ANY POLITICIAN can make a career promising tax cuts, pay increases or other goodies — and many do. It takes leadership, however, to address realistically situations with no pleasing solutions. Just such a situation is presented by the large and growing funding shortfalls of multi-employer pension funds covering more than 10 million truckers, grocery store employees and other blue-collar workers, active and retired. This red-ink tsunami threatens to swamp the agency responsible for backstopping the plans, the federal Pension Benefit Guaranty Corp. (PBGC).
Believe it or not, responsible leadership did emerge two years ago, in the form of Reps. John Kline (R-Minn.) and George Miller (D-Calif.), who pushed through bipartisan legislation that would preserve benefits for everyone over the long-term by enabling pension plans to trim benefits for some over the short-term.
Alas, this law is being undermined before it has had a chance to work. Last year, the Central States Pension Fund , which supports retired Teamsters, asked the Treasury Department to approve a Kline-Miller solvency plan that would have reduced payments by an average of 28 percent for about 115,000 current retirees. The alternative, Central States argued, was bankruptcy within a decade. But last month a special master designated by Treasury rejected the plan, asserting that it didn’t really assure long-term solvency because its assumptions about future returns on investments were too rosy. The remedy to that, of course, would be to propose even greater benefit cuts, something Central States has said it cannot conscientiously do. And so the financial death spiral continues.
Critics of Treasury’s decision smelled an election-year evasion; an unsurprising hunch given the fact that 46 senators, mostly Democrats, signed a letter in April urging rejection of the Central States plan, and that Democratic presidential insurgent Sen. Bernie Sanders (I-Vt.) has been campaigning on a proposal to bail out the multi-employer pensions with federal funds. Mr. Miller, now retired from Congress, told Politico the Treasury ruling “was a calculated response to sort of stop the discussion in this political year.”
Treasury insists that is untrue; we take the department at its word. Still, if Central States says it has no alternative to a proposal Treasury says isn’t adequate, exactly what is supposed to happen next? If Central States collapses and the PBGC takes over, retirees would, by law, get even less than they would under the just-rejected proposal. And if the PBGC itself is insolvent — an alarmingly real possibility — retirees might get almost nothing.
Mr. Sanders, characteristically, advocates federal rescue, without explaining why this is more feasible politically than it was in 2010, when a Democratic Congress declined to act on a similar proposal. Nor is it clear why defined-benefit pensioners should have a higher claim on taxpayer resources than the many people who do not have such pensions — and, indeed, often make less money than union members.
Not for a minute do we underestimate the plight of pensioners facing a major financial hit that they were told, long ago, they would never have to face. What we do dispute is that there’s a cost-free way out of their predicament. The sooner politicians level with them about that, the better.