From the Judge's Chambers: This is what Greece looks like

By William C. Whitbeck The various Occupy groups around the country have an interesting characteristic: the ability to come up with really puerile slogans, slogans that cry out for some type of adult response. The one I particularly like is: "This is what democracy looks like." Not really. More accurately, this is what Greece looks like. In Greece--home of the world's first democracies--the street mobs virtually run the place. They meet every attempt to deal with the country's out-of-control pension and debt costs with furious mass demonstrations and protests. They paralyze parliamentary debate. They vilify the nation's leaders. They hijack public attention. And the Greek street mobs show the same mixture of self-righteous anger and preening self-regard that was so earnestly on display in New York's Zuccotti Park. But our Occupy folks have another characteristic all their own: they absolutely will not look beyond the next protest. If they were to do so, they might get much more serious much more quickly. As an example of what looms out there, consider state and local pension costs. According to The ABA Journal, the Kellogg School of Management at Northwestern University estimated in 2010 that state governments have $3 trillion in unfunded employee pension fund liabilities and local governments have another $574 billion. And this does not include health care costs for retirees that The ABA Journal says may account to additional hundreds of billions, indeed trillions, in costs. So, what's that got to do with the tent-dwellers? Not much currently, as they are probably not bond-holders, taxpayers, or retirees. But if they might conceivably someday join one of these groups--rather than the latest street demonstration--they should keep in mind six words: Chapter 9; Pritchard, Alabama; and Rex Wall. Chapter 9 is an obscure section of the United States Bankruptcy Code that provides for bankruptcy protection for municipalities. According to The ABA Journal¸ Chapter 9 is "the bullying stepbrother to its Chapter 11 stepbrother because of its unstructured nature and onerous potential." The consequences of a Chapter 9 bankruptcy filing can be brutal. The city or county can stiff its creditors, most notably its bondholders. Bond buyers will then demand higher interest rates to compensate for this new risk. Bond issuers in the state, as a result, will pay more interest on every bond they issue after the bankruptcy filing. And the taxpayers, of course, will ultimately pay these added interest costs. Most directly affected, however, are the retirees. Take the case of Rex Wall, a firefighter and fire marshal in Pritchard, Alabama. The ABA Journal says that Wall worked for the city for 30 years and looked forward to retirement with a comfortable pension. But in 2009, Pritchard simply could not cover its unfunded pension liabilities out of current revenues and stopped paying its retirees' pensions. Wall, at 62, did not qualify for Social Security or Medicare. He could not find a job, fell into depression, and became chronically ill. Ultimately, Wall died alone in his home, unable to pay for his electricity, gas, water, and prescriptions. Before Wall died, he had joined in a class action suit against the city, seeking payment of $2.7 million in unpaid pension funds. Pritchard responded by filing for bankruptcy under Chapter 9. Experts view Pritchard as a microcosm of many of this country's municipalities. Faced with declining revenues and increasing costs, these municipalities simply will not be able to pay the legacy costs of pension and health care benefits for their retirees, benefits that they so generously bargained away years ago when the going was good. If Pritchard, Alabama is an analog for America's municipalities, Wall is every retiree's avatar. Rather than dreaming about the next rumble on Wall Street, the tent-dwellers of Occupy Whatever might stop demonstrating what Greece looks like and start remembering what happened to Rex Wall and why. Published: Thu, Dec 8, 2011