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“The Federal Government’s Little-Known Pension Heist”: The Ones Who Will Suffer The Most Had No Part In Managing The Funds

“Too big to fail” means one thing for banks and another thing for union pension funds.

When banks are on the verge of collapse, Congress bails them out. When union pension funds are in mortal danger, Congress changes the law to let them shaft retirees.

Did you miss that newsflash? So did many of the 407,000 unsuspecting Teamsters, mainly former truck drivers, who received letters in October announcing whether their pension benefits will be cut.

Two-thirds of them got bad news. The Central States Pension Fund claims it will be reducing members’ retirement checks by an average of 23 percent. Union activists say that figure is much higher, and for some the reductions will top 60 percent.

That means hardship for people who have deferred compensation for their entire work lives in exchange for a pension. Bills won’t be paid and mortgages won’t be met — and it will be through no fault of their own.

It once was illegal to cut promised pension benefits. But at the end of 2014 Congress voted to change that — for some. It did so with no debate and no hearings. The Multi-Employer Pension Reform Act was attached to a must-pass omnibus spending bill. President Barack Obama signed it a few days later.

The law permitted the so-called multi-employer pension plans, run jointly by unions and employers, to apply to the Treasury Department to reduce benefits. And that’s what Central States did in October. Union member will notionally get a chance to vote on the cuts, but the Treasury Department can override that outcome. Count on it to do so.

Multi-employer pension plans are clearly in trouble. They cover more than 10 million workers and they are mostly underfunded. The Pension Benefit Guaranty Corp., the federal agency that backstops pensions, would not be able to withstand the failure of the Central States fund. (The federal program is also in trouble, reporting a $76 billion deficit in mid-November, and its estimated exposure to future losses runs to the hundreds of billions.)

How did the situation get to this drastic point, and what should be done?

First of all, Central States is not in trouble because of mob skimming, as some might presume. Yes, it was set up by the notorious Teamsters President Jimmy Hoffa in 1955, and he was later convicted of improper use of funds from the pension. Courts intervened in the early 1980s, and Goldman Sachs and Northern Trust were set up as fiduciaries.

The main factors in Central States’ decline have been deregulation, de-unionization and demographics. Following the trucking deregulation of the 1980s, numerous companies went under, adding to the pension’s burdens. Over the decades, union membership has declined and retirees have lived longer.

The financial crisis of 2008-09 hurt as well. In 2007, Central States had $27 billion; it has since lost one-third of its assets. It is currently paying out $3.46 in pension benefits for every dollar it receives through worker’s contributions.

However one apportions the blame, the ones who will suffer the most had no part in managing the funds. And the whole point of federal pension guarantees is protecting such people. A more fair resolution would be to bolster federal pension protection.

Sen. Bernie Sanders of Vermont and Rep. Marcy Kaptur of Ohio have introduced companion bills, the Keep Our Pension Promises Act. They would prop up the vulnerable pension funds through changes in the tax code affecting wealthier people.

Not all union-involved pension funds are in such straits. But when they do get into trouble, it’s fashionable for some politicians and opinion-page blowhards to blast the misfortune as just deserts. We need to remember that all benefits are compensation. Workers take them in lieu of wages, and to take them back once they have been earned is, well, theft.

Why is it that no one but the retired workers — the only people who have held up their side of the bargain through their years of labor — are being made to suffer the consequences?

 

By: Mary Sanchez, Opinion-age Columnist for The Kansas City Star; The National Memo, November 27, 2015

November 29, 2015 Posted by | Congress, Multi-Employer Pension Reform Act, Pension Funds, Unions | , , , , , , , | 3 Comments

“They Show That They Still Have No Answer”: Scott Walker, Marco Rubio Propose ‘Plans’ To Replace Obamacare

Today, Scott Walker and Marco Rubio have published plans — really, not so much plans as skeletal descriptions of planlike concepts — to replace Obamacare. Their fundamental dilemma is that Obamacare provides a popular benefit to millions of voters. Appealing to the conservative base demands they eliminate the program that provides this benefit. Appealing to the general election requires them to promise something to compensate the victims of repeal. How will they fund that something? This is the basic problem that for decades has prevented Republicans from offering a health-care plan. Rubio and Walker show that they still have no answer.

The usual pattern in politics is for politicians to turn complex problems into simple ones. But covering the uninsured is a simple problem they want to make complex. The main reason people lacked insurance before Obamacare is that they did not have enough money to afford it. Some of those uninsured people had unusually high health costs. Some of them had unusually low incomes. Boiled down, Obamacare transferred resources from people who are rich and healthy to people who are poor and sick, so the poor and sick people can afford insurance.

It cuts funds, but not benefits, from Medicare. And it transfers resources to sick people through regulations. The individual insurance market is reorganized so that insurers can’t deny essential health services or jack up prices to people with preexisting conditions. This means people with expensive medical needs pay less, and people with cheap medical needs have to pay more. Repealing Obamacare means eliminating all these forms of redistribution from the rich and healthy to the poor and sick. And replacing them with … what?

Walker and Rubio are fairly clear about their plans for regulating the insurance market. They want to go back to the pre-Obamacare, deregulated system. They’d eliminate the requirements that insurance plans cover essential benefits, and let them charge higher prices to sicker customers. That’s good for people who have very limited medical needs (as long as they never obtain a serious medical condition, or have a family with somebody with a serious medical condition). It’s bad for people who have, or ever will have, higher medical needs.

Both Walker and Rubio promise to take care of people with preexisting conditions by creating separate “high-risk pools.” That is a special kind of insurance market for people with expensive medical conditions. As you may have guessed, insurance for people with expensive medical needs is, well, expensive. Making that insurance affordable therefore requires lots of subsidies from the government. Where would Walker and Rubio get the money for that? They don’t say.

Both the Rubio and Walker planlike concepts share a basic structure and an extreme lack of detail. Walker’s document is a few pages padded out with ample white space. Rubio’s op-ed, which repeats the talking points of another op-ed from a few months ago, contains even less information. And the lack of detail is not a matter of filling in the fine print. Both Walker and Rubio have signed the Grover Norquist pledge to never raise a single penny of tax revenue ever, under any circumstances.

Both Walker and Rubio propose to cut funding for Medicaid, but this doesn’t create much room to subsidize coverage, since Medicaid is already much cheaper than Medicare or private insurance. Indeed, the main conservative complaint about Medicaid is that it is so cheap that many doctors refuse to see its patients. Republicans are willing to cut Medicaid because they’re generally willing to cut programs that focus on the very poor, but there’s not much blood to be drawn from this stone.

It is tempting to treat the lack of specifics in the Republican health-care plans as a problem of details to be filled in. But it is not a side problem. It is the entire problem. They will not finance real insurance for the people who have gotten it under Obamacare, nor will they face up to the actual costs they’re willing to impose on people. The party is doctrinally opposed to every available method to make insurance available to people who can’t afford it. They have spent six years promising to come up with an alternative plan, and they haven’t done it, because they can’t.

 

By: Jonathan Chait, Daily Intelligencer, New York Magazine, August 18, 2015

August 21, 2015 Posted by | Affordable Care Act, Health Care, Marco Rubio, Scott Walker | , , , , , , , | 1 Comment

“Democrats Being Democrats”: Adopting Ideas That Work And Rejecting Ideas That Don’t

On Friday, House Democrats shocked almost everyone by rejecting key provisions needed to complete the Trans-Pacific Partnership, an agreement the White House wants but much of the party doesn’t. On Saturday Hillary Clinton formally began her campaign for president, and surprised most observers with an unapologetically liberal and populist speech.

These are, of course, related events. The Democratic Party is becoming more assertive about its traditional values, a point driven home by Mrs. Clinton’s decision to speak on Roosevelt Island. You could say that Democrats are moving left. But the story is more complicated and interesting than this simple statement can convey.

You see, ever since Ronald Reagan’s election in 1980, Democrats have been on the ideological defensive. Even when they won elections they seemed afraid to endorse clearly progressive positions, eager to demonstrate their centrism by supporting policies like cuts to Social Security that their base hated. But that era appears to be over. Why?

Part of the answer is that Democrats, despite defeats in midterm elections, believe — rightly or wrongly — that the political wind is at their backs. Growing ethnic diversity is producing what should be a more favorable electorate; growing tolerance is turning social issues, once a source of Republican strength, into a Democratic advantage instead. Reagan was elected by a nation in which half the public still disapproved of interracial marriage; Mrs. Clinton is running to lead a nation in which 60 percent support same-sex marriage.

At the same time, Democrats seem finally to have taken on board something political scientists have been telling us for years: adopting “centrist” positions in an attempt to attract swing voters is a mug’s game, because such voters don’t exist. Most supposed independents are in fact strongly aligned with one party or the other, and the handful who aren’t are mainly just confused. So you might as well take a stand for what you believe in.

But the party’s change isn’t just about politics, it’s also about policy.

On one side, the success of Obamacare and related policies — millions covered for substantially less than expected, surprisingly effective cost control for Medicare — have helped to inoculate the party against blanket assertions that government programs never work. And on the other side, the Davos Democrats who used to be a powerful force arguing against progressive policies have lost much of their credibility.

I’m referring to the kind of people — many, though not all, from Wall Street — who go to lots of international meetings where they assure each other that prosperity is all about competing in the global economy, and that this means supporting trade agreements and cutting social spending. Such people have influence in part because of their campaign contributions, but also because of the belief that they really know how the world works.

As it turns out, however, they don’t. In the 1990s the purported wise men blithely assured us that we had nothing to fear from financial deregulation; we did. After crisis struck, thanks in large part to that very deregulation, they warned us that we should be very afraid of bond investors, who would punish America for its budget deficits; they didn’t. So why believe them when they insist that we must approve an unpopular trade deal?

And this loss of credibility means that if Mrs. Clinton makes it to the White House she’ll govern very differently from the way her husband did in the 1990s.

As I said, you can describe all of this as a move to the left, but there’s more to it than that — and it’s not at all symmetric to the Republican move right. Democrats are adopting ideas that work and rejecting ideas that don’t, whereas Republicans are doing the opposite.

And no, I’m not being unfair. Obamacare, which was once a conservative idea, is working better than even supporters expected; so Democrats are committed to defending its achievements, while Republicans are more fanatical than ever in their efforts to destroy it. Modestly higher taxes on the wealthy haven’t hurt the economy, while promises that tax cuts will have magical effects have proved disastrously wrong; so Democrats have become more comfortable with a modest tax-and-spend agenda, while Republicans are more firmly in the grip of tax-cutting cranks than ever. And so on down the line.

Of course, changes in ideology matter only to the extent that they can influence policy. And while the electoral odds probably favor Mrs. Clinton, and Democrats could retake the Senate, they have very little chance of retaking the House. So changes in the Democratic Party may take a while to change America as a whole. But something important is happening, and in the long run it will matter a great deal.

 

By: Paul Krugman, Opinion Writer, The New York Times, June 15, 2015

June 17, 2015 Posted by | Democrats, Hillary Clinton, Republicans | , , , , , , | 2 Comments

“Heads We Win, Tails The Taxpayers Lose”: Wall Street’s Revenge; Dodd-Frank Damaged In The Budget Bill

On Wall Street, 2010 was the year of “Obama rage,” in which financial tycoons went ballistic over the president’s suggestion that some bankers helped cause the financial crisis. They were also, of course, angry about the Dodd-Frank financial reform, which placed some limits on their wheeling and dealing.

The Masters of the Universe, it turns out, are a bunch of whiners. But they’re whiners with war chests, and now they’ve bought themselves a Congress.

Before I get to specifics, a word about the changing politics of high finance.

Most interest groups have stable political loyalties. For example, the coal industry always gives the vast bulk of its political contributions to Republicans, while teachers’ unions do the same for Democrats. You might have expected Wall Street to favor the G.O.P., which is always eager to cut taxes on the rich. In fact, however, the securities and investment industry — perhaps affected by New York’s social liberalism, perhaps recognizing the tendency of stocks to do much better when Democrats hold the White House — has historically split its support more or less equally between the two parties.

But that all changed with the onset of Obama rage. Wall Street overwhelmingly backed Mitt Romney in 2012, and invested heavily in Republicans once again this year. And the first payoff to that investment has already been realized. Last week Congress passed a bill to maintain funding for the U.S. government into next year, and included in that bill was a rollback of one provision of the 2010 financial reform.

In itself, this rollback is significant but not a fatal blow to reform. But it’s utterly indefensible. The incoming congressional majority has revealed its agenda — and it’s all about rewarding bad actors.

So, about that provision. One of the goals of financial reform was to stop banks from taking big risks with depositors’ money. Why? Well, bank deposits are insured against loss, and this creates a well-known problem of “moral hazard”: If banks are free to gamble, they can play a game of heads we win, tails the taxpayers lose. That’s what happened after savings-and-loan institutions were deregulated in the 1980s, and promptly ran wild.

Dodd-Frank tried to limit this kind of moral hazard in various ways, including a rule barring insured institutions from dealing in exotic securities, the kind that played such a big role in the financial crisis. And that’s the rule that has just been rolled back.

Now, this isn’t the death of financial reform. In fact, I’d argue that regulating insured banks is something of a sideshow, since the 2008 crisis was brought on mainly by uninsured institutions like Lehman Brothers and A.I.G. The really important parts of reform involve consumer protection and the enhanced ability of regulators both to police the actions of “systemically important” financial institutions (which needn’t be conventional banks) and to take such institutions into receivership at times of crisis.

But what Congress did is still outrageous — and both sides of the ideological divide should agree. After all, even if you believe (in defiance of the lessons of history) that financial institutions can be trusted to police themselves, even if you believe the grotesquely false narrative that bleeding-heart liberals caused the financial crisis by pressuring banks to lend to poor people, especially minority borrowers, you should be against letting Wall Street play games with government-guaranteed funds. What just went down isn’t about free-market economics; it’s pure crony capitalism.

And sure enough, Citigroup literally wrote the deregulation language that was inserted into the funding bill.

Again, in itself last week’s action wasn’t decisive. But it was clearly the first skirmish in a war to roll back much if not all of the financial reform. And if you want to know who stands where in this coming war, follow the money: Wall Street is giving mainly to Republicans for a reason.

It’s true that most of the political headlines these past few days have been about Democratic division, with Senator Elizabeth Warren urging rejection of a funding bill the White House wanted passed. But this was mainly a divide about tactics, with few Democrats actually believing that undoing Dodd-Frank is a good idea.

Meanwhile, it’s hard to find Republicans expressing major reservations about undoing reform. You sometimes hear claims that the Tea Party is as opposed to bailing out bankers as it is to aiding the poor, but there’s no sign that this alleged hostility to Wall Street is having any influence at all on Republican priorities.

So the people who brought the economy to its knees are seeking the chance to do it all over again. And they have powerful allies, who are doing all they can to make Wall Street’s dream come true.

 

By: Paul Krugman, Op-Ed Columnist, The New York Times, December 15, 2014

December 17, 2014 Posted by | Dodd-Frank, Financial Crisis, Wall Street | , , , , , , | Leave a comment

“Buying And Selling Political Campaigns”: McConnell’s Eyes On The Prize–Repealing All Campaign Finance Laws

The big unfolding story of the post-election period is the ever-rising clamor of Republicans for appropriations riders “defunding” Obama’s executive action on immigration, or this or that feature of Obamacare. I am sure others will get into line holding up additional conservative ideological totems.

But what does it appear Mitch McConnell is focused on? Further deregulating campaign money, of course (per a report from Paul Blumenthal at Huffpost):

Sen. Mitch McConnell (R-Ky.) is trying to use a massive appropriations bill to loosen campaign finance rules.

The Republican leader’s office is attempting to attach a policy rider to the omnibus bill that would effectively end limits imposed on coordinated spending by federal candidates and political party committees.

Currently, coordinated spending by candidates and political parties is limited based on a series of formulas for different offices. For example, the total amount presidential candidates may coordinate with political parties is calculated as the national voting-age population multiplied by two cents — a figure that is adjusted for the cost of living each election cycle.

The McConnell rider would allow parties to consult with candidate campaigns on advertising or other electoral advocacy without having the resulting spending count towards their coordinated limit, so long as the spending is not “controlled by, or made at the direction of” the candidate. The change would create a loophole essentially making the coordinated limits moot…..

In practice, discarding the current limits would give candidates significant input into the spending of party committees that can accept much larger direct contributions than the candidates are allowed to receive for their own campaigns.

This is pretty typical of McConnell’s priorities. This supremely cynical man may or may not actually believe in the various tenets of conservative orthodoxy. But he believes in buying and selling political campaigns with vast and unlimited appeals for cash from special interests with the tenacity of a mystic in direct communication with God Almighty.

 

By: Ed Kilgore, Contributing Writer, Political Animal, The Washington Monthly, December 2, 2014

December 3, 2014 Posted by | Campaign Financing, Mitch Mc Connell, Politics | , , , , , , | 1 Comment

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