TEXT OF COMMENTARY
SCOTT JAGOW: By the end of the week, Republicans in the House and Senate are hoping to pass a big tax cut bill. The measure would also overhaul the way pensions work in corporate America. And that's where it gets tricky. Marketplace commentator Robert Reich believes whatever it decides, Congress should make sure of one thing.
ROBERT REICH: The President's approval ratings are so low, I want to announce something he's done worthy of commendation. He wants a law that forces companies to fully fund their pension obligations to their employees, and he's right. The question is how far corporate lobbyists will get in watering down the White House plan.
Corporate pension plans don't have nearly enough money to pay what the companies have promised their workers. We're talking big money here — a shortfall of almost $500 billion. And if companies can't pay up, you know who's left holding the bag? Not only tens of millions of people who count on these pensions, but you and me and every other taxpayer.
You see, there's a government agency called the Pension Benefit Guarantee Corporation that insures most — but not all — of these promises. But the PBGC itself is already deep in the red. Last year United Airlines alone dumped 121,000 present and future retirees on the agency. Northwest Airlines, Delphi, every other company now using bankruptcy to get out from under the promises they've made to their employees are poised for similar moves. The number of future retirees added to the PBGC's rolls over past three years is already more than in previous 27 years combined.
Need I remind you what happened almost a quarter century ago when hundreds of Savings and Loan banks that had been insured by the government went belly up? It cost American taxpayers several hundred billion dollars. This time we don't have several hundred billion dollars to spare. The federal budget is already deep in debt. We're paying for a war. The Administration is handing out more tax breaks to the rich.
Lobbyists for big companies say requiring them to fully fund their pension plans will discourage them from setting up such plans in the first place. Baloney. If they're not funding them they shouldn't be setting them up. They say forcing companies with low credit ratings to pay up faster will hasten their demise. More baloney. We're not talking about new obligations. They already owe their retirees this money.
They might as well pay up because they're going to have to disclose their unfunded pension obligations later this year under new accounting rules anyway. Including these liabilities on balance sheets now would wipe out the book value of at least a dozen big companies and slice shareholder equity in half at 40 or 50 more.
Do the right thing, corporate America — what the President wants you to do: Fund your pension promises.
Former Labor Secretary Robert Reich teaches public policy at the University of California at Berkeley.