This is crossposted from mathbabe.org. All the opinions below are those of Cathy O’Neil.
I wrote a post yesterday to discuss the fact that, as we’ve seen in Detroit and as we’ll soon see across the country, the math isn’t working out on pensions. One of my commenters responded, saying I was falling for a “very right wing attack on defined benefit pensions.”
I think it’s a mistake to think like that. If people on the left refuse to discuss reality, then who owns reality? And moreover, who will act and towards what end?
Here’s what I anticipate: just as “bankruptcy” in the realm of airlines has come to mean “a short period wherein we toss our promises to retired workers and then come back to life as a company”, I’m afraid that Detroit may signal the emergence of a new legal device for cities to do the same thing, especially the tossing out of promises to retired workers part. A kind of coordinated bankruptcy if you will.
It comes down to the following questions. For whom do laws work? Who can trust that, when they enter a legal obligation, it will be honored?
From Trayvon Martin to the people who have been illegally foreclosed on, we’ve seen the answer to that.
And then we might ask, for whom are laws written or exceptions made? And the answer to that might well be for banks, in times of crisis of their own doing, and so they can get their bonuses.
I’m not a huge fan of the original bailouts, because it ignored the social and legal contracts in the opposite way, that failures should fail and people who are criminals should go to jail. It didn’t seem fair then, and it still doesn’t now, as JP Morgan posts record $6.4 billion profits in the same quarter that it’s trying to settle a $500 million market manipulation charge.
It’s all very well to rest our arguments on the sanctity of the contract, but if you look around the edges you’ll see whose contracts get ripped up because of fraudulent accounting, and whose bonuses get bigger.
And it brings up the following question: if we bailed out the banks, why not the people of Detroit?