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Taking Away Our Futures Again – Today
Americans were hard hit by the current recession – one that was denied until a couple of months before the Bush/ Cheney administration were out of office in 2008. Actually, figures and experts from left, right and center agree that recession technically started roughly a year earlier at the end of 2007. Either the Bush administration hadn't hired a single person competent enough to ascertain the nation was in a recession for over a year, or they were lying to us. We can go by their record to figure that out, though that would be a short trip to a conclusion from the starting point given their blemished record.
Whatever the case we're still doing pretty poorly. Neither party holds all the blame, though as the buck stops at the White House it is really hard to see how in eight years nobody in that administration saw it coming. One does have to feel for the current administration a little, as you can wreck a house in one day in such a way that would take months to repair if not longer. The best anyone can figure this damage started at least in 2001, but the seeds were sewn farther back.
The rules were changed under the administration previous to the Bush administration that allowed the sub-prime mortgage bubble and the subsequent credit default swap frenzy among insiders that escalated the imminent crash. Yet, “nobody saw it coming,” instead their attitude was one of just walk out dusting yourself off and say in passing to the person coming in, “we'll leave the lights on – the ones still working anyway. You're going to need them!” But that would be reflective of the current Washington mentality, so insular that it no longer says things like, “we'll leave the lights on – the ones still working anyway. The work you need to do for Americans is that important. Anything you need, just call on us. This goes beyond politics.”
Nope, Vice-President Cheney just left office and went on a bashing tour. Warm person. Thanks, Dick. Though if it had been a Democrat, I doubt it would have been much different.
Of course, we got sold out before that when our good paying jobs were allowed to be exported. That was all about helping to boost the wealth of small Asian countries our government was worried would turn Communist during the Cold War, and then in the nineties, after large corporations had figured out how vastly they could expand their profit margin by manufacturing in Asia, laws were enacted to make that even easier with fanfare, red faced smiles and cigar smoke all around.
And the companies did not care one dime. They just stayed headquartered here, so they could enjoy the protection of our military on the taxpayer dime over there, and politicians gained ever greater amounts of cash to play with come election season and big salary jobs for them to retire on.
And we got stuck with the check and holding the bag. As a report from October of 2011 points out, “While the earnings of middle-income Americans have barely budged since the mid 1970s, the new data showed that from 2000 to 2010, they actually regressed.” (http://money.cnn.com/2011/09/21/news/economy/middle_class_income/index.htm) That isn't the talk of idealists or hippies as certain people would love to claim. It's the real thing. Not only did we flat line, but over the last eleven years we have been slipping back, while wealthy corporations have grown exponentially and have had their profits grow wildly. This especially after the recession hit.
They got bailed out on our dime after swindling us, knowing we would have to pay the tab. They built up a huge business conning people into investing in mortgage bonds built on pools of bad mortgages, mortgages that weren't even being paid and mortgages that were set to have their fixed payments balloon out of control in 2007. They knew this was going to happen. They built the industry. They even took out bets just before it crashed that it would crash. Both their businesses and their bets (technically considered “insurance policies”) were covered by the Federal Government. That meant when the dominoes collapsed the people paying for the cleanup was you and me, Joe and Jane taxpayer.
While our jobs were being shipped, they were cooking up schemes to take the tax dollars earned from now two and three jobs both mom and dad were working and often the teenage kids. Mortgages and car payments were being paid out of nest egg savings and college savings for the kids only to make these guys wealthier. They did get wealthier. Make no mistake.
But shipping our jobs overseas and deregulating so they could rip us off was not the end. There was a quiet war being waged since the nineties and culminating during the 2000's on our futures in another way. Ellen Schultz, author of the book Retirement Heist, lays out how employers found ways to raid pension funds to expand their bottom line starting in the nineties by exploiting “loopholes” in legislation regarding worker's pensions.
It's just one more way middle income and lower income Americans have slipped backwards while wealthy corporations have gained at our expense. Shultz said in an interview with Forbes, “During the 90s when accounting rules changed, this coincided with the trend toward awarding executives pay that was based on performance. Let’s say you reduce pensions by $100 million, that’s essentially $100 million that gets added to profit. It’s paper profit, but it affects earnings the same way as earnings you get from selling trucks. So executives were rewarded.
“FORBES: Don’t pension payments for thousands of workers dwarf the amount paid to executives?
“SCHULTZ: Not necessarily. Look at Massey Energy (Eds: now part of Alpha Natural Resources). Last year, they had a huge Big Branch mining disaster. Dozens of miners were killed. The CEO was pushed out. He was given a retirement package that was worth $55 million. And the total payout for the coal miners, for black lung, traumatic workers compensation which means severe injury, and pensions and health care, that all came to $37 million, and that’s for thousands of people.” (http://www.forbes.com/sites/emilylambert/2011/10/03/has-your-retirement-been-stolen/)
She discusses the problem further when asked if there's anything that can be done to reverse things once the funds have been raided, stating, “In many cases, the damage has been done. If they had a pension, it’s already been cut or in more extreme cases frozen, like at IBM. People who really have to worry are those at a company that’s headed toward bankruptcy. That company is probably not contributing to the pension plan and is diverting assets elsewhere. If the plan is very underfunded, then they can lose some of their benefits. People most likely to lose the most are midlevel to upper level managers, I’m not talking about the executive ranks. People close to retirement who have already built up a pretty good pension, they might not get all of it. [...]
“The maximum amount paid out by the PBGC – the Pension Benefit Guaranty Corp., a federal insurer that takes over failed pensions – is $54,000 a year in 2011. But the amount can be reduced significantly if the plan is underfunded and because of quirks in the rules. If a person is expecting a pension of $4,000 a month or so, he should keep his eye on the company and make sure the plan’s funded.” (http://www.forbes.com/sites/emilylambert/2011/10/03/has-your-retirement-been-stolen/)
She even talks about how it can affect pensions for public employees, “There’s been a bit of hysteria over the public plans. For the most part, the benefits aren’t as rich as they’ve been characterized. Most are fairly realistic, and the numbers sometimes look larger than they really are because they include automatic forced retirement savings, for example. The bottom line is that, with some well-publicized exceptions, a lot of these plans aren’t as generous people think they are and aren’t as underfunded as people think they are.
“It’s unlikely that public employees will be forced to forfeit what they’ve earned, so if a person’s earned $2,000 a month in retirement, that’s probably not going to be taken away. But they may see their benefits reduced going forward. There will also be a big push to curtail retiree health benefits, so both public and private employees need to be saving extra for that. There are a lot of things you can’t count on anymore.” (http://www.forbes.com/sites/emilylambert/2011/10/03/has-your-retirement-been-stolen/)
We often hear that corporations are the victims, particularly from certain folks that tend to side with management on such issues, but that is nonsense. Shultz lays out in another Forbes article, “Two decades ago, pensions were well funded, due to laws and regulations passed in the 1970s and 1980s. By 2000, pension plans at many large companies had large surpluses that would have covered all current and future retirees’ pensions without them having to contribute anything.
“Yet US firms found ways to siphon off billions of dollars in assets from the pension plans. Verizon used assets to finance downsizings. GE sold pension surpluses in restructuring deals, indirectly converting pension assets into cash. Many firms clandestinely cut benefits, using 'actuarial sleight of hand' to disguise the cuts.
“The masterminds of this heist should take a bow: They managed to take hundreds of billions of dollars in retirement benefits that were intended for millions of workers and divert them to corporate coffers, shareholders, and their own pockets. And they’re still at it. It might not be possible to resuscitate pension plans, but it isn’t too late to expose the machinations of the retirement industry, which has its tentacles into every type of retirement benefit: profit-sharing plans, 401(k)s, employee stock ownership plans (ESOPs), and plans for public employees, nonprofits, small businesses, and even churches. The retirement industry has exported its tactics, using them to achieve similar outcomes in retirement plans in Canada, Europe, Australia, and elsewhere, and has big plans for Social Security and its overseas equivalents as well. Unless it is reined in, the global retirement industry will continue to capture retirement wealth earned by many to enrich a relative few.” (http://www.forbes.com/sites/stevedenning/2011/10/19/retirement-heist-how-firms-plunder-workers-nest-eggs/)
This effects people currently working at firms with such practices in place and people that have retired from them. They will have to find other ways to support themselves. Many will need to take jobs and keep working well into their seventies and eighties while the executives that approved of and engineered the scams will be retiring wealthy on the fat cut from former retiree’s pensions.
This also effects people still working that have no plans to retire for years. People paying mortgages/ rent with kids and car payments are affected in numerous ways. Many will have to start taking from their own retirement savings to give to their parents to supplement their incomes. Others will have to take their parents in. These retirees will have to depend more on entitlement programs than they would have and so the burden on Social Security and other such programs increases.
Let's not forget this also meant an additional source of taxpayer burden once bailouts began. As the recession hit and firms with raided pensions were hit financially, the federal government had to step in to supplement underfunded pension funds and the companies knew this. It's done through a little known government agency called the Pension Benefit Guaranty Corporation (PBGC).
In 2009, the PBGC “announced a tripling of its deficit from $11 billion to $33 billion. This is a striking increase, especially over six months, and is significant even in these days of huge financial rescue packages. While it is bad news that the PBGC is now $22 billion deeper in the hole, it is not fundamentally surprising news. Numerous studies [...] have shown that the premium rates set by Congress are insufficient to cover the risks, which themselves are heavily influenced by congressionally mandated minimum funding rules. Further, the deficit tends to grow in jumps, staying stable or modestly declining in good economic times and soaring when conditions sour.” (http://www.brookings.edu/research/papers/2009/06/04-pbgc-elliott)
And the outcome? We end up paying more today and having more taken from our futures. It's done both by corporations and people that keep pass laws tacitly enabling corporations to raid those pensions. Until we get a hold on all the money being poured into campaign financing we lose – the average Joe. All those commercials in favor of spending billions per candidate or whatever? Who has the money to fund those? Who benefits by allowing one group or interest to donate as many millions as they wish? You? Me?
It's killing average people and basically leaving us on the sidelines to choose from two candidates, both selected by wealthy corporate donors one on each side. It's time to do it differently – or to start trying to find a new and better way. Corporations will want to keep things going as they currently are going and steer things further in their favor. The two party system will fight to keep it's stranglehold on the American political system. Only Joe and Jane voter can change this by working to add new parties in Congress over the next ten to twenty years. Then we can start to hold people accountable and pass laws that favor us – you and me.
To read about my inspiration for this article go to www.lawsuitagainstuconn.com.