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!
Originally posted: March 28, 2005
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!
I think the problem with democrats is that they are so socially focused, being for abortion, euthanaisa, wellfare and all that. They don’t know anything about insurance, finance, law or economics because if they did they would become republicans.
Democrats came up with the pension system, I think, in the 60s and 70s so, just like Social Security, it is thier own programs that are biting them in the ass. Democrats have been a one issue party for about 15 years now and the issue is to get elected.
I went to a democratic rally in college in 1998 and the three democrats agreed on one principle, it doesn’t matter which on of them gets elected just as long as it isn’t a republican. This whole fillibuster issue is a DNC temper tantrum of not being in power.
So, as I talked about here before, issues such as race, religion, unions and civil rights are great come election time but once that’s over it’s back to business as usual. The only thing the liberals have a staunch belief in is the slaughter of babies, so I wouldn’t wait too long for democrats to jump into the economics fray.
You complain about deregulation but that is what brought about Southwest, Ted and a few other new airlines. The old system fostered inefficiency and bloat so the natural selection is taking hold. I think there has been a bubble in employment where unions forced employers to grossly overpay their employees so maybe this is just part of an evening out process.
http://www.foxnews.com/story/0,2933,157557,00.html
Wow, talk about timing, check out this story straight from the jackass’s mouth. Btw, what’s with the donkey thing anyway? I’m noth thrilled about an elephant mascot, but the donkey, I mean, come on. Anyway, enjoy.
I think the right-wing is more focused on abortion and euthanasia…as is evidenced by the new anti-stem cell argument. That embryos which would end up in the trash cannot be used for research. This issue is growing some steam, but it’s the Republicans who represent the anti-everything involving science constituency.
I think this is the same for both parties.
I disagree. It was a power grab that would have fundamentally changed the senate. The house and senate operate differently by design. It’s about working with one another, not becoming a rubber stamp.
Take a look at the Dallas-Fort Worth airport and the government supported monopoly. These airlines will be allowed to default on their pension payments and the GOP won’t do anything about it. Competition in the airline industry is vital, but what is being done? Deregulate all you want, but if a corporation is allowed to sacrifice their workers’ pensions in order to survive…it’s not exactally playing fair, is it? Southwest should be able to buy up those routes and assets. The pensions need to be paid before the banks.
Yea – having an ass for a mascot is probably ill-advised…I think I remember learning in high school that it all started with political cartoons from back in the day.
Dean has been so-so…but I do like what he’s saying here about devoting more time to minorities. The voting machine snafu in Ohio should have been foreseen by Democrat operatives in the state. Perhaps it was a wake up call, that they had to pay more attention to what’s going on in the the cities.