Public Sector Pensions: The Real Bailout Bomb is Still Midflight
by Kyle OlsonWill the madness ever stop? Just over two weeks ago, Congress passed a $10 billion “Education Jobs Fund” that gave money to cash-strapped states to keep teachers and other school employees on the job. It was spun as a victory for the kids, but the real winners were the teacher unions who were spared from making any concessions on pay and benefits that are necessary to balancing school budgets.
Once that $10 billion is spent, the structural problems of school spending will still remain. A recent study from the Manhattan Institute and the Foundation for Educational Choice finds that “teacher pension liabilities for all 50 states now total almost $1 trillion….almost triple the cost of what state officials have on their balance sheets.” The study concludes that these unfunded public burdens “could bankrupt state budgets including education programs.”
While the teacher unions won a temporary victory, we have to believe that they are paying careful attention to another, bigger bailout that is lurking in the shadows. And this time, there is more at stake than just a few billion dollars. If this latest bailout becomes law, it will mark the first time in American history that tax dollars are used to fund the pension plans of private—unionized—industry.
The teachers unions know that their lavish pension plans will result in a financial tsunami for the states. Should this new bailout go through, it will pave the way for a massive bailout for the teacher unions, the likes of which have never seen. This is a very big deal.
In late July, Sen. Dick Durbin (D – IL), the second most powerful Democrat in the U.S. Senate, announced that he is supporting the “Create Jobs and Save Benefits Act of 2010.” This proposed bill that would make certain labor union pension plans the “obligations of the United States.” Put another way, the American taxpayer will be on the hook for financially disastrous pension plans.
Here’s how it would work. Congress would specifically bail out troubled Multiemployer Pension Plans (MEPPs). These pension plans are used in the transportation, construction, and entertainment industries (among others) in which workers regularly change employers but stay working in the same field. Instead of having each employer set up a unique pension plan, MEPPs establish a general pension fund that employers pay in to at a rate determined during collective bargaining sessions with the union. Unlike traditional pension plans that are controlled entirely by the company, the unions help manage the MEPPs.
Death By A Thousand Cuts
The MEPP system may work okay when the economy is humming along, but its structural flaws quickly become evident during a recession. Since the beginning of this current economic downturn, a large number of companies have gone out of business. As a result, fewer employers are paying into the MEPPs, and those employers are having to pay more and more into these pension funds just to keep them afloat. Employers are in danger of death by a thousand cuts.
If the unions were responsible, they would head back to the negotiating table and rework their pension agreements to make them sustainable. But why do that when there’s bailout money to be had?
Here’s where Congress enters the picture. The bill supported by Sen. Durbin would take the pension benefits of workers whose companies have gone bankrupt and put them into a separate account. This new account would be administered by the Pension Benefit Guaranty Corporation (PBGC), a government run insurance fund for pension plans. Currently, when a pension plan goes bust, the PBGC takes it over and uses the insurance premiums paid by its members to cover the costs. But since the PBGC itself is more than $20 billion in debt, that is not a viable solution.
Under this proposed bailout, these new, separate pension accounts (called the “partitioned plan”) would become the “obligations of the United States.” In other words, the multiemployer pension plans would be given a clean bill of health after the taxpayers make them whole. As Yogi Berra might say, “It’s deja vu all over again!”
In testimony before the U.S. Senate, Assistant Secretary of Labor Phyllis Borzi put it this way:
“The proposal ultimately makes the taxpayers liable for paying the benefits of the partitioned plan. Currently, no other benefit obligations assumed by the PBGC are subject to the full faith and credit of the U.S. government.”
Read that last sentence again and let it sink in. What’s being proposed by the happy-sounding “Create Jobs and Save Benefits Act of 2010” is unadulterated socialism. Should this bill pass, unions will know that no matter how reckless and irresponsible their demands are during a collective bargaining showdown, the U.S. taxpayer will be forced to come to the rescue should their employer go bankrupt.
“We want ours!”
This proposed bailout needs to clear a few major hurdles before it can become law. The first hurdle: the American people are sick of bailouts. That’s why supporters are selling this as a jobs bill. They argue that if the taxpayers take responsibility for these pension plans, employers will have money freed up to spend on job creation. This is the “Rebecca of Sunnybrook Farm” approach to economics: it’s nice and simple, but it has no basis in reality. Adding more debt (which will need to be paid back in the form of higher taxes) is no way to grow the economy. Not even the bill’s supporters believe this. But by labeling something as a “jobs bill” instead of a “bailout,” they hope enough people will be bamboozled into supporting it. Hey, it worked for the teacher unions.
The cost is another major sticking point. Supporters of the bailout argue that it would “only” cost around $10 billion. Here’s how a spokesman for the International Brotherhood of Teamsters put it: “We’re not asking for trillions of dollars like the banks get. We’re just looking for temporary relief for pensions that lost money in the stock market crash.” Translation: “We want ours!”
The $10 billion price tag for the bailout is laughable. A 2009 analysis by Moody’s Investor Services looked at some of the largest MEPPs in the nation and concluded “that these plans are collectively underfunded by upwards of $165 billion.” What’s going to happen to the other $155 billion? Does anyone really think this bailout would stop at $10 billion? Anyone?
The Senate bill and its counterpart in the House of Representatives are currently hung up in committee. It looked like the union pension bailout was going nowhere until Sen. Durbin threw his weight behind it. This has fueled speculation that the Senate may try to push this bailout through later this year, after the November elections. Even though there is no appetite among the public for another bailout, organized labor might demand that Congress jam it through. Big Labor is already upset that their friends in Congress have not passed “Card Check” legislation which would do away with secret ballots when employees are deciding whether or not to join a union.
If this bailout fails to get through this year, rest assured the idea isn’t going away. The unions can’t afford to let this issue go away – there’s too much money and power at stake. It’s true they could get by with less, but that’s simply not the union way.
There’s a scene in the 1969 film Butch Cassidy and the Sundance Kid in which the duo is being relentlessly pursued by a posse. Exhausted and exasperated, Cassidy wonders aloud, “Who are those guys?”
That’s how the American taxpayer must feel about those continually seeking bailouts. In this case, the pursuers are from Big Labor. And you can bet they will soon be joined by the National Education Association and the American Federation of Teachers.
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62 Comments
This will pass too. You know how? The unions will go to the RINO Republicans and tell them that there will be huge campaign contributions and no opposition for their elections and that will get them the Sisters of Socialism (Snow and Collins), Scott (I can swim!) Brown and Grahamnesty. This will be the source of all future election contributions for Democrats as they will use taxpayer money to replenish pension plan liability funding shortfalls the contributions took away. Yet another example of how you use taxpayer money to sustain the wealth and privileges of the ruling class. This is a self-sustaining system that guarantees power for these people into perpetuity and you are going to be the one paying for it all.
There is a war coming to America. The war will pit the ruling class elites against us and the war will be won by the most ruthless – those willing to do whatever it takes to win. Our choice is to fight to the bitter end or to accept their proposal of perpetual slavery that doesn't even flatter us with chains.
Choose.
The more the bully Unions push for their "Bail-out$" and the more they ROB America, in plain sight, for their nefarious agenda, the sooner America will push back, and Unions will find themselves with their backs against the wall. Don't underestimate a capable and furious electorate!
Ponzi schemes always fail – eventually.
The insatiable appetite of Unions and this socialist Federal Government, to rob, use and Abuse U.S. is coming to an end. Don't believe U.S? Watch.
I agree one hundred percent.
yes but its a Pnzi scheme that leaves us tax payers with the bill.
Every friggen day they come up with a new way to stick it to the honest hard working Americans. I "can't wait" to see what they come up with after November.
This is what we get when we leave such important decisions in the hands of the all beneficent government and their co-conspirators in the public sector unions. When are people going to wake up and realize our nation is heading in a free fall straight to communism. This government is flat out of control and it must be stopped.
/bites tongue
If they get this bill they do not need marshal law to sustain a tyranny into perpetuity. The use of this mechanism will allow them to use unlimited taxpayer funds to pay for the campaigns of liberal-progressives and there will never be a Republican majority in the future to stop it. Just as was the case in Germany and Russia you are voting for one thing, while the letter of the law allows them to accomplish something else altogether. This will give them a permanent lock and that permanent lock means a dictatorship of the liberal-progressives that cannot be repealed under our system. They get there and nobody will ever realize in the future how it happened. It will just be.
You obviously don't understand how deposit multiplication works in fractional-reserve banking. They can make us pay for this so that they can fund unlimited campaign contributions to liberal-progressive candidates into perpetuity. This will give them a permanent seat of power that is no different than what the Soviet Union and China experienced.
I had an argument a while back with a co-worker about pensions versus 401K's. This jacka** assumed that a pension had to be paid because the company promised. We were talking car companies and unions at the time. I was arguing in favor of 401K's. My coworker couldn't seem to comprehend that if a company went belly up there would be no money to pay out, whereas with a 401K the money goes to you up front with no follow on requirement from your employer.
There's risk in every investment. For a company to give you your retirement money up front you only have to worry about how the investments are going and less about the health of the company.
For disclosure, the company I work for has a generous 401K matching program. Also I have been taking a real beating on my investments lately cause I was heavily into stocks more than bonds. It's been so bad I don't even want to look at them. But all in all, it's still my money and I'm not subsidizing someone else's retirement with my account.
That's why unions and democrats don't like 401k's. They can't control you through them. Although liberals have floated the idea of nationalizing all the 401K's just as Argentina has done to mitigate their own mismanaged budgets.
Remember this any time you see some moron on the left talk about "greedy (insert entity)".
We can call the de-funding bill the 'Keep our fluffy kittens and puppies away from the meat grinder act' . Take that, Turban Durbin.
Unbelievable…absolutely unbelievable. I think the key is to shame them. They act like kids and kids hate to be shamed.
America needs to bust the B@lls of unions. They need to either be elimated completely or let those that wish to be in one fend for themselves. Not one penny from should come from anyone but the workers that support unions. Your pension is underfunded? Then string up your unions reps for ripping you off. Don't blame America for your complete failure. All I need to do is look at that fat bloated carcass Trumka and it's all I need to remind me who truely runs unions.
An even more basic question is when will people wake up to the fact that we are dead *** BROKE! This "bail out" will come from borrowed Chinese money or printing presses running non-stop. We can't afford to spend a DIME, much less bail out some evil self serving union.
I want mine and I am getting mine!!! I'm working for it! Stop this insanity! Stop ALL bail outs!
I don't like having what's mine stolen from me. I won't stand for it. As we have seen over the last 14 months, there is an engagement of the American people in the political process that is unprecedented. This will NOT abate on Nov. 3rd. It will continue to grow and anyone that thinks that business as usual is the norm best look out. The strom is just beginning to rise!
Make us pay? Hardly. Assign us debt……
The problem with the public sector is nationwide, salary and pensions are all out of proportion in the public sector.
But that's not the real problem, that's that both parties are to blame for it.
Absolutely
Yep, the dims just keep on taking.
What these Statists and union goons fail to realize is that eventually our economy will bleed out and 'reset.' Hyperinflation is on the horizon. Their gold-plated benefits are going away whether they like it or not!
It's just about a choice between this and dispersing yet another bonus army. We will not like what happens when these people line up for their handouts, and their is nothing left to hand out. Ten more years of the crap we are getting now will push us to that point. Somebody has to say "No" to these moochers.
Only if the "furious electorate" is willing to fight to win convincely. Remember the current admin and congress are beholden to the unions and special interest groups for those generous contributions.
There is NO WAY IN HELL the average American taxpayer will pay for the pensions of these union sectors while THEIR pensions have been trashed by this administration. It AIN'T gonna happen. In November these clowns will be wiped from office forever. This legislation will not even get out of conference and will, therefore, be soundly defeated by Republicans.
It's over for you union asses.
"Who Are These Guys"
We are the unrepresented and the recently undead, awakened to the fact that we are already in Bolivia.
SENATE TO SNEAK THROUGH BILL ON INTERNET KILL SWITCH:
http://www.infowars.com/senate-to-sneak-through-i...
But what are our two RINO's here in Maine going to do if they lose, it takes Collins so long to say a simple sentence that nobody would hire her because she looks and talks like a retard, Snowe is so ugly she would have to get a job where nobody could see her, she scares little children.
We are already paying, last statement, Savings .32%, CD's .75%.
I only wish shaming them would work. Unfortunately dictator socialists have no shame. Trying to shame them looks like victory to them. They thirst for power and money. Their slaves are invisible to them. They are Narcissists. Narcissists couldn't care less about the welfare of their partners & families. They only see them as Supply Depots for their own use. We need to take the Power and the money away from them.
I lost money in the stock market. Where's my bailout?
Beware the lame duck session after 2 Nov. That is when the push comes. This will truly show us whether the repubs have brass or cotton ones, or none at all. Watch the rinos closely.
We are beginning to look more like Greece every day.
What scares me is the fact that Arizona, got back to stupid with John McCain after I believed that they would lead the way. The same thing will happen here in Maine with Collins and Snowe.
Oh no. These Socialists in power in our Fed Govt. need to be Impeached now, for High Crimes. We cannot wait until November.
Remember the lame duck will likely include such conservative stalwarts as Climate Change McCain, don't be so sure the lame duck won't include the RINOs returning to their true fiscal roots of big government spending.
an RAF Lancaster with a 'bunker buster' most likely being dropped on the Graf Spee…
Sorry, couldn't help ourselves on that. Yes, the real 'bomb' is the public pension sector. Just ask the Governator about it. Public service unions pretty much killed off his political career five years ago. Just think: Prison guards in CA can retire at 45 and earn 90% of their salary FOR LIFE.
Not bad work if you can get it.
And those rascals in Bell, CA who voted themselves $900,000 salaries while the median income in the town is $25 grand? What a bunch of kooks there, eh? The avearge salary of a bureacrat is now roughly DOUBLE that of the private sector.
November cannot come soon enough…
I feel for you. You will be betrayed by those two. Without a doubt. Those two women will do anything to sustain their own power and privileges.
Are you "poor" yet??
right. that's got to stop.
Never been poor. I've been broke, but that's different. Poor is a state of mind that is hard to escape. Broke means you don't have any money now (but doesn't say anything about the future).
I want to be a bureaucrat when I grow up.
Problem is, I'll probably never grow up.
They will need an enforcement department. This dept. must be ruthless, brutal and unrelenting. The IRS will not work in this aspect as the IRS contains elements of Christianity and independent thinkers. Only the One World Religion fits this bill, Islam and its Shareah law. Persecution through shareah is their goal. Mark of the Beast comes.
It makes me wonder whether mclame bussed in voters from CA. However, the option wasn't so great either. It was more or less a vote for the lesser of two evils.
You miss the point. They can call it democracy without enforcing anything. Once the money system is in place, they don't have to worry about standing for election ever again. It's all paid for in the same manner as any other government bailout – they will use unlimited taxpayer funds to support their own elections and there will be no other candidates as these candidates won't be able to raise enough money to compete. They win just as surely as if it were People's Congress in North Korea. Remember, North Korea is called the People's Democratic Republic of Korea, but nobody thinks it is a republic and nobody has ever seen democracy there. This is the same thing. We'll just use the treasury to get to the same place as a coup would get. This is their bloodless, benign dictatorship they have been dreaming of.
Looks like a Grand Slam but I guess it could be a Tallboy.
You need to be a union member to get a bailout. It's the votes, don't cha know.
Didn't Reality TV report that for Vallejo Cal to support its pensions it couldn't afford police and fire.
Refuse to raise the debt ceiling.
Screeching halt.
FDR had the same love affair with the unions, went so far as looking the other way when crimes were committed.
We sure have some big time fixing to do, and it's not going to be pretty.
I'm hoping the same doesn't happen for us here in Nevada.
I wonder if the millions annually spent on political contributions and lobbists are part of the problem with the union pensions. Do the dues paying members all think that the dues they pay should go into their pension plans… or do they want them to go to the political campaigns and lobbying? Seems to me this should be the first step the unions take to help them selves. Oh, there I go… expecting someone to do for them selves – imagine that, what a concept! 68 more days…
Breitbart should show the VIDEOS involving GANGS of BLACK YOUTHS roaming the IOWA STATE FAIRGROUNDS yelling "BEAT WHITEY NIGHT" and then BEATING UP WHITE PEOPLE. Police won't even call it a hate crime. Apparently it's not a hate crime if the victims are white.
YOUTUBE "BEAT WHITEY NIGHT"! http://www.youtube.com/watch?v=7qeMslmDBxY
Only heads on pikes (figuratively speaking all you NSA info gatherers) lining the streets of Washington will stop the malfeasant in Washington. Put the fear of GOD into these liars and reprobates.
Not without some beatdowns first.
Yes, but it will only work if they beleive that the US citizens are like the people of N. Korea. We are not in any way like that. The unlimited taxpayer funds will not exist when taxpayers refuse to pay. HERE is where they will need a law to enforce their will and take our rights from us and maintain some kind of order. Only shareah law fits the bill here and Muslims will be happy to be the enforcers. Do Not Accept their Mark.
No pensions have been trashed by this administration! I challenge you to name ONE!
Good thing Bush was unsuccessful in his social security privatization scheme!
I like the idea of union bailouts, anytime a union pension problem arises raid the union's coffers. Use the money from union dues to pay what the union employees believe is due to them, I think the irony will be delicious. What was the phrase again…everyone needs to have some skin in the game?
Correction:
"If the unions were responsible, they would head back to the negotiating table and rework their pension agreements to make them sustainable. But why do that when there’s bailout money to be had?"
These negotiations are in fact taking place. YRC Teamsters have ratified two wage concessions and an 18 month reprieve to the MEPP's and their pension credit. Any further contract concessions will, of course require ratification as well. But if the remaining MEPP companies are required to pay for "orphaned" pensioners, they will not survive. Jobs will be lost and there will be substantial damage to the countries transportation infrastructure.
More… https://docs.google.com/document/edit?id=1dOUnMr8...
We absolutely need a pension bail out and only the federal government must step up with the perfect solution. Here is how. Immediately tax all excessive public pensions (you pick a number) with a federal excise tax. Find out whatever jurisdiction is responsible for funding such outrageous pension and grant the money back to current officials. Empower them to spend this money in any way they want. Presto. Bypass the local and state politico/employee sweetheart deals. Allow them to pass whatever they want in pensions then take it back. Only the feds have the power to collect such an excise tax. This would result in perfect symmetry. Tax those who receive the benefit. The good people of Bell have provided a case study of why this is absolutely essential. Tax the rich!
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