The PBGC will reduce its potential contribution to moral hazard by increasing fees paid by companies with poor credit ratings. Even more important, the administration wants the PBGC empowered to prevent financially parlous companies from making pension promises they are apt to eventually make a government burden. All this could cause some companies to abandon defined benefit plans, in which the amount of benefits paid to a retiree is fixed in advance in accordance with the plan's formula.
The PBGC probably is necessary to ease the political friction that must attend what the airline industry must eventually experience -- a radical reduction of excess capacity. Eventually this should mean the liquidation of one or more of the major airlines that have stayed aloft by finding refuge in bankruptcy courts. But this reduction of friction takes a toll on America's economic system.
Three decades ago sociologist Daniel Bell postulated the ``cultural contradictions of capitalism.'' He meant that capitalism, by its success, subverts its cultural prerequisites. At first, capitalism depended on a Protestant asceticism -- thrift, deferral of gratification, industriousness. But capitalism produces wealth, and a shift from production to consumption -- the marketing of hedonism -- as the economy's motor. The banishment of asceticism by acquisitiveness means the systematic inflammation of appetites and the undermining of stern capitalist virtues.
The PBGC's increasing importance may herald a new cultural contradiction of capitalism in the context of today's increasingly fierce competitive marketplace, and of the regulatory, aka welfare, state. Today's contradiction is this:
Market forces, including the gales of globalization, prod capitalist entities, in their pursuit of efficiencies necessary for survival, to shed pensions. This heightens the entire public's sense of insecurity. But the welfare state exists to assuage insecurities. So this dynamic of capitalism draws the economy deeper into regulation, overruling market forces that make possible capitalism's rational allocation of wealth and opportunity. Hence capitalism's dynamism, a virtue which entails insecurity, reduces capitalism's virtues.
The financial fragility of the highly visible airline industry may be spreading an infection of insecurity about pension promises generally. This should not, but probably will, complicate the task of convincing the public to make necessary changes in Social Security.