A Total Misuse Of Taxpayer Dollars

The Biden administration has blazed new trails in wasting taxpayer money. Aside from pouring millions into the war in Ukraine to support a dictator who recently has banned the Ukrainian Orthodox Church after having nationalized television news and restricted political opposition, they have now decided to bail out the pensions of their union friends.

On Thursday, The Epoch Times reported:

President Joe Biden will announce the injection of $36 billion in funding to bolster the multi-employer Central States Pension Fund and prevent “drastic cuts” to the pensions of more than 350,000 union workers and retirees on Dec. 8.

According to the Biden administration, the funding was approved by the Pension Benefit Guaranty Corporation (PBGC) and is the largest-ever amount of federal aid awarded to a pension fund.

The funding will be sourced from the American Rescue Plan, the $1.9 trillion COVID-19 relief package Biden signed into law in 2021.

“Without the historic Special Financial Assistance program included in President Biden’s American Rescue Plan, these workers and retirees—who have already earned these benefits—would have faced estimated benefit reductions of roughly 60 percent in the next few years,” according to a White House fact sheet previewing the announcement. “The Central States Pension Fund estimates that it will now be able to pay full benefits to workers and retirees through 2051.”

Established in 1955, the Central States Pension Fund is one of the country’s largest multi-employer pension plans and provides benefits to union members in the trucking, car haul, warehouse, construction, food processing, dairy, and grocery trucking industries.

According to its website, the fund pays out more than $2.8 billion in pension benefits annually and $5.7 million more per day than it receives in employer contributions.

On June 13, 2010, I posted the following:

The reference for this story is a May 25 article in the Washington Examiner.  The article deals with the Pension Benefit Guarantee Corporation (PBGC).  Senator Bob Casey, (D-Pa.), introduced S. 3157 in late March.  According to Thomas.gov, the bill is currently in committee.  The bill is called “Create Jobs and Save Benefits Act of 2010.”

The bill would back union pension funds with federal tax dollars.  The article in the Washington Examiner points out that in 2006, before the recession, only six percent of these union pension funds were doing well.  In a column in the Washington Examiner in April, Mark Hemingway pointed out that the average union pension plan had only enough money to cover 62 percent of its financial obligations.  Pension plans that are below 80 percent funding are considered “endangered” by the government; below 65 percent is considered “critical.”  Union membership is declining, which means that less people are paying into these funds.

In July 2009, the PBGC bailed out the pension liabilities of auto parts manufacturer Delphi ($6.2 billion). In 2007, the PBGC had a deficit of almost $1 billion. They are expected to assume $86 billion in liabilities by 2015. This is not good business practice.

The government has no business bailing out pension funds.

Wasteful Spending In Washington

On Saturday, Just the News awarded its Golden Horseshoe award to the Pension Benefit Guaranty Corp. This is the organization that was created by the Employee Retirement Income Security Act of 1974 to protect pension benefits and is responsible for more than 34 million workers and retiree pension plans.

The article reports:

This week’s Golden Horseshoe award goes to the Pension Benefit Guaranty Corp. (PBGC), the nation’s pension bailout agency that is still reeling from revelations its chief of contracting engaged in a bribery scheme that steered $4.8 million in fraudulent business to a vendor in return for more than $1 million in personal benefits.

The bribery scheme involving the now convicted director of PBGC’s Procurement Department was possible because the agency suffered from several vulnerabilities, including reduced competition among vendors, missing legal reviews and sole-source contracts that evaded bidding designed to get taxpayers the best bargain, the PBGC’s inspector general reported.

“His actions were enabled by internal control weaknesses; specifically, inadequate oversight of PD procurements and a lack of a control mechanism to ensure that PD sent all requisite contract actions for legal review,” the inspector general reported. “Although PBGC began requiring that more contract actions receive legal review after the PD Director resigned in February 2020, it does not have a mechanism to ensure PD complies with this requirement.”

The internal watchdog said it also found “internal control deficiencies allowed PD to avoid competition requirements when awarding five other contracts, three of which were for PD support. Four of the contracts were awarded on a sole-source basis, including three using small business set-aside programs.”

The weaknesses are particularly concerning because PBGC, which normal funds itself through insurance payments from employer pension plans, just received its first ever infusion of tax dollars to replenish coffers that were on track to be insolvent by 2026, the IG noted. 

Please follow the link above to read the details. This is disgusting. The amount of fraud is disgusting and the fact that our tax dollars were used to fund this agency to allow further fraud is even worse. Our tax dollars at work.

This Is Not A New Problem

Congress has an uncanny talent for taking a bad situation and making it worse. Before they left for August recess, they did just that.

The Daily Signal posted an article yesterday headlined, “Congress Poised to Give Unions a Massive Bailout.”

The article reports:

A new report from the Pension Benefit Guaranty Corp. shows that the private union pension crisis is only getting worse, and now Congress is poised to make it worse still.

Not only are many multiemployer pension plans rapidly approaching insolvency, but the situation is so bad that even the pension safety net—the PBGC’s Multiemployer Program—will be bankrupt in just six years, leaving pensioners with mere pennies on the dollar in promised benefits.

Unfortunately, the House of Representatives passed a bill just before leaving for August recess that will make the situation even worse. Not only would the Rehabilitation for Multiemployer Pensions Act (H.R. 397), exacerbate the problem, it would put taxpayers on the hook for potentially $638 billion or more in broken pension promises.

This is the summary of the bill posted at Congress.gov:

Rehabilitation for Multiemployer Pensions Act of 2019

This bill establishes the Pension Rehabilitation Administration within the Department of the Treasury and a related trust fund to make loans to certain multiemployer defined benefit pension plans.

To receive a loan, a plan must be (1) in critical and declining status, including any plan with respect to which a suspension of benefits has been approved; (2) in critical status, have a funded percentage of less than 40%, and have a ratio of active to inactive participants which is less than two to three; or (3) insolvent, if the plan became insolvent after December 16, 2014, and has not been terminated.

Treasury must transfer amounts, which may include proceeds from bonds and other obligations, from the general fund to the trust fund established by this bill as necessary to fund the program. The Pension Rehabilitation Administration may use the funds, without a further appropriation, to make loans, pay principal and interest on obligations, or for administrative and operating expenses.

The bill allows the sponsor of a multiemployer pension plan that is applying for a loan under this bill to also apply to the Pension Benefit Guaranty Corporation (PBGC) for financial assistance if, after receiving the loan, the plan will still become (or remain) insolvent within the 30-year period beginning on the date of the loan.

The bill also appropriates to the PBGC the funds that are necessary to provide the financial assistance required by this bill.

No. In 2010, I wrote about this problem at rightwinggranny. One source of my article was Human Events, which stated:

“EPI has published and advocated what we feel would be an excellent national supplemental retirement plan, the Guaranteed Retirement Account, which was authored by Prof. Teresa Ghilarducci, Director of the Schwartz Center for Economic Policy Analysis at the New School for Social Research. In a nutshell, the GRA would mandate employer and employee contributions to a federally administered cash balance plan. The combined 5% of payroll contributions would be invested by a Thrift Savings Plan-like entity in the bond and stock markets, with a guaranteed minimum return of 3% beyond inflation. A $600 tax credit would cover the entire 2.5% contribution for workers earning $24,000 or less, and greatly reduce the effective contribution rate for other lower-paid workers. We calculate that at the end of a normal working life, the average worker would accumulate, along with Social Security, enough to assure a 70%replacement rate of pre-retirement income.”

The Daily Signal article concludes:

Under H.R. 397 (which is similar to the Butch Lewis Act already before the Senate), insolvent union pension plans would receive taxpayer dollars to invest in the stock market, as well as loans to cover their broken pension promises.

Risking taxpayer money in the stock market and making loans to insolvent pension plans is reckless and wrong.

And instead of fixing the underlying problems, this bailout-without-reform proposal would incentivize union pension plans to become more underfunded so they could receive taxpayer funds.

That would be particularly unfair, considering that Congress has not even addressed its inability to pay its own Social Security obligations to taxpayers.

Instead of a costly bailout-without-reform, Congress should improve the Pension Benefit Guaranty Corp.’s solvency, prevent plans from overpromising and underfunding pensions, and help plans minimize pension reductions across workers.

The current House of Representatives will go down in history as one of the most irresponsible governmental bodies ever elected.

A Victory For Freedom, A Possible Victory For Taxpayers

The Associated Press posted an article today about the Supreme Court’s decision that government workers can’t be forced to contribute to labor unions that represent them in collective bargaining.

The article states:

A recent study by Frank Manzo of the Illinois Economic Policy Institute and Robert Bruno of the University of Illinois at Urbana-Champaign estimated that public-sector unions could lose more than 700,000 members over time as a result of the ruling and that unions also could suffer a loss of political influence that could depress wages as well.

Alito acknowledged that unions could “experience unpleasant transition costs in the short term.” But he said labor’s problems pale in comparison to “the considerable windfall that unions have received…for the past 41 years.”

Billions of dollars have been taken from workers who were not union members in that time, he said.

“Those unconstitutional exactions cannot be allowed to continue indefinitely,” Alito wrote.

Kagan, reading a summary of her dissent in the courtroom, said unions only could collect money for the costs of negotiating terms of employment. “But no part of those fees could go to any of the union’s political or ideological activities,” she said.

The court’s majority said public-sector unions aren’t entitled to any money from employees without their consent.

There are two aspects of this decision that are going to make the political left very unhappy. Obviously this will severely limit the amount of money unions can contribute to Democrat political campaigns (to check union political donations, see opensecrets.org). But there is another issue here–pension funds. The other aspect of this decision is union retirement funds.

On October 19, 2012, I posted the following (here):

In a column in the Washington Examiner in April, Mark Hemingway pointed out that the average union pension plan had only enough money to cover 62 percent of its financial obligations.  Pension plans that are below 80 percent funding are considered “endangered” by the government; below 65 percent is considered “critical.”  Union membership is declining, which means that less people are paying into these funds.

The Pension Benefit Guaranty Corporation (PBGC) was created by the Employee Retirement Income Security Act of 1974 (ERISA).

According to Wikipedia:

The PBGC was created to encourage the continuation and maintenance of voluntary private defined benefit pension plans, provide timely and uninterrupted payment of pension benefits, and keep pension insurance premiums at the lowest level necessary to carry out its operations. Subject to other statutory limitations, PBGC’s insurance program pays pension benefits up to the maximum guaranteed benefit set by law to participants who retire at 65 ($60,136 a year as of 2016).[2] The benefits payable to insured retirees who start their benefits at ages other than 65 or elect survivor coverage are adjusted to be equivalent in value.

In fiscal year 2015, PBGC paid $5.6 billion in benefits to participants of failed single-employer pension plans. That year, 69 single-employer pension plans failed. PBGC paid $103 million in financial assistance to 57 multiemployer pension plans. The agency’s deficit increased to $76 billion. It has a total of $164 billion in obligations and $88 billion in assets.

On 03/23/2010, Senator Robert Casey of Pennsylvania introduced S3157.

The summary of S3157 at congress.gov states:

Create Jobs and Save Benefits Act of 2010 – Amends the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code to: (1) permit multiemployer pension plans to merge or form alliances with other plans; (2) increase Pension Benefit Guaranty Corporation (PBGC) guarantees for insolvent plans to increase participant benefits; and (3) increase from $8.00 to $16.00 the annual premium rate payable to the PBGC for each individual who is a participant of a multiemployer plan after December 31, 2010. (The underline is mine)

The bill was referred to committee and died there. So what is my point? The danger to the unions in this Supreme Court decision is that they will not have the money to pay their union pensions. The danger to the taxpayers in this decision is that they will be asked to pay the union pensions.

Stay tuned. This is going to get interesting.

 

Searching For The Truth About Delphi

 

The Washington Free Beacon and the Daily Caller have both posted articles about how the bailout of the automobile industry was handled in regard to Delphi, a company which supplies electronics and technology to the auto industry.

The Daily Caller posted an article stating that the decision to end the pensions of the non-union  workers at Delphi was not made independently by the Pension Benefit Guaranty Corporation (PBGC), the federal government agency that handles private-sector pension benefits issues, but that the decision was the result of pressure from the Treasury Department. They have uncovered a chain of e-mails that backs up this conclusion.

The Daily Caller reports:

The email chain was titled “Delphi Hourly Plan.” Delphi’s unionized hourly retirees originally saw their pension plans terminated together with the nonunion Delphi salaried retirees’ plans in a process that commenced on July 31, 2009.

Later, in September 2009, the union retirees’ plans were topped up while nonunion retirees’ plans remained terminated.

 These emails contradict July 2012 congressional testimony Feldman (Treasury official Matt Feldman) gave during an investigation by the subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs.

The treatment of Delphi employees is becoming a campaign issue in Ohio, where many of its employees were located. Paul Ryan met with nine Delphi retirees who lost their pensions, while their union coworkers pensions were untouched.

The Washington Free Beacon explains some of the details of the bailout:

Delphi was an important element of the auto-bailout. The company, one of GM’s largest parts suppliers, had been in bankruptcy since 2005 and Treasury officials recognized that it would need to be lifted from bankruptcy along with GM.

To cut costs, the Pension Benefit Guaranty Corporation (PBGC), an independent federal insurer of retirement systems, terminated the nonunion plan while GM volunteered $1 billion to top-off pensions belonging to the United Autoworkers union.

The administration has contended that GM was acting on a 1999 agreement with the union to close any pension gap that emerged if Delphi declared bankruptcy.

That agreement, however, was liquidated when GM itself entered bankruptcy and emerged as a new company, according to bankruptcy expert Todd Zywicki.

General Motors’ decision to guarantee the obligations of a separate company—Delphi—was completely unjustified under established principles of bankruptcy law, and it increased the cost of the taxpayer bailout of the automotive industry by more than $1 billion with no reciprocal benefit to General Motors,” he told Congress in July.

The auto industry bailout is an example of the government interfering with the laws of bankruptcy and acting in total disregard to the law. It’s time to bring people into Washington who respect the laws of this country.

 

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Those Pesky E-Mails

Investors.com posted an article today about the latest scandal in the Obama Administration. You may not see this in the major media–they are too busy trying to distract the public with shiny objects–but it is an indication of how things work in the Obama Administration.

The article deals with GM’s Delphi auto parts unit and how its non-union employees were dealt with during the GM bailout.

The article reports:

The news site The Daily Caller has obtained internal government emails that show the U.S. Treasury Department, led by Timothy Geithner, pushed in 2009 to end the pensions of 20,000 non-union employees of GM’s Delphi auto parts unit as part of the auto bailout.

What’s truly outrageous is that, while those workers were cheated of their full pensions, union employees of the same Delphi company got their pensions paid.

This financially ruinous favoritism of union workers over nonunion workers is blatantly unfair, illegal and a violation of Constitutional guarantees of equal treatment under the law. And the reason is political.

This is one of many examples where government agencies were used for political purposes (paying back union supporters or wealthy donors) in the Obama Administration.

The Pension Benefit Guaranty Corporation (PBGC) is responsible for overseeing private pensions. This organization is an independent, quasi-governmental insurer of private pension plans. Under law, that organization would have had the authority to determine how the pensions were handled.

The article further reports:

The email trail shows clearly that in April 2009 the Treasury Department held meetings on GM and Delphi, including “pension issues.” However, the PBGC was, in the words of one official, “disinvited.”

This was well before the decision, made in July, to stiff nonunion workers on their pensions. It suggests that the White House and Treasury were calling the shots — not the compromised, and politically bullied, PBGC.

This violates PBGC’s independence under the law as the sole agency that can terminate a private pension — not Treasury. Worse, the PBGC, based on the emails, seems to have thought it needed to clear whatever it did with the White House and Treasury. It didn’t.

There is also the question of whether or not several White House officials may have lied under oath when questioned about the decision on the pensions.

The Obama Administration has taken political cronyism to a new level. It is time to vote them out of office.

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