Pushing the message that the GOP is no friend of bailouts, the Republican platform warns that taxpayers might be on the hook once more — not only to rescue banks, but also for the nation’s pensioners. A draft of the party’s 2012 platform warns that taxpayers could be forced to bail out the government insurance agency that backs private pensions unless corrective action is taken.
Republicans don’t have any further to go than its presidential nominee to understand why the Pension Guaranty Benefit Corp. has been under strain. In 2001, GS Technologies — a steel company that Bain Capital took over in 1993 — went bankrupt, forcing the government insurance agency to cough up $44 million for the plant’s underfunded pensions, as Reuters reported this year.
The Pension Guaranty Benefit Corp. is funded by premiums from private companies, but there’s been increasing concern that it might need a taxpayer bailout. Late in 2011, the fund ran its biggest deficit in history, running $26 billion in the red. At the same time, private pension plans have been seriously underfunded, which Republicans blame on their “overestimating their rates of return on investments,” but is also the outgrowth of an underperforming stock market.
But poor management and other factors have endangered pensions as well, as the case of Bain and GS Technologies makes clear. Romney’s supporters argue that the pension gap “was an unforeseen consequence of a falling stock market and adverse market conditions,” Reuters writes. “But records show that the mill’s Bain-backed management was confronted several times about the fund’s shortfall, which, in the end, required an infusion of funds from the federal Pension Benefits Guarantee Corp.”
All told, the $44 million pension bailout that GS Technologies received was just one of many bailouts that the Pension Benefits Guarantee Corp. handed out to bankrupt steel and transportation companies at the time, Reuters notes. And Bain has certainly a notable record of success in turning around companies. But the failure of companies such as GS Technologies had a ripple effect that required government intervention — and Republicans who want to fix the broken pension system will have to confront this reality as well.