Critics of public pensions are using the economic crisis as a result of the COVID-19 pandemic to spread misinformation about public pensions and retirement systems. The National Public Pension Coalition (NPCC) released a brief that addresses and debunks three pieces of misinformation circulating among public pension opponents.
- The coronavirus-induced recession will cause unmitigated harm to public pensions, threatening their ability to offer benefits. The NPPC focuses on a recent Reason Foundation blog post last month titled “Public Pension Plans Won’t Be Able to Invest Their Way Out of Financial Losses.” The NPPC shows how several important facts are omitted, and why Reason’s claim public pensions’ unfunded liabilities skyrocket during economic crises has been demonstrated to be false. Finally, the NPPC explains why the ratio of the Gross Domestic Product (GDP) of the economy compared to pension debt is critical to examine, and that as long as this is a stable ratio, pensions should be able to continue paying out benefits during the recession and beyond.
- Pensions are a burden to taxpayers and this burden increases during economic crises. The NPPC points out, in response to this claim, how the vast majority of pension plans were well-funded before the current economic downturn and will survive the economic slowdown because all pension plans invest for the long-term. Their response also stresses how public pensions are actually a benefit for taxpayers, pointing to the National Institute on Retirement Security (NIRS) research showing how pension spending supports hundreds of billions of dollars in taxes for federal, state, and local governments. “This spending will only become a more valuable source of tax revenue during the current economic crisis, as many states depend on income and sales taxes that will fluctuate depending on the economy,” the NPPC brief notes.
- States should be allowed to go bankrupt. The NPPC calls this suggestion, made by Senate Majority Leader Mitch McConnell — who cited public pensions to suggest that state governments should “use the bankruptcy route” instead of seeking financial assistance from the federal government during the economic downturn – as “one of the most egregious examples of gaslighting.” The NPPC goes on to show why this idea is unsound constitutionally, based on misinformation about public plans, and would be devastating to retired public employees who “could see their earned benefits effectively frozen, leaving them destitute in retirement.”
Read the NPCC’s brief here.