The defined benefit pension is an economic lie. It's a lie because no income can be 100% guaranteed. And the longer that supposed guarantee is in effect, the less likely it will hold up. But defined benefit pensions are also an economic lie promoted for decades by a coalition of labor leaders, corporate leaders, and politicians who all have something to gain by lying to workers and their families. And like all lies, it's finally been uncovered and causing lots of pain in process.
That pain is about to be felt in severe and unfair intensity by 273,000 retirees, most of them former truckers, who any hour now will find out just how much of their monthly pension payment checks will be lost. That's because the ubiquitous federal mediator, Ken Feinberg, is about to issue his decision on the Central States Pension Fund. Under a new law that makes it easier for even non-bankrupt funds and other firms to seek government-protected cuts to pension payments, Central States is asking Washington to accept its plan to slash pension check payments to those 273,000 retirees by as much as 60% in some cases. Feinberg's decision is due by this Saturday and could come at any moment. Feinberg is not known for tardiness or delays.
As much as many of us oppose large labor unions, and even though many of us knew the defined pension benefit was a dangerous myth that would and will continue to blow up in its proponents' faces, this story is no reason to celebrate. To the contrary, everyone should be feeling outrage and compassion on behalf of the over a quarter of a million Americans who are going to see their income slashed through no fault of their own. Just as we feel compassion for poor children trapped in failing public schools thanks to the unholy partnerships between unions and politicians, we should be thinking about these former truckers and their families, many of whom are simply too old to go back to work.
But the best way to show that compassion is to blow up the myths and lies that have put Central States pensioners and so many like them in this position in the first place. The first lie is that defined benefits can be paid in perpetuity and aren't akin to economic unicorns and rainbows. The second lie is that most Americans are just too financially ignorant and/or emotionally weak to be trusted managing their own retirement funds. Now it may be true that many of us are indeed financially uneducated, but no one should be naive enough to think the government and its so-called experts can do the job better or without questionable personal and political motives. The list of "government or expert-protected" pensions that have failed anyway and left their recipients with 50% losses is extensive. So is the list of cases where government-controlled pensions were handed over to private firms to manage thanks to illegal favors or political pressure. And if you're still a stickler about rank-and-file financial ignorance, remember that there's nothing stopping workers from seeking experts to manage their retirement funds for them. And all things being equal, I trust the public to choose financial professionals with more purity than any politician any day.
The hard fact is that the supposedly wiser and kindlier government and pension fund pros in the Central States case screwed up anyway. And it wasn't just bad luck or bad timing. Bad politics played a big role too, as union leadership and elected officials propped each other up by keeping risky pension structures in place rather than allowing companies and employees to go the 401(k) or IRA route. Then they made sure they were protected by passing the new law that allows the government to cut payments almost at will. And every Central States pensioner should take note that politicians never seem to have their pensions cut or clawed back, even when they "retire" and immediately return to salaried government work or get convicted of crimes. No wonder they seem to believe pensions can never be lost. Politicians never seem to lose them.
But everyone else can. So a better idea is to make it easier for everyone to save their own money or make informed choices to find the right professionals to do it for them. If Washington would rather use some of our tax money to expand the number of educated and principled retirement planners that would be a fair trade for the much bigger amount of our tax money that's used to bail out pensions and pay for administrators like Feinberg to slash those pensions anyway.
It's probably too late to do anything to save the Central States pensions. But at least the pain those pensioners will begin to suffer this week can teach us all a needed lesson in avoiding this kind of thing from happening again.