As cities and municipalities continue their fiscal struggles by cutting workers, public programs, and social services, and attacking pension obligations, it is important to understand what class interests are spared from the budget ax – namely the financial sector and bondholders. Michael Hudson at New Economic Perspectives wrote a great piece on this ( another take here).
By depicting local employees as public enemy #1, the urban crisis is helping put the class war back in business. The financial sector argues that paying pensions (or even a living wage) absorbs tax revenue that otherwise can be used to pay bondholders. Scranton, Pennsylvania has reduced public-sector wages to the legal minimum “temporarily,” while other cities are seeking to break pension plans and deferred-wage contracts – and going to the Wall Street casino and play losing games in a desperate attempt to cover their unfunded pension liabilities. These recently were estimated to total $3 trillion, plus another $1 trillion in unfunded health care benefits.
Although it is Wall Street that engineered the bubble economy whose bursting has triggered the urban fiscal crisis, its lobbyists and their Junk Economic theories are not being held accountable. Rather than blaming the tax cutters who gave bankers and real estate moguls a windfall, it is teachers and other public employees who are being told to give back their deferred wages, which is what pensions are. No such clawbacks are in store for financial predators.
Conversations on solving the urban fiscal crisis need to consider all of the parties that are responsible for the budget woes and financial obligations of cities.