Union pensioners quietly benefit from Biden plan
Except for those sweet $1,400-per-person payments, the average citizen knows nothing about the $1.9 trillion American Rescue Plan Act of 2021.
I am also behind this veil of ignorance when it comes to the massive spending bill Congress passed in mid-March with zero Republican votes.
But I noticed one obscure provision: an $86 billion bailout of union pensions.
Although that’s only 5 percent of the money allocated, it stands out because most other funds were at least loosely related to protecting the financially vulnerable during the COVID-19 pandemic. The union pensions were a problem many years in the making — one largely unrelated to the economic disruptions of the past year.
Taft-Hartley pension plans, also known as multiemployer plans, benefit workers who belong to unions. The Teamsters union and unions representing several construction trades, garment workers and grocery store employees have these plans.
With the multidecade decline of union membership and industrial trades, Taft-Hartley pensions have faced a common structural problem of retirement plans: an aging and
shrinking workforce. This makes solving pension math — the money already in or coming into the plan needs to match or exceed the money going out — very difficult.
Also, critics of these pensions point to lax oversight by pension boards, leading to poor investment choices or an unwillingness to make hard decisions about upping contributions or reducing benefits in lean times.
About 10 million workers are covered under these plans, including some 1 million workers covered by the 185 plans considered severely underfunded.
Those running systematically underfunded or insolvent pension plans are typically forced to make unpopular changes, such as reducing benefits and increasing employee contributions. Or employers can be forced to pay in additional funds
to make plans solvent.
These choices are unpleasant when pension plans go bad.
With the American Rescue Plan, the U.S. Treasury will set aside $86 billion in a separate pool to make grants to failing pensions as needed. Not a loan, as earlier rescue plans had proposed. Problem solved! No hard choices needed!
Critics of the opportunistic pension bailout compare it to a spendthrift child whose credit card bill is covered by Dad.
What’s to prevent the plan from getting in a similar bind in the future? What’s to prevent other pensions from similarly failing to solve their own privately generated problems?
A slightly more nuanced view would take in the existing quasigovernmental Pension Benefits Guaranty Corp., which would have incurred losses from backstopping failed pensions. Designed a bit like the Federal Deposit Insurance Corp., which backstops bank deposits, the PBGC would not have been allowed to become completely insolvent. Arguably, public money would have shored it up in the event of widespread TaftHartley pension insolvencies.
Union workers are blameless for their pensions’ insolvency. It is not reasonable to expect them to insist on paying more or receiving less over the prior decades. That choice would have to come from pension managers and the boards that hire them. Those are the folks to blame.
One basic problem I see is that pensions are hard. All pensions, I would assert, are ticking financial time bombs disguised as complex math problems.
In the best of cases, successful pensions combine actuarial expertise, a not-too-generous approach to funding and benefits, and cooperative investment markets. Over decades, if any one of those three elements goes wrong, the pension won’t work as promised. But it might take years to recognize the deterioration.
I don’t want to argue that when it comes to bailouts, we have easy and clear rules of determining which group of workers is worthier than the other. I will not work myself into a high dudgeon about the bailouts of these union pensions. Mostly because it’s becoming harder to name specific industries that have not been bailed out recently. The exception is maybe tech overlords, who seem to be thriving without direct federal subsidies. And finance columnists. Finance columnists haven’t been bailed out either, and they really deserve it more than anyone.
Everybody else — airlines, restaurants, churches and other nonprofits, agriculture companies, small businesses and large corporations, cities and states — have received subsidies. That’s just capitalism in the United States of America in 2021.
While generous bailouts usually come as a result of a particular threat — the 2008 credit crisis, the 2018 agricultural trade disputes with China and the 2020 COVID-19 shutdowns — the Taft-Hartley pension bailout feels more like political opportunism.
The Taft-Hartley pension problems arose over decades. They have been “solved” by acting on former presidential adviser and former Chicago Mayor Rahm Emanuel’s advice to “never let a crisis go to waste.”
The $1,400 stimulus check was the shiny object from the American Rescue Plan that we heard about, but most of the $1.9 trillion was earmarked for other stuff. This is likely to be President Joe Biden’s most significant fiscal legislation, so I hope we figure out more of it over time.