Wall Street Is to Blame for Pension Shortfalls

09/03/2010 01:57 pm ET | Updated May 25, 2011
  • Eliseo Medina Chair of Immigration and Latino Civic Engagement Initiative, Service Employees International Union (SEIU)

It's no surprise that Gov. Arnold Schwarzenegger has taken his attack on public employee pensions to the Wall Street Journal, the paper of record for the big banks and giant corporations whose greed and recklessness put at risk the retirement savings of all Americans. After all, here in California his administration's tired arguments, misplaced blame, and selective use of statistics have worn thin with a public who knows that hard-working public employees like nurses, college professors, and child protection workers deserve to share in the American dream of a secure retirement.

Everyone who works hard and plays by the rules deserves to retire in dignity. But Wall Street doesn't see it that way. The same banks and mortgage brokers who are responsible for our economic collapse got rich by gambling with the jobs, home values, and retirement savings of ordinary Americans. Too many Americans lost everything, but Wall Street wealth and banker bonuses are on the rise.

Even as Americans are struggling to recover from an economic catastrophe created on Wall Street, the same set of bankers and brokers are trolling for more victims, and they have their sights set on hard working employees in the public and private sectors.

For generations, Americans have counted on three sources of retirement income: social security, employment pensions, and personal savings. Wall Street is bent on undermining all three by pushing risky social security privatization schemes and pursuing corporate wealth and executive bonuses while stripping workers of jobs that provide for their basic needs, let alone any chance at saving for retirement.

Now these banks and their allies have launched a sustained campaign to spread misinformation and alarm about a public employee pension system that has served California well for 70 years and which remained nearly fully funded until the Wall Street-driven stock market crash that caused our current economic crisis. Their goal is to strip away guaranteed pensions and force more workers into 401k-style plans that put all the risk onto workers while putting more money into the bankers' own pockets.

Rather than working together with the public sector employees who have the led the drive to make the pension systems models of good management and transparency and to stop a handful of top managers from gaming the system, the Governor has emerged as California's chief spokesperson for the Wall Street banks who wrecked our economy, plunged the state budget into deficit, and devoured billions in pension earnings.

The Governor has misrepresented pensions as a drain on government when in reality 73 cents of every dollar paid to pensioners comes from employee contributions and investment earnings, not employer contributions. Adding to Schwarzenegger's hype was a report he commissioned by Stanford graduate students which made use of faulty assumptions to arrive at a conclusion that risky individual accounts are the best approach for retirement saving, even when a large body of research shows these accounts are less efficient, more costly and gravely risky for retirees.

Rather than blaming state employees for mess Wall Street has made of our economy, the Governor must work with us to make sure our economy recovers in a healthy and sustainable way so that pensions and other investments continue to provide the safety net they were intended to do.