Letter-writer Victor Capece argued that public-sector employees considering the implications of Detroit’s bankruptcy will conclude not that they must negotiate fiscally sound benefits but rather that they must seek to maximize short-term benefits [“Detroit’s lesson for unions might not be the right one,” Dec. 7].
There is a third way, however.
As Mr. Capece pointed out, municipalities can change dramatically over time. Requiring a local government to underwrite the retirement benefits of public-sector employees can have ill effects on both that locality and the benefits. However, if retirement benefits are severed from the local tax base, through the use of 401(k)s and similar investment vehicles, retirees will not be dependent on the vagaries of their local economy. Major corporations made this transition years ago, and the self-employed have had only this method to plan for their future.
As a consequence, as a town or city loses population, its tax base remains appropriate for its needs without the drag of taxes to support retirees based on formulas that did not incorporate the possibility of a smaller population or worse economy.
Robert Pokras, Silver Spring