The President's approval ratings are so low I thought I'd find something to compliment him on. It took a bit of a search, but here it is. Congress is debating what to do about corporate pension plans. The President wants a law that forces companies to fully fund their pension obligations to their employees. He's right.
Corporate pension plans don't have nearly enough money to pay what the companies have promised their workers. We're talking big money here -- a shortfall of over $450 billion. And if companies can't pay up, you know who's left holding the bag? Not only 44 million Americans who won't get the monthly pension payments they were promised. You and I and every other taxpayer will also be on the hook.
You see, there's a government agency called the Pension Benefit Guarantee Corporation that's supposed to insure most of these promises. But the PBGC itself is already deep in the red, to the tune of almost $30 billion.
Last year United Airlines alone dumped 121,000 present and future retirees on the agency. Northwest Airlines, Delphi, every other company now using bankruptcy to get out from under the promises they've made to their employees are poised for similar moves. The number of future retirees added to the PBGC's rolls over past 3 years is more than in previous 27 years combined.
Who will have to bail out the PBGC American taxpayers? Need I remind you what happened almost a quarter century ago when hundreds of Savings and Loan banks that had been insured by the government went belly up? The debacle cost American taxpayers several hundred billion dollars.
But this time we don't have several hundred billion taxpayer dollars to spare. The federal budget is already deep in debt. We're paying for a war, a giant Medicare drug benefit, a huge pile of subsidies to big Agri-business, corporate welfare and "earmarks" galore, and more tax breaks to the rich. That's not all. Seventy-six million post-war baby boomers are already lining up to collect their Social Security and Medicare checks. The early boomers are now just five years away from retirement.
Lobbyists for big companies argue they shouldn't be required to fully fund their pension promises. They say that such a requirement will discourage them from setting up pension plans in the first place. That's like saying drivers shouldn't be required to stop at stop lights because that might discourage them from driving. If companies aren't funding their pension promises, they shouldn't be making pension promises to begin with.
The lobbyists also argue that forcing companies with low credit ratings to pay up faster -- as is only logical, since their underfunded plans are at greater risk -- will push these companies into bankruptcy. But no one is talking about placing new obligations on them. They already owe their retirees this money. Why should retirees be treated differently from the company's creditors and suppliers, who get paid what they're owed?
Corporate laggards might as well pay up. They're going to have to disclose their unfunded pension obligations later this year anyway, under new accounting rules about to go into effect. Warning to Wall Street: Including these liabilities on balance sheets now would wipe out the book value of at least a dozen big companies, and slice shareholder equity in half at 40 or 50 more. Wall Street should be telling their corporate clients to fund their pension promises, pronto.
So do the right thing, corporate America. This President has given you almost everything you've ever wanted. Now, for once, he's asking you to do something for your employees. Do it. Fund your pension promises.
Robert B. Reich is co-founder of The American Prospect. A version of this column originally appeared on Marketplace.
