Bribing the Voters with Their Own Money

Detroit is bankrupt. I passed through Detroit in 1969 and was struck by the sign that continuously counted the cars manufactured in the city. the numbers changed rapidly as we drove past it. Today much of the motor industry has moved to other places and the prosperous Motown is bankrupt. That means the creditors of the city will not be paid what they are due, a feature of all bankruptcies and in particular those who are entitled to pensions from the City of Detroit will get much less than they are due.
pensions, whether provided by the state, a city, a large corporation or an insurance company are not gifts. pension is pay, simply deferred to a time when the employment has ended. Cutting pensions is the same as retrospectively cutting wages and drawing back from those who have earned their pensions a significant sum, back dated to the start of when the employees started working.

Detroit is not the first and will not be the last institution or steal back money from its employees. A few years ago the UK government announced a deferral of its female citizens’ pensions. For years women paid their national insurance contributions and in return were promised that they would receive a small pension from the state when they reached the age of 60. However a few years ago the rules changed. If you were born after 1951 and are a women you will not be able to claim your pension until you are 62 years 6 months old. Two and a half years of pension has been taken from you, even though you might well have being main contributions (including some who were making voluntary contributions) for 47 years.

It is odd that governments think that they are entitled, in times of economic distress, to cut back on pensions that people have earned or for which people have paid. It is odder still that states and local governments are not obliged to ring fence pension contributions that people have made. Both the UK and Detroit pay pensions out of present and future taxes and imposts and spend the money on providing for present needs, instead of future investment, thus bribing the voters with their own money. It is odder still that the voters permit them to do this.

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