Pension Funds and Ponzi Schemes

Martha Paskoff Welsh of the Century Foundation has a valuable report on Congress’ role in creating the current pension fund crisis. Here’s what it comes down to:

Congress repeatedly has passed legislation that enables corporations to underfund their pensions, overstate their profits, and postpone to another day any action that would lead them to keep their promises to employees. At the same time, Congress has passed laws making it more difficult for struggling workers and retirees to file for bankruptcy protection. The pattern is consistent: give business the breaks they need to avoid responsibilities to their employees while cracking down on households in trouble.

Is there any way out of this? Well, a few months ago Michael Hudson wrote in Harper’s that Bush’s plan to privatize Social Security can be seen as a last-ditch attempt to bail out companies that have underfunded their pensions, primarily by giving stock prices a much-needed jolt. Perhaps. My sense is that the plot to phase-out Social Security has less to do with dastardly corporate bailout schemes—see William Greider for more along these lines—and more to do with simple ideology. Conservatives hate Social Security as a program; after all, it’s the shining, popular symbol of the New Deal and the triumph of big-government liberalism, even though there’s nothing all that “big government” about Social Security (all it does is take money in and pay money out; no labyrinthine bureaucracies here.) Still, it is rather convenient that privatization just happens to help Congress and large corporations patch over the pension-fund Ponzi scheme they’ve been running all these years, isn’t it?