Fix is too mild, too political
City Hall sent Deputy Mayor Bob Steel yesterday to a Citizens Budget Commission breakfast to pitch public-pension reform. Steel gave a commanding presentation -- but couldnt overcome the timidity of his boss plan.
As Steel explained, the situation is dire: Since 2001, yearly pension costs have skyrocketed from $1.4 billion to $8 billion-plus -- a 20 percent annual growth rate. Pensions cost more than fire, police and sanitation combined. They cost more than debt service, which pays for the roads and schools we need.
“Instead of investing, were simply spending,” he warned, and risk “sliding back” to the 1970s.
To avert the crisis, Mayor Bloomberg is pushing the same fixes hes been suggesting for months. New workers who arent police officers, firefighters, corrections officers or sanitation workers would have to wait until age 65 to retire, up from 55 now (with 25 years in).
And all workers would have to pay 6 percent of their pay toward their pensions, while no one could count huge overtime hours in their last work years toward their permanent retirement payments.
These steps might do if this were the 1970s, and we had decades to change gradually. But weve made similar reforms before -- and seen them undone, until were back facing another fiscal pickle.
As one audience member asked Steel, why not move new workers into a 401(k)-style plan -- in which they and the city would save up in the workers personal account, rather than in a taxpayer-guaranteed pension pot?
“Those might be ambitions,” Steel allowed. But the mayors way is a “more likely way to make progress.”
Whats wrong with being ambitious? After all, the mayor wants to be out front on national issues, and theres a chance here to help fix the US private-sector retirement system -- which is a mess, with people not saving enough and confused by complex plans whose high fees suck up their money.
Bloomberg could use the power of a huge, diverse, 290,000-strong workforce to show how a 401(k) should work: high matching contributions (from the city) to get people to save; super-low fees; rules to protect people who might invest too heavily in one stock, plus lifespan protection -- i.e., a much smaller guaranteed pension, so that nobody outlives the money theyve saved.
Instead, the mayors merely asking the state to do the kind of reforms it often does in a crisis (and often undoes later). Plus, hes compounding this meekness with distractions.
One distraction is Bloombergs ongoing request that Albany let the city negotiate benefits directly with unions, rather than be dependent on state law. Practically, this makes little sense: In 10 years in office, the mayor has yet to show he can win big labor savings at the bargaining table.
But it does make sense politi cally: The mayor wants people to think that todays high pensions are Albanys fault for setting benefits too high, not his fault for giving away big raises -- which later increase pensions -- without asking unions in return to support pension reform in Albany.
Steel showed the flaw in this yesterday: Pension increases based on wage hikes arent the citys fault, he said, because “its impractical to think wages wont go up. Wages likely will go up . . . because of inflation and the need to attract talent.”
Gee, thats a good way to tell the unions that they dont have to give ground on pension reform, because wages just have to rise anyway.
Steel added a new distraction, too: He said Albany should change a law that restricts pension-fund investments so that the city can achieve higher returns with international stocks. Every percentage point in return saves the city $1 billion, he noted -- and if theres one thing that New York has “an abundance of, its investment expertise.”
Abundance, yes -- though “investment expertise” also got us the 2008 financial meltdown. Anyway, getting pension-benefits changes is tough enough already: Its not a good idea to give the anti-reform crowd the excuse that better “asset management” can solve the problem.
One final note: Policies aside, the mayors choice of point man here is telling. Steel seems honest and personable, but hes Wall Street through and through -- a vet of Goldman Sachs, the Paulson-era US Treasury on the eve of TARP, and head of Wachovia during its rescue drama.
If Bloomberg insists that he can get reform by bargaining with the unions, hes going to need someone who can actually win labors trust as a negotiating partner on these issues.
Thats another problem -- when it comes to reform, the unions still make Bloomberg look like a wild-eyed radical.
Original Source: http://www.nypost.com/p/news/opinion/opedcolumnists/mike_reform_dud_u65qBn6WmW6j5ZjcD5pC8H