Editorial: Link pension reform to tax reform (Second in a series on pension reform)

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Mayor Ed Lee has released a draft set of proposals for pension reform, and union leaders continue to meet with financier Warren Hellman to try to craft an alternative. Meanwhile, Public Defender Jeff Adachi is narrowing his options and appears ready to move forward to put his own plan on the ballot.

Everyone involved claims to be interested in a compromise, in some proposal that would reduce the city's burden of paying $350 million this year (and potentially as much as $790 million in five years) into the employee pension fund. We support that idea, too — there are plenty of necessary, progressive moves to fix the city's pension system and free up more cash for local programs.

But so far, none of the proposals on the table include any new revenue sources — which means, in effect, that the mayor, Hellman, and Adachi all want city workers to bear the entire brunt of the impact of a Wall Street-driven recession. The message: only city employees should share the pain; the wealthiest San Franciscans and biggest, richest businesses don't have to contribute at all.

It's a dangerous part of the tax mythology that Pulitzer Prize-winning reporter David Cay Johnston discusses on page 10. He notes that the argument in favor of tax cuts for the rich — that lower taxes will lead to more investment and thus more jobs — has been tested in this country for 30 years. And it hasn't worked.

Most San Franciscans probably realize that. Most city officials vote for Democrats, opposed the Bush-era tax cuts on the rich, and argue for more federal aid to cities. This is a progressive town.

But when it comes to something as fundamental as local economic policy — who pays for city services and who gets the benefits — the story becomes completely different.

The mayor and eight of the 11 supervisors are celebrating a broad-based tax cut as a way to create jobs in the Tenderloin and mid-Market (although the evidence that tax cuts don't create jobs is overwhelming). The mayor is looking at the equivalent of a cuts-only budget (although everyone at City Hall opposes the notion of a cuts-only budget in Sacramento). And while it's almost certain that some sort of pension reform will be on the November ballot, none of the players involved in the negotiations have openly taken what seems to us to be the only logical position:

Pension reform has to be linked to tax reform — a commercial rent tax, a progressive gross receipts tax, a city income tax, an increase in the Pacific Gas and Electric Co. franchise fee or something else that hits those who can afford to pay. Otherwise, we can't support it.

Even the city employee unions are being awfully quiet about the need for a deal that includes new taxes. They ought to be leading the charge here, telling everyone that a cuts-only pension deal isn't going to be acceptable. (The tax measures could hold until the November 2012 budget, when they'll be easier to pass — if there's a firm assurance that the mayor, Hellman, Adachi, the supervisors, and all the other players will support them.)

City employees are being asked to take what amount to pay cuts — which will reduce their purchasing power and have a depressing impact on the local economy. Taxing the wealthy (who spend a much smaller percentage of their income) has no such depressing impact. Those are hard, cold facts. They need to be part of the discussion.

Robert Reich, the former labor secretary who now teaches at the University of California, Berkeley, has an interesting essay on his blog April 9 that discusses Obama's budget capitulations. The president, he notes, "is losing the war of ideas because he won't tell the American public the truth: that we need more government spending now — not less — in order to get out of the gravitational pull of the Great Recession. That we got into the Great Recession because Wall Street went bonkers and government failed to do its job at regulating financial markets ... That the only ways to deal with the long-term budget problem is to demand that the rich pay their fair share of taxes.

"And that, at a deeper level, the increasingly lopsided distribution of income and wealth has robbed the vast working middle class of the purchasing power they need to keep the economy going at full capacity."

That's as true here as it is in Washington. And if city officials want progressive support for pension reform, they need to acknowledge it.

Comments

I feel like that is definitely the answer, fairness, and I wonder which 8 supervisors are going to be completely against it?

Posted by Guest on Apr. 12, 2011 @ 3:19 pm

Taxing the rich is the SFBG's solution to every problem under the sun. Someone wake me when Bruce and Tim stop blathering incoherently.

Posted by Chromefields on Apr. 13, 2011 @ 9:29 am

Won't solve every problem in the world, but it will sure solve a lot of them. Radical economic inequality is at the root of an awful lot of social problems.

Posted by tim on Apr. 13, 2011 @ 10:11 am

The way a cake gets divided doesn't affect the size of the cake.

The way wealth is distributed doesn't affect the total amount of wealth.

You're substituting the politics of envy and class warfare for the sounder notion of fiscal viability through economic growth.

Posted by Chad on Apr. 13, 2011 @ 1:03 pm

That is why a referendum on the Twitter tax break would be a national campaign.

-marc

Posted by marcos on Apr. 13, 2011 @ 10:27 am

..." in effect, that the mayor, Hellman, and Adachi all want city workers to bear the entire brunt...

Yes- exactly. You got something right. Add SF residents to the list. City employees get very generous benefits - they should pay more for them. This is a very straightforward concept for a City that is broke.

In your next piece, can you please explain why for example when SF firefighters are paid 35% more (this is just one employee group) than their bay area counterparts as the DHR reported to the Board, anyone should be taxed to subsidize this?

Posted by Guest on Apr. 13, 2011 @ 10:45 am

The City just cut taxes on Twitter. Why would a city that is broke cut taxes? That would mean the City was not broke. If the City is broke as a result of cutting taxes, then we should repeal that tax cut as ill-advised economic policy.

The City is BROKE, after all, dire conditions require otherwise unthinkable responses, no?

-marc

Posted by marcos on Apr. 13, 2011 @ 11:00 am

We simply cannot stand for people taking personal responsibility for their own retirement. It would rend the very fabric of the republic.

Posted by Chromefields on Apr. 13, 2011 @ 12:11 pm

Personal responsibility means current employees take on the taxpayer's obligations to keep current retirees whole because the taxpayers mishandled their contract negotiations (sacrosanct contracts!) and their fiduciary responsibility?

-marc

Posted by marcos on Apr. 13, 2011 @ 12:20 pm

somebody else's fault?

And the corollary - that nothing is ever your fault because you have no self-determination?

Somehow, we went from the founding fathers to a Euro-style entitlement culture in just 200 years.

Posted by Chad on Apr. 13, 2011 @ 1:00 pm

No, but nor does it surprise me that a transparent concept such as "personal responsibility" eludes your grasp.

Posted by Chromefields on Apr. 13, 2011 @ 12:47 pm

City employees show personal responsibility by showing up for work, putting in an honest day's work, and deferring compensation per contract until retirement.

Floating a raft of $500t in derivatives and offering up garbage mortgages to anyone who could fog a mirror, bundling those in with good loans and collapsing the economic system was not exactly the pinnacle of personal responsibility, but the response to that was to put the taxpayers on the hook for the costs which were doubled in the carry trade, repaid and now sit idle in corporate coffers.

Do these dollars employ anyone? Not really, unless you consider libertarian capitalist activists who get paid to force their discredited economic sharia on us all using the jackboots of the state.

Personal responsibility involves taxpayers living up to the contractual obligations entered into by their elected officials and by themselves at the ballot box. Personal responsibility involves stepping up to the plate with concessions as public sector unions have done for 7 out of the past 10 years. Personal responsibility involves retirees offering up solutions other than current employees subsidizing current retirees' high standard of living. And personal responsibility involves corporations paying their damn taxes without fucking whining about it like children fearful of the bogey man.

Public sector employment benefits ARE social services.

-marc

Posted by marcos on Apr. 13, 2011 @ 1:04 pm

"Pension reform has to be linked to tax reform — a commercial rent tax, a progressive gross receipts tax, a city income tax, an increase in the Pacific Gas and Electric Co. franchise fee or something else that hits those who can afford to pay. Otherwise, we can't support it."

I've been asked for my solution to the budget crisis. I've said all along that it must include revenue-producing measures. If you drive down the wages of workers (public employee benefits are deferred wages), you will end up torpoeding the economy and any chance for economic recovery. This hurts everyone, not just city employees.

Posted by Lisa on Apr. 18, 2011 @ 5:56 pm

*torpedoing (typo)

Posted by Guest on Apr. 18, 2011 @ 6:01 pm