The Flight From Pensions
There is one certainty should the troubled pension plan system go broke. Taxpayers would be pressured to bail out the federal agency that insures traditional corporate retirement programs. Our advice for taxpayers when Congress comes knocking? Just say no.
Federal law doesn’t require taxpayers to bail out the Pension Benefit Guarantee Corp. It’s troubling that anyone in Washington would think of asking taxpayers, most of whom will never enjoy the security promised by a traditional pension, to surrender hard-earned dollars so airplane pilots and steel workers can enjoy a more comfortable retirement. Who’s going to bail out the worker who can’t afford the grocery bills and rent?
We could always stick our children with the growing retirement plan shortfall. But that could prove nettlesome given record federal budget deficits that already are part of their inheritance and the growing likelihood that they’ll also be forced to bail out Social Security and Medicare. That leaves a national policy that makes it every man and woman for himself or herself in retirement. That’s what it all seems to be boiling down to: a sorry string of broken promises.
Experts hold up the familiar three-legged stool to illustrate solid retirement planning. But Washington’s seeming inability to shore up the Social Security system’s long-term finances is inviting termites to nibble on one leg. United Airlines’ plan to dump $6.6 billion of its pension liabilities onto the troubled PBGC underscores how anxious corporations in “legacy” industries (where pensions are most common) are to kick out the second leg.
That leaves -- drum roll, please -- personal savings to pick up the slack. So it’s foolish to think that individuals who are barely able to save for their own retirement would be able to bail out neighbors whose promised monthly pension checks are in jeopardy.
This analysis may be too cold for the real world, and in the end some tax money will inevitably be used to rescue at least part of those promised corporate pensions. But it remains unfair to pensionless workers.
Congress needs to at least make it easier for people to save for their own retirement. Some of the sensible proposals being floated by the likes of Peter Orszag, an economist at the Brookings Institution, entail having companies automatically set up paycheck deductions that would go straight into an employee’s IRA or 401(k) account.
Meanwhile, you can hear labor unions and big corporations trying to push their joint burden onto society’s broader shoulders. They’re really promoting a pyramid scheme, one that worked for the steel industry. It is now playing out in the airline industry and very well could spread to the domestic automobile industry. A financially troubled company (say, US Airways) uses U.S. Bankruptcy Court to shift its pension liabilities onto the PBGC. United, already struggling, finds itself at a competitive disadvantage and does the same. Delta and American carry the same “legacy” costs as United and US Airways, not to mention domestic automakers that are burdened by significant retirement promises.
What’s curiously absent in Washington is a blanket guarantee that less fortunate Americans won’t be conscripted to bail out their neighbors. And any talk of a universal retirement program that would promote savings beyond Social Security for all workers, not just those who earn enough to save well for retirement. It’s time for an earnest discussion of both of those ideas.
