Veto This
Airline lobbyists aim to gut pension reform.

Friday, June 30, 2006

TWO YEARS AGO, Congress tried to fix the rickety corporate pension system and made the problem worse. Confronted with rules that allowed companies to promise workers retirement benefits without setting aside enough money to pay for them, Congress passed new rules allowing companies to put aside even less. The result was that workers participating in these "defined-benefit" plans -- ones that, unlike 401(k) plans, purport to guarantee a certain percentage of salary at retirement -- were put at risk of collecting less than they expected. Meanwhile, taxpayers were put at risk, too, because they backstop part of these pension promises.

Now Congress is taking a second shot at pension reform. The House and the Senate have each passed bad bills that, once again, would make the underfunding worse rather than better. The Bush administration, in a rare show of determination, has threatened a veto. This has driven the House and Senate conference negotiators to improve their legislation, and until recently reformers were quietly predicting victory. But at the eleventh hour a posse of airline lobbyists has held up the process, demanding special permission to shortchange pension promises.

The airlines and their allies argue that they need special treatment to keep their pension plans afloat; they don't have the money to fund their promises properly, so if forced to do so they will terminate their pension plans and dump them on the taxpayer-backed insurance system. This is unconvincing: Airlines have been given similar relief in the past, but that didn't stop some of them from terminating their pension plans anyway. Loose funding rules merely increase the likelihood that when plans do get terminated they will be even further underwater than they would have been otherwise.

If the airlines don't get what they want, they may have the clout to block the legislation. But it would be better to have no bill than one that worsens underfunding, and the proposed airline giveaways are so huge that they would cancel out the funding gains in all other industries put together. Having pushed Congress into improving the legislation, the Bush administration should not allow the airlines to steal its victory. It should stare down the lobbyists and reiterate the veto threat.