Biden Celebrates $90 Billion Bailout of Private Union Pension Plans
Plus: Don't cry for the failure of Homeland Security's disinformation board, states discover supply-side solutions to labor shortages, and more...
President Joe Biden jetted off to Cleveland on Wednesday evening to announce the official launch of a $90 billion bailout of union retirement plans—one that's completely paid for with federal borrowing.
The bailout was approved last year as part of the American Rescue Plan, the $1.9 trillion emergency spending bill that was ostensibly meant to combat COVID-19 but included an impressive array of spending that had nothing to do with public health. The bailout will direct funds to more than 200 nearly insolvent multiemployer pension plans, which are established jointly by unions and the private companies that contract with them through collective bargaining agreements.
"With today's actions, millions of workers will have the dignified retirement they earned and they deserve," Biden told the cheering crowd at a Cleveland high school.
Millions of union workers, that is. If you're not part of that select club, there's no bailout coming your way—even as a sagging economy eats into private retirement savings, inflation makes every saved dollar worth less, and Social Security looms on the brink of insolvency.
Oh, and you'll have to pay back (with interest!) the money borrowed to make this bailout (and the rest of the American Rescue Plan) possible. Sounds like a great deal, right?
As I detailed for Reason shortly after the American Rescue Plan passed last year, the multiemployer pension plan bailout is arguably the least defensible provision in a bill that was full of indefensible spending. The borrowing and spending is bad enough, but lawmakers also jettisoned a Republican-backed effort that would have at least attached some strings to the funds in the form of additional federal oversight of the bailed-out pensions.
What happened to the private multiemployer pension systems will sound familiar to anyone who has followed the slow collapse of public sector pension plans in many states. A 2018 study by the Government Accountability Office found that the Central States Pension Fund, one of the largest and most deeply indebted private multiemployer funds, would have 91 percent of the assets necessary to cover future costs if it had achieved its target annual financial return of 7.4 percent every year since 2000. Instead, the fund has earned an average of less than 5 percent annually and was on pace to run out of money by 2025. (It's also worth noting that there are more than 1,400 multiemployer pension plans out there; most are well-managed and not at risk of insolvency.)
"These pension plans failed to protect workers and retirees, and their trustees refused to make the changes necessary to make good on their promises" said Reps. Virginia Foxx (R–N.C.) and Rick Allen (R–Ga.), respectively the top Republicans on the Education and Labor Committee and the Health, Employment, Labor, and Pensions Subcommittee, in a joint statement on Wednesday. The American Rescue Plan, they added, "creates perverse incentives for further mismanagement and underfunding and leaves the taxpayer holding the bag."
For the roughly 3 million workers enrolled in the sinking multiemployer plans, the situation may well have been dire. But it wasn't an emergency. Congress had been bickering for years over how to deal with this problem—until the American Rescue Plan offered an opportunity for a party-line vote to approve a bailout for a constituency that reliably votes Democratic.
In that regard, this is something of a no-brainer. Biden delivered a major win to his labor union allies, put the cost on the taxpayers' tab, and took a victory lap for doing it.
"I promised you I would be the most pro-labor, pro-union, pro-worker President in our history," Biden said Wednesday in Cleveland. "I see you, I hear you, and I'll always have your back."
And everyone else gets to pay for it.
FREE MINDS
The New York Times has published its own feature-length obituary for the Department of Homeland Security's (DHS) "disinformation board" and its ousted would-be director, Nina Jankowicz. The piece's opening paragraphs have to be seen to be believed:
The memo that reached the top of the Department of Homeland Security in September could not have been clearer about its plan to create a board to monitor national security threats caused by the spread of dangerous disinformation.
The department, it said, "should not attempt to be an all-purpose arbiter of truth in the public arena."
Yet when Secretary Alejandro N. Mayorkas announced the disinformation board in April, Republican lawmakers and conservative commentators denounced it as exactly that, calling it an Orwellian attempt to stifle dissenting views. So did some critics from the left, who questioned the powers that such an office might wield in the hands of future Republican administrations.
Well, if the memo promised the board wouldn't be bad, how could anyone argue with that? Thankfully, lots of people did—not just conservatives, but liberals and libertarians and anyone who understands that free speech is great and the DHS…isn't.
And given the DHS's two-decade history of mission creep and its pervasive lack of accountability, no one should be persuaded by the claim that the agency would have strictly limited how the disinformation board operated.
FREE MARKETS
Some states are discovering that they can ease labor shortages by letting more people work legally. New Jersey Gov. Phil Murphy just signed a bill allowing 16-year-olds to work up to 50 hours per week, 14-year-olds to work up to 40 hours per week, and simplifying the process for minors to get the necessary paperwork to hold a job. The downside? The law won't take effect until next summer, so it won't do much to alleviate current labor supply issues.
Meanwhile, Michigan recently became the second state (after Maine) to allow 17-year-olds to serve alcohol. Other states are offering one-time bonuses to lure potential workers back into vacant jobs, Axios reports.
QUICK HITS
• British Prime Minister Boris Johnson has announced that he's stepping down as leader of the Conservative Party, though he will remain prime minister until a successor is chosen. His position atop the party became untenable in recent days as a flurry of resignations called into question Johnson's handling of a sexual misconduct scandal involving a Tory lawmaker.
• The United Nations estimates that the war in Ukraine has driven 71 million people worldwide into poverty, and those numbers could grow as key exports from Ukraine including grain, fuel, and fertilizer are disrupted.
• The Federal Reserve is preparing to raise interest rates by another 0.5 percent or 0.75 percent when its board meets later this month.
• Being friends with an NYPD officer means you can score a primo spot for watching Fourth of July fireworks.
• Does this make him the best taxpayer advocate ever, or the worst?
Wayne M. Garvin faces 13 months in prison after being convicted of evading taxes for at least five of his 26 years as a manager in the Philadelphia office of the IRS' Taxpayer Advocate Service. https://t.co/r2VEmm6gIj
— The Philadelphia Inquirer (@PhillyInquirer) July 6, 2022
