Some time ago this paper surveyed the approach of a “perfect storm” of economic assaults on the U.S. private pension system. Not entirely unmindful of the weather, the U.S. Republican-controlled Congress, under the leadership of Sen. Chuck Grassley (R-Iowa) and new House Majority Leader John Boehner (R-Ohio), constructed companion bills promising to restore the U.S. pension system to stability.
The result of their efforts resembles FEMA’s preparations for Katrina. The pathetic legislation now being completed in a House-Senate conference committee, rather than strengthening the pension system, would actually weaken it, according to a little-noticed analysis by the government’s pension agency. After numerous changes, exceptions and blandishments pressed by airline, manufacturers and other lobbyists, the agency’s report projects that the House and Senate bills would lower corporate contributions to the already under-financed pension system by $140 billion to $160 billion in the next three years.
As the legislative response to this storm awaits a final vote, assets in American private defined-benefit pension plans took a step backward in 2005, dropping 2 percent to $1.769 trillion, according to the Federal Reserve Board’s flow of funds data. The levees, so to speak, are already breached.
That shortfall raises the certainty of more pension plans failing. These liabilities will, of course, fall on working-class taxpayers. (The same legislators want to make the mammoth Bush corporate tax cuts permanent.)
According to Jeremy I. Bulow, an economist at Stanford University specializing in pensions and Social Security, “It takes a better economist than me to understand how reducing contributions by that much is going to protect benefits and put the system on a sounder footing.”
Can’t trust private industry
The lessons of this sad tale are two: First, private industry cannot be trusted with management of any long-term social responsibility like pension benefits for employees. And second, our bought-and-paid-for Congress cannot protect us from this failure.
The choices for working people who want to keep their pensions are also two:
• Compel corporations to fulfill their responsibilities.
• Completely nationalize and reorganize the U.S. pension system, removing corporate prerogatives altogether.
Both solutions would require dumping the (with a few noteworthy exceptions) bought-and-paid-for Congress. But, like health coverage, many employers would actually heave a sigh of relief (after appropriate genuflecting to the gods of anti-socialism) at losing another burden blocking investments in the areas of their expertise.
Anyone who has ever watched the very brief moral struggle taking place behind the eyes of a CEO balancing quarterly profits against 30-year possible liabilities or, heaven forbid, a social responsibility, will not be surprised at this sorry outcome. The corporate-owned Congress, despite the threat of ruin for millions of workers, will also grieve but briefly, trusting that their preferred but largely discredited “private savings account” philosophy will now take root as the replacement for private pensions. A blizzard of blame directed at unions “excessive demands” will no doubt be the song these cowardly varlets sing to deflect the judgment they richly deserve.
Seniors are becoming enraged, and so they should be. Lets dump this poisoned parliament of putrid poltroons calling themselves congressmen in 2006, and start afresh with a new, Peoples Retirement Program.
That program, in my view, should discard employer-managed pension funds completely in favor of a publicly regulated mix of government and participant-based plans. All assets and liabilities of existing plans would be transferred to the control of such funds. The California State Employees Pension fund and TIAA-CREF, the academic and research employee fund, are two working models that, though not trouble-free, stand head and shoulders above corporate managed funds.
Further, retirement expenses are inevitably bound up with medical expenses. And a solution to fundamental reform of retirement fund management is unlikely to be found without the nationalization of health care.
Since the nation’s net pension liabilities currently exceeds actual assets by nearly $600 billion, and this shortfall is the direct result of underfunding by corporate pension management, these liabilities should be satisfied through corporate taxation or some other means of recapitalizing the underfunded plans.
This approach can liberate those companies that truly want to focus on genuine competition and secure the hard-earned retirement security of working Americans.