PBGC Continues to Foreshadow the Social Security Crisis
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Yet another update to my previous post and two earlier updates on how the Pension Benefit Guaranty Corporation generally, and the airlines in particular, are foreshadowing the looming Social Security crisis:
The specific numbers at the PBGC aren't so important as the bureaucratic behavior in the face of the crisis and what it portends for Social Security as time passes and the crisis deepens.
As I blogged previously: The mechanics, economics and demographics of the Social Security crisis are essentially identical to the PBGC crisis. In essence, too much was promised and too little put away, with a mountain of paper-pushing sleight-of-hand in the meantime to give the illusion of solidity. It's unfortunate that some are trying to downplay the latter as an aberration triggered by two dysfunctional industries (airlines and steel). That's simply not true -- the flaws in the schemes are structural and not exogenous. The PBGC crisis is a perfect opportunity to analyze, experiment and educate about the much larger crisis looming on the horizon.
UPDATE: Arnold Kling takes it up a notch by suggesting that the PBGC is not just badly run, or demographically burdened, but actually "completely irrational." Review the definition of "moral hazard," then visit his post. Intriguing.
Related Posts:
Airline Pensions and Social Security
Airline Pensions, Part 2
The Other Pension Crisis
The deficit at the federal agency that rescues failed U.S. corporate pensions more than doubled to $23.3 billion in fiscal year 2004, officials said on Monday, with analysts largely blaming bankrupt airlines.
The Pension Benefit Guaranty Corp. insures the traditional "defined benefit" pensions of about 44 million workers. It started the year with a then-record deficit of $11.2 billion in its program for pension plans sponsored by a single employer.
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Total underfunding of pensions at U.S. companies whose single-employer pension plans are insured by the PBGC jumped in fiscal 2004 to $450 billion -- up from $350 billion a year earlier.
The PBGC's separate insurance program for multi-employer pensions had a deficit of $236 million in fiscal 2004 -- smaller than the deficit of $261 million a year earlier.
The specific numbers at the PBGC aren't so important as the bureaucratic behavior in the face of the crisis and what it portends for Social Security as time passes and the crisis deepens.
As I blogged previously: The mechanics, economics and demographics of the Social Security crisis are essentially identical to the PBGC crisis. In essence, too much was promised and too little put away, with a mountain of paper-pushing sleight-of-hand in the meantime to give the illusion of solidity. It's unfortunate that some are trying to downplay the latter as an aberration triggered by two dysfunctional industries (airlines and steel). That's simply not true -- the flaws in the schemes are structural and not exogenous. The PBGC crisis is a perfect opportunity to analyze, experiment and educate about the much larger crisis looming on the horizon.
UPDATE: Arnold Kling takes it up a notch by suggesting that the PBGC is not just badly run, or demographically burdened, but actually "completely irrational." Review the definition of "moral hazard," then visit his post. Intriguing.
Related Posts:
Airline Pensions and Social Security
Airline Pensions, Part 2
The Other Pension Crisis
Posted by KipEsquire on
16 November 2004
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