We 401k and IRA holders have to take a hit every time the market tanks, why shouldn’t public sector employees take a hit every time the government tanks?
That is a VERY good point.
Perhaps I’m misreading this. But the private sector - government sector argument is a little too simple in this case. The reason for that is because there are very, very, very few private sector companies still offering defined benefit plans - pensions - in the same way that the government sector does.
So when a large private sector company has to make cutbacks, it either fires people or reduces costs in other ways such as reducing its contribution to the 401k, or reducing its contribution to healthcare premiums, etc. What it cannot do is take the employee’s 401k or tell the employee that it will only receive 10 cents on the dollar from its 401k, which is what could happen to Detroit public employees under bankruptcy.
No doubt the public unions clamored for as many benefits as they could get. But the real bad guys here are the Detroit politicians who failed to say No. The clerks, administrators, janitors, etc. who were promised a pension and made career decisions based in part on that contractual commitment are hardly to blame and in all fairness should not bear the brunt of the bankruptcy. But of course they will.
I’d sure like to see a judge tell the city it won’t allow pensions to be stripped but in return there will be no more collective bargaining on anything but wages. Bondholders would get screwed, but then they certainly had an opportunity to read the prospectus.