Great commentary for those who haven't been obsessing about this problem for decades.
You said a couple of things that to me demonstrate why we are stuck in this endless loop until hyperinflation or revolution resolves the problem as it has in other places and times.
1) "PBGC is quasi-private" - no it isn't; the law creating it quite explicitly says that there is no federal backstop or source of funds behind the PBGC guarantees. This is the same thing that used to be said about Fannie and Freddie; they were explicitly not backed by the federal government right until they were about to fail.
2) "If Central States failed it would immediately wipe out the PBGC fund and then PBGC would have to be bailed out" - NO IT WOULDN'T; see point 1. PBGC would not HAVE to be bailed out; that would be a choice that would have to compete with all other options for taxing and spending.
Really, the big misinformation behind all of this, and why I personally consider ALL defined benefit pensions a scam, is the idea that the workers just want what they were promised. They were getting exactly what they promised, they just didn't like the results. The 'promise' includes the funding source!
The reason the multi-employer plans get minimal protection from PGBC is because that is what the plans paid for. The multi-employer pension systems and their beneficiaries fought to make sure that the requirements put on the single employer plans did not apply to them, because everyone could predict and then see the results; if employers AND employees were forced to adequately reserve for pension promises, no one would offer one, or want to work for a company that did.
Finally, of course Central States and other plans like it will need future bailouts; they've just seen that if they pay out more than employers/employees pay in, there is a chance that outside money will come into the plan to their benefit.
Look, I know and you know it -says- that PBGC is private
HOWEVER
when Central States would've wiped out the PBGC MEP program in 2025, the Congress absolutely would have bailed it out. That's just practicality. The question was how much it would have bailed it out. Yes, it would be a choice - but we know what the choice would be.
It's a huge moral hazard, and yes, this is why I'm pissed -- if they just covered the minimal guaranteed amount in that bailout, it wouldn't be so bad. But they've just been made whole... for no other reason than it's politically a winner for the midwestern politicians - both Democrats and Republicans. They wanted to bailout Central States.
So now I'm looking at the public pensions, and wondering who and how much.
In the podcast itself, I'm fairly dispassionate, but I'm very annoyed by all this. I'm seeing the public pension disaster and Social Security in particular coming... and it's nasty. And what's going to happen there?
I agree with all you say, hence my line above "we are stuck in this endless loop until hyperinflation or revolution resolves the problem as it has in other places and times".
I've been reading you for years and commenting very rarely because we basically agree and I devolve into old man shouting at clouds pretty quickly. I don't see any way out of this.
Great commentary for those who haven't been obsessing about this problem for decades.
You said a couple of things that to me demonstrate why we are stuck in this endless loop until hyperinflation or revolution resolves the problem as it has in other places and times.
1) "PBGC is quasi-private" - no it isn't; the law creating it quite explicitly says that there is no federal backstop or source of funds behind the PBGC guarantees. This is the same thing that used to be said about Fannie and Freddie; they were explicitly not backed by the federal government right until they were about to fail.
2) "If Central States failed it would immediately wipe out the PBGC fund and then PBGC would have to be bailed out" - NO IT WOULDN'T; see point 1. PBGC would not HAVE to be bailed out; that would be a choice that would have to compete with all other options for taxing and spending.
Really, the big misinformation behind all of this, and why I personally consider ALL defined benefit pensions a scam, is the idea that the workers just want what they were promised. They were getting exactly what they promised, they just didn't like the results. The 'promise' includes the funding source!
The reason the multi-employer plans get minimal protection from PGBC is because that is what the plans paid for. The multi-employer pension systems and their beneficiaries fought to make sure that the requirements put on the single employer plans did not apply to them, because everyone could predict and then see the results; if employers AND employees were forced to adequately reserve for pension promises, no one would offer one, or want to work for a company that did.
Finally, of course Central States and other plans like it will need future bailouts; they've just seen that if they pay out more than employers/employees pay in, there is a chance that outside money will come into the plan to their benefit.
Look, I know and you know it -says- that PBGC is private
HOWEVER
when Central States would've wiped out the PBGC MEP program in 2025, the Congress absolutely would have bailed it out. That's just practicality. The question was how much it would have bailed it out. Yes, it would be a choice - but we know what the choice would be.
It's a huge moral hazard, and yes, this is why I'm pissed -- if they just covered the minimal guaranteed amount in that bailout, it wouldn't be so bad. But they've just been made whole... for no other reason than it's politically a winner for the midwestern politicians - both Democrats and Republicans. They wanted to bailout Central States.
So now I'm looking at the public pensions, and wondering who and how much.
In the podcast itself, I'm fairly dispassionate, but I'm very annoyed by all this. I'm seeing the public pension disaster and Social Security in particular coming... and it's nasty. And what's going to happen there?
I agree with all you say, hence my line above "we are stuck in this endless loop until hyperinflation or revolution resolves the problem as it has in other places and times".
I've been reading you for years and commenting very rarely because we basically agree and I devolve into old man shouting at clouds pretty quickly. I don't see any way out of this.