Of Pension Plans and Empty Promises - Capitol Hill Coffee House

It's morning in America; but it's the end of my workday. Another grueling fourteen hours; and while I'll have plenty of time to sleep, there's no cure for that jet-lag wasted feeling when the sleep-wake cycle is thrown off. Four hours from now I'll awaken feeling like death; more ill-used than any frat-boy sleeping off a kegger. And then, ten hours later, or twenty, I'll go out and do it again. And again after that.

Why I keep coming back for more is all wrapped up with debt, and a big paycheck, and the difficulties of a job search for a middle-aged man with limited marketability, and a criminally malfeasant union...all of which are fodder for another screed. But one factor stands out..my eligibility for a retirement pension.

Yes, the fabled pension. Put in your twenty years, or forty, or reach the magic age of 65, or 70. The gold watch, delivered with ceremony, is quickly forgotten in a drawer. But the monthly retirement checks are a lifeline.

If there's any testimonial to man's inhumanity to man, it's how such a vital need, such a sacred promise, as income in old age has been abused by sharpies over the decades. The misnamed Social Security system comes to mind; far from being an ironclad guarantee of at least a minimal income guarantee, it's been criminally twisted into a Ponzi scheme and a tool with which unscrupulous politicians buy votes, with the voters' own money. But, ironically, it's becoming the private pension programs that are failing first, one after another.

The first major failure was in 1963, when automaker Studebaker closed its American assembly operations...and terminated, with it, its pension program. Neither the Canadian subsidiary nor the parent company, Studebaker-Worthington, could be held accountable for pensions promised, promise broken.

Following this came the progressive collapse of the American steel industry, when Bethlehem and LTV Steel were able to shrug their guarantees to retirees off onto the government's Pension Benefit Guarantee Board. Retirees were left with pennies delivered for dollars promised.

Now, in recent days, United Air Lines, operating in bankruptcy has been given permission to pass its pension obligations over to the PBGB. The result of this will be partial, probably fractional, pension payments to retired United employees.

There's a lot to contemplate in this turn of events, not the least of which is how a government program nearly always brings about the opposite of its intent. The Pension Benefit Guarantee Board, sold as an oversight and guaranteeing agency, has instead turned into an escape hatch for struggling corporations, and only a partial insurer of benefits. Its existence almost certainly has led to more broken guarantees, not less, and creation of yet another dependency category.

That's material for a writer better schooled than I. But there's another group of persons at least partly at fault...

Yes, I'm going to blame the recipients themselves.

I blame them...because only a fool will trust others, people who have no love for them and with whom they have no leverage, with something so vital as old-age support. Only a fool will accept a promise due far into the future, long after the or-else option is gone.

There's a disconnect here. Consider the incongruity: A failed contract negotiation. A job action...a strike, threatened or actual. The rank-and-file cost management money, and they in turn are vilified and castigated. Under duress, a contract is signed - a contract the company did not willingly agree upon and will continue to resist.

Under these circumstances, the contract employees are going to blithely accept vacuous promises of future retirement income? Promises made under the gun, promises that will not need to be made good for a generation, and by a future management team?

These are obligations made far into the future - and for current managers, owners, shareholders, it cost nothing, and allows business to resume. But what of the future?

A retired worker is no asset. He offers the company nothing; he has no leverage. What can he do when a pension obligation is broken? Active workers are not likely to be overly concerned with his plight; especially if they believe their contract-bond is somehow "different" than that of present recipients. Likely they're going to be more concerned with the current health of the company; the prospect of their jobs.

Promises glibly made; and then broken by a later management team. Often not even broken viciously or with avarice; but with the business in legitimate financial crisis. General Motors, for one example, is reeling under the twin blows of exponentially shrinking market-share and an ever-lengthening retiree roster.

Employees' unions led their workers down this primrose path, extorting empty promises, and then did little to assure that monies would be there when the time came to collect.

These pension payments should have been funded, true. This is ficundary irresponsibility, true. But who was minding the store? Only the most credulous would put faith in promises that entail heavy sacrifice in a distant future...in a world ruled by quarterly-profit reports.

Nor was this practice illegal. Pay-as-you-go was accepted, a system not unlike our perennially-threatened Social Security program.

Changes are being made, to try to insure pension program are funded. But..as long as management and their lawyers are more crafty and clever than the guys hanging fenders on Pontiacs - which is to say, forever - there will be attempts to shrug off non-performing obligations, onto the government, or into the shredder.

The problem isn't so much of a bad system as it is of one that ignores human nature and basic realities. A promise extracted of a person in a headlock, will not be worth much once the victim is released. Similarly, waiting until there is no leverage, to find out if a promise will be honored, is maybe not the smart plan.

Nor is more regulation by the PBGB any more than a short-term fix. The railroad industry is a good example...railroad workers currently have their pensions administered by the government. It's a program rife with irrevelant requirements, which have the effect of chaining these workers to their employer, for life. This, at the behest of the industry, at the detriment of the workers it purports to serve.

It's a good case lesson in why more freedom and choice bests more oversight and bureaucracy.

What is needed is...not additional costly guarantees. Not management of private pensions by the operator of the world's biggest and most elaborate Ponzi scheme.

What is needed is for these well-paid workers, who have been able to extract pay and benefits beyond comprehension a century ago, to step up to the plate.

To manage their own pension funds. Not through a union bureaucracy, which will have many of the same risks and corrupting pressures...but privately.

We, Americans, have come a long way in this regard. Individual Retirement Accounts, 401(k) plans, and deferred compensation programs have brought average persons into the ownership class.

It's time to build on this. It's time to recognize that the old plans, the old promises, were flawed and risky and rife with corruption and malfeasance.

It is time for average people, with average intellect but an income unfathomable to most of the world, to manage their own retirements.

Tax laws can and must be changed to make this possible. Allow these workers to invest money in retirement plans - off the top, out of their gross income - to the extent they are able. Shielded entirely from income and capital-gains taxes. In lieu of FICA withholdings. Allowed to grow, through the miracle of compound interest.

It's time to ash-can the corporate-government dependency model in favor of individual empowerment. And it's LONG past time for Big Labor to recognize that the service they would provide their often-coerced membership, by educating them in a new way would far outweigh whatever political power they gain by groupthink and cultivating dependency.

Promises made and promises kept. The proof would be right there, on a worker's pay stub. It would provide the freedom needed for a wage-earner to move about in the workplace, free to reach out and experiment, to become all he could be.

If only the unionists and dependency pimps could be brought onboard, or overcome in the marketplace of ideas...then it would truly be the start of a bright new day in prosperous America.

Mayville, New York

June 3, 2005

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JustPassinThru is a non de plume for a blue-collar middle-class Everyman, who lives and works in the Midwest

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