03/27/2012 04:27 pm ET Updated May 27, 2012

The Pension Wars

New York just adopted a major reduction in pension benefits for new public workers. It's a sign that pension reduction has become a generally accepted response to the widely growing state and municipal fiscal mess. If a state as liberal as New York will do it, so will most other state governments.

The argument is interesting. The cost of pensions are not a fundamental cause of today's budget problems. The average NY state worker gets an average pension of $34,000, and the total (according to Cuomo) will amount to 35% of local budget costs in 2015. But improvements in benefits, so called "pensions sweeteners," were common in the boom years, which mean we're trending towards much ire, annual budget costs within a few years. This is compounded by people living longer and therefore collecting for many more years. Over-time abuses, worker productivity concerns and unrelenting right wing attacks on public sector unions were the final straw in the battle for public opinion

The defense of pensions has come largely from public sector unions. They correctly point out that many state budget problems are largely the result of the same unrelenting reduction in state taxes that have paralyzed fiscal policy in Washington. New York has repeatedly and dramatically reduced its income tax, a trend only partially offset by last year's modest "millionaire's tax."

Unions point out that public sector salaries have generally been low, and were offset by a sense of job security and pensions that provided a decent retirement. But they've been slow to confront the abuses, and have been distracted defending the right to organize from attacks by the right.

All of this comes in the context of a national fight between austerity hawks seeking to "starve the beast" with cutting revenue and downsizing public enterprises, and the Keynesian/stimulus crowd which defends public investment and is supported by the OWS 99%ers.

For most of us this battle is something of a spectator sport. In cities, counties, school, towns and villages across America blood is running in the streets. The kind of municipal services that define American life, education, sanitation, public safety, parks and community centers are holding on for dear life as their budgets are slashed. In that context, reducing pension costs for employees who don't retire until 2040 is easy for lefties and well as righties. Hence the New York pension reductions and the sense that more is coming across the nation.

If one's goal is to protect the American middle-class than these pension reductions are not cause for joy. An adequate level of public service and workers who provide them without impoverishing themselves helped make America what it is today. That's a value dugement as much as an economic judgement. It shouldn't be left just to public sector unions to make that case and many of us will step up in defense of a government that protects middle class interests on both the user and the worker class side.

Budget crises cause short-term dislocations. Pension reductions may be inevitable in the short-term. We need a national dialogue on these questions that includes advocates who aren't afraid to defend a decent retirement for public workers.