Congress Wants to Bail out Pension
Funds at Taxpayer Expense ~ Liberty Planet
As the mainstream
media’s financial pundits focus on President Trump’s new tariffs, China’s
response to the new tariffs, politics surrounding the upcoming spending bill
and Facebook’s loss of value, one very important bit of financial news has been
almost totally ignored.
Amidst all the chaos
that surrounds Washington politics, Congress is quietly working on finding a
way to bail out pension funds.
Like all other bailouts, the hundreds of millions of dollars that would be
needed to pay for such a scheme would come from tax-payers.
The massive spending
$1.3 trillion bill that President Trump just signed contains a lot of hidden
surprises that a lot of people are bound to strongly dislike, including
conservatives.
One of the items not
getting very much attention is a provision snuck in by Congress to create a
committee that would use federal funds to bail out up to two hundred
multi-employer pension plans.
Congress also
considered a proposal pushed by private sector unions and employers to use
taxpayer money to
make loans to private, union-run pension plans. These loans would
essentially be bailouts under a different name.
The fact that the
government is even considering such plans is extremely alarming. There are over
1,400 multi-employer pension plans in the United States, and they are facing a
collective shortfall of over $550 billion. A quarter of all these plans are
expected to be broke within the next decade.
Given these stats,
Congress’ plan to bail out 200 plans seems laughable, especially when
considering the fact that the plans that would be bailed out are not even the
ones that are expected to go broke the fastest.
At the same time,
Congress’ willingness to throw taxpayer money at pension plans sets a dangerous
precedent. If Congress did in fact decide to bail out some pension plans, what
criteria would be used to decide which plans get bailed out and which do not?
Would Congress only bail out pension plans considered to be “too large to
fail”, leaving individuals who are part of smaller pension plans to fend for
themselves?
Another factor that is
well worth considering is the fact that many state pension plans are facing the
same funding problems as multi-employer pensions. States are already trying to
come up with ways to fund these plans so that current retirees and those who
are set to retire in the future can have the pensions promised to them. If the
federal government gives itself the authority to bail out pension plans at its
discretion, state governments will certainly take note.
Yet another problem
with the government’s plan to bail out pension funds is that this action would
most likely encourage pension funds to make unrealistic promises to future
workers, underfund pensions and then come calling on the Federal government to
pick up the slack.
While instability in
the financial markets coupled with long-term, historically low interest rates have made it very difficult for many pension funds to turn
needed profits, some politicians and pension fund trustees are making
investment decisions based on political correctness rather than maximizing
investment return. Many pension funds have been banned from investing in tobacco stocks, even though these pay high dividends and
consistently perform well. Pension funds across the country are facing calls to
divest from gun stocks and a number of liberal politicians are looking for ways
to mandate divestment from fossil fuels.
Taxpayers across the
nation should not have to fork over their hard-earned cash simply because
pension plans mismanaged their finances.
There is no easy
solution to the pension crisis facing the nation. People on the verge of
retirement, many of whom have contributed portions of their salary to the
company pension plan, expect to receive the pay and benefits they were
promised. Unfortunately, the money promised is simply not there and cannot be
created out of thin air.
Having taxpayers foot
the bill for a pension bailout is a recipe for disaster as it encourages future
pension fund mismanagement. Instead of throwing billions of dollars at the
problem at hoping it goes away, it would behoove the federal government to
regulate pension funds to ensure they are properly managed in the future. At
the same time, individuals who are counting on pensions for retirement should
seriously consider making a “Plan B” and set money aside in order to enjoy
their golden years
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