Democrats Must Protect Our Pensions

Legislation to make it harder for corporations to default on payment to pension plans must be a staple of Democrat campaigns in the upcoming mid-term and national elections.  This dilemma impacts corporations, stockholders, employees and pension-fund managers. The only one of these groups finding themselves without representation in DC happens to be the employees. The Democrats have to step up and seize this opportunity.

Republican loyalty is firmly on the side of the corporate sector and it’s shareholders, while lobbyists for the pension-fund managers are finding success in loosening regulation pertaining to value and earnings estimates of pension funds. These estimates are often overstated, creating a bubble, not unlike the accounting practices that brought Enron and Worldcom crashing to the ground.

To inflate earnings companies predict high returns on their pension funds whether they are realistic or not. By predicting a high rate of return, more money can be redirected from the pension funds to the balance sheet, creating higher earnings and investment. A fund can legally be predicted to make a return of 8%, come in at under 1% and the next year be predicted to again come in at 8%. This practice is similar to what CEOs and CFOs are going to jail for, and our elected legislators in DC look the other way when it comes to this enterprise that should be deemed criminal.

On the backs of these examples of how false accounting hurts everyone over time, politics on the issue should be easy to frame in the sense that our overall goal is to create a level playing field in the market. One company should not be able to falsely predict pension-fund earnings while a competitor doing it legitimately suffers for following the rules. The bubble this creates will eventually burst and right now the pensions are allowed to be legally defaulted on.

When this happens, the federal program (PBGC) picks up the slack and provides the workers a portion of what they should have received from the company they worked for. In 2001 PBGC reported a surplus of $8 billion, but last year it reported a deficit of $23 billion. If this program were to continue in this direction and go bankrupt, the government would have to bail it out to the tune of anywhere from $90-$200 billion. Legislation is needed to make it harder for companies to overstate pension-fund returns and also for them to default on the pensions when filing for bankruptcy.

Ironically the Republican controlled executive and legislative branches have instead moved to rewrite individual bankruptcy law on behalf of credit card companies. The focus in DC right now is not about the individual, but the company that employs or hands out credit to the individual. Corporate responsibility in terms of how they reward credit lines and wrongly inflate earnings on the backs of individual Americans should be on the table for discussion. Individual taxpayers and workers are what enable the system to exist in the first place, not the other way around.

Investors know that when you put money in the stock market there is a risk involved. There should be NO risk involved for an American working thirty or more years of their life for a company when it comes to their pension. Politicians are employed by the taxpayers/voters, yet on this issue their attention is only spent on reducing the risk of companies, stockholders and pension-fund managers. The workers are paid to perform a service, and without their efforts, the success of the other three would be impossible. It is the American worker who makes it all possible, yet the American worker is now without representation in DC. Democrats must take on that role starting today!