Increasing Deficits, Sinking Pensions

By Gus Tyler

Published March 07, 2003, issue of March 07, 2003.
  • Print
  • Share Share

Pensions are in trouble — whether they are public (Social Security) or private. The reason is the same; namely, the institutions that stand behind the pension plans are running out of the needed resources to meet their commitments. Let’s start with the private (non-governmental) plans.

Some 44 million people are covered by pension plans, usually sponsored by companies or unions — or jointly by both. To protect these millions, the government, many years ago, set up an insurance agency known as the Pension Benefit Guaranty Corporation. The purpose of this corporation was to guarantee the continuance of coverage in the event that the private pension plans are under-funded or just go bankrupt.

Over the years, the government agency has been running surpluses. In 2001, it ran a surplus of $7.7 billion. But last year it ran a deficit of $7.7 billion. And that’s just the tip of the iceberg. The agency estimates that the company plans that it insures currently owe some $300 billion more for present and future retirees than the government agency can cover.

In plain words, as things are now moving, more and more workers who are covered by company- or industry-based plans will find that their coverage will be lost under the plan and that the insurance provided by the government agency is also not forthcoming because the government agency does not have the money to come to the rescue.

Why is this happening? Because more and more corporations are going bankrupt at a rate beyond the capacity of the government insurance agency to keep up with the skyrocketing costs. In other words, “It’s the economy, stupid!”

And the same can be said about the Social Security system, which has assets of more than $1 trillion. These “assets” are, by law, invested exclusively in government securities. In recent years, Uncle Sam has been paying the Social Security Trust Fund some 7% interest on the money it borrows from the trust fund. The government uses this money for whatever it wishes. The money it borrows is treated like any other money received through taxes or borrowed from banks, insurance companies, individuals, etc.

One of the reasons that the assets of the trust fund are so huge is that for many years it took in more than it laid out. But that happy situation is not likely to continue for two reasons. Soon the numerous members of the “baby boom” generation will be retiring and will start collecting pensions. Simultaneously, the American economy is on a downward slide. So, less will be coming in and more will be going out.

At which time the trust fund will have to start drawing upon its assets. And there’s the rub. With our present policy of cutting taxes by trillions of dollars to enrich the rich and by moving into a war whose costs will run into the trillions of dollars and going into a backbreaking debt starting this very year, the inevitable question is whether Uncle Sam (the U.S. Treasury) will be in a position to redeem the trillion dollars plus that he drew from the Social Security Trust Fund to feed his rich cronies and the dragons of war.

All this won’t happen immediately. It will take a little time. So don’t worry too much, because in about 19 months you can go to the polls and turn things around.






Find us on Facebook!
  • The eggplant is beloved in Israel. So why do Americans keep giving it a bad rap? With this new recipe, Vered Guttman sets out to defend the honor of her favorite vegetable.
  • “KlezKamp has always been a crazy quilt of gay and straight, religious and nonreligious, Jewish and gentile.” Why is the klezmer festival shutting down now?
  • “You can plagiarize the Bible, can’t you?” Jill Sobule says when asked how she went about writing the lyrics for a new 'Yentl' adaptation. “A couple of the songs I completely stole." Share this with the theater-lovers in your life!
  • Will Americans who served in the Israeli army during the Gaza operation face war crimes charges when they get back home?
  • Talk about a fashion faux pas. What was Zara thinking with the concentration camp look?
  • “The Black community was resistant to the Jewish community coming into the neighborhood — at first.” Watch this video about how a group of gardeners is rebuilding trust between African-Americans and Jews in Detroit.
  • "I am a Jewish woman married to a non-Jewish man who was raised Catholic, but now considers himself a “common-law Jew.” We are raising our two young children as Jews. My husband's parents are still semi-practicing Catholics. When we go over to either of their homes, they bow their heads, often hold hands, and say grace before meals. This is an especially awkward time for me, as I'm uncomfortable participating in a non-Jewish religious ritual, but don't want his family to think I'm ungrateful. It's becoming especially vexing to me now that my oldest son is 7. What's the best way to handle this situation?" http://jd.fo/b4ucX What would you do?
  • Maybe he was trying to give her a "schtickle of fluoride"...
  • It's all fun, fun, fun, until her dad takes the T-Bird away for Shabbos.
  • "Like many Jewish people around the world, I observed Shabbat this weekend. I didn’t light candles or recite Hebrew prayers; I didn’t eat challah or matzoh ball soup or brisket. I spent my Shabbat marching for justice for Eric Garner of Staten Island, Michael Brown of Ferguson, and all victims of police brutality."
  • Happy #NationalDogDay! To celebrate, here's a little something from our archives:
  • A Jewish couple was attacked on Monday night in New York City's Upper East Side. According to police, the attackers flew Palestinian flags.
  • "If the only thing viewers knew about the Jews was what they saw on The Simpsons they — and we — would be well served." What's your favorite Simpsons' moment?
  • "One uncle of mine said, 'I came to America after World War II and I hitchhiked.' And Robin said, 'I waited until there was a 747 and a kosher meal.'" Watch Billy Crystal's moving tribute to Robin Williams at last night's #Emmys:
  • "Americans are much more focused on the long term and on the end goal which is ending the violence, and peace. It’s a matter of zooming out rather than debating the day to day.”
  • from-cache

Would you like to receive updates about new stories?




















We will not share your e-mail address or other personal information.

Already subscribed? Manage your subscription.