McConnell To Kentucky: Drop Dead

The Senate Republican leader is blocking aid to his own state, which is facing one of the worst pension crises in the entire country

It’s not every day that a U.S. Senator explicitly enriches his out-of-state Wall Street donors while telling his own constituents to drop dead. Usually that kind of behavior is somewhat obscured by legislative machinations and spin. But if there was going to be any lawmaker who would be unabashedly blatant about it, you had to know it would be Mitch McConnell. 

The Senate Republican leader just finished up shoveling trillions of dollars of federal largesse to businesses and billions of dollars of tax cuts to the super-rich. Having allocated all that cash to the interests that bankroll his political career, McConnell is now taking a hardline stance against a modest amount of aid to states because he says he doesn’t want resources used to prevent cuts to government workers’ retirement and health benefits. 

"There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations,” McConnell said. 

His goal is to use the coronavirus crisis to realize one of the most radical long-term goals of the conservative movement: empowering states to break existing contracts and slash previously pledged pension benefits for teachers, firefighters, cops, first responders and other public-sector employees.

In a half-assed play to avoid looking like he’s deliberately enriching his elite financiers and starving the peasants, McConnell cast himself as a principled opponent of “blue state bailouts” -- a seemingly shrewd anti-coastal framing for his own potentially difficult reelection campaign. 

In reality, though, McConnell’s opposition to pension aid is even worse than a pathetic Gerald Ford impression. It is him giving the big middle finger to hundreds of thousands of his own constituents whose Republican-leaning state is now facing one of America’s worst pension crises after McConnell’s Wall Street courtiers strip-mined Kentucky’s public retirement system.

Kentucky Fried Pensions

That’s right: for all the talk of pension shortfalls in blue states like Illinois and California, the bright red state of Kentucky has one of the most underfunded pension systems in the country. The gap between promised benefits and current resources has been estimated to be between $40 billion and $60 billion. One of the state’s pension funds is less than 15 percent funded

Those shortfalls are not the product of Kentucky’s public-sector workers being greedy or lavishly remunerated -- Kentucky teachers, for example, are paid 23 percent less than other workers with similar educational credentials, and they do not receive Social Security benefits

No -- the shortfalls are the result of 1) state lawmakers repeatedly refusing to make annual contributions to the system, 2) investment losses from the 2007 financial crisis and now the COVID downturn, and 3) especially risky hedge fund investments that generated big fees for politically connected Wall Street firms, but especially big losses for the state’s portfolio. (Executives from some of those specific firms are among McConnell’s biggest collective donors, and those firms could be enriched by other parts of McConnell’s federal stimulus bill.

The pension emergency in Kentucky has become so dire that teachers staged mass protests last year, resulting in national headlines and a PBS Frontline special, and a court case that ultimately overturned the Republican legislature’s proposed pension cuts, which the GOP literally attached to a sewer bill.

Typically, a state facing this kind of budget catastrophe would be psyched to have its senator in a prime position like Senate Majority Leader, so that it could have some extra special leg up in securing federal assistance to prevent cuts to pensions and other basic public services. 

But McConnell isn’t typical -- he is as close to a comic-book villain as has ever occupied an office in the highest ranks of America’s legislative branch. And so rather than taking up Democrats’ offer to work on a bipartisan aid package, McConnell is positioning himself to block the very aid that would especially help hundreds of thousands of his own constituents during his state’s dire emergency.  

Empowering States To Use Bankruptcy To Crush Workers

Instead, McConnell is proposing to empower states like Kentucky to declare bankruptcy -- a financial maneuver that in practice could allow states to reverse their promises and slash retirees’ promised health benefits and subsistence income.

For retired teachers in Kentucky, a state declaration of bankruptcy and subsequent reneging on promised benefits might mean huge cuts to fixed incomes and medical coverage in the middle of the pandemic.

While retirees struggle to make ends meet, Republicans continue to depict government workers as greedy pigs getting rich off taxpayers. That portrayal is designed to create political support for letting states use bankruptcy to fleece workers -- a top consevative movement goal for at least a decade. 

“A new bankruptcy law would allow states in default or in danger of default to reorganize their finances free from their union contractual obligations,” wrote Jeb Bush and Newt Gingrich in a 2011 op-ed that explained the overall scheme and demonized public employees. “In such a reorganization, a state could propose to terminate some, all or none of its government employee union contracts and establish new compensation rates, work rules, etc…The lucrative pay and benefits packages that government employee unions have received from obliging politicians over the years are perhaps the most significant hurdles for many states trying to restore fiscal health.”

“He Thinks He Will Be Fine Even If He Screws Every Teacher Out of A Pension”

McConnell is no dummy -- he is a sophisticated political operator and so there is almost certainly some sort of method in his madness. With polls showing him deeply unpopular in his home state, he isn’t just flippantly telling workers to eat cake -- one longtime Kentucky pension expert told me he believes the Republican leader is trying to both realize a conservative movement dream and punish public sector workers and their unions, who tend to support Democratic candidates. 

“McConnell is the smartest politician who ever lived,” said Chris Tobe, a former Kentucky pension official and the author of the book Kentucky Fried Pensions. “He knows that most of these workers are never going to vote for him. He thinks he will be fine even if he screws every teacher out of a pension. And he knows that this crisis gives him a chance to achieve the state bankruptcy plan that has been a dream of Republicans for years. They’ve been waiting for the right time to bring this out.”

Perhaps McConnell’s calculation is that if he allows his state’s public sector workers to be economically decimated by huge health care and retirement benefit cuts, they will be too demoralized to come out in force to vote him out of office in the 2020 election. 

But that would be a risky political gamble. After all, Kentucky saw huge teacher protests last year that ultimately resulted in the electoral defeat of its incumbent Republican governor

The same could happen to McConnell if lots of folks in Kentucky hear about his aggressive efforts to make the coronavirus crisis as crippling as possible for thousands of workers in his home state.


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