Some think pension bailouts should be part of the equation now that the federal government is rolling out aid packages for businesses and individuals. However, others argue that they should not be. The coronavirus pandemic has brought about the biggest stimulus package in modern American history, but the pension crisis continues.
Argument in favor of pension bailouts
In an op-ed piece for CNBC, former lawmakers John Boehner and Joe Crowley argue in favor of pension bailouts as part of the coronavirus response. They believe addressing the pension crisis affecting multiemployer plans should be part of the response to the pandemic.
They note that billions of dollars are falling out of retirement accounts and the economy. Further, pension plans and the government agency that supports them have been running out of money for years, and the problem is only going to get worse as the market crashes.
Central States is one of the biggest multiemployer pension plans in the country, and it’s on track to become insolvent in only five years. Economists believe that when that happens, it will cause a GDP shortfall of over $5 billion, over $1 billion in lost federal tax revenue, and the loss of 55,000 jobs.
Boehner and Crowley argue that a pension bailout for multiemployer plans would help improve confidence in the nation’s economy as it deals with the fallout from COVID-19.
Argument against funds for pensions
WirePoints in an article for Real Clear Politics argues against pension bailouts for state funds. The writers believe “the nation’s most fiscally irresponsible states” will probably request bailouts for their bankrupt pension funds. They say there probably will be some financial aid for state funds, but if that does happen, they want the bailout to be contingent on pension reform.
Pension funds were facing $5 trillion in shortfalls before the coronavirus-driven market crash. Thus, it’s expected that they will be in even greater need of assistance now that the market has crashed. Real Clear Politics believe states could either demand direct assistance for their floundering pension funds or indirect assistance to fund their operations that support their pension plans.
The key difference between these two arguments is that one calls for pension bailouts for multiemployer plans, while the other pushes against states receiving bailouts for their plans. In both cases though, the issue is structural problems with the pension funds, which have been kicking the can down the road for decades in an attempt to avoid dealing with the real problem. Whether bailouts materialize for multiemployer or public pension funds, they should be done with strings attached. Reform must be part of the equation.
The post Debate over pension bailouts rages amid COVID-19 pandemic appeared first on ValueWalk.