Red States Owe Workers More Than $500 Billion -- The GOP Is Trying to Steal The Money
Trump is boosting a McConnell plan to help states renege on promised retirement and health benefits to millions of workers and retirees
In a tweet that now has more than 100,000 likes, Donald Trump this morning seemed to boost Mitch McConnell’s new proposal to block state aid and instead help states slash promised retirement and health benefits for millions of first responders, teachers, firefighters and other government workers and retirees.
There’s a lot of nonsense in this one bloviation -- but the biggest lie of all is that aid to states would only benefit “Democrat run and managed” states. While it is true that some Democratic states face big budget problems, it is also true that many red states have run up some of the largest pension deficits in the country — after they diverted money from workers and retirees into tax cuts and corporate subsidies.
Trump States Owe $519 Billion To Workers & Retirees
States that Trump won in 2016 — which have been run in part or in full by Republicans — now face a combined $519 billion gap between what their pension systems owe to workers and what those pension systems have saved up, according to a review of 2017 financial data (the most recent available from Pew). In fact, 12 of the worst funded pension systems in the country are Trump states:
Check out a few details of how some these red states have created their budget crises by screwing over workers and enriching the wealthy and large corporations:
Arizona: The Republican-run state has the 39th worst-funded pension system in the country and now faces a $27 billion shortfall. This follows Arizona’s Republican lawmakers passing income tax cuts and corporate tax cuts. In 2018, Arizona’s corporate subsidies and tax breaks cost the state more than $600 million -- more than double what the state owed to its pensioners that year.
South Carolina: The Republican-run state has the 44th worst funded pension system in the country and now faces a $25 billion shortfall, after state officials funneled large portions of retirees’ savings to high-fee Wall Street firms. Under Republican administrations, those fees have skyrocketed to more than $450 million a year -- all while the state has become infamous for its massive corporate subsidies. The state’s current Republican governor is calling for the closure of the state’s defined-benefit pension system -- as he pushes a new package of massive tax cuts.
Kentucky: This Trump state -- which was run by a Republican governor until 5 months ago -- has the single worst funded pension system in America, and now faces a $42 billion shortfall. As in South Carolina, state officials funneled retirees’ savings to high-fee Wall Street firms, and suffered huge investment losses. While shortchanging its pension system, Kentucky has handed out huge corporate subsidies, and Republican lawmakers have tried to hide details of those subsidies.
McConnell & Trump Are Trying to Complete A Robbery
When government workers accepted their jobs, they deferred up-front salary in exchange for specific promises of guaranteed retirement and health benefits. However, over many years, states have refused to make promised contributions to pension funds to fulfill those promises. They have instead funneled the cash into tax cuts, investment fees for politically connected financial firms and corporate subsidies.
Indeed, a new report out today from Good Jobs First shows that many states now spend far more per year on corporate handouts than they do on funding their pension systems — all while they plead poverty to insist there’s no money for retirees.
To understand what that means in practice, imagine that you were offered a job and you signed a contract accepting less pay in exchange for your boss promising you they would pay for a specific set of retirement benefits. Then imagine that your boss simply refused to put money into your retirement account for years and instead gave it away to his rich friends. Then imagine that when you found out about the situation, your boss turned around and said he wasn’t going to backfill your retirement fund by getting the money back from his friends — instead, he’s just going to tear up your contract.
That’s what could happen to public sector workers, many of whom are on the frontlines of the coronavirus crisis. States have basically stolen money from them — and now the bankruptcy plan being pushed by McConnell and boosted by Trump proposes to help states effectively legalize that theft, and make it permanent.
Bankruptcy could help states avoid increasing taxes on the rich, reducing corporate subsidies or doing anything else to come up with the money to repay what they stole from workers. It would allow states to preserve those giveaways and instead balance the books by simply tearing up workers’ contracts that enshrined their retirement and health care benefits.
The federal government could prevent this -- unlike states, it can deficit spend, and it is deficit spending to make sure giant, politically connected corporations don’t go bankrupt.
Giving trillions of dollars to corporations while denying a fraction of that for state aid isn’t fiscal responsibility or budget hawkery -- it is a deliberate effort to drive the getaway car in a robbery.
It is a plan to complete a financial crime against millions of workers at the very moment so many of them are struggling to survive a lethal pandemic.