Should unions get a bailout?

[applecorped]

http://www.foxbusiness.com/personal-finance/2010/05/24/lawmaker-introduces-b-union-pension-bailout/

"A Democratic senator is introducing legislation for a bailout of troubled union pension funds. If passed, the bill could put another $165 billion in liabilities on the shoulders of American taxpayershttp://kona.kontera.com/javascript/lib/imgs/grey_loader.gif
. The bill, which would put the Pension Benefit Guarantee Corporation behind struggling pensionshttp://kona.kontera.com/javascript/lib/imgs/grey_loader.gif
(http://www.foxbusiness.com/personal-finance/2010/05/24/lawmaker-introduces-b-union-pension-bailout/#) for union workers, is being introduced by Senator Bob Casey, (D-Pa.), who says it will save jobs and help people.
As FOX Business Network’s Gerri Willis reported Monday, these pensions are in bad shape; as of 2006, well before the market dropped and recession began, only 6% of these funds were doing well.
Although right now taxpayers could possibly be on the hook for $165 billion, the liability could essentially be unlimited because these pensions have to be paid out until the workers die."

[drkitten]

http://www.foxbusiness.com/personal-finance/2010/05/24/lawmaker-introduces-b-union-pension-bailout/

"A Democratic senator is introducing legislation for a bailout of troubled union pension funds. If passed, the bill could put another $165 billion in liabilities on the shoulders of American taxpayershttp://kona.kontera.com/javascript/lib/imgs/grey_loader.gif
. The bill, which would put the Pension Benefit Guarantee Corporation behind struggling pensionshttp://kona.kontera.com/javascript/lib/imgs/grey_loader.gif
(http://www.foxbusiness.com/personal-finance/2010/05/24/lawmaker-introduces-b-union-pension-bailout/#) for union workers, is being introduced by Senator Bob Casey, (D-Pa.), who says it will save jobs and help people.
As FOX Business Network’s Gerri Willis reported Monday, these pensions are in bad shape; as of 2006, well before the market dropped and recession began, only 6% of these funds were doing well.
Although right now taxpayers could possibly be on the hook for $165 billion, the liability could essentially be unlimited because these pensions have to be paid out until the workers die."

Well, if the best argument you have against it is argument by really badly formatted post, I must say that I would be inclined to support it. Anything that upsets FOX News and draws the angry fruit salad brigade out of the woodwork is probably a good thing.

[Thunder]

the Pandora's box of bailouts has begun.

why is it ok to bail out banks and insurance companies and car manufacturers...but not unions, New York City, New York State, etc etc?

[drkitten]

the Pandora's box of bailouts has begun.

why is it ok to bail out banks and insurance companies and car manufacturers...but not unions, New York City, New York State, etc etc?

Because banks are a critical part of the national infrastructure (and insurance companies were allowed to get too close to banks, which is something the recent bill is trying to address). Unions and the New York State government are not.

[Freddy]

Politically, this proposal is DOA. I doubt it would get 10 votes in the Senate, but we'll probably never find out. I doubt it ever makes it to the floor.

[corplinx]

Should unions get a bailout?

No.

The big financials didn't get a bailout. Bank patrons did. TARP funds really weren't needed, they just provided enough confidence in the system to end the bank runs that had taken out several. (we have met the enemy and he is us). This is why the money got paid so fast, it wasn't really needed. They made the top 25 big banks take money regardless of condition to install confidence.

GM and Chrysler, got bailouts. Most of us are still ticked about it. This was a bailout at the end of a string of bailouts. The chicken tax, import quotas, Chrysler bailout 1 from the late 70s, etc, etc.

And now the unions need a bailout? Beam me up Mr. Speaker, the Tea Party might attract normal people for once if this goes through.

[Darth Rotor]

What revenue stream do the Unions have that will allow them to pay back this loan?

[GlennB]

What revenue stream do the Unions have that will allow them to pay back this loan?

Union dues, return on assets held, growth in property values? But these are the things that should also be funding the pension.

The Casey business is generating so much steam it's hard to determine whether this $165B is required right now or whether it's another of those dang 'actuarial deficits' which would be less severe over time if contributions went up, return on assets improved in a more vigorous economy, retirement ages were raised and benefits were reduced.

If (big if. I don't know) that's the case then I imagine the Govt. will be wanting a major say in how the pension fund is administered in future, if it accepts the bill of course

[WildCat]

What revenue stream do the Unions have that will allow them to pay back this loan?
If the bill passes, your wallet.

eta - from the bill (http://thomas.loc.gov/cgi-bin/query/z?c111:S.3157:):
(6) OBLIGATIONS OF UNITED STATES- Notwithstanding any other provision of this title, obligations of the corporation which are financed by the fund created by this subsection shall be obligations of the United States.

[GlennB]

If the bill passes, your wallet.

eta - from the bill (http://thomas.loc.gov/cgi-bin/query/z?c111:S.3157:):

Yes, but that relates only to

`(d) Establishment of Fifth Fund; Purpose; Availability, etc-

which is part of

(d) Financing for Partitions and Other Special Matters-

which is part of, er ... sorry I can't follow the sections, subsections, minor/major mini-sections and general indentation levels. This is one piece of literature that I won't be taking for light holiday reading.

[Darth Rotor]

Union dues,
You can stop with the one liner jokes, Glenn. ;)

I was asking a serious question. If Union dues were the revenue stream, there'd be no need for a bailout, as the revenue stream would be there, eh? :p


More to the point, you can argue that union workers at GM and Chrysler are already providing a tax funded revenue stream to their unions, since the government bailout kept those two afloat, which kept at least some of the employees on payroll, and thus feeding union coffers with their dues.

DR

[WildCat]

Yes, but that relates only to

`(d) Establishment of Fifth Fund; Purpose; Availability, etc-

which is part of

(d) Financing for Partitions and Other Special Matters-

which is part of, er ... sorry I can't follow the sections, subsections, minor/major mini-sections and general indentation levels. This is one piece of literature that I won't be taking for light holiday reading.
What part of "obligations of the United States" don't you understand?

[GlennB]

You can stop with the one liner jokes, Glenn. ;)

I was asking a serious question. If Union dues were the revenue stream, there'd be no need for a bailout, as the revenue stream would be there, eh? :p

DR

Yeah yeah ;) I carelessly slapped in dues when I meant pension scheme contributions.

But there are pension schemes around that have zero assets, where all pension payments are funded from the annual revenue. If revenue is endlessly rising from, say, increasing salary related contributions, and there are plenty being born and joining the workforce and people live no longer than they used to, then that can work. Er, for a time that leaves the administrators dead maybe, and not much caring. A bit like politicains, really.

When salaries and, therefore, contributions are stalling, the birth rate is less than replacement and life-expectancy is increasing then that system runs into trouble. i.e. Europe where, for example, Greece has a 1.4 birth rate and rising longevity. And it's not so very different in most parts of the continent. The pension time-bomb is ticking loudly over here.

The UK has no 'fund' for the basic state pension or the earnings-related top-up (now discontinued but applicable to those that earned it). The entire public sector pension system (not just the basic state pension) has an actuarial deficit of > £1 trillion, a very significant part of GDP. But that's not an annual figure.

Back o/t .... what does the Casey "bailout" figure actually represent? An actuarial (lifetime) liability or a one-off top-up to the scheme? Plenty of pension funds are making one-off top-ups way short of the actuarial deficit. If it's actuarial then the year-on-year "bailout" will be much less. Combine that with altering the structure of the scheme and it might work. Whether 'the Unions' are worthy of special treatment is another matter. Politics eh?

In the words of a learned French economics commentator - "Our children are going to hate us".

[Darth Rotor]

In the words of a learned French economics commentator - "Our children are going to hate us".
What if they already do? :jaw-dropp

[applecorped]

if?

[MikeMangum]

To answer the question in the title of the OP:

My answer is not "no", it is "are you freaking serious?"

Private employees and retirees with tanking 401k plans (or no retirement funds at all) should be taxed to prop up the pension plans of some politically connected group who use collective bargaining to artifically inflate their compensation above market rates? Someone wants to propose that, I've got two words in response: "bugger off".

[GlennB]

What if they already do? :jaw-dropp

Yeah. Damn kids today got no respect. Is it too late to bring back mandatory national service? :)

But the unions .... I can't think of one good reason for them to have any kind of preferential treatment, but if they can summon the political clout to swing this their way then that's just how the world turns. Or perhaps young Casey is just making the noises expected of him

[GlennB]

What part of "obligations of the United States" don't you understand?

... obligations of the corporation which are financed by the fund created by this subsection shall be obligations of the United States. ...

Which part of "this subsection" don't you understand?

[GlennB]

Here ya go (http://mediamatters.org/research/201005250005)

"$165 billion figure represents total underfunding of all multi-employer pension funds. The $165 billion figure cited by Cavuto, Willis, and others is an estimate made in a September 2009 report by Moody's Investor Service of the total underfunding of multi-employer pension funds, not the underfunding of such funds related to former employees of defunct companies ....."

Casey's bill relates to the last part of that.

Looks like the $165billion could well be a <cough> slight distortion by someone at Fox news. Who are Fox news anyway? They seem to have a poor reputation, but we have no access to them over here.

[GlennB]

A hilarious comment about Fox's $165b claim:

"Well, that’s nonsense and I don’t know who the pin head and weenie is at Fox News that decided to put that story together <snip>
It’s a good Tiberi bill and I don’t know what they’re doing at Fox News, but they should stop smoking it and get back to reporting the facts."

If Fox has this very wrong then I imagine that - being total professionals - they'll issue a retraction and clarification quite soon ?

[Meadmaker]

To the OP: No.

However....there's probably some misunderstandings of what this bill really is.

A lot of people don't know it, but if you see a union worker at a construction site, his employer is often not the builder. The employer is the union itself. A lot of union workers are, technically, employed by the union. The contractor hires the union, and the union provides the labor. This is not the same arrangement as, for example, the UAW's relationship with GM or Chrysler, in which the union is a representative of the workers, who are employees of the auto company.

It looks like this bill is basically a pension guarantee bill for an insolvent employer plan. I don't know why this particular pension plan would not fall under the general provisions of the government's pension guarantee system, but what is happening here is that workers were promised pensions by their employer, but their employer doesn't have the means to deliver. It's happening throughout our society. This legislation seems to be attempting to make sure that the employees get what they were promised.

I think it is a very, very, bad law, and I think that all such provisions are bad law, but at the same time, you have to acknowledge that we have a huge problem in our nation. There are a whole lot of promises that have been made by parties public and private, and the resources to keep those promises aren't there.

[WildCat]

... obligations of the corporation which are financed by the fund created by this subsection shall be obligations of the United States. ...

Which part of "this subsection" don't you understand?
Which means that those obligations are backed by US taxpayers if the corporation decides they can't make the payments.

The whole point of this legislation is to let the corporations and union off the hook, and put those obligations on taxpayers.

[WildCat]

I think it is a very, very, bad law, and I think that all such provisions are bad law, but at the same time, you have to acknowledge that we have a huge problem in our nation. There are a whole lot of promises that have been made by parties public and private, and the resources to keep those promises aren't there.
Because defined benefit plans, like pensions, are generally a very bad idea. Which is why the vast majority of companies now have defined contribution plans, such as 401(k) plans. These don't require the psychic ability to see the future and skimp on the contributions due to overly optimistic return forecasts.

[Darth Rotor]

But the unions .... I can't think of one good reason for them to have any kind of preferential treatment, but if they can summon the political clout to swing this their way then that's just how the world turns. Or perhaps young Casey is just making the noises expected of him
Aye. There was a really good article a couple of years ago in either Time or Newsweek about all of the holes in the pension systems.

Chilling.

DR

[GlennB]

It looks like this bill is basically a pension guarantee bill for an insolvent employer plan. I don't know why this particular pension plan would not fall under the general provisions of the government's pension guarantee system, but what is happening here is that workers were promised pensions by their employer, but their employer doesn't have the means to deliver.

Not really. The scheme covers multi-employer pension funds that become underfunded when one or more of the participating employers goes bust. At this point the remaining employers/employees are supporting 'orphan' retirees - the pensioners whose old company no longer contributes. Casey's bill separates these 'orphans' into a different fund.

This (http://mediamatters.org/research/201005250005)

explains it a lot better

Basically Fox News pulled a large number out of their butts and are scare-mongering.


I think it is a very, very, bad law, and I think that all such provisions are bad law,

Well, Congressman Steve LaTourette (Rep. Ohio) disagrees, saying :
"But the true facts of this piece of legislation are as follows. This bill will save the taxpayers by saying to those corporations that have union pension plans, if you find yourselves in a bind, rather than thrusting that upon the taxpayer, it spreads out over five years the ability to bring those pension plans up to speed. That’s good government, it’s a good bill."

link (http://vodpod.com/watch/3705352-video-latourette-slams-fox-news-i-dont-know-what-theyre-doing-but-they-should-stop-smoking-it)

...
but at the same time, you have to acknowledge that we have a huge problem in our nation. There are a whole lot of promises that have been made by parties public and private, and the resources to keep those promises aren't there.

Amen to that.

[WildCat]

Well, Congressman Steve LaTourette (Rep. Ohio) disagrees, saying :
"But the true facts of this piece of legislation are as follows. This bill will save the taxpayers by saying to those corporations that have union pension plans, if you find yourselves in a bind, rather than thrusting that upon the taxpayer, it spreads out over five years the ability to bring those pension plans up to speed. That’s good government, it’s a good bill.".
LaTourette is a moron. The cost only gets "thrust upon the taxpayer" under this stupid bill. Currently, taxpayers are not on the hook for when unions and corporations underfund their pensions.

I suspect he has some companies in his district who are dying to have US taxpayers pay for their pension plans. Private profit, public risk once again.

[GlennB]

LaTourette is a moron. The cost only gets "thrust upon the taxpayer" under this stupid bill. Currently, taxpayers are not on the hook for when unions and corporations underfund their pensions.

I suspect he has some companies in his district who are dying to have US taxpayers pay for their pension plans. Private profit, public risk once again.

I'm sure the Congressman would love to discuss your point of view. No doubt you can get in touch via his website.

Meanwhile, can we agree that Fox News just picked a huge pension-related number out of their arses and aimed to stir up trouble?

[WildCat]

I'm sure the Congressman would love to discuss your point of view. No doubt you can get in touch via his website.

Meanwhile, can we agree that Fox News just picked a huge pension-related number out of their arses and aimed to stir up trouble?
The number is actually irrelevant. It's a terrible idea.

Taxpayers should not be on the hook for the financial failings of private entities. It's bad enough we bailed out GM and Chrysler, now this? What next, the government will guarantee returns on 401(k) plans?

[GlennB]

The number is actually irrelevant. It's a terrible idea.

Taxpayers should not be on the hook for the financial failings of private entities.

OK. So if the pension future of thousands of retirees could be saved for the sake of $10 you'd reject that plan? Hmmm ??

Because "The number is actually irrelevant" ?? Your words.

This is exactly what Congressman LaTourette was talking about. It's called good government. Good economics. Saving taxpayers money and serving the common good at the same time.

Your evasion of the question about Fox News deviousness is also noted.

[applecorped]

OK. So if the pension future of thousands of retirees could be saved for the sake of $10 you'd reject that plan? Hmmm ??



yes.

[rwguinn]

yes.

There's always this option:
http://www.seattlepi.com/fun/comic.asp?feature_id=Mallard_Fillmore

[Ziggurat]

OK. So if the pension future of thousands of retirees could be saved for the sake of $10 you'd reject that plan? Hmmm ??

I would. If thousands of retirees can't pony up $10 of their own money to save their own pension futures, well, why SHOULD I (or anyone else) pony up anything for such pathetic losers?

[BeAChooser]

Should unions get a bailout?

Absolutely NOT.

[WildCat]

OK. So if the pension future of thousands of retirees could be saved for the sake of $10 you'd reject that plan? Hmmm ??
If they don't care enough to come up with less than a penny each to save it why should I care?

Because "The number is actually irrelevant" ?? Your words.
Yep.

This is exactly what Congressman LaTourette was talking about. It's called good government. Good economics.
"Good economics" is rewarding failure and punishing success? How the hell does that work?

Saving taxpayers money and serving the common good at the same time.
"Saving taxpayers money" - good to see your sense of humor is intact!

Your evasion of the question about Fox News deviousness is also noted.
I care about Fox News deviousness (if it even was) why exactly?

[Tsukasa Buddha]

Unions boo!!!

That's all the facts we need :p .

[applecorped]

That's an opinion.

[MikeMangum]

OK. So if the pension future of thousands of retirees could be saved for the sake of $10 you'd reject that plan? Hmmm ??

Apparently you believe ends justify means. I don't.

[GlennB]

"Saving taxpayers money" - good to see your sense of humor is intact!


Saving taxpayers money is the point of the bill. Without it the companies, and their employees, who haven't gone bust are left supporting the orphan retirees. That puts up pension contributions or reduces benefits for those who are succeeding. Conceivably even making them non-competitive and leading to more company failures.

Spoiling the ship for a ha'porth of tar. For want of a nail the shoe was lost. Stitch in time. False economy.

[corplinx]

Saving taxpayers money is the point of the bill.

Maybe you should re-read it.

[Ziggurat]

Supporting uncompetitive companies at taxpayer expense isn't good for the economy. Instead, it prevents the reallocation of resources to companies which ARE competitive. That's a bad thing. And it costs taxpayer money, it doesn't save it.

[GlennB]

Supporting uncompetitive companies at taxpayer expense isn't good for the economy. Instead, it prevents the reallocation of resources to companies which ARE competitive. That's a bad thing. And it costs taxpayer money, it doesn't save it.

Quite possibly, but the bill isn't doing that. It's partitioning multi-employer pension funds where contributing companies have already gone bust through no fault of the remaining companies. Where the remaining companies are being punished. This bill is designed to give them perfectly reasonable protection.

"As more companies leave the pension plan, the costs left to the remaining companies increase to cover the pension benefits of all employees covered by the plan. Companies still contributing to the plans also run the risk of bankruptcy because of the additional burden of being forced to pay for the pensions of the employees of other companies."

From this (http://mediamatters.org/research/201005250005)

[WildCat]

Saving taxpayers money is the point of the bill. Without it the companies, and their employees, who haven't gone bust are left supporting the orphan retirees.
No, they don't. Where are you getting this from?

That puts up pension contributions or reduces benefits for those who are succeeding. Conceivably even making them non-competitive and leading to more company failures.
Actually, this is exactly what the bill does. Tax the responsible to pay for the failures of the irresponsible. This is not good policy or good economics.

[WildCat]

Quite possibly, but the bill isn't doing that. It's partitioning multi-employer pension funds where contributing companies have already gone bust through no fault of the remaining companies. Where the remaining companies are being punished. This bill is designed to give them perfectly reasonable protection.

"As more companies leave the pension plan, the costs left to the remaining companies increase to cover the pension benefits of all employees covered by the plan. Companies still contributing to the plans also run the risk of bankruptcy because of the additional burden of being forced to pay for the pensions of the employees of other companies."

From this (http://mediamatters.org/research/201005250005)
So let them declare bankruptcy. Then they can renegotiate the pension plans to a responsible level. Why should taxpayers be on the hook because labor unions negotiated a stinker of a pension plan?

[GlennB]

So let them declare bankruptcy. Then they can renegotiate the pension plans to a responsible level. Why should taxpayers be on the hook because labor unions negotiated a stinker of a pension plan?

'The Taxpayer' is on the hook anyway, but the route of bankruptcy/unemployment/wrecked pension schemes is a much costlier one. That's what the whole Pomeroy-Tiberi-Casey raft of measures is about. Plus a lot of the current worry derives from the downturn in the overall economic situation. Funds are performing badly because of poorly performing assets like stocks, cash and property. The Pomeroy etc measures gives breathing space for the situation to improve without flushing people's lives down the drain.

Incidentally a whole load of "idiot" companies right across the spectrum wrote to Congress in support of these measures. Con-Ed, DuPont, Kraft, Lockheed, Metlife, The Small Business Council of America .... The full list is here (http://tiberi.house.gov/UploadedFiles/10_1_09_pension_reform_support_letter_to_Congress. pdf)

And guess who's in there? You got it. Fox.

Also Girl Scouts of the USA, so it must be right.

[daenku32]

Did anyone post yet the fact that the premise of the Faux News article is a false one? It's not a union bailout program.

[WildCat]

'The Taxpayer' is on the hook anyway, but the route of bankruptcy/unemployment/wrecked pension schemes is a much costlier one. That's what the whole Pomeroy-Tiberi-Casey raft of measures is about. Plus a lot of the current worry derives from the downturn in the overall economic situation. Funds are performing badly because of poorly performing assets like stocks, cash and property. The Pomeroy etc measures gives breathing space for the situation to improve without flushing people's lives down the drain.
The funds are their problem, not mine. Most people don't even get a pension. Why should taxpayers who don't get a pension, and who are watchig their 401(k) plans tank in recent years, pony up money to save these unaffordable pensions?

Incidentally a whole load of "idiot" companies right across the spectrum wrote to Congress in support of these measures. Con-Ed, DuPont, Kraft, Lockheed, Metlife, The Small Business Council of America .... The full list is here (http://tiberi.house.gov/UploadedFiles/10_1_09_pension_reform_support_letter_to_Congress. pdf)

And guess who's in there? You got it. Fox.

Also Girl Scouts of the USA, so it must be right.
You bet they support it. If this bill passes they don't have to make contributions to the pension plans any more, the US taxpayer will assume those liabilities.

May as well ask Kraft if they'd support a bill to supply taxpayer-provided milk for their cheese factory.

[WildCat]

Did anyone post yet the fact that the premise of the Faux News article is a false one? It's not a union bailout program.
It is in fact a union bailout program. What makes you think it isn't? Do you know what a "multi-employer pension plan" covers?

And the Teamsters are creaming their pants over this: http://www.teamster.org/content/teamsters-make-progress-pension-relief-jobs-0

Because, you know, they're special.

[GlennB]

You bet they support it. If this bill passes they don't have to make contributions to the pension plans any more, the US taxpayer will assume those liabilities.


That's possibly the single stupidest comment I've ever read on JREF. It beats Heiwa. It trumps Christophera. It dwarfs Michael Mozina.

ConEd, Kraft, Lockheed and all will willingly declare bankruptcy to avoid pension fund contributions? Duh???? :jaw-dropp

[WildCat]

ConEd, Kraft, Lockheed and all will willingly declare bankruptcy to avoid pension fund contributions? Duh???? :jaw-dropp
They don't have to declare bankruptcy under this bill. They just say they would if they had to continue making pension contributions.

With a few tweaks in accounting procedures it wouldn't be very hard to show that either.

Right now, without the bill, they do have to declare bankruptcy to renegotiate their pension contract. An that sure as hell beats this bill, which will encourage irresponsible and unsustainable pension plans because the worst that can happen is Uncle Sam will pay for them.

And somehow, this is "good policy" and "good economics".

[leftysergeant]

There is a simple solution to this problem. First, ammend the bill to prohibit bankrupt firms from defaulting on pensions. Pension funds go to the head of theline for any disbursements. CEO's beg for whatever crumbs are left. Add a surtax on cap gains from financial instruments not linked to actual production of commodities.

Prohibit severance pay to executives of bankrupt firms. Give the pension funds that are in arears a share in the re-organized companies that emerge from bankruptcy.

All paid for.

[pipelineaudio]

There is a simple solution to this problem. First, ammend the bill to prohibit bankrupt firms from defaulting on pensions. Pension funds go to the head of theline for any disbursements. CEO's beg for whatever crumbs are left. Add a surtax on cap gains from financial instruments not linked to actual production of commodities.

Prohibit severance pay to executives of bankrupt firms. Give the pension funds that are in arears a share in the re-organized companies that emerge from bankruptcy.

All paid for.

Holy crap i might actually agree with this...the universe is melting