New Lame Duck Threat to Bailout Union Pensions
Democrats in the Senate on Thursday held a recess hearing covering a taxpayer bailout of union pensions and a plan to seize private 401(k) plans to more “fairly” distribute taxpayer-funded pensions to everyone.
Sen. Tom Harkin (D-Iowa), Chairman of the Health, Education, Labor and Pensions (HELP) Committee heard from hand-picked witnesses advocating the infamous “Guaranteed Retirement Account” (GRA) authored by Theresa Guilarducci.
In a nutshell, under the GRA system government would seize private 401(k) accounts, setting up an additional 5% mandatory payroll tax to dole out a “fair” pension to everyone using that confiscated money coupled with the mandated contributions. This would, of course, be a sister government ponzi scheme working in tandem with Social Security, the primary purpose being to give big government politicians additional taxpayer funds to raid to pay for their out-of-control spending.
From written hearing testimony submitted by Economic Policy Institute (EPI) Vice President Ross Eisenbrey:
“We need a comprehensive solution that addresses interrelated problems. For example, a system that places most of the burden for retirement saving on individuals will always have to wrestle with the problem of pre-retirement loans and withdrawals (simply plugging these leaks will not work, because many workers would stop contributing to the system). A system that relies on tax incentives to promote individual retirement savings will necessarily tend to favor high-income workers who can afford to save more and who benefit the most from these tax breaks. Conversely, a truly universal system would need to shield low-income workers from out-of-pocket costs or wage cuts. EPI has published and advocated what we feel would be an excellent national supplemental retirement plan, the Guaranteed Retirement Account which was authored by Prof. Teresa Ghilarducci, Director of the Schwartz Center for Economic Policy Analysis at the New School for Social Research. “
The EPI is housed on the third floor of the building occupied by the George Soros-funded Center for American Progress, a hard-core leftist group whose flavor of socialist policy has brought you the current blend of elitist socialism and crony capitalism bankrupting the American economy. Which speaks volumes about EPI and the Democrat leadership’s choice of witness.
Brett McMahon, spokesman for the Associated Builders and Contractors (ABC), a trade association, warns this hearing exposed part of a process that may come as early as the November lame duck push to bailout union pensions by attaching the bailout to an across-the-board extension of the current tax rates.
“I am deeply concerned that they will try to attach something like the Casey bill or the Casey bill in and of itself to tax cut extensions bill that is inevitably going to have to be dealt with at some point during the lame duck session,” McMahon told HUMAN EVENTS.
As reported in HUMAN EVENTS the Casey bill from Sen. Bob Casey (D-Penn.) is a new entitlement program that would set up a permanent bailout of the union multi-employer pension plans that are desperately underwater through a new “fifth fund” at the government Pension Benefit Guaranty Corporation (PBGC). Casey’s bill would create a line item on the federal budget through the PBGC to fund these union pension bailouts annually — union pensions that are underwater as a result of mismanagement that pre-dates the 2008 financial upheaval.
Sen. Bernie Sanders (I-Vt.) was the only other senator at the hearing with Harkin. His particular brand of gutter class warfare was on full display as the self-described socialist made the absurd claim that wealthy job creators oppose the Social Security system because it “works.”
“So, the reason that there is so much opposition to Social Security for some of these billionaire guys is because Social Security has worked. It has done exactly what it was supposed to do. It has worked for the elderly, for the disabled, for widows and orphans,” Sanders said in his opening remarks.
In typical leftist drive-by fashion, Sanders never explained why he believes successful people don’t like the elderly, disabled, widows or orphans.
And, of course, the theme of the day was “fairness” as it’s somehow “fair” to take what one person has earned in the free market and give it to another in a government-run wealth redistribution retirement scheme.
Shareen Miller, a personal care assistant and a member of the Service Employees International Union (SEIU) Local Number 5 in Falls Church, Virginia, offered testimony about the need for wealth redistribution to fund her pension.
“I make $12 an hour and receive no healthcare benefits, retirement benefits, sick time or vacation,” the SEIU union member said.
Which begs the question: why is she paying union dues? Not exactly a sterling recommendation for SEIU membership.
Miller went on to say that the physical demands of her job giving care to a cerebral palsy patient are becoming more difficult. But Miller has been aware of these conditions for at least two years.
In 2008, Miller spent a day with then Virginia Senate candidate Mark Warner in an SEIU “Walk a day in the shoes” for Democrat candidates. Common sense would dictate Miller’s individual responsibility for moving out of this particular line of work, leaving the physically demanding jobs to younger folks entering the work force. Perhaps Miller could demand fair payment for shilling for Democrats.
But the physical demands and hazardous jobs claims are not new from those demanding taxpayers fund a “fair” pension for everyone. This scheme is at the heart of the collapse of European socialism.
From Michael Lewis in Vanity Fair magazine:
“The retirement age for Greek jobs classified as ‘arduous’ is as early as 55 for men and 50 for women. As this is also the moment when the state begins to shovel out generous pensions, more than 600 Greek professions somehow managed to get themselves classified as arduous: hairdressers, radio announcers, waiters, musicians, and on and on and on.”
Overall McMahon said the pressing issue for the lame duck is the union pension bailout with new Financial Accounting Standards Board (FASB) rules currently set to take effect December 15. These new rules would force companies to account for the cost of penalties to extract themselves from these union pension plans against their bottom line. (Full report from HUMAN EVENTS here.)
“The pension bailouts are something they need desperately and they need quickly because as everyone involved with the forthcoming new FASB rule acknowledges, you cannot stop the accounting board from a new transparency requirement,” McMahon said. “It’s going to hurt.”
One of the largest of these multiemployer funds, Central States Funds, is in such bad shape that UPS paid a $6.1 billion penalty to extricate itself from employee participation in the fund. It is that type of penalty that would now be on the books, and it could be more than the company’s overall value.
McMahon notes non-union companies without the multiemployer union plans have been operating under these types of transparency rules all along. And the participating companies have had decades to address the issue of the pension underfunding but have not done so.
Now companies and unions alike are looking for a taxpayer bailout in the lame duck session that could garner enough support from both sides of the aisle blanketed in the tax cut extension.
The lame duck session would offer the last chance for unions and companies to be able to place liability for their underwater pensions on the taxpayers’ backs before the new FASB rule goes into effect.