Pensions and Promises and Perfidy

Townhall.com ^ | January 1, 2012 | Paul Jacob

[Kaslin]

Politicians love to make ’em. But who has to fulfill those promises, and how?

The tendency to rely upon political assurances without establishing workable, reasonable plans and follow-through has to be high on the irresponsibility list. Our politicians may promise us the stars, but what we wind up with remains of a more earthy nature.

Take pensions. There are two basic ways of setting them up. One is to sock money away, or invest it, taking it out at retirement. The other is to promise to give somebody a certain amount of money on retirement . . . and figure out how to pay for it later.

Between these two extremes lie compromise positions, of course. The government takes money from people now, for instance . . . but then immediately spends it on current retirees. That’s Social Security, and it combines the two methods in a rather fraudulent way. It’s not “our money” going into “our retirements”; it’s “our money” going into other people’s retirements. We will (if the system survives) take our retirements from younger “investors.”

It’s a dubious deal on the face of it. Like a Ponzi scheme, it tends to reward earlier participants (retirees) at the expense of later ones. Of course, the government, being government, had an advantage Ponzi did not: It forces us all into the scheme — something ol’ Ponzi could not do — and it changes the deal as it goes along, and makes us accept it. Hence the long-term “viability” of Social Security.

But Social Security isn’t the only pension system to over-rely on promises and skip the actual savings and investment part. Many a government employee pension system does the same. Not only do they unfairly shift burdens onto future retirees and future taxpayers, they also build up huge debt loads to whoever has done the promising.

Well, that’s not exactly right. Politicians make the promises. Taxpayers get stuck with the bills.

The defined benefit pensions concocted by politicians are now throwing towns and municipalities into bankruptcy, and California and New York are just two of many states to be greatly harmed by the unworkability — the sheer irresponsible design — of the defined benefit packages contracted with government workers.

This problem has been brewing for some time. In the mid-2000s, Congress attempted to forestall disaster with the U.S. Postal Service by requiring fully funding postal worker pensions.

Now that the postal service is failing — for reasons having to do with any number of factors, including a decline in need for the service — the people who decide the fate of our public institutions are trying to take money from the pensions and save the current accounting.

When private businesses do this, people cry Fraud! Theft! Greed!

But when it happens in a badly run outfit controlled by government, you can count on some people to attempt to take a most dubious “high moral ground.” Consider this petition from the people at MoveOn.org:

To be delivered to: The United States House of Representatives

We, the undersigned, urge you to co-sponsor and vote for H.R. 1351, which will restore the U.S. Postal Service to a sound financial footing. We oppose H.R. 2309, which will unnecessarily destroy many good jobs and ultimately the U.S. Postal Service, itself.

USPS management is proposing a drastic downsizing and service reduction. In part, it is due to an unreasonable requirement instituted by G.W. Bush through the Postal Accountability and Enhancement Act of 2006, which requires the prefunding of retiree health benefits for 75 years within ten years. H.R. 1351 will relieve the some of the most unfair aspects of this legislation and refund to the USPS part of the current overpayment.

Yes, a MoveOn fellow wants to take money from a funded pension program and “refund” it to the USPS, diminishing the viability of a pension system — not merely promised to current employees, but contracted — to shore up a failing enterprise?

One could be cynical and respond by saying that, if the commercial concern fails, they wouldn’t have a job, and . . . which do they want more?

But this would simply sell out principle for short-term gain — it’s the kind of thinking that leads to utter disaster. Real businesses exist in time, over time. If they cannot meet current obligations, and move funds from a contracted future obligation to meet a current crisis, the danger is real, and smacks of embezzlement. Moving money from worker pensions to a business is not traditionally associated with those who lean left, like those at MoveOn.

How can they justify the idea?

Well, the email promoting the petition provided a clue.

“The management of the U.S. Postal Service is proposing a drastic downsizing and service reduction—including possibly shutting down [your local] branch post office..., harming local service, and laying off 100,000 workers nationwide.

You see. The appeal is partly to local patrons. Those services you use every now and then, why, some might be cut out so that at least a few core services can be financially sustained. How shocking! Whatever you think about mail delivery, six-day-a-week delivery and a post office in every podunk town is not written into the Constitution.

Upon mere whims, nebulous expectations, and outrageous promises made by politicians? A campaign to take pension money and give it to the USPS to continue a losing business plan.

Taking a wider view, one could ask why the postal service has a pension plan at all. Why not fund each retirement account at time of wage payment (in a defined contribution plan) and let the workers — perhaps guided by their union? — decide how to manage their individual pensions. At that point, any attempt to grab their pension would not only become unthinkable, but unachievable.

Even for someone at MoveOn.

Of course, MoveOn’s got itself covered. The above petition, and its promotion from the MoveOn.org email, was written by a MoveOn member, “not by MoveOn staff, and MoveOn is not responsible for the content.” Thank you. I believe MoveOn that MoveOn is not responsible for this bit of content.

In general, it’s been my experience that, when it comes to understanding the nature of contracts and of responsibility itself, MoveOn is, indeed, not responsible.

[trebb]

Yep - just like those of us who joined the Military and were promised free health care for life for us and our spouses. Congress decided to remove it because it was inconvenient to the spending habits of the day (better to use the funds to support those with no value to society). Use that as an example of how the government will promise one thing and throw you out with the slop after they get your vote and the Left (along with too many on the Right) will say it only makes sense as Military folks don’t deserve any better treatment than them. I had a friend make a statement like that and asked him what his retirement was expected to be. It was expected to be pretty lucrative and I asked him how he would feel if, when it was time to retire, the company told him that it was too expensive and he wouldn’t get it. He said he had a contractual agreement with them. I told him that I had the same agreement with the DoD and they reneged, what made him think it wouldn’t happen to him. It eventually did happen and he remains pissed to this day.

[Jim Noble]

I actually worked for the Post Office Department the year before the USPS was created, and then worked for the USPS for five more years.

I have mixed feelings. Post offices and post roads are one of the few constitutional functions actually carried out by FedGov. The intent - secure, private communications among citizens - is absolutely necessary. To the extent that a budget line item is necessary to secure/promote this function, I'm fine with it.

[KarlInOhio]

So many pension plans have been destroyed by companies going out of business or using "strategic bankruptcies" to void contracts that I won't trust any plan other than a defined contribution plan that I can take with me when I leave. Those are far safer, especially if some third party is holding the money in trust rather than the company itself. Since the government makes its own rules, any retirement plan organized by it is by definition inherently insecure - especially Antisocial Insecurity.

[cherry]

my husband HAD his company basically steal away his pension and his post working years medical...after 27 yrs...that has left us in quite a quandry because I have to pay a ton of money to get him health insurance thru my work...

so yes...many private plans go belly up and no one really gives a darn about it...

Life is not fair afterall...people better stop pretending that it won't happen to them because it very well could happen to a lot of people....