Friday, June 18, 2010

Look For The Union Label--On Your Tax Bill

It's payback time in Washington, and the unions are calling in their markers. Congress is now preparing another bailout--for unions too big to fail (as well as those too small to succeed). The latest bill, proposed by Democrat Senator Bob Casey of Pennsylvania, would guarantee that mismanaged, misplaced, misapplied and just plain missing union pension funds will be replaced by you, the taxpayer.

In a chapter right out of Animal Farm or 1984, the bill is called the "Create Jobs and Save Benefits Act of 2010." Many union employees have retirement and pension benefits which would make Midas blush, but that isn't enough. The union bosses want to make sure that no union employee will ever get less than he was promised by those same bosses. This perpetuation of outrageous and crippling pension deals used to be guaranteed by union pools ("multiemployer pension plans") which shored up or saved benefits for union employees who moved to a company that later went bankrupt and couldn't fund the pensions.

The employees who were vested in the pension, even though years from retirement, would never be allowed to accept the risks that the rest of us face. Once a member was vested and then found himself without a participating company to pay the benefits for his full retirement, he became what is called an "orphan." Orphaned union member benefits were previously paid for out of money collected from companies which were still capable of paying into the retirement fund (the "pool"). Casey now wants to leave that money in place for ever-increasing benefits for the healthy companies' union employees and instead have you, the taxpayer, pick up the tab for the orphaned union retirees.

The whole concept is that regardless of whether the union benefits themselves have caused a company to go under, or the union has screwed up funding the pensions which the healthy companies have been paying into all along, the union retiree will now have the complete security of knowing his cushy pension will always be funded. Under certain extraordinary circumstances, Congress authorized the Pension Benefit Guaranty Corporation (PBGC) to rescue the union pensions. But the taxpayer funding (Guaranty) has to be approved and reviewed annually. In a scheme similar to the Federal Deposit Insurance Corporation, the PBGC is theoretically only guaranteeing a pension failure bailout once for a total of $12,870 per retiree.

When these guarantees were worked out originally under the multiemployer (pool) concept, there were many active union employees for each retiree, so the funds usually appeared to be working. That has changed drastically, such that today for every working union pool worker, there is one retiree. That means that there is simply no way the union/healthy employer scheme can fund the orphan pensions. Some unions are even worse off. The Teamsters Union has four retirees for every currently employed worker, which means it's almost impossible to fund Teamster employee retirees, let alone have money left over to go into a pool for orphan retirees.

In other arenas, this is called a Ponzi scheme. When liberals do it, it's called "compassion." Things are so badly underfunded and mismanaged in the multiemployer pools that UPS recently paid a penalty of over $6 billion just to get itself out of the Central States Fund pool so that it could establish its own retirement fund. It was still a bargain for UPS, since despite the fact that it now had to pay for its own pension fund on top of the $6 billion penalty, the company was now responsible only for its own employees and not the retirement of thousands of union types who never worked a day for UPS.

The Ponzi pyramid is about to collapse, and that means years of mismanagement, misfeasance and malfeasance at the funds must now be salvaged by going to the taxpayers--or so says Senator Casey. By using federal funds to save the pension funds, the unions are now free to tell future employees that "there will always be a pension fund if you sign up for membership in our union." In other words, the unions have either intentionally or negligently allowed the multiemployer funds to shrink to unsustainable levels with no worries, since they can always count on the Democrats to have the taxpayers make up the difference.

20 comments:

StanH said...

Not only is this a pyramid scheme, but an inverted pyramid that is resting precariously on it’s apex. The collapse of our financial system becomes more likely every day that the democrats and their Barry are in charge. This must be stopped, and the union leaders jailed…come on November!

Anonymous said...

You said it Stan, November can't come fast enough. TJ

Ponderosa said...

OK so the next step with multi-employer pension plans – set up a fake company, higher a bunch of union buddies, ‘negotiate’ a pension plan guaranteed by PBGC, vest, collapse the ‘business’ and then retire. About right?

I used to buy the idea that unions were a force for good back in the bad old days. For coal miners, steel, heavy industry, etc. where there was, you know, a physical danger.

But I have never heard or read of a valid rationale as to why any government organization should be unionized. In the end we, the public, are already the bosses.

Finally realized it all propaganda and about power. I can be so naive.

Tennessee Jed said...

Hawk - along with government operated healthcare, no issue pisses me off more than unions. Growing up around Philly, I was in possibly the most heavily unionized city in the country. It was mob controlled and thug policed. Not too far from where I went to college was the site of the real "Molly McGuires" where thugs were romanticized by Hollywood.

One of the first insurance clients I had was trying to do a big project in King of Prussia, Pa. (near Valley Forge.) The thugs from the building and trades union kept destroying his equipment.

Never has a far left liberal regime been so naked in their pursuit of rewarding their friends.

LawHawkRFD said...

Stan: Eventually, all Ponzi schemes end up with the pyramid inverted. But only when the government gets involved in supporting the scheme do the taxpayers get stuck shoring up the whole unbalanced mess. In private Ponzi schemes, somebody usually goes to jail when the inverted pyramid tips over and kills a few people (usually metaphorically, but occasionally literally).

LawHawkRFD said...

Anon: I'll join that chorus !

LawHawkRFD said...

Ponderosa: Under this administration, with the Justice Department looking the other way and the Labor Department actively promoting forced unionism, I wouldn't be completely shocked to see something exactly like your scenario happen. Another reason to get rid of this administration.

I have always believed that the Supreme Court was simply wrong when it found collective bargaining constitutional, and that includes my days as a member of the New Left. But it was reacting at a time when certain heavy industries were completely uncaring about the welfare of their employees who were treated like cogs in a machine. That's the danger in the courts "doing the right thing" when reacting to specific situations rather than the overall constitutional plan.

The double-whammy of unionism and civil service protection has produced a huge waste of taxpayers money combined with an astounding lack of genuine productivity. Trying to fire a federal employee is like trying to punch air.

LawHawkRFD said...

Tennessee: My second job as a young man required that I join a union. I never saw it do much more than collect dues and show up occasionally to glad-hand the workers. Later, when I became a manager for the same company, the union did manage to require that we re-hire an employee I had fired for violating company policy (it was in fact theft, but we thought firing was sufficient). I've been a determined enemy of unions ever since.

AndrewPrice said...

You know, I was saying 20 years ago that the primary focus of unions these days should be protecting pension funds. But they didn't care about that. They wanted to spend their time trying to get rules that kept malingerers from being fired. Now that failure is highlighted, and WE should not be paying for it.

LawHawkRFD said...

Andrew: You are so right about the pensions being one of the few things unions should have been protecting. But when you know the government will cover your profligate losses, why bother?

For twelve years, I was a negotiator for a very large retail company. We had to deal with a union that represented both retail workers and grocery workers. The grocery people had their pensions administered by the union, but we kept the pensions in company hands for the retail workers. After a nasty slide in value after the market crash, the company-run pension got back on its feet and started making money after only one fiscal quarter. The union-administered fund has been underfunded for so long that the crash nearly did it in entirely. So the grocery people will now be looking to the taxpayers to cover their losses, while the retail people are already ahead of the minimum guarantee provided by the PBGC. Vested employees in the retail division will be "made whole" by the company, not by the taxpayers.

Joel Farnham said...

LawHawk,

I don't know the whole history of Civil Service, but I seem to remember the reason why it was imposed was to increase the competence of individuals working for the government.

Civil service testing and evaluation was created after World War II.

Public service unions? I don't remember when they came into being. I do think there is a clause where it is illegal for Public Service members to strike. Ronald Reagan broke the back of one of them during his administrations. Air Controllers.

LawHawkRFD said...

Joel: The civil service system was supposed to be the remedy for the spoils system. As often happens, the cure was as bad as the disease. Why these people need civil service and union protection both is beyond me, except for the greed and perpetuation of incompetence part.

Who thinks that a little thing like the law will stop union agitators from calling a strike? Ronald Reagan did indeed break the back of the militant wing of the Air Traffic Controllers union by simply firing them all and making them apply for their jobs again, along with many qualified applicants who had been excluded from the job because of union work rules.

And it was the laconic Calvin Coolidge who said "No one has the right to strike against the public good."

Joel Farnham said...

LawHawk,

Thanks. I remembered an off-hand remark from years ago, that while the civil service is imperfect, it was much better than what was going on before.

If they had just left it at civil service and didn't add unions, would it be better?

HamiltonsGhost said...

Lawhawk--The union bosses need to perpetuate their jobs, so they curry favor with the Democrats in order to get them to paint over the union mistakes at the taxpayers expense. If they spent as much money funding their pensions instead of throwing multiple millions of dollars at the political campaigns of sympathetic liberals, the taxpayer would have to foot a lot less of the bill for the ridiculous pensions.

LawHawkRFD said...

Joel: It was an improvement over the spoils system, but like all human institutions, imperfect. The concept was that you took a test, qualified for the job, did your job well for decent if not great wages in exchange for which you got a good job that was not subject to the whims of government and politics and served the public's interests.

One of the side effects was that you created a hierarchy of drones who would never strive to do things better or more efficiently. Eventually, the drones felt that they were separate and apart both from the government that funded them and the public that they were supposed to be serving. Arrogance and incivility began to creep into the work ethic, and then the unions came in and demanded more pay for less work to go along with the endemic lethargy. And then, of course, there are the pensions that are completely incongruous as compared to private pensions which depend on fiscal reality.

I guess my answer is not that it would be better without the unions, only less bad.

LawHawkRFD said...

HamiltonsGhost: The Supreme Court ruled in Beck v Communications Workers Union that union dues could not be used for political purposes without the consent of the union members, and in the case of an objecting member, not at all. The rule has been routinely ignored, and the Obama pro-unionists will simply burn the decision on the pyre of forced unionism. Even the hacks on the Labor Board during the Bush administration bent over backwards to find "implied consent" of the members for unions to spend lavish sums on Democratic candidates.

In addition, Beck said that without consent, unions could spend member dues only on administrative costs, recruiting, organizing, and union advertising--never on politics. It further said that any member who objected to political expenditures was entitled to an accounting of all union activities in order to determine what percentage was being spent on political candidates and issue campaigns.

Amazingly, union accountants invariably produced figures which showed that about 3% to 5% of all union funds were being spent on the forbidden political activities, and the objecting member was entitled to a corresponding reduction in union dues.

Yet when the National Right to Work Foundation sued in individual cases, it always turned out that a genuine independent audit showed that no less than 40%, and sometimes as much as 70% of collected dues were actually being spent on forbidden political activity.

Anonymous said...

Since this is about unions, I thought you might want to read this as well, if you haven't seen it yet: http://biggovernment.com/laborunionreport/2010/06/17/union-backed-democrat-wants-to-kill-22-right-to-work-states/#more-133574

TJ

Anonymous said...

Sorry, the link didn't post like I wanted it to, but you can find it on the first page of the Big Government site. TJ

LawHawkRFD said...

Anon: I had seen a similar piece elsewhere, but for those who haven't, I definitely recommend it. Just for the record, the union I referred to in my reply to Andrew Price's comment is the UFCW, which I noticed is one of the major contributors to the campaign to end right-to-work.

LawHawkRFD said...

Anon: I'm not sure if this works for every computer setup, but I've discovered that if I use my mouse to highlight the link, then right click, I get a message that allows me to go to the site. It's a lot easier than trying to enter the entire link on the address bar, but it may not work for everyone.

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