The pensions guaranteed by taxpayers
Letter to the editor

The Editorial Commentary in the July 5 issue, "What a Relief It Is," rightly described the foibles of the recent Pension Relief Act, which displays the fundamental unsoundness and unhedgeability of defined-benefit pension plans. As Thomas G. Donlan said, these plans "helped many companies slide into bankruptcy."

However, he failed to mention an essential element of these plans. This is that even if the pension plan is broke as the company slides into bankruptcy, there is no need for labor unions to worry. The pensions are guaranteed by the government, under the guise of the Pension Benefit Guaranty Corporation.

The PBGC allowed the United Auto Workers union to negotiate pensions bigger than the auto companies might be able to pay. It was explicitly modeled on federal deposit insurance. Now the PBGC has a net worth of negative $22 billion. Its model, the FDIC, has a net worth of negative $20 billion.

But don't worry! Both are managed by the government and guaranteed (involuntarily) by taxpayers.

Alex J. Pollock is a resident fellow at AEI.

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Tuesday, September 16, 2014 | 5:00 p.m. – 6:00 p.m.
The Constitution as political theory

Please join us for the third-annual Walter Berns Constitution Day Lecture as James Ceasar, Harry F. Byrd Professor of Politics at the University of Virginia, explores some of the Constitution’s most significant contributions to political theory, focusing on themes that have been largely unexamined in current scholarship.

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Wednesday, September 17, 2014 | 8:10 a.m. – Thursday, September 18, 2014 | 1:30 p.m.
Third international conference on housing risk: New risk measures and their applications

We invite you to join us for this year’s international conference on housing risk — cosponsored by the Collateral Risk Network and AEI International Center on Housing Risk — which will focus on new mortgage and collateral risk measures and their applications.

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Thursday, September 18, 2014 | 2:15 p.m. – 3:00 p.m.
Speaker of the House John Boehner on resetting America’s economic foundation

Please join us as Speaker John Boehner (R-OH) delivers his five-point policy vision to reset America’s economy.

Friday, September 19, 2014 | 9:15 a.m. – 11:00 a.m.
Reforming Medicare: What does the public think?

Please join us as a panel of distinguished experts explore the implications of the report and the consumer role in shaping the future of Medicare.

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