 and in cases $100,000 per year after working 20 years or less.

Which sounds to me like they are getting overpaid.

Second, to put the pension funding “into context,” the City of San Diego was struggling to fill a $179 million deficit in a $2.9 billion budget this year when it was informed that it had to provide, in addition, no less than $231 million immediately to the pension fund. That’s half of what we spend for an entire year on police and fire departments combined.

Because of subsequent cutbacks in Fire Department staffing, fire response times have been made longer, and two lost lives have been attributed to those delays, but the pension obligation of $231 million was met. Taxpayers who are funding the pensions are dying so that the pensions can be funded.

Does that put the pension funding “into context” for you, Doctor?

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