The Real Crisis: Private Pensions
by Paul Gallagher
Nothing shows the insanity of "privatizing" Social Security more clearly than the conditions of the nation's private (corporate) retirement pension plans, whose assets and contributions are invested in stocks and bonds as Bush would do to Social Security. While the Social Security Trust Fund is gathering a surplus of over $150 billion a year, recent estimates are that private pension funds have a collective $450 billion deficit. Fed Chairman Alan Greenspan's low interest rates, and negative stock indexes since 1999, as well as corporate under-funding of the plans, have brought this about. Moreover, plans which offer reliable benefits in retirement—called "defined benefit" plans—are dying out; only 30,000 such plans remain of 130,000 a generation ago.
Faced with the ongoing collapse of the big airlines' pension plans, the Bush White House is seeking to save the Pension Benefit Guarantee Corporation (PBGC), which has to absorb the bankrupt pensions. Bush on Jan. 10 announced a call for legislation to raise corporate insurance premiums to the PBGC by 58%, and add additional "risk premiums" to that. Congressional experts say this could cause more firms—especially in auto and auto-supply industries—to end their defined-benefit plans and perhaps enforce that by declaring bankruptcy.
Americans' retirement funds are spoken of as having "three legs"—Social Security, private pension plans, and personal savings. But in 2004, "52% of working America has only one leg—Social Security," said one expert. And among Americans earning $25,000 or less annually, 80% now can look forward only to Social Security in retirement. Thus the folly of taking away Social Security and replacing it with private accounts invested on Wall Street.