Earlier this year, we exposed John Arnold’s “web of connections.” This is the wide variety of groups he funds to attack public pensions. Many of these groups are connected to each other and many of them cite each other’s work to justify their attacks on pensions. Today we want to dig a little bit deeper into how these groups orchestrate their anti-pension campaigns.
Before they begin their anti-pension work, these groups need a target. They need to make a pension plan seem weak and in need of “reform.” This is where the Pew Charitable Trusts comes in. Despite its sterling reputation and the good work it does on many issues, Pew’s Public Sector Retirement Systems project has been hijacked by John Arnold. Pew’s latest anti-pension gimmick is what they call “stress testing.” The idea, supposedly, is to test how public pension plans would respond to different types of financial distress. Unfortunately, what this typically means is that Pew uses unrealistic assumptions about public pensions to make them seem less well-funded than they actually are. Pew then shares the “results” of its stress testing with lawmakers and the public, spooking them into thinking that public pensions are in danger. This is the first domino to fall.
The credit ratings agencies play an underappreciated role in pushing states down the path of gutting pensions. Moody’s, in particular, has been aggressive in their anti-pension rhetoric. The credit ratings agencies see the results of Pew’s stress testing and they warn states that they must make changes to their pension plans or risk their credit being downgraded. Of course, everyone should be suspicious of the credit ratings agencies after their actions leading up to the housing crisis and the financial crisis of 2008. The ratings agencies inaccurately rated plenty of subprime mortgages as credit-worthy, contributing to the crisis. Despite the checkered past of the ratings agencies, states do value their credit ratings and can be moved to take action to preserve their good credit. This is the second domino to fall.
Once the mood has been set to gut pensions by Pew and the credit ratings agencies, the Reason Foundation and the Retirement Security Initiative show up. Just like Pew, these groups are both funded by John Arnold to attack public pensions. They use high-priced lobbyists and slick messaging campaigns to convince politicians that public pensions must be “reformed”, which really means gutted. In recent years, they have shown up in states from California to Colorado to Nebraska to Kentucky to South Carolina, pushing for legislation that would weaken retirement security for public employees. This is the third domino to fall.
Just like a child’s game of dominoes, where one piece falls and then knocks down another and then another, the attacks on public pensions follow a familiar pattern. The opponents of public pensions are well-funded and are deliberate in their efforts. It’s important to understand how these attacks are orchestrated in order to fight back and protect pensions.