Economics

Who’s enriching the 1 percent?

Over at the Huffington Post, the AFL-CIO’s Secretary-Treasurer Lee Saunders takes a shot at me in an article subtly titled “Killing Pensions to Benefit the 1 Percent.”

Andrew Biggs and Jason Richwine—representing two right-wing, corporate-funded propaganda outfits, the American Enterprise Institute and the Heritage Foundation—were given prime space on the Journal’s op-ed page last week to make an argument for radically transforming the retirement savings of working Americans. They laid out a reckless plan to end guaranteed retirement accounts, and in some cases require workers to forfeit their life savings, and force public workers to enrich Wall Street firms that have already demonstrated their inability to produce adequate resources to meet the needs of retirees.

Leaving aside the total bull about requiring workers to forfeit their life savings, who does the AFL-CIO think manages public pension investments, the tooth fairy? The “1 percent” is all over public pensions, which are the largest single investor in hedge funds and are shifting heavily into private equity. That’s a lot of corporate jets and Cristal for the top 1 percent, courtesy of public sector pensions and the unions that back them.

The typical 401(k), by contrast, has nothing to do with hedge funds and private equity, and certainly doesn’t pay anything like that 2 percent of assets and 20 percent of profits that public pensions pay to hedge fund managers. A well-run defined-contribution pension like the Thrift Savings Plan for federal government workers—which is the more likely model if state/local workers shifted to DC plans—pays almost nothing to Wall Street managers of any kind.

In truth, the “1-percenters” make far, far more money off public sector pensions than they ever would from 401(k) plans.

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