With the victories of the Tuesday elections, one would think that some stability is now at hand. Just the opposite is what will happen. The following is part of an article by Connie Hair. In it she outlines some of the dangers that lie ahead in the Lame Duck Congress.
Many Threats Loom in Lame-Duck Session
by
Connie Hair
11/08/2010
The stunning election victories for conservative Republicans in Congress offer a stop-gap, gridlock salve for a country reeling from out-of-control Democrat spending over the past two years.
In Washington, D.C., the new 112th Congress will be sworn in January 3. But in the interim, Democrats are committed to a lame-duck session convening November 15.
The primary issue members will face is the Obama tax hike set to go into effect January 1. Unless Congress acts, everyone paying taxes will see a marked increase. Democrat leaders want tax increases on everyone making above $250,000 while Republicans want to keep the current tax rates for everyone. That showdown could result in a "compromise" in the lame duck making all middle class tax cuts permanent and extending the upper bracket rates for two-to-three years.
The most pressing issue for Democrats is the union pension bailout. Public and private unions by most estimates shelled out over $1 billion to elect Democrats in the 2010 elections.
Both Democrats Joe Manchin of West Virginia and Chris Coons of Delaware will be sworn in immediately upon state certification and when the Senate re-convenes. Each won special elections to fill the remainders of the terms of the late Robert Byrd and Vice President Joe Biden, respectively.
Sen.-elect Mark Kirk (R.-Ill.) is also immediately sworn in to serve the remainder of Barack Obama's Senate term.
The priority for unions in the lame duck is the bailout of underwater multi-employer union pension plans.
As
reported in HUMAN EVENTS, the bill sponsored by Sen. Bob Casey (D-Pa.) would establish a new entitlement program by setting up a permanent bailout of union multi-employer pension plans through a new "fifth fund" at the government Pension Benefit Guaranty Corp. (PBGC). Casey’s bill would create a line item in the federal budget through the PBGC to fund these union pension bailouts annually. Many union pensions are underwater as a result of mismanagement that pre-dates the 2008 financial upheaval.
The companion House bill co-sponsored by outgoing Rep. Earl Pomeroy (D-N.D.) and newly re-elected Rep. Pat Tiberi (R.-Ohio) had nine Republican co-sponsors when it was introduced.
The urgency in Congress has been created by new Financial Accounting Standards Board (FASB) rules set to take effect December 15. These new rules would force companies to account for the cost of penalties against their bottom line they would have to pay to extract themselves from these union pension plans. (Full
report from HUMAN EVENTS.)
One of the largest of these multiemployer funds, Central States Funds, is in such bad shape that UPS paid a $6.1 billion penalty to extricate itself from employee participation in the fund.
It is that type of penalty that would now have to be put be on companies’ books, and in many cases these penalties could be more than a company's overall value.
According to a new
report, by F. Vincent Vernuccio, the Labor and Labor Policy Counsel at the Competitive Enterprise Institute, says the pension bailout legislation allows the PBGC to become the Fannie Mae and Freddie Mac of pensions.
"PBGC likes to boast that it 'receives no funds from general tax revenues.' It is, like Fannie Mae and Freddie Mac, a quasigovernmental agency that describes itself as a federal corporation. The sponsors of [defined benefit] plans pay insurance premiums to finance PBGC operations. But because the premium rates are set by politicians elected to Congress, they are generally too low to cover the potential liabilities they insure against. Besides giving PBGC tax dollars to sustain underfunded union pensions the [proposed] legislation also lets PBGC use tax dollars to support other financial transactions it makes. The bills state that PBGC may 'invest amounts of the [fifth] fund in such obligations as the corporation considers appropriate'—a camel’s nose under the tent for bailing out all of PBGC," the report states.
Vernuccio also points out that, according to the PBGC Pension Insurance Data Book 2009, the Pension Benefit Guaranty Corp. expects to spend on multiemployer benefit programs five times as much in the next 10 years as it has over the last 30 years. PBGC already has a severe funding shortfall. In 2009, it had only $72 billion in assets to cover $90 billion in liabilities. The shortfall is expected to balloon to $34 billion in the next decade on its present course.
"Royal S. Dellinger, PBGC’s principal deputy executive director from 1984 to 1989, confirms the potential for an agency bailout. He notes that 'as the agency heads toward inevitable failure this provision seems to allow it to use funds held in the single employer trusts and the new 'fifth fund' to mask the shortage in multi-employers plans.' It could allow PBGC to 'defer ugly decisions and could very well violate the trusts of extant terminated single-employer plans.' Dellinger suspects PBGC will 'use the [fifth] fund to mask deficiencies wherever they can' including using it to shore up their single employer fund," Vernuccio reports.
