Democrats Support Yet Another Bailout
November 5, 2010
The so-called Create Jobs and Save Benefits Act of 2010, introduced by Sen. Robert Casey (D-Pa.), is a microtargeted bailout for underfunded union pensions that could cost taxpayers billions, say F. Vincent Vernuccio, labor policy council, and Ivan Osorio, editorial director and fellow in labor policy, at the Competitive Enterprise Institute.
- The bill would create a special fund in the Pension Benefit Guarantee Corporation (PBGC), an agency chartered by Congress that insures private sector pensions.
- The PBGC is funded through premiums paid by private companies to insure retirees if a plan sponsor were to become insolvent.
- Casey's bill would direct taxpayer dollars to shore up some underfunded union pension plans.
Casey's bill would create a new fund for the PBGC called the "fifth" fund, which would be "obligations of the United States." In other words, taxpayers, not just PBGC premium payers, would be on the hook. Money in the "fifth" fund would go to "orphans" -- employees whose employers have stopped contributing to their plan -- of certain existing pensions.
Phyllis Borzi, the assistant secretary of labor for the agency in charge of pension plans, is skeptical that the legislation will fix the current situation. She commented that the root of the problem is a sharp decline in the number of new employers joining union pension plans and a dramatic drop in the ratio of employees to retirees.
Estimates on the bill's cost vary widely.
- Sen. Casey very conservatively predicts the bill will cost $8 billion to $10 billion.
- News outlets such as the Wall Street Journal, Washington Examiner and Fox Business estimate the bill could cost as much as $165 billion.
Source: F. Vincent Vernuccio and Ivan Osorio, "Democrats Support Yet Another Bailout," Competitive Enterprise Institute, November 1, 2010.
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