By George Landrith, President and CEO, Frontiers of Freedom
The nation’s multiemployer pension system is legally obligated to provide retirement benefits to over 10 million American families. But the system is in crisis. About 125 multiemployer plans will be financially insolvent in as few as two or three years. And over the next two decades, even more plans are on the brink. These failures will impact millions of American workers and their families. The ripple effect will reach far wider.
Most pension recipients in insolvent plans are still receiving their full benefit because the Pension Benefit Guaranty Corporation (PBGC), a government run and owned entity, has made up the difference. But with the growing number of insolvent plans, the PBGC will not be able to keep up and the American taxpayer will likely be on the hook for future pension plan failures.
Just think back to the last financial crisis. In 2008, the housing bubble created financial shockwaves that sent the economy into recession and impacted almost everyone — not just homeowners. Congress rushed to bail out those impacted and threw in tons of pork for political allies — wasting nearly a trillion dollars on “shovel-ready jobs,” that turned out to be raw pork that benefited only those who had the best lobbyists and “friends” in high places.
If this multiemployer pension crisis isn’t prevented, there will be another huge crisis that the Left will gladly use to grow government, bust budgets, and pass record breaking pork bills that benefit their political allies but harm taxpayers. Don’t forget former Obama Chief of Staff, Rahm Emanuel candidly revealed how it works: “You never let a good crisis go to waste.”
Conservatives may be tempted to do nothing about this coming crisis. I can understand that inclination. But it is dangerous. And it plays into the hands of those who seek to make Americans more dependent upon government and who seek greater government spending. And that spending will not be just to fix the crisis, but will include all the other “goodies” and “pork” that will be thrown into the mix while Congress is allegedly trying to “fix” a crisis and “help” Americans in need. If you think a trillion dollars for non-existent shovel ready jobs turned out badly, you “ain’t seen nothin’ yet!”
Fortunately, Senator Charles Grassley (R-IA), chairman of the Senate Committee on Finance recognizes this coming crisis and is trying to head it off. Senator Grassley said, “We need to act quickly, but we can’t just pour money into failing and mismanaged funds. Our plan will provide relief and reform now. Without it, our retirees will be left without the future they worked for.” This plan is wise and it is conservative.
The Democratic approach currently known as Butch-Lewis (H.R. 397) is essentially a bailout deal. Conservatives are smart to oppose Butch Lewis. But there are things that conservatives must support to head off this crisis. In so doing, conservatives can prevent the crisis from happening and thus they can prevent future crazy, budget busting bailouts from being passed in an atmosphere of financial emergency and crisis. Simply stated, doing nothing isn’t a serious option — it simply gives the Left the “crisis” that they will use to their advantage in growing government spending and imposing more government regulations which will stifle future economic growth.
Senator Grassley’s reform plan makes a lot of sense. In the past, I’ve suggested that fixing this crisis requires a number of things.
First, require the failing pension plans, as a condition of any short-term assistance, to reform the way they operate. They must begin to meet more rigorous and realistic actuarial standards. Additionally, Congress must reform the Pension Benefit Guarantee Corporation (PBGC) to make it function as a real insurer where risks and costs balance out. If nothing is done, the PBGC will be bankrupt within 5 to 6 years — leaving taxpayers to make good on its promises. That will cost hundreds of billions. Part of the reform should be to end the disparity between how the PBGC guarantees multiemployer plans versus single-employer plans.
Second, a workable solution must engage all the stakeholders to share in the costs, rather than simply passing them off to taxpayers at some future date when billions in porkbarrel spending will be thrown in as well.
Third, Congress should authorize modest loan guarantees to help only those pension plans that make the needed and required reforms. This will allow them to get through their short term cash crunch and permit them to get back on a firm actuarial footing. Then, they could pay off the relatively modest loans because such loans will only be made to plans that make the required reforms.
Senator Grassley seems to have a good handle on what needs to be done to prevent this crisis and he is clearly avoiding the Democrats’ desire to go full bore bailout.
Conservatives need to be careful to not allow perfection to become the enemy of the good. Doing nothing because the proposed solution isn’t perfect, is dangerous. Insisting on perfection will inevitably lead to a crisis that our friends on the Left will not let go to waste. Then we will see more wasteful government spending, more debt, more Americans dependent upon government, and more job-killing regulations. None of that bodes well for those who value freedom and opportunity. True conservatives must be proactive in preventing this coming financial crisis. It looks like Senator Grassley has provided a road-map.
George Landrith is the President of Frontiers of Freedom a public policy think tank devoted to promoting free markets, individual liberty, and constitutionally limited government. Previously, Landrith served as the Vice President and General Counsel to the National Legal Center for the Public Interest — now associated with the American Enterprise Institute.