Democrat Doug Jones won a narrow victory over Roy Moore in Alabama's special Senate election, with write-in candidates pulling votes away from the Republican candidate and on the strength of voter turnout, especially by African-American voters.
African-Americans made up a higher percentage of voters in Alabama than during Obama's 2012 re-election. African-American women preferred Doug Jones over Roy Moore by a 98% to 2% margin. As Charles Barkley eloquently put it, "It's time for (the Democrats) to get off their a-- and start making life better for black folks and people who are poor."
In reality, it is time for politicians from both parties to address an issue that affects many Americans, but especially African-Americans.
That there is a looming pension crisis in the U.S. is well known. Pension funds have not adequately built up the reserves needed to pay their future obligations. What is less acknowledged is that this shortfall will most hurt African-Americans. And the impact will be felt beyond the individual retirees themselves.
Pension funds typically operate as follows. A pension fund collects money; in the case of federal, and state and local government, it can be collected in the form of taxes. That money is then invested in a mix of fixed income debt, equity securities and other asset classes with the aim of growing the investment to meet future financial obligations to retirees.
As a group, federal, state, local and corporate pension funds have major funding gaps. Estimates for the unfunded liabilities of corporate pensions of the S&P 500 companies fall in the $500 billion range. Federal, and state and local government pension funds are underfunded by anywhere from $2 trillion to $5 trillion. The low interest rate environment coupled with a stock market that has already risen sharply make it unlikely they will be able to close their funding gap.
The problem for state and local pensions is especially acute. State and local governments do not have the same tools that the federal government does to fix the problem. States can try and raise taxes, but residents can always move to other states; a "millionaire's tax" in Maryland was blamed for an exodus of some of Maryland's largest individual taxpayers.
The federal government can raise taxes, and U.S. citizens have little leeway in where they can move to avoid the higher taxes. The Federal Reserve can try and stimulate inflation to drive down the real cost of the pension obligations, an option that the states do not have.
States are legally restricted from declaring bankruptcy, and many are prohibited by law from reducing their pension payouts, thus increasing the likelihood of state budgets imploding and not making their pension payments. Given the federal government's own fiscal problems with Social Security and Medicare and the magnitude of the problem at the state and local levels, the federal government is unlikely to bail the states out of their messes.
Thus the problem appears to be the most severe at the state and local level. And this is where it will disproportionately harm the African-American community.
The employment metrics for the African-American community have lagged behind the majority of the U.S. population. It has a lower percentage in the workforce and a higher unemployment rate for those in the workforce. Those who do work are on average paid lower wages.
State and local governments are major employers in the U.S. According to the BLS, state and local governments employ nearly 20 million people and account for over 13% of total non-farm employment. These jobs have tended to offer good benefits and greater job security than private sector employment.
State and local government employment has been a bright spot for African-Americans. Though the data does not fully align with BLS figures, according to the EEOC, in 2015 African-Americans held 18.5% of all state and local government jobs, despite representing just over 13% of the total U.S. population. This follows a consistent pattern of African-American employment in State and Local Government. In 2005, African-Americans held 18.9% of State and Local Government jobs.
These jobs have been a particular boon for African-American women. In 2015, African-American women alone held 10.4% of all state and local government jobs and represented 22% of all women employed in state and local government.
Because of the higher rates of employment in state and local government, African-Americans are more exposed to pension failure than the rest of the U.S. population.
This problem is exacerbated by African-American population concentrations. States vary in their level of pension funding. Wisconsin's and South Dakota's pension funds are overfunded, while Illinois' and Kentucky's are severely underfunded.
States where African-Americans comprise a high percentage of the total population, such as Mississippi, Louisiana, Maryland, South Carolina, Alabama and Virginia, rank in the bottom half of states for pension funding.
States with large African-American populations, such as Illinois, New Jersey and Connecticut, have some of the worst performing pensions.
There are bright spots. New York, Florida, Georgia and North Carolina have large African-American populations and have some of the better funded pensions. But in aggregate, across the U.S., African-Americans are centered in states whose pension positions are below average.
The implications of the shortfall in pension funding are severe. Pension payments will eventually have to either be cut or the pensions will fail. Americans on the whole have not saved enough for retirement, and retirees are at a stage in life during which it is harder to return to the workforce.
Worse, a pension collapse has implications beyond the pensioners. Pensions are a path to building family wealth and better positioning future generations. Retirees often are at a stage in life in which they are past their largest bills. Homes are paid off, kids have moved on to live independently and start their own families.
Retirees with a steady source of pension income can help their children scrape together the down payment for a home, or contribute to their grandchildren's education and extra curricular activities. The loss of pension income could flip the retirees position from being able to help their families to one in which they become burdens on their family.
That many pensions will renege on their obligations is nearly a given. The magnitude of the issue makes it a national, not just a local, problem, and a generational problem as well. Thus the health and viability of pensions deserves more individual attention and public planning than it currently receives.
Yeshiah Grabie is an economist, M&A professional and writer living in Los Angeles.
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