If the economy is growing and corporate profits are at all time highs, why did the cumulative deficit of the PBGC double in the last year? This fake corporation (aka Fannie & Freddie) is bleeding cash to the tune of $62 billion. You are on the hook. Even though Obama and his minions report declining deficits, these numbers are nowhere to be found in the deficit numbers, even though they will need to be bailed out by the Federal government. Imagine the losses when the financial system cracks again.
So the company that bails out defunct pension plans needs a bailout. Of course, as you can see by the truly shocking charts below, the entity bailing them out is also insolvent. Who bails out the entity that bails out the pension bailout entity?
Do you see what a farce this has become?
I think it is time to bailout on this fucked up system.
A Growing Shortfall
The Pension Benefit Guaranty Corporation is insuring the pensions of more than 40 million Americans employed in the private sector that have defined benefit pensions. We hadn’t been aware that it has run deficits for 12 years running, but it apparently has – and it is adding up. At the moment, the fund has a cumulative deficit of $62 billion. It has reportedly doubled just over the past year:
“The deficit run up by the federal agency that insures pensions for about 41 million Americans has nearly doubled, to $62 billion. And the agency says that without changes, its program for pension plans covering 10 million of those workers will be insolvent within 10 to 15 years. It was the widest deficit in the 40-year history of the Pension Benefit Guaranty Corp., which has now run shortfalls for 12 straight years. The gap grew wider in recent years because the weak economy triggered more corporate bankruptcies and failed pension plans.
If the trend continues, the agency could need an infusion of taxpayer funds to pay retirees, who are guaranteed their pensions by law. The PBGC said Monday that the increased deficit was due to worsening finances of some multi-employer pension plans, which are pension agreements between labor unions and a group of companies, usually in the same industry. The $62 billion deficit reported for the year ended Sept. 30 compared with $36 billion in the previous fiscal year. Labor Secretary Thomas Perez said fixing the problem is vital to the retirement security of the nation’s middle-class. Agency officials called for Congress to enact legislation submitted by President Barack Obama designed to shore up the program’s finances. The PBGC was created in 1974 as a government insurance program for traditional employer-paid pension plans, which have become much less common in recent decades as most employers turn to retirement accounts such as 401(k)s.
The traditional plans are most prevalent in industries such as auto manufacturing, steel and airlines. If an employer can no longer support its pension plan, the PBGC takes over the assets and liabilities, and pays promised benefits to retirees up to certain limits. The agency didn’t name the multi-employer plans that it expects to run out of money or how many are involved. It said they represent a minority of the total 1,400 or so multi-employer pension plans, which cover about 10 million workers. “Plans covering over 1 million participants are substantially underfunded, and without legislative changes, many of these plans are likely to fail,” PBGC Acting Director Alice Maroni said in a statement. The agency said in its annual report that it has “sufficient liquidity to meet its obligations for a number of years.”
The agency said the deficit in its multi-employer insurance program jumped to $42.4 billion in the budget year that ended on Sept. 30, from $8.3 billion in 2013. By contrast, the deficit in the single-employer program shrank to $19.3 billion from $27.4 billion as the economy strengthened. The PBGC reported that its pension obligations grew by $30.9 billion in fiscal 2014, to $151.5 billion. Assets used to cover those obligations increased by only $4.9 billion, to $89.8 billion. Rep. John Kline, R-Minn., chairman of the House Education and Workforce Committee, called the multi-employer insurance program “a ticking time bomb that will inflict a lot of pain on workers, employers, taxpayers and retirees if Congress fails to act.”
(emphasis added) To summarize: in spite of its $62 billion deficit, the insurance fund will only be insolvent in another 10 to 15 years, ceteris paribus. Although this qualification is not mentioned above, it is an important one. What if the economy suffers another severe downturn, which seems a nigh certain outcome of the many years of bubble blowing by assorted central banks? Even in the muddle through scenario currently assumed to continue, the fund will require a tax payer bailout (this is what “Congress needs to act” means). We wonder how the fund invests its assets, given the rather paltry growth of same (after all, it also receives fees from the companies the pension plans of which it insures).
Conclusion:
We actually come across stories bemoaning the underfunding of pension plans on a regular basis. This is a problem that not only concerns defined benefit plans. Now we learn that the insurer of these pension plans is actually busy going down the drain as well. However, the government, which is supposed to bail the insurer out, has also begun to bleed red ink in its social security fund – and that deficit is going to grow and grow for many years to come. 
Social security: from a surplus that was spent, to a deficit that is growing inexorably year after year – click to enlarge.
If one adds the projected medicare deficits to this, things look a lot worse still:
Social security and medicaid deficits combined – click to enlarge.
And now there is yet another hole that needs to be plugged. Charts by: Heritage Foundation, Wikipedia
I’m 65. My investments are enough to retire on. However…. having no work for over 6 months (in 2008) I realized that I could not be at home with my wife – for maybe more than a week at a time.
I have a friend whose a retired Target Exec. He makes bird houses, and band sawn fish – no shit – that’s fucked up.
I decided I’m going to work until the day or day before I die.
I’m taking my SS next year when I’m 66 – I’ll get the max. So you Millennials better work your asses off – cause you’re workin’ for me now!!
Time to move to Switzerland ????
Switzerland May Give Every Citizen $2,600 a Month
According to the folks behind the Basic Income campaign, Switzerland’s government will start discussing the proposal in spring 2015, with the public vote likely to take place by fall 2016.
Switzerland could soon be the world’s first national case study in basic income. Instead of providing a traditional social net—unemployment payments, food stamps, or housing credits—the government would pay every citizen a fixed stipend.
The idea of a living wage has been brewing in the country for over a year and last month, supporters of the movement dumped a truckload of eight million coins outside the Parliament building in Bern. The publicity stunt, which included a five-cent coin for every citizen, came attached with 125,000 signatures. Only 100,000 are necessary for any constitutional amendment to be put to a national vote, since Switzerland is a direct democracy.
The proposed plan would guarantee a monthly income of CHF 2,500, or about $2,600 as of November 2014. That means that every family (consisting of two adults) can expect an unconditional yearly income of $62,400 without having to work, with no strings attached. While Switzerland’s cost of living is significantly higher than the US—a Big Mac there costs $6.72—it’s certainly not chump change. It’s reasonable income that could provide, at the minimum, a comfortable bare bones existence.
The benefits are obvious. Such policy would, in one fell swoop, wipe out poverty. By replacing existing government programs, it would reduce government bureaucracy. Lower skilled workers would also have more bargaining power against employers, eliminating the need for a minimum wage. Creative types would then have a platform to focus on the arts, without worrying about the bare necessities. And those fallen on hard times have a constant safety net to find their feet again.
Detractors of the divisive plan also have a point. The effects on potential productivity are nebulous at best. Will people still choose to work if they don’t have to? What if they spend their government checks on sneakers and drugs instead of food and education? Scrappy abusers of the system could take their spoils to spend in foreign countries where their money has more purchasing power, thus providing little to no benefit to Switzerland’s own economy. There’s also worries about the program’s cost and long term sustainability. It helps that Switzerland happens to be one of the richest countries in the world by per capita income.
The entire story can be read here:
http://motherboard.vice.com/en_uk/blog/what-would-you-do-with-2800-a-month-no-questions-asked?utm_source=mbtwitter
@Leobeer: “The benefits are obvious. Such policy would, in one fell swoop, wipe out poverty. By replacing existing government programs, it would reduce government bureaucracy”
What a fuckin’ crock of bullshit. This article makes all sorts of statements such as: “in one fell swoop, wipe out poverty” as though it is a fact. Actually no facts, just like Obola and the ACA where the government propaganda uses an ’empty lable’ Affordable Care Act. There is no definition of ‘affordable’. The bullshit in this article is of the same sort.
This gotta be from the Onion.
Will You Light $180,000 on Fire by Taking Social Security at Age 62?
Dennis Miller
Social security: from a surplus that was spent, to a deficit that is growing inexorably year after year – click to enlarge.
Anyone got a light?
The guaranteed income will simply become the new poverty level, just as the higher minimum wage will become the new poverty level here. The poor will still be poor, and hundreds of thousands of working Swiss in lower-level jobs will be pushed that much closer to poverty as the price of absolutely everything inflates in response to the higher baseline. The salaries will have to rise, driving more inflation, else lower-paid workers will simply quit working and accept the base income rather than find themselves poorer as working expenses increase.
It amazes me that policy makers in advanced societies can be so deluded as to believe that this extremely primitive “solution” for poverty, which has been tried and has failed hundreds of times, will accomplish anything but to create more poverty and more economic perversions.
Yellen better fire up Bens helicopter.
Just how bad do things have to get for most citizens before they decide to do something about it like those who fought to gain our country’s independence? After economic collapse, its’ too late.
We can all vent. It makes us feel better perhaps. But while we vent, the ruling class keeps amassing wealth at everyone else’s expense. Do they see collapse coming and are running up the market before it happens?
Unfortunately, the vast majority of citizens accept a monthly government check (bribe – excluding retirees) instead of risking their lives to gain much more opportunity to prosper. Accepting bribes is certainly better than risking one’s life right?
No substantial government or financial reform will ever happen unless citizens are willing to put their lives on the line. If citizens remain subservient, most will suffer increasing hardship and poverty – as expendable economic slaves. Is slavery really worth a monthly bribe to anyone who really cares about themselves and their children?
Without action by all citizens, we are simply watching the train wreck. I don’t think watching sports and entertainment as the train disintegrates will make economic collapse feel any better.
@SS: “No substantial government or financial reform will ever happen unless citizens are willing to put their lives on the line.”
I am optimistic some event – maybe a small event – will trigger a citizen response. And that response will grow into a wave. Like the Boston Tea Party. People will see the Emperor has no clothes. It will be down hill from there.
Remember the standoff (this past summer) with the rancher out west, and the BLM. Guys on horseback made the Feds stand down.
I have hope….. but it’s very dim.
If these graphs are accurate, it ain’t purty.