David Cay Johnston: Wisconsin Public Workers Earned Their Pensions -- It's Not The Taxpayers'

Ed Schultz talked to Tax.com columnist David Cay Johnston about the misinformation being spread by Governor Scott Walker and others on the public employee pensions in Wisconsin. You can read more at his column here -- Really Bad Reporting in
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Ed Schultz talked to Tax.com columnist David Cay Johnston about the misinformation being spread by Governor Scott Walker and others on the public employee pensions in Wisconsin. You can read more at his column here -- Really Bad Reporting in Wisconsin: Who 'Contributes' to Public Workers' Pensions?:

When it comes to improving public understanding of tax policy, nothing has been more troubling than the deeply flawed coverage of the Wisconsin state employees' fight over collective bargaining.

Economic nonsense is being reported as fact in most of the news reports on the Wisconsin dispute, the product of a breakdown of skepticism among journalists multiplied by their lack of understanding of basic economic principles.

Gov. Scott Walker says he wants state workers covered by collective bargaining agreements to "contribute more" to their pension and health insurance plans.

Accepting Gov. Walker' s assertions as fact, and failing to check, created the impression that somehow the workers are getting something extra, a gift from taxpayers. They are not.

Out of every dollar that funds Wisconsin' s pension and health insurance plans for state workers, 100 cents comes from the state workers.

How can that be? Because the "contributions" consist of money that employees chose to take as deferred wages – as pensions when they retire – rather than take immediately in cash. The same is true with the health care plan. If this were not so a serious crime would be taking place, the gift of public funds rather than payment for services.

Thus, state workers are not being asked to simply "contribute more" to Wisconsin' s retirement system (or as the argument goes, "pay their fair share" of retirement costs as do employees in Wisconsin' s private sector who still have pensions and health insurance). They are being asked to accept a cut in their salaries so that the state of Wisconsin can use the money to fill the hole left by tax cuts and reduced audits of corporations in Wisconsin.

Much more there so go read the rest. Transcript below the fold.

SCHULTZ: Welcome back to THE ED SHOW and thanks for watching tonight. Scott Walker, governor of Wisconsin, wants you to believe that pensions -- pensions for state workers in his state of Wisconsin are taxpayer funded and union members just need to contribute more. And he is getting plenty of help spreading this junk around the country.

The "New York Times" reported that Walker`s plan, quote, "would raise the amount government workers pay into their pension to 5.8 percent of their pay, from less than one percent now."

The Associated Press, well, they reported that "Governor Walker wants state workers to contribute more to their health care and pension costs."

"The Milwaukee Journal Sentinel`s" online news service reported on "an effort by Governor Walker to get state employees to contribute more toward their health insurance and pensions."

Heck, this was even happening when Walker was just a candidate.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Walker says if elected he will make all state employees contribute to their pension plans. Right now, most of those workers have it paid for with taxpayer dollars. Walker said the plan would save the state more than 180 million dollars per year.

WALKER: We think when most workers across the state right now, outside of state government, are making their own employee contribution to the retirement system, the least we should be asking for is something like this.

(END VIDEO CLIP)

SCHULTZ: You know, it`s a good thing we`re here, because the truth is state workers fund -- fund -- every penny of their own pension. Instead of getting the money as part of their salaries, they defer it to an investment fund. It`s already money that they have earned. If you don`t believe me just look at the state`s own website which says, quote, "the fringe benefits offered to state of Wisconsin employees are significant and are a valuable part of an individual`s compensation package."

Hello. Joining me tonight is David Cay Johnston. He`s a columnist for Tax.com, Pulitzer Prize winning author, and former tax reporter for the "New York Times."

Mr. Johnson, I want to play this piece of tape because I visited with a lady at this rally last Friday in Trenton. And I think she is a product of all the misinformation that`s out there. Here it is.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Why do I have to make sure they have fabulous benefits and they have tenure and they have a great pension? But they don`t care that it`s costing me money to give them that. And it`s taken away from me. I don`t have a fabulous pension. I don`t have -- I have to pay for my health care. It`s not right that I make sure they get it but they`re not making sure I get it.

(END VIDEO CLIP)

SCHULTZ: David Cay Johnston, how do you straighten things like this out?

DAVID CAY JOHNSTON, COLUMNIST, TAX.COM: Well, it`s real troubling that this kind of basic economics people don`t understand it. Everybody who has a job who gets any kind of fringe benefits, that`s part of their compensation. And once you have performed the services, the money is yours.

And how the money is divvied up, whether the workers have it direct from the paycheck or its paid directly on behalf of the employee, which is the language in the labor contracts in Wisconsin -- on behalf of the employee -- they earned the money. It`s not the taxpayers`. The taxpayers bought their services.

SCHULTZ: You`ve gotten a lot of communication on this. Why do you think so many media outlets have bought into this?

JOHNSTON: Well, they didn`t critically question the assumption in what the governor said. They just assumed what he said was true. And so it sounds to people like this is a gift, like you`re getting something extra that other people don`t have. The woman who was interviewed, you know, if she had a collective bargaining agreement, I suspect her union would have said we want part of this money to go to health care and part of this to go to pensions, and that`s going to mean your paycheck is smaller.

SCHULTZ: You know, there is a poll out showing that cutting government worker pension benefits in the state of New Jersey, 54 percent of the people support it; 40 percent oppose. These constant bullet points and the misinformation that`s out there obviously is having an effect.

But shouldn`t we point to Wall Street as some of the failure for pensions in this country, to say it bluntly?

JOHNSTON: You know, Ed, that 180 million dollar figure that Governor Walker mentioned as a candidate, that is just about what Wall Street gets in fees every year from the Wisconsin pension plan. And by the way, defined benefit pension plans are economically efficient and cost taxpayers less money, because they use the money efficiently and they make sure that these public employees, in their old age, don`t become wards of the state or welfare cases when they`re old.

SCHULTZ: David Cay Johnston, thanks for joining us tonight. Thanks so much.

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