In 1997 I was working for the Indiana State Budget Agency. Hoosiers are fairly conservative people, and while sometimes that manifests in retrograde attitudes toward ideas like same-sex marriage, it also means they tend to not collectively do really stupid things with money. This is a state so chastened by a bad canal-related investment in 1841 that it didn’t issue general-obligation debt for another 160-odd years. So I distinctly remember the buzz around the office back then when we got word from our colleagues in New Jersey about the crazy stuff their governor was about to do.
Christine Todd Whitman unseated incumbent Democrat Jim Florio in 1993 running on an anti-tax platform. The problem with cutting taxes, then as now, is that every dollar of tax revenue goes to someone, and that someone is usually quite aware of the situation. One of the things New Jersey did with its tax revenues was contribute to the public employee pension fund. So in 1997, Governor Whitman decided to take that money and use it to cut taxes. This raised the obvious question of how future teacher pensions would be paid. Whitman’s solution? Gambling.
Now, gambling is a good way to make money—if you’re the house. States have made billions this way in recent decades, either being the house, through state lotteries, or letting someone else do it and taking a percentage off the top. But New Jersey already had a lottery and Atlantic City. Whitman’s plan was for the state to walk into the casino like a sandal-wearing tourist on the Vegas strip and let Wall Street be the house. It borrowed $2.75 billion at 7.6% interest and started spinning the wheel.
We were aghast. Indiana had tackled its unfunded teacher pension problem a few years earlier through a combination of employee contributions and putting actual money in the bank. Whitman’s plan was madness. And, needless to say, it didn’t work. The stock market went up for a few years, then crashed, then went up for a while, then crashed again.
Now New Jersey Governor Chris Christie says public-employee pension-fund deficits mean that benefits must be cut. When people point out that the deficits are there because previous New Jersey lawmakers were reckless, greedy and stupid, Christie says. As Matt Bai reports in The New York Times:
What’s done is done, he told me, and it’s time for someone to tell these workers the truth, which is that the state is simply never going to have the money to make good on its commitments. “Listen, if they want to travel in the Michael J. Fox time machine and change time, I guess we could try that,” he said. “We could get the DeLorean out and try to go back there. But I think realistically that that was just a movie and make-believe. So we’ve got to live with what we’ve got.”
Say Chris Christie hired me to renovate his kitchen and paid me 20 percent down. And say I took the money to Atlantic City and blew it playing craps. And say when Christie called to ask why his granite countertop was nowhere to be found, I said “Chris, what’s done is done.” Would he say “You’ve got me there!”?
And say Christie paid me that 20 percent with a home equity loan and decided, since I stole his money, not to pay it back. And when his bank asked if the loan check was in the mail, Christie said, “Do you have one of those Michael J. Fox DeLoreans? No? Then tough luck.” Would the bank say, “I guess we’ve got to live with what we’ve got!”?
More to the point, is anybody suggesting that the people who lent New Jersey that $2.75-billion shouldn’t be repaid? Of course not. Obligations to financial interests are sacrosanct in this country while obligations to teachers are infinitely negotiable.
There are reasonable discussions to be had about reforming pension policy for future teachers. But the assault on pension benefits and collective bargaining now underway is another chapter in the sad history of middle-class workers in America having their pensions stolen out from under them. In the private sector it happens through private equity using bankruptcy to “unlock value” in distressed companies by screwing people out of their pensions. In the public sector it happens through opportunistic governors using remediable fiscal crises to score political victories by screwing people out of their pensions.
Meanwhile, Chris Christie won’t renew a tax on millionaires to balance the state budget. Some of those millionaires are the same morons, thieves, and sociopaths who engineered the financial crisis that caused the recession that put Chris Christie and his ilk in office in the first place. There’s apparently no amount of absurdity that can’t be overcome with ill-gotten gains.