Pensions are a staple of the U.S. economy as millions of pensioners oil the squeaky wheel of capitalism. Pensions are not just a promise, they are the only means for millions of workers to retire upon as they were told for their entire careers, they would be safe in their senior years. An April 2018 CNN study found U.S. pensions had reached a $1.4 trillion deficit putting our entire economy at risk of poverty-not just the pensioners. Just think about it. If the federal shutdown of 2018-2019 cost the entire economy $11 billion dollars, what could millions of people forced into poverty decreasing their contributions to capitalism do to our economy? We could have a twenty-year depression as millions of Baby Boomers are expected to retire on pensions in the next 10 years. It’s not worth the anti-union, anti-pension arguments when poverty will harm us all. Let’s consider the following solutions that don’t increase taxes.
Stop pension dipping. It’s a perfect example of the adage when you find yourself in a hole stop digging. The government has historically and continuously borrowed from pensions. In 2006 and now, the United States Treasury Secretary borrowed money from the federal employee pension fund to cover the budget. In 2012 New York borrowed against the public employee pension funds to pay their pension dues. The local union pension funds for the City of Chicago were depleted by the former mayor’s family members, possibly to the tune of $80M. Borrowing from pensions is a favored money scheme of politicians and their illicit accountants. A federal law mandated and monitored by the National Labor Relations Board could save millions in deficits. State and local politicians have not been actively finding solutions beyond raising taxes that are not audited or monitored to ensure collection into the pension funds. As the examples above prove, we must have federal intervention to save millions of Americans. A two-part federal law must include an immediate cease upon borrowing any and all funds from public pensions and a 5-year plan on returning the funds without raising taxes. This is not impossible as states have enacted laws that employees cannot borrow from pensions, now it’s their turn. Big brother must intercede for a stable economic future for all Americans.
When politicians aren’t borrowing from pensions, they are deferring payments. As far as any economist is concerned deferred payments are even worse. The Chicago Teachers Union deferred payments to its pension from 1998 till 2012. Smaller payments were made so teachers would continuously receive raises. It was a risky contract that is now the brunt of their pension liability issues. Chicago continued to defer payments for this fund and others creating even more shortfalls. Now, Illinois’s pensions are considered nearly insolvent as the Baby Boomer retirement begins. New York has had similar issues as well as the Teamsters.
Underfunding pensions by deferring payments or lowering actual payment obligations is and will cause economic disaster. The second part of the federal law must require actual obligation payments of all state pension payments. These payments must be paid in full per quarter without exception. The law must also state that all contracts with public employee unions must not include pension payment deferrals in lieu of increased wages or benefits. Payments made by tax increases either, they must be directly extracted from employees and their unions. In England, pensioners were paying 11% of their wages to pensions. If that is what it takes, then so be it. We must pay now because there isn’t going to be much time later.
As we venture into the progressive 21st century, we must make progressive policy. Financial policy has and will continue to be built around the few Big Business analysts and investors. Those investors do not have the interest of the majority of the population of Chicago or the nation as witnessed in the tragic financial situation since 2008. Public employees can no longer rely on the government to secure their retirement as the governments were not careful watchdogs of the pension systems.
The pension liabilities can be solved through Pension bonds-the new public savings bond. While Wall Street exchanges millions in urban type bonds, the average American cannot afford to be part of the interest-laden surplus generated by big bond trades. Average Americans, the Middle-Class investors, still buy US Savings Bonds with an average $25-$100 bond purchase (US Treasury). The key to funding the billions in underfunded pensions is to create an average savings bond that average people can invest in for their future. The public savings bond is drafted from the US Savings Bond Series EE. That’s the bond Grandma still buys. Let’s make pensions a viable long-term investment for every resident that is affected by deficits by compounding not only their interest but the stability of the pension system.
Please read the link below for the downloadable policy proposal. https://drive.google.com/file/d/11bCFlhh_2wtxHxQEteB7HFTYnfUZZs7H/view