by Randolph T. Holhut
Chief of AR Correspondents
October 24, 2010
SWISS BUILD TUNNELS; AMERICANS MAKE EXCUSES
BRADENTON, Fla., Oct. 22, 2010 -- With cuts in welfare payments and hikes in public housing rents - and 490,000 job cuts in the public sector - Britain's Conservative Party Prime Minister David Cameron hopes to slash a budget deficit that is just over half of that in the United States. But as he watches the reaction in France among workers rioting in the streets of Paris, Lyon, Nice and Marseilles, among other cities, over retirement age issues, he must wonder what is in store for London when the hammer comes down there.
The French decision to increase the retirement age from 60 to 62 is characterized on FoxNews, the voice of conservative opinion in America, as the beginning of "the end of the welfare state." Yet it is also the end of the benign and moderate system of public assistance joined to private cooperation that has brought a measure of social stability to France, a nation with a volatile mix of populations and a strong streak of utopian socialism that had made working there a far better experience than working in America.
Currently, the French get to retire on their equivalent of Social Security at the age of 60, compared to 63, 65 and 70 in the United States (depending on the level of benefits one hopes to receive). The French system includes lifelong, comprehensive, free health care and, for working people, six weeks of paid vacation every year. To most Americans, the system sounds impossibly generous. But is it?
That depends on what you think the taxes you pay ought to support. Shoulder they permit every single citizen in the country to enjoy free health care from cradle to grave? Should they ensure a generous package of benefits at retirement time? Should taxes support a month and a half of vacation each year? Americans in mid-level jobs, if they get a vacation, rarely get more than two weeks. After five or 10 years the American worker gets another week, and sometimes a fourth after 20 years. He or she is thoroughly exhausted by the time retirement age rolls around, if he or she isn't laid off before that.
Today, many employers no longer offer pensions to new workers, and pension funds at many corporations have been raided and deeply diminished in efforts to first, fantastically increase the rate of return by deadly and complex investment strategies, and after the bubble bursts, to pay loans that can no longer be serviced - i.e., are raided for corporate survival.
Meanwhile, the housing meltdown has dramatically shrunk the value of their homes, a retiree's primary asset, while various downturns in the stock and bond markets have greatly decreased the value of their Keogh, IRA and 401K retirement plans. Unless they work for the state or federal government, whose generous pensions are more or less guaranteed, their future - and the pleasure of retirement - has become very uncertain.
Here in Bradenton, Fla., on the front page of the local Bradenton Herald a minor but very instructive drama is playing out. A fireman who worked for the local department retired and asked for a lump sum payment of his pension, just as the retiring chief of the department had gotten.
The retiring chief, though, got a lump sum retirement payout after 28 years of $1,600,000. That broke the retirement fund, so when the second fireman asked for a lump sum payout of $690,000, there wasn't enough money to pay him. The fund presumably will have to be supplemented with additional taxes if the availability of pension money at retirement for future employees was not insured. As it has worked out so far, the second fireman had to settle for a monthly payout of $4,400, a sum that sounds like a fortune to most folks.
And if you think those numbers are outrageous, what do you say about the 10 San Diego, Calif., retirees who will share a $61 million pot of pensions - yes, $6.1 million each - for the rest of their lives? That's the kind of money that ought to go to a Medal of Honor winner, not a coastal California bureaucrat.
The question most taxpayers would ask is why a fireman - or any public employee - is getting a $1.6 million payout in the first place? Or a $690,000 payout, for that matter? The firemen's pension board has refused to let their deliberations be recorded for accuracy.
Salaries and pensions grew completely out of control in Bell, Calif. - and who knows how many other cities across the country? - where city council members voted themselves and a few city employees stratospheric salaries as high as $800,000 a year before retirement benefits. Eight are now pleading not guilty and trials loom. But there are huge retirement payouts waiting for thousands of city and county officials and state and federal legislators that the media have not yet seen fit to explore.
Thus, the question for voters in Bradenton, Bell and elsewhere, and that President Sarkozy and Prime Minister Cameron are probably asking of their respective workers, is what have the workers done that demands pensions so generous they may bankrupt their cities, states and nations?
As most policemen will tell you, they rarely or never draw or fire their guns in self-defense throughout their careers. They do have a job that can become dangerous, as do firemen, but every effort is made to protect them. Police have dozens of armed men and women ready to back them up at a moment's notice, and firemen are trained to conduct their work safely even when private property is at risk. (Of course, in parts of Tennessee, all bets are off if the property owner hasn't paid his fire district tax; they'll let the home burn.) And there's at least one other problem, in the case of police: In many cities, it's as dangerous to be a citizen as to be a police officer.
American politicians pretend that able people would not run for public office if generous pensions and free or very cheap health care were not part of getting elected. Mindful of that threat of a leaderless society, they increase their benefits and pensions at every opportunity.
But there is a plain and gnawing truth Americans are coming to grips with as money keeps draining out of our economy and into China's. Our pension costs for all kinds of public employees cannot continue to grow, and they are costly to service even at current levels. But who has the power to take pension money away from public employees? And those who have that power must wonder how it can be taken from others without also taking it from them?
The answer, in part, may be to become - again, in part - more like France. As a tradeoff for pensions, American workers would have to be given, as a standard and enforceable condition of their employment in both the public and private sector, six weeks' vacation paid at the level of unemployment benefits, not regular pay, and a comprehensive free health care system at retirement.
During their working life they would pay health care without public insurance, and put away non-taxable income themselves in lieu of private or public pensions. Allowing anyone to be able to save would require a $10-$12 minimum wage now, and more later.
If those things could happen, we might be able to work our way out of pension debt and thus avert social unrest a few years from now. Can Republicans and Democrats create a consensus to bring this or another solution forward? I doubt it, frankly. The parties are too polarized to work together.
And for Britain, I fear it is already too late - not to escape debt, but to escape it safely. David Cameron is in for a long and difficult time at 10 Downing Street.
For Britain, it is Too Late the Phalarope* enacted on a vast scale. As a conservative, Cameron couldn't resist an easy and mostly helpless target - poor people, and government bureaucrats (whether they really are or not). It's an easy sell to his camp. But so many people are covered by Britain's welfare system, which is far more extensive and expensive than ours, that taking it away almost certainly means violence against the social order that will be very hard to repair.
According to Wikipedia, the novel by Alan Paton of South Africa concerns a man who, due "to his childhood and training, succumbs to the temptations he was thought strong enough to resist."