During college and law school in Detroit, I met my wife, Sue, and we had our first two children there. Sue’s family lived and worked in Detroit, and her siblings include two doctors, a nurse, two teachers, a businessman and a salesperson-caregiver.
During the 1950s and 1960s, Detroit was a prospering, beautiful and exciting city. You could walk the streets and enjoy the parks in safety. Detroit was a melting pot but many neighborhoods had a distinctive and ethnic character. As the automotive capital of the world, Detroit had the highest per capita income of any city in the United States.
However, since 1961, Detroit has been governed by the Democratic party. Now the city is bankrupt! The corporations that had provided a livelihood for so many thousands of people became pressured by union leaders who demanded ever-increasing wages and benefits. To avoid being devastated by strikes, the corporations gave in to union pressure. They then were unable to keep up with unsustainable retirement plans, burdensome taxes and onerous regulations, which led to the demise of the automotive industry in Detroit.
As auto companies were forced to close, their workers moved out of Detroit, looking for work in other states, Meanwhile, foreign automobile companies took advantage of the opportunity to establish production plants around America.
The same thing happened to the governance of Michigan’s large cities, Detroit being the foremost. The politicians, working with the unions who funded and eventually controlled them, kept giving to civil employees wages, benefits and retirement plans that were unsustainable – and that led to bankruptcy. To quote Gary Schilling, a noted economist: The wages and benefits paid to an average government employee are 1.6 times that paid to the average non-government employee.
A recent example of such prolificacy is a recently retired Long Beach, Calif., lifeguard who retired with benefits and a full pension of $105,000 annually, at age 50! If he lives to age 80, he will draw pension and benefits for 30 years. There are not enough workers in the system to sustain such payments – thus the result is bankruptcy. As Margaret Thatcher put it, “Eventually, you run out of other people’s money.”
If I were king (and most lawyers believe they are!), I would do the following:
1. Put all elected politicians on a 401(k) retirement plan, matching up to 10 percent of their salaries, provided they save the same amount for themselves. (The political class would not push sacrifices onto others which they themselves would also have to pay.)
2. If government employees want to retire after 30 years, or whenever, their pensions would not commence payment until age 67 – just like those on Social Security. If government employees want to retire early, e.g., at age 55, they would receive an actuarially diminished pension starting at age 55, but which would assume an age 67 retirement.
3. All new hires, in the government and private sector, would receive only a 401(k) type of retirement plan, plus Social Security, like every other worker in our society.
4. Round down all government checks to the nearest dollar.
There are my ideas. What are yours?
Very truly yours,
Michael B. Lange,