Obviously AIG execs are more important than public workers

The New York Times has an outrageous story about how courts in Minnesota and Colorado have ruled it permissible for state governments to cut public worker pensions and retired workers have no recourse to sue to keep the benefits that they negotiated and have been promised for years. Dean Baker has a good response to the rulings. He writes:

In effect the courts were saying that contracts with workers do not have the same standing as other contracts. It is almost inconceivable that the courts would allow a state government to unilaterally cut its contracted payments to a supplier or other government contractor.

It is worth noting that government officials have openly pushed the sanctity of contracts in other contexts. For example, when he was head of President Obama’s National Economic Council Larry Summers argued for the importance of the sanctity of contract in the context of the bonuses going to AIG executives. Many of the top executives of the company, which was saved from bankruptcy by a massive government bailout, had bonuses that ran into the billions of dollars.

It is likely that the vast majority of the public did not support giving bonuses to these executives. (Bankruptcy voids contracts.) However, these bonuses were paid.

The hypocrisy in terms of how both government officials and the judicial system look at the validity of contracts is staggering. Quite simply in the case of the banksters and Wall Street executives who destroyed their companies and the US economy, it was an unthinkable, unAmerican notion that the contracts governing their bonuses not be honored (even though as Baker points out, “bankruptcy voids contracts”). But in the case of public workers whose pensions have been around for years and were negotiated to cost tax payers less money in salary to public workers, it’s A-OK for state governments to welch on the money they owe these workers. Worse still, the only reason that there are pension shortfalls in the first place is because Wall Street wrecked the economy and wiped out twenty years of stock market growth. Value that had been in pensions was wiped out, making small underpayments look like massive shortfalls. But it’s not because of public workers, it’s because of the financial collapse. Now, for these workers to be punished a second time and have no recourse under the law to protest, it’s beyond disgusting. It’s as clear an example as any that there are two tiers of justice in America: one for the super rich and one for everyone else.

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