Is It Ethical For Governments to Break Pension Promises?
A recent essay from pension analyst Roger Lowenstein boiled a complicated debate down to a simple bromide: "The point isn't to punish public retirees. The point is that, when governments make contractual promises, they ought to fund them." While we concur with the thrust of his statement, we think the pension debate is more complicated than that.
When you listen to arguments against reducing public sector pension benefits in Detroit and cities in similar straits, morality is frequently invoked. Pensioners not only want to receive their pensions, they believe they ought to. Pensions are promises. And the key ‘ought' here is a simple one: ‘One should keep one's promises.'
This argument is initially compelling. Breaking promises seems a morally bad thing; and it seems particularly bad when the promise in question is a promise to do something good: namely, take care of persons of retirement age, most of whom have contributed to the retirement system in good faith, and whose financial future depends upon receiving the projected payouts.
Yet while the pensioners' moral claim hinges on the morality of promise-keeping, the Detroit debacle demonstrates just why, when taken without at least two massive caveats, the maxim ‘One should keep one's promises' is flat-out false.
First, the maxim is false, not merely because very few promises are unconditional, but also because very few promises should be. I promise to make my child's recital; but it is preposterous to suppose that, say, the bloody accident I witness on the way and the life-saving aid I render to the injured are a morally insufficient response to the child-like rejoinder ‘But you promised!' Similarly, interested parties in Michigan might be forgiven if, despite their empathy for the pensioners' plight, they have reservations about the ethics of insisting on full compensation, given the road-side disaster that is present Detroit; in such dark light, pensioners might seem like persons who have seen the injured on the side of the road-then floored it in order to catch the recital's opening bars. Such easy-to-come-by examples do not, of course, de-legitimize promise-keeping. What they do is show that context matters. And the question of which particular promises to keep can and should involve the larger ethical environment of competing moral claims.
The notion of the context raises a second and far larger problem -- a problem almost too big to see. The question of Detroit pensions is usually formulated as a question of keeping one's promises. But the question of whether it is moral to keep a promise overlooks the normatively prior question of when it is moral to make them. This is not merely to make the obvious point that, like laws or sausages, promises are the sort of things which are often messily made. Rather, the point is that whether a particular promise ought to be kept cannot be separated from considerations like ‘What was promised? By whom? To whom?" More precisely: the questions of whether it is right to keep a promise cannot be considered apart from the question of whether the promiser had the right to make it.
It is easy to come up with cases of illegitimate promise-making. For instance: I pledge you my neighbor's attic-space for the summer; you cannot, on the basis of my promise, promptly move in to his attic. The attic space is only rightly promised by its rightful owner. In general, then, I cannot make promises to you for others. And neither can you.
Yes, the example is a bit trite, but the attic case and the issue it raises gives reason to think it may be morally right to adjust or annul a promise made in shady ways -- whereby ‘shady' is meant this morally careless ‘promising-for-others.' So, if the pensions in question present a case of promising-for-others, then keeping the promise to pay these pensions in full is not only not morally obligatory, but morally problematic -- even wrong.
In what way might the pensions of Detroit be this sort of problematic promise?
By way of answer: think of debt as a kind of time-traveling. One of the wonderful things about debt is how it enables one to ‘travel' -- not to far-away lands but to far-away times -- and extract the resources one ‘finds' there. Such time-traveling can be morally innocuous. For instance, we often borrow against our future selves' earnings; in this way we use promises to bind our future selves to pay for present plans. The future self will be ‘on the hook' for what we spend now. Such ventures to acquire the resource of future times are generally spoken of as ‘investing' in the present. And for those living in the present, this investment is a very good deal.
But what of those who are not in the present? What is the moral status of those who inhabit the future, and whom our promises have crossed time to bind? Do we have a right to promise for them? i.e. to travel, as it were, across time to extract their resources for our present needs? Or is there something fundamentally wrong with the project? Something chronically wrong -- even colonial -- with treating the future as a vulnerable and unresisting resource-of treating them as something akin to defenseless colonies -- a population we consider every year at the budget table or bond issue, and bipartisan-ly resolve to pillage at will?
The thesis that such economic adventuring is innocent is implausible; for it harms future persons in two ways.
The first harm is to the future economy. An example: the city of Detroit presently has annual revenues of $1.1 billion and spends 40% of this revenue on paying down the debt. At the present pace, in 2017 -- a mere four years from now -- it will be spending 65% on debt servicing. In a mere fifteen years, then, the city will be doing nothing but servicing debt, and the citizens who have not yet fled will be more or less told to service themselves. For its revenues have been pre-harvested by the past for the past; the old will have indentured the young and laid claim to the product of their labor before they plant; and this leaves -- not the physical but the fiscal environment devastated (though a quick drive through Detroit shows how the despoiling of the latter leads to the devastation of the former).
The practice of promising-for-others thus condemns future persons to ‘planting-for-others,' thereby both depriving them of services and pressing them into service, forcing them to bear a material burden through no choice or fault of their own.
If this is right, the response to the recent chants of ‘Stop the theft of our pensions!" is to turn it on its head, by pointing out that the promises made by debt instruments were themselves a form of inter-generational thievery. And the claim that the promise ought be kept might be vitiated by the counter-claim that the promise the pensioner would have us keep is one which, in its present form, is a promise that ought never have been made.
We can already imagine some furious objections.
A first critique might condemn us for calling pensioners thieves. However, instead we argue that the pensioners are victims as well. And in a democracy no pensioner by themselves extracted from the future a promise; they did not create the debt whereby the present helped itself to the future. But while this should increase our empathy with the position/plight of the average and admirably hard-working pensioner, there remains the questionable ethics of insisting a defenseless future nonetheless be forced to pay for a morally dubious promise. One may not be complicit in the construction of this chronological colonialism, yet still be complicit for insisting the colonialism continue.
A second objection: it might be that future persons also not only bear the cost, but also benefit from our ‘investments.' But even total equity of material outcomes (which never happens) still doesn't settle the question of whether we have a right to promise for them.
This gives rise to a crucial second harm. It is not merely that lengthy and large-scale debt -- here in the form of promised pensions -- harms the future economy; it also renders harm to future autonomy. It is not, after all, merely that we take from the future their resources, some of which we might give back. That is not the only issue. The issue is that by filling their lives with promises made by us (the past), we take from them the power to make their own. To the degree we commit some future soul to pay for plans we set in motion, to that degree we take from them the power to set in motion their own plans.
If the above settles the ethical inadequacy of the ‘Keep one's promises' trope, it doubtless leaves other matters unsettled. For instance, there may be services one cannot conceive of future persons not wanting; in such cases the colonial-thievery formulation is too strong; adjustments, not abolition, would then be prudent policy. Moreover, showing moral reason to transition away from the ‘promising-for' model of public finance suggests a further moral obligation to make this transition as easy as possible for those pensioners least prepared for it-a point with obvious and immediate relevance to more than one American municipality.
Nevertheless, considering present practice as colonial does give us a flip-side to the ethics of pensions, along with insight into a moral problem intrinsic to debt. It also exposes the nature of pension debt debates today as more than just a matter of governments making sure they fund their pensions, and suggests even if they did, they might still be acting against the interests of their constituents.
