the Voice of
The Communist League of Revolutionary Workers–Internationalist
“The emancipation of the working class will only be achieved by the working class itself.”
— Karl Marx
Aug 1, 2022
State and local pension funds lost half a trillion dollars in the first half of 2022. These funds are supposed to provide secure retirement income for 21 million active workers and retirees, including teachers, in the public sector.
Currently, estimates are that these losses over the last six months have increased the funding gap up to 1.4 trillion dollars, that is the gap between the cost of pension benefits that states and localities have promised their workers and what is there to actually pay for them. That gap is enormous, about 15% of U.S. GDP (Gross Domestic Product).
What is behind these losses? All public pension funds depend upon Wall Street investments for the bulk of their funding. About 77% of the contributions for these pension funds is supposed to be generated by “investment earnings.”
This means that the state and local governments actually contribute very little to these pension funds. The state and local governments claim that they are setting aside enough money for the future retirement of their employees, money that is supposed to be part of the overall compensation package for each employee. But they never follow through. Instead, public officials take the money that should go into the workers’ retirement funds and hand it over to big business and the banks through ever more tax breaks and subsidies.
Instead, public officials turn over the main responsibility for funding pensions to various Wall Street financial companies, including money managers, hedge funds, private equity funds, etc. These companies use this money for their own profit in many ways.
First, they generate enormous profits from pension funds by taking out huge fees and commissions.
But that is just the beginning. For they use this big pot of pension fund money to fuel wave upon wave of various kinds of speculation.
Over the years, pension fund money has been used to help fuel the big run-up in the price of stocks and bonds. It has been used to finance wave upon wave of speculative corporate takeovers and corporate buyouts. And it is used to buy up huge amounts of commercial and residential real estate. In other words, pension fund money is used to enrich corporate executives, real estate developers, construction companies, as well as banks and investment houses.
This does not in the least benefit ordinary workers. On the contrary, when Wall Street companies use pension fund money to finance buying up private homes and apartment houses, it drives up the price of housing. When Wall Street companies use pension fund money to buy and sell companies, it leads to plant closings, big layoffs and pay and benefit cuts. And when Wall Street companies use pension fund money to speculate in commodity markets, including on such essentials as oil, gas, copper, wheat, etc., it is used to help fuel the very inflation that is impoverishing ever larger parts of the working population … including public sector retirees trying to survive on fixed incomes.
Thus, in order to enrich itself, the capitalist class uses the workers’ pension fund money against the working class.
Of course, since it is the workers’ money that the Wall Street financiers have been speculating with, when speculative markets eventually crash, it is the workers’ pension funds that take the hit and suffer the biggest losses.
These losses are then used by public officials to demand ever further sacrifices from public employees in order to supposedly “save” the pension funds, including big cuts in pension benefits, and much higher contributions to pension funds by the employees. In the future, workers can expect more of the same.
The working class long ago produced more than enough wealth to allow everyone to be able to retire young enough, with a decent income to be able to do other things with their life. Instead, over the last decades the capitalist class is pushing the working class back to conditions of centuries past.
For workers, the only security is in their capacity to organize and fight. Workers can only keep what they are ready to fight to defend.