Sometimes it helps to understand the other side if you try to put yourself in their shoes...

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Pension Management Strategy

As per your request concerning our conversation of last week on proposed pension legislation, I am forwarding these notes to you summarizing my comments. You will recall we discussed broad strategic issues, not details as to Plan funding or benefits. I also wish to point out that although I stand by these remarks, I owe a debt to our Party's legislative delegation for their contributions to the overall strategy they have devised in conjunction with the Caucus and our consultants and other stakeholders, now taking shape and being implemented at the national level. For obvious reasons, the symmetries between political realities in both arenas suggest that tactics regarding entitlement reform can easily be applied to those same issues locally. For the security reasons you pointed out, there are no other copies, paper or electronic, of this document. You can rest assured plausible deniability can be maintained.

The constituencies affected in this matter are as follows. They are listed in increasing order of the potential negative effects of reform, from low to high, (roughly correlated with age) and consequently, in the anticipated level of political opposition to our proposals which can be expected from each category, or level.

1) Those not in the system, either because they are not or never were employees, have no expectation of becoming employees, are not covered by the Plan, or because they are too young to work or even unborn.

2) Those who have contributed to the Plan, but are not vested.

3) Those who are vested, but not ready to cash out or retire.

4) Those approaching retirement and planning, if not depending, on receiving benefits.

5) Those currently collecting benefits under the Plan.

As one would expect, our polling confirms the higher numbers will vigorously resist any Plan modifications and will organize politically (many already are) to lobby against them. To put it bluntly, they represent an insurmountable obstacle to any form of reform they perceive as against their interests. And they vote. Our political opponents can also be expected to invest heavily to get the word out to this demographic as well. The results of this activity can have disastrous consequences for both our program and our Party. These higher-numbered groups must remain convinced that they are not targeted by any potential changes in their pensions, that they are "grandfathered" in, and that they need not be concerned about the impact of any reforms on their benefits. In fact, it may even be tactically useful to increase their benefits and pass those costs to the lower number categories, as long as those increased costs do not contribute to the Plan's future solvency. If the Plan is perceived to be in trouble, newer members may well recognize the futility of being dependent on it and demand its removal, and they will challenge the legitimacy of their higher level colleagues who are soon to benefit. And of course, we must keep in mind Plan funds represent a potential and substantial financial resource perhaps utilizable in a more productive manner.

For the lower numbered levels, these considerations are less compelling, retirement is in the far future, and present issues and problems dominate personal planning. But they still pay. Immediate cash on hand trumps the promise of future payouts every time! These groups will feel less urgency and perceive less threat in substantial changes to the Plan. As a rule, they are also younger, have confidence in the future and in their ability to prosper in a more entrepreneurial environment, and have already come to a realization that traditional pension plans offer less in the way of long term financial security. They are particularly sympathetic to privatized savings and free market alternatives to traditional pensions. It is here where we should focus our public information efforts and target negative modifications to Plan details. This group will grudgingly accept larger withholding contributions, increases in vesting requirements, and delays and postponements to retirement age, as well as outright benefit cuts, but they will most likely blame this on the senior members of the plan, not on us. These actions will of course be resented and resisted, but not with the ferocity and urgency we can expect from those retired or on the verge of retirement.

There is the key advantage of this strategy. Those workers in the lower number categories will come to resent the more generous future benefits and easier past contributions of higher number workers, will see themselves in competition with them for a shrinking benefits dollar, and become even less interested in supporting the entire pension concept with their vote. As the number of well-to-do pensioners declines through attrition, the younger, less-satisfied workers will be less inclined to support the entire concept. They will be more eager to cash out early, or to seek other employment altogether which will increase financial stress on the system as a whole. There are other advantages. With decreased viability, the demand for pensions as an employment benefit will go down, and it will be easier to implement even more comprehensive reforms in the future. One can even expect conflict between older and younger workers, which will make it easier to present our case to the younger generation as the older, more intransigent one dies off and is voted down by a younger majority. The younger worker must be helped to see that his family's welfare is being sacrificed for the benefit of the older worker, and encouraged to do something to stop it. They must be led to understand that they are in direct competition with the older pensioners for a shrinking benefits dollar. The utmost delicacy in carrying out this strategy must be observed, lest we be exposed to the usual tedious charges of attempting to divide-and- conquer and instigating class warfare.

Similar strategies can also be applied to other benefit programs.