Veto This Pension ‘Reform’
The pension “reform” bill that passed the Senate 86 to 9 in late January was pushed by a potent combination, big business and organized labor. That powerful lobbying combination now hopes to harness election-year politics to stymie a threatened White House veto. But President Bush should stick with the warnings of three Cabinet secretaries who fear that the bill would further swell a huge funding deficit in the retirement system.
The Senate’s sweet deal would allow companies to scale back contributions to pension plans by $80 billion over two years and give the troubled metals and airline industries $16 billion in special relief. Labor unions went along because the bill promised to free up cash that could be used to protect wages and benefits. But the Senate vote came just days after the troubled Pension Benefit Guarantee Corp. warned that this country’s pension plans were underfunded by a collective $350 billion.
The Senate measure would reward companies that ignored financial obligations during the unprecedented bull market of the late 1990s, when pension fund contributions averaged just $26 billion per year (in 2002 dollars). During the early 1980s, pension plan contributions averaged $64 billion.
Right now, the $350-billion funding deficit is a private-sector concern because the Pension Benefit Guarantee Corp. is funded by contributions from companies that offer pensions to 44 million Americans. But taxpayers -- including the millions without private pensions -- risk being saddled with a huge bill if the PBGC, with its record $11.2-billion deficit, fails.
Treasury Secretary John Snow already sees troubling similarities between the growing pension fund crisis and the 1980s savings and loan bailout that cost taxpayers more than $150 billion.
The House passed a narrower pension relief bill that doesn’t include the airline and steel bailout. The Senate should accept the House version in a coming conference committee, which should also jettison the $80-billion corporate gift.
Failing that, Bush should listen to his advisors, exercise his administration’s first veto and send the muddled excuse for reform back to Congress.
Safeguarding traditional pension checks is but one piece of a complex economic puzzle to be solved as baby boomers move into retirement. But no part of the fragile system should be given added reason to fail.
