Saturday, May 21, 2016

Self-Deluded Pensioners Get Burned

In 1982, that's 35 years ago, in San Francisco, I was sitting at the table representing industry opposite the longshoremen in the West Coast Master Contract negotiations.  The "strike issue" was unfunded pension liability.  With post-war pension promises which had been going on for 35 years proving impossible to meet, the unions wanted change: pension liabilities funded.

Reagan was the new president, and his first act was to bust the Air Traffic Controllers union.  As our chief negotiator noted, "The worm had turned."

Our chief strategist noted all the small unionized trucking companies could not afford to go out of business, because of what was owed to the unions.  That may sound odd, but there are laws protecting pensions, and about the only way to get out is bankruptcy.  Well, in bankruptcy the owner of the company gets nothing also.

Well, the bankruptcies came, the pensions busted, workers burned, but guess what?  Not a single protest march, no riots, no nothing.  So onward it went.  Either companies, like airlines, went bust and the liabilities were bailed out by taxpayers, or businesses got bought and their liabilities were assumed by the new owners.  But even then, Fedex bought Flying Tigers because Fedex's pension was underfunded and Flying Tigers was overfunded.  So in that case, a solvent pension was made insolvent.

AS these union pensions faded, so did their membership level.  In the early 2000s the autoworkers union started to organize college teaching assistants, since colleges were growing and TAs could be tapped for pension contributions.  My nephew studying for his PhD in philosophy at University of Washington, and working as a TA, was obliged to join the autoworkers union.

That is to say a couple of things.  The promises made were never intended to be met.  The creativity of avoiding responsibility is astonishing.  The time it takes to reach crisis is very long indeed.  But now the fights over who gets what is getting specific.  A month ago one huge pension was suggesting a 23% reduction in pension payments.  Well, turns out a 60% cut will not do the trick.  Even then a taxpayer bailout is needed.  And this is just the first, and early problem to be addressed.  (The problems were perfectly clear in 1982.  Now people are getting around to "doing something.")

Another point:  No one making any contribution to any pension plan in the last 35 years should have believed they would ever see any returned.  That, given the readily available facts, would be an exercise in gross, willful self-delusion.  If they got any, well, that was just the ponzi early payout.

So here we are:

At that time, pension benefits for about 407,000 people could be reduced to "virtually nothing," he told workers and retirees in a letter sent Friday.
In a last-ditch effort, the Central States Pension Plan sought government approval to partially reduce the pensions of 115,000 retirees and the future benefits for 155,000 current workers. The proposed cuts were steep, as much as 60% for some, but it wasn't enough. Earlier this month, the Treasury Department rejected the plan because it found that it would not actually head off insolvency.
The fund could submit a new plan, but decided this week that there's no other way to successfully save the fund and comply with the law. The cuts needed would be too severe.

This is just 400,000 pensioners.  There are probably another 50 million people with pensions which necessarily will face the same problems.  If you are affected, you have a choice.  Try to join the fight at the trough for what little there may be, or start your own business.

And to note, none of this problem would be possible except for the practice of lending credit at interest, since there is no rational limit on what promises can be issued as asset-less credit.

Benecredit business start-up is at once part of the solution for everyone, and for yourself.

Feel free to forward this by email to three of your friends.