You might think our recent economic trouble – whether you call it a recession, a depression, or enforced cannibalism – has hit bottom and is about to start turning around. Recently President Obama saw a glimmer of hope in the economy – mortgage refinancing is up, for instance. And even though it’s a small and subjective measurement, things have been looking up. Alas in the economy, as in many hospitals, a patient in critical condition can perk up right before he rolls over and dies.
Unfortunately the bailouts and potential bankruptcies of General Motors and Chrysler have revealed a long-standing and disturbing truth – their pension funds are short about $49 billion, and our choices, as the responsible corporate socialists that we have become, are both few and painful. We can either spend money bailing out the pension and health plans that the auto companies have underfunded for decades, or we can let retirees work as Wal-Mart greeters and sell their kidneys for spare change.
Reasonable peole might look at the books of major corporations with pension plans and wonder how we arrived at this ugly impasse. After all, the greatest minds of several generations were allegedly focused for decades on making the United States the world’s economic powerhouse, churning out goods faster and cheaper than anywhere else in the world. Turns out that most companies just made big promises and hoped they could keep them years down the road.
When the brilliant people in charge of your corporation’s pension fund didn’t meet their projected growth rate – or, heaven forbid, lost money – they would compensate with what’s popularly known as the gambler’s fallacy. They would put more money on riskier bets in the hopes that they’d strike it big and everything would work out:
Maybe the people protesting President Obama’s acquisition of corporate power are rightly afraid that the federal government is a bad manager and not really responsive to the interests of the people. If that’s so, then they’re a few decades late in looking out for the little guy. Right now we’re all the owners of a hundred billion dollars of IOUs for the retirement and health care plans of our friends, families and neighbors. We’re going to have to pony up somehow, and it’s going to be painful and expensive. But at least the worst alternative – which the free marketers keep advocating in spite of the facts – is one we can eliminate quickly. The people who lost all our pension funds in the first place have absolutely no business managing them anymore.
Unfortunately the bailouts and potential bankruptcies of General Motors and Chrysler have revealed a long-standing and disturbing truth – their pension funds are short about $49 billion, and our choices, as the responsible corporate socialists that we have become, are both few and painful. We can either spend money bailing out the pension and health plans that the auto companies have underfunded for decades, or we can let retirees work as Wal-Mart greeters and sell their kidneys for spare change.
Reasonable peole might look at the books of major corporations with pension plans and wonder how we arrived at this ugly impasse. After all, the greatest minds of several generations were allegedly focused for decades on making the United States the world’s economic powerhouse, churning out goods faster and cheaper than anywhere else in the world. Turns out that most companies just made big promises and hoped they could keep them years down the road.
When the brilliant people in charge of your corporation’s pension fund didn’t meet their projected growth rate – or, heaven forbid, lost money – they would compensate with what’s popularly known as the gambler’s fallacy. They would put more money on riskier bets in the hopes that they’d strike it big and everything would work out:
On the investment side, pension plans cover over their funding shortfalls first by assuming future returns on equities that, while possible, are not guaranteed. The assumption makes funds look healthier than they are, and drives their investments deeper into the stock market.Is it comforting to find out that people with years of training and allegedly great financial acuity were acting like drunk vacationing neophytes at a Las Vegas craps table? Then you’ll be thrilled to know that the people who guaranteed that money did the same damn thing.
Maybe the people protesting President Obama’s acquisition of corporate power are rightly afraid that the federal government is a bad manager and not really responsive to the interests of the people. If that’s so, then they’re a few decades late in looking out for the little guy. Right now we’re all the owners of a hundred billion dollars of IOUs for the retirement and health care plans of our friends, families and neighbors. We’re going to have to pony up somehow, and it’s going to be painful and expensive. But at least the worst alternative – which the free marketers keep advocating in spite of the facts – is one we can eliminate quickly. The people who lost all our pension funds in the first place have absolutely no business managing them anymore.
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