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Politics : Politics for Pros- moderated -- Ignore unavailable to you. Want to Upgrade?

To: LindyBill who wrote (25707)	1/22/2004 3:35:13 PM
From: Lane3	Respond to of 793766

I think if we could raise it one year every five years for the next twenty five years, a good chunk of the problem would be solved. That doesn't address the problem of those who won't be able to afford to life in retirement. We can't just let them starve. So we will send them welfare checks every month instead of social security checks. Fiscally speaking, what's the difference? We'll still have that cost. Private investment will only take care of those who are better off. Congress now guarantees private pension systems. at a multi-billion dollar cost to the rest of us. You know, I came within a inch of working for those folks, a tiny agency, back in the late seventies. At that time, they were handling only a handful of pension systems and never anticipated how many companies would later dump their bankrupt systems on the government.

To: LindyBill who wrote (25707)	1/26/2004 2:03:50 PM
From: Lane3	Read Replies (2) \| Respond to of 793766

Post editorial on pension system solvency. Pension Perniciousness Monday, January 26, 2004; Page A18 NOT FOR THE first time, Congress has muscled up to an important problem, taken a good long look at it and resolved to make it worse. The problem is the vast hole in the nation's corporate pension schemes, and the perverse rules that helped create them. Congress's solution, championed in the Senate by an alliance of Sens. Charles E. Grassley (R-Iowa), Judd Gregg (R-N.H.), Max Baucus (D-Mont.) and Edward M. Kennedy (D-Mass.), is to reward the hole-diggers with what amounts to a $16 billion loan from taxpayers. About one in five private-sector workers has a "defined-benefit" pension, the sort in which an employer guarantees a certain pension to its workers when they retire. To pay for these future benefits, employers are supposed to put sufficient money into a pension fund; the problem is they often don't. The gap between money put aside and money needed in the underfunded pension plans comes to an enormous $350 billion. When companies go bust, the Pension Benefit Guaranty Corp., the government-backed entity that insures pensions, gets saddled with plans that are in deficit. As a result, the PBGC itself has a deficit of $11.2 billion, which taxpayers may have to plug eventually. As more companies go bust, more of the $350 billion problem out there in the private sector will land on taxpayers' shoulders. Why do companies run these pension deficits? Because regulations perversely encourage them to do so. If a firm gives workers a pay raise, it will have to pay for that immediately; if it gives them an increase in their pension, accounting rules allow it to defer the cost into the future. This deferral is especially tempting for cash-strapped companies -- which often means ones with a strong chance of going bust. Bethlehem Steel, for example, upped its pension promises and declared bankruptcy three years later. Wobbly companies that underfund their pensions would pay extra insurance premiums if the insurer were a private company. But the PBGC's rules do not allow it to price risk properly, adding a further incentive for shaky companies to hitch a free ride with the others. There is, as Congress is demonstrating, no political constituency for fixing this problem. Weak companies with underfunded pensions lobby lawmakers for permission to continue their imprudence; labor leaders from those same firms lobby lawmakers in the same direction; nobody is on the other side. In the deal currently being cooked up, a group of hard-pressed companies led by the steel industry and the airlines will be given a special break for two years; if any of these firms goes bust in the meantime, the public will end up shouldering the deficits, which is why the congressional measure amounts to a taxpayer loan. Yet taxpayer support for people in defined-benefit pension plans is a perverse notion. Fully one in two private-sector workers has no company pension plan whatever. Why should the less fortunate bail out the lucky ones?