San Diego’s pension crisis sits front and center in a new book by renowned financial journalist Roger Lowenstein titled “While America Aged: How Pension Debts Ruined General Motors, Stopped the NYC Subways, Bankrupted San Diego, and Loom as the Next Financial Crisis.”
Lowenstein, a frequent writer for The New York Times Magazine, was in town earlier in the month to discuss the book; I couldn’t make it because I visited my mom for Mother’s Day.
But, I’ve got a couple of book reviews for you to chew on instead. The first is this brief New York Times review.
Here’s the section of the review about San Diego:
The final example is the most egregious. San Diego’s municipal workers were also granted generous pension benefits. The city management then deliberately skimped on the annual contributions, hiding the underfunding from the public while the union knowingly looked the other way. The result was near bankruptcy for the once thriving metropolis.
From all this, however, Lowenstein draws a conclusion he does not prove. “The story of pensions is, in fact, largely the story of the slow accretion of power by the labor unions,” he concludes. But is it? The unions bear plenty of responsibility in the three stories he tells. But so does management. In each case, management deliberately underfunded its obligations.
G.M. was run down more by Japanese competition (to which Lowenstein barely alludes) than by huge pensions. New York City’s financial prospects were affected by many adverse factors, not least the stagflation and dire recession of the mid-1970s, when it almost went bankrupt. San Diego, as Lowenstein states, could have raised taxes to meet its obligations — it is one of the lowest taxed of major cities in California. But the politicians refused.
Columbia Journalism Review, a journalism trade magazine, had a nice, lengthy review of the book, too, but apparently they won’t let us read it online. So here’s a little snippet, sans link:
After reading Lowenstein’s book, it’s hard not to come away with a picture of leaders as almost weak and self-interested. But there’s another piece of the equation: most of us, as shareholders and taxpayers, also prefer not to face reality. The quintessential case of this is San Diego, where citizens accepted the delusional and outright deceptive statements of their politicians because they didn’t want to pay higher taxes, even though San Diego has some of the lowest taxes in the country. San Diego is an extreme case of a dysfunctional city, but it captures something important about voters, which is that they, too, seek to avoid short-term pain even if it means longer-term suffering.