Pension benefits of more than 44 million American workers and retirees are protected and guaranteed by the Pension Benefit Guaranty Corporation (PBGC). This is a federal corporation created by the Employee retirement Income Security Act of 1974 and covers more than 29,000 private single-employer and multi-employer defined benefit pension plans.
PBGC receives no funds from tax payers. Its operations are funded entirely by insurance premiums set by Congress and paid by the pension plans, from investment income, from pension plan assets under PBGC control, and from monies recovered from the companies formerly responsible for plans taken over by the PBGC.
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for pension plans in private industry and how pension funds are taxed by the Internal Revenue Service. ERISA was enacted to protect the interests of retirees and their beneficiaries by requiring the disclosure of financial information concerning the plan; by establishing standards of conduct for plan trustees; and by providing remedies and access to the federal courts in case of misconduct or to settle disputes.
Responsibility for the interpretation and enforcement of ERISA is divided among the Department of Labor, the Department of the Treasury (particularly the Internal Revenue Service), and the Pension Benefit Guaranty Corporation.
Bankruptcy of Studebaker
The need for government regulation of pension plans began in 1961 when President John F. Kennedy created the President’s Committee on Corporate Pension Plans. The movement for pension reform gained momentum when the Studebaker Corporation, an automobile manufacturer, closed its plant in 1963. The company’s pension plan was so poorly funded that Studebaker could not pay the pensions earned by all its employees. Instead, the company paid full pension benefits to only 3,600 workers who reached the retirement age of 60. Another group of 4,000 workers, aged 40–59, who had ten years with the company received a lump sum payment roughly equated to 15 percent of the value of their pension benefits. A third group of 2,900 workers with no vested pension rights got nothing.
In 1970, NBC broadcast a television documentary called “Pensions: The Broken Promise.” The TV program reviewed how millions of Americans received little or none of the pension benefits promised by their employers because of mismanagement and inadequate funding of the plans. The public outcry led Congress to create ERISA and the Pension Benefit Guaranty Corporation in 1974. The Act was signed into law by President Gerald Ford.
90 essential public services provided by government
Let’s imagine the Republicans have their way and government is reduced to a few core functions. There are no more government regulations and business can do anything they want. Government services are eliminated, thousands of government workers are fired, and taxes are lowered.
What would life be like?
You wake up in the morning and everyone would have different times on their clocks. Every city, every state, or any business can use any time zone they want because there are no government requirement for an area to use the same time.
You brush your teeth with toothpaste that contains unknown, possibly unsafe and toxic ingredients because there are no government rules on what companies can put in their products.
You buy your water from a private business which claims its water is pure, but you’ll have to just trust them, because there is no government rules on water quality. The price of water increases every year, but there is only one water company and you have no choice but to pay more. There are no government regulations that prevent one company from controlling the market.
You eat your breakfast of eggs and spam from food manufacturers who don’t have to follow any government health and safety rules, like keeping food at a certain temperature or sanitizing food handling equipment.
Crime protection? Safety?
You unlock the steel bars that surround your house, because you can’t afford to pay for the private security service and, because of budget cuts, the small city police force can only handle serious crimes.
You get in your car which has no seat belts nor air bags, because there is no government requirement to have any safety devices on cars. You turn on your radio and you can only catch one station. Radio stations can use any frequency they want, and you would need an expensive multi-band radio to tune in to other stations. You hear a radio commercial about a revolutionary, new vaccine that is guaranteed to protect against all types of influenza—only $49.99 a shot. You doubt there is such a vaccine, but there is no government restrictions on advertising claims, and the government has no money to do research on new diseases nor produce vaccines. All of this is left to private business.
The radio weather report says there is a chance of rain, which would be good as the air is brown with smog. There is no government restrictions on air pollution. There’s a report about an earthquake, but there is no tsunami warning system, no civil defense, and no help from the government if there is a disaster.
You drive on a dirt road because the city has no money to maintain the roads in your neighborhood. You have to get all your neighbors to share the cost of paving the roads, and a couple of neighbors refused to pay. Those same neighbors also have piles of trash and junk in their yards, because they can’t afford to pay the private company which collects trash.
What is the cost to you?
You finally get to a paved road and have to pay a $1.00 fee to drive on the road. All the major roads are owned by private companies that charge fees to use their roads. You see the notice that the road fees will increase to $2.00 next year, but you have no choice as there are no government regulations that prevent companies from agreeing to raise their fees at the same time.
You give each of your children $5.00 for lunch and drop them off at private schools where tuition is $1,200 a month. There are no public schools, no public libraries, and no public transportation. After stopping four more times and paying four more dollars to drive on different roads, you reach your workplace.
It’s pay day and you get your pay check in Yen because your company is owned by a Japanese corporation. There is no standard currency and businesses can use Dollars, Yen, or Euros. You cash your check, keep most of your money in cash, and deposit a small amount in two different banks.
None of the banks are regulated, and you think it’s safer to put your money in different banks in case a bank goes out of business or steals your money. There is no government requirement for banks to review any information about their ownership, financial condition, or even register as a business.
Life would be a nightmare
In this short story of what life might be like after cutting government, there are at least 26 public services which are now provided by government at the city, state, and federal level. Can you find the 26 services?
The taxes you pay provides government with the funds it needs to operate and provides these services. If you cut taxes, you would cut these services. You would then likely pay more to private, for-profit businesses for these same services.
Government is an essential part of modern life. Enlightened countries understand a three way partnership with government, labor, and business is the best way to function as a democratic society.
How many essential services do you think government provides? Test yourself, then turn to page 8.