Pensions and Promises and Perfidy

Paul Jacob

1/1/2012 12:00:00 AM - Paul Jacob

Promises, promises.

Politicians love to make ’em. But who has to fulfill those promises, and how?

The tendency to rely upon political assurances without establishing workable, reasonable plans and follow-through has to be high on the irresponsibility list. Our politicians may promise us the stars, but what we wind up with remains of a more earthy nature.

Take pensions. There are two basic ways of setting them up. One is to sock money away, or invest it, taking it out at retirement. The other is to promise to give somebody a certain amount of money on retirement . . . and figure out how to pay for it later.

Between these two extremes lie compromise positions, of course. The government takes money from people now, for instance . . . but then immediately spends it on current retirees. That’s Social Security, and it combines the two methods in a rather fraudulent way. It’s not “our money” going into “our retirements”; it’s “our money” going into other people’s retirements. We will (if the system survives) take our retirements from younger “investors.”

It’s a dubious deal on the face of it. Like a Ponzi scheme, it tends to reward earlier participants (retirees) at the expense of later ones. Of course, the government, being government, had an advantage Ponzi did not: It forces us all into the scheme — something ol’ Ponzi could not do — and it changes the deal as it goes along, and makes us accept it. Hence the long-term “viability” of Social Security.

But Social Security isn’t the only pension system to over-rely on promises and skip the actual savings and investment part. Many a government employee pension system does the same. Not only do they unfairly shift burdens onto future retirees and future taxpayers, they also build up huge debt loads to whoever has done the promising.

Well, that’s not exactly right. Politicians make the promises. Taxpayers get stuck with the bills.

The defined benefit pensions concocted by politicians are now throwing towns and municipalities into bankruptcy, and California and New York are just two of many states to be greatly harmed by the unworkability — the sheer irresponsible design — of the defined benefit packages contracted with government workers.

This problem has been brewing for some time. In the mid-2000s, Congress attempted to forestall disaster with the U.S. Postal Service by requiring fully funding postal worker pensions.

Now that the postal service is failing — for reasons having to do with any number of factors, including a decline in need for the service — the people who decide the fate of our public institutions are trying to take money from the pensions and save the current accounting.

When private businesses do this, people cry Fraud! Theft! Greed!

But when it happens in a badly run outfit controlled by government, you can count on some people to attempt to take a most dubious “high moral ground.” Consider this petition from the people at MoveOn.org:

To be delivered to: The United States House of Representatives
We, the undersigned, urge you to co-sponsor and vote for H.R. 1351, which will restore the U.S. Postal Service to a sound financial footing. We oppose H.R. 2309, which will unnecessarily destroy many good jobs and ultimately the U.S. Postal Service, itself.
USPS management is proposing a drastic downsizing and service reduction. In part, it is due to an unreasonable requirement instituted by G.W. Bush through the Postal Accountability and Enhancement Act of 2006, which requires the prefunding of retiree health benefits for 75 years within ten years. H.R. 1351 will relieve the some of the most unfair aspects of this legislation and refund to the USPS part of the current overpayment.

Yes, a MoveOn fellow wants to take money from a funded pension program and “refund” it to the USPS, diminishing the viability of a pension system — not merely promised to current employees, but contracted — to shore up a failing enterprise?

One could be cynical and respond by saying that, if the commercial concern fails, they wouldn’t have a job, and . . . which do they want more?

But this would simply sell out principle for short-term gain — it’s the kind of thinking that leads to utter disaster. Real businesses exist in time, over time. If they cannot meet current obligations, and move funds from a contracted future obligation to meet a current crisis, the danger is real, and smacks of embezzlement. Moving money from worker pensions to a business is not traditionally associated with those who lean left, like those at MoveOn.

How can they justify the idea?

Well, the email promoting the petition provided a clue.

“The management of the U.S. Postal Service is proposing a drastic downsizing and service reduction—including possibly shutting down [your local] branch post office..., harming local service, and laying off 100,000 workers nationwide.

You see. The appeal is partly to local patrons. Those services you use every now and then, why, some might be cut out so that at least a few core services can be financially sustained. How shocking! Whatever you think about mail delivery, six-day-a-week delivery and a post office in every podunk town is not written into the Constitution.

Upon mere whims, nebulous expectations, and outrageous promises made by politicians? A campaign to take pension money and give it to the USPS to continue a losing business plan.

Taking a wider view, one could ask why the postal service has a pension plan at all. Why not fund each retirement account at time of wage payment (in a defined contribution plan) and let the workers — perhaps guided by their union? — decide how to manage their individual pensions. At that point, any attempt to grab their pension would not only become unthinkable, but unachievable.

Even for someone at MoveOn.

Of course, MoveOn’s got itself covered. The above petition, and its promotion from the MoveOn.org email, was written by a MoveOn member, “not by MoveOn staff, and MoveOn is not responsible for the content.” Thank you. I believe MoveOn that MoveOn is not responsible for this bit of content.

In general, it’s been my experience that, when it comes to understanding the nature of contracts and of responsibility itself, MoveOn is, indeed, not responsible.