DECRYING THE UNION PENSION BAILOUT BILL
April 13, 2010
Sen. Robert Casey (D-Penn.), wants Americans to bail out union pension plans underfunded by hundreds of billions of dollars. Casey's bill, the Create Jobs and Save Benefits Act of 2010, is similar to that of Reps. Earl Pomeroy (D-N.D.), and Patrick Tiberi (R-Ohio), who seek to bail out pension plans with their proposed Preserve Benefits and Jobs Act of 2009, introduced last fall, says Diana Furchtgott-Roth, a contributing editor of RealClearMarkets and an adjunct fellow at the Manhattan Institute.
Under these bills, the Pension Benefit Guaranty Corporation (PBGC) would, at the request of the plans, have the authority to take over the pension obligations of employers who have withdrawn from the plans, and pay the benefits out of taxpayer dollars, says Furchtgott-Roth:
- Once the PBGC shoulders that obligation, it would keep making payments until the last retiree or designated survivor dies.
- Since many multiemployer plans are in financial difficulty, this legislation, if enacted, could dramatically increase the federal deficit, putting even more pressure on the American taxpayer and the economy.
- Depending on events, it might add billions to government spending -- current underfunding levels are estimated at $165 billion-bumping up future deficits.
By bailing out the plans, Congress would compromise the remedial provisions of the Pension Protection Act of 2006. The Act requires underfunded pension plans to put their houses in order by raising retirement ages; increasing contributions by employers, workers, or both; and lowering benefits. A bailout would remove any incentive for multiemployer pension plans to reorganize their plans responsibly, says Furchtgott-Roth:
- Neither bill has been voted out of committee and reached the floor of the House or the Senate, nor have hearings been held, however, the bills have generated support from unions and employers.
- Unions want to be free of pension obligations so that they can focus on higher wages in future contracts; employers seek to avoid higher contributions.
With deficits stifling the economy, making the taxpayers already in trouble themselves, pay for underfunded pensions is manifestly unfair. Yes, Casey's Create Jobs and Save Benefits Act would save benefits for workers and retirees. But spending billions of taxpayer funds on failed pensions would swell the deficit still further, harming the economy and destroying jobs rather than creating them, says Furchtgott-Roth.
Source: Diana Furchtgott-Roth, "Decrying the Union Pension Bailout Bill," Real Clear Markets, April 8, 2010.
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