 Midwest Teamsters lost their pensions after it was turned over to financial speculators. Photo: Jeff Haynes |
One trillion dollars is hard to imagine. To use up $1 trillion would require spending $114 million per hour for an entire year. Another way to express that would be $57,000 per hour every day of every year for the past 2004 years.
Proponents argue the accounts will multiply in value, assuring participating workers a prosperous retirement. Of course, the bankers and brokers will be paid a percentage of each transaction as a reward for their “work.” The investment firms would be guaranteed huge profits.
If the brokers received just a two percent fee on $1 trillion, it would amount to $20 billion, paid whether the investment fared well or poorly. Hundreds of billions of dollars would flow through the banks and other giant financial institutions. Everyone will come out ahead, they say.
Well, maybe not everyone. The recently exposed decline into near-bankruptcy of the Teamsters’ Central States Pension Fund should raise a red flag for all workers regarding Social Security “reform.” The Central States fund, which covers 460,000 truckers and other Teamster workers, is famous for its role in building Las Vegas into the fastest growing city in the U.S.
Now, the pension benefits of these workers are in jeopardy, and retirees’ benefits are already being reduced.
From the 1950s to the 1970s, the Teamsters’ Fund lent hundreds of millions of dollars to build many of Las Vegas’ big casinos and hotels. While there were charges of involvement with organized crime and corruption, the Central States Fund was repaid its loans and never had a problem paying benefits to retirees. The Fund’s assets increased steadily through the 1970s.
Gov’t attacks Teamsters
The federal government, beginning with the 1961-63 Kennedy administration, and continuing under Democratic and Republican presidents, waged a campaign to break or curtail the power of the Teamsters union.
The pretext for the anti-Teamsters campaign, aimed especially at the union’s long-time president, James Hoffa, Sr., was fighting corruption and mob influence. Teamster leaders, including Hoffa, were investigated, indicted and imprisoned. After being released from prison in the early 1970s, Hoffa disappeared without a trace. It is believed he was murdered.
In the eyes of U.S. corporations and their politicians, Hoffa’s real crime was not corruption. Hoffa advocated uniting workers in all transport industries—truck, rail, air and ports—into a single, powerful federation. Such a union would have the power to shut down the country.
After decades of persecution and prosecution, Teamsters union leaders signed a consent decree in 1982 allowing the federal government to take control of the union. Even though the Central States Fund was legally independent of the union, the government turned over control of the Fund to Morgan Stanley. Morgan Stanley is one of the major investment banking companies in the U.S.
Morgan Stanley’s duties were to “pick money managers, to allocate the assets among them, and to advise the new board of trustees on investment objectives and strategies.” (New York Times, Nov. 15, 2004) The money managers shifted Central States’ funds into increasingly high-risk investments. If successful, such investments usually carry big bonuses for the broker. When these investments failed, as most did, the brokers still collected their fees. Only the workers lost out.
J.P. Morgan took over administration of the Fund before the stock market crash of 2000. The Fund was heavily invested in energy trading, telecommunications and high tech stocks. The price of many of these stocks fell by 80 to 90 percent. Some became nothing more than worthless pieces of paper.
By 2003, the pension fund only had assets of 60 cents for every dollar owed to retirees—present and future. It cut benefits for the first time. As pensions were being reduced, a new rule was implemented to punish retirees: their benefits would be totally cut off if they began working again.
 The Bush administration’s plans to privatize Social Security threaten millions of elderly. Photo: Bill Hackwell |
The pension crisis is not limited to the Teamsters or the trucking industry. According to an October 2002 report by the Labor Research Association, “private company pensions were under funded to the tune of $111 billion last year, the highest level ever reported, up from $26 billion in 2000.”
The list of the top ten “under funded” employer pension plans in 2002 included many of the biggest corporations: General Motors, Ford, SBC Communications, IBM, Boeing, Exxon Mobil, DuPont, Verizon, Lucent and Delphi Automotive. (Merrill Lynch Co. 10k Reports)
Many major corporations, particularly in the airline, steel and other industries, have completely defaulted on their pension plans. The practice of diverting money from pension funds to cover lavish executive salaries and other expenses, and then going bankrupt, has become commonplace for big business.
“Under funding” should be given a more accurate label: out-and-out theft. Pensions are really a deferred part of workers’ wages. In union contracts, workers agree to postpone receiving a portion of their pay so that it can be set aside as retirement income.
While millions of poor and oppressed people are jailed in the U.S., no one should expect to see corporate bosses marched off to prison for stealing billions from their employees. That’s not how the capitalist legal system works.
Workers pay the bills—twice
Three decades ago, the government established the federal Pension Benefit Guarantee Corporation. It was intended to be a back-up for employer pension funds that went bankrupt. Today, the PBGC insures the pensions of 34.6 million people in 29,600 single-employer plans. It is funded by insurance premiums paid by the corporations.
On Nov. 15, the PBGC—the insurer of last resort—issued a press release
announcing a net loss of $12.1 billion in fiscal year 2004. The 2004 losses increased the PBGC’s deficit to $23.3 billion. It now has assets of $39 billion, and liabilities—pension funds owed to retired workers—of $62 billion.
In other words, the PBGC will go bankrupt unless it receives massive funding from the government.
Corporations pay very little of the federal tax bill anymore. They now pay around seven percent as compared to 48 percent a half-century ago. This means that working people may be forced to pick up the tab, which would be a kind of double robbery.
Making matters worse, when a company defaults on its pension plan, and the workers are turned over to the PBGC, their pension benefits are usually slashed.
An angry worker, identified as “Ivan,” confronted Bradley Belt, head of the PBGC, on National Public Radio’s “Talk of the Nation” program on Nov. 18. Ivan described how the company where he worked for 29 years had found a way to attach his pension plan to a shaky subsidiary, and then spin-off the subsidiary. The new entity went bankrupt and Ivan’s disability pension was transferred to the PBGC forcing his benefits to be cut by $600 a month.
When the show’s host asked Belt if this could be true, Belt replied, “Yes, under the current law.”
The pension disaster is affecting tens of millions of workers. It threatens millions more. But the majority of U.S. workers have no pension plan aside from Social Security.
If the bankers, financiers and investors have their way, the entire Social Security system. The future of hundreds of millions of workers will be at risk.
The government is preparing to do to Social Security what has already been done to pension funds.
They must be stopped.
