Monday, September 8, 2008

Obama/Biden, More of the same;… The same empty economic voodoo language that is.

There has been much said lately about the state of the U.S. economy and the now titled credit crunch that the nation has been experiencing for some time now. These are important topics too, deserving of some discussion both in political and non-political forums. Yet in the last few weeks since both the Democratic and Republican conventions, there seems to be an unhealthy focus on the part of the Democratic party on talking about and promising to fix all of the financial ails of the nation and its citizens. If I had a dollar for every time I have seen or heard a sound byte of the Obama/Biden ticket talking about the average person and their money problems, I’d have no money problems anymore, or would I?

The problem is that, while without question some of the strife the nation currently is facing is a result of questionable economic policies used by the Bush Administration a lot of it frankly… is just not.

Take one of the big promises made by the Obama/Biden ticket: “we will save your pensions!”. This nebulous promise to bring certainty to millions of Americans’ retirement accounts has less value than a North Korean made automobile. There is already a security net in place for pensions everywhere: it is called the Employee Retirement Income Security Act of 1974 and the Pension Benefit Guaranty Corporation (aka the PBGC).

ERISA provides for legal protection of vested rights obtained by employees through the course of their careers, and the PBGC is a government run corporation that steps in to insure those pensions in the event that the company is unable to honor their commitments. While this is a highly simplified explanation of benefits law and concepts, the bottom line is, if you have a pension and it is vested you are already saved. Obama/Biden got here about 35 years too late.

Furthermore, just to cover all of the bases for those still concerned that those gosh darn corrupt corporate boards are all out to get us, there is Sarbanes Oxley (Public Company Accounting Reform and Investor Protection Act of 2002). This law, which applies to publicly traded corporations, addresses issues like transparency, proper regulation, and criminal penalties for those public firms that do engage in wrongful conduct. (Remember it was a response to Enron and Worldcom). While this law is far from perfect, it does beg the question how much more could the government ever reasonably be expected do?

With all of this already available law in place to protect the retirement security of America’s workforce, one can’t help but wonder why we even care about social security anymore!

Beyond the obvious multitude of laws, though, that apply to this issue, there is also the reality that it is and always has been each individual’s responsibility to save their money in preparation for retirement, not the federal government’s. There is no legislative substitute for a thrifty attitude, proper spending habits, and a well- diversified retirement savings plan.

In closing there really is little question that the Obama/Biden promise to save our pensions is based on pure conjecture and nothing more. Like many other grandiose promises offered by the Democratic Party this year, this one again has little basis in reality and disregards the facts as they are. Candidates that promise to do what has already been done shouldn’t be trusted—your personal and economic futures are far too important!

By U.S. Grant 


Anonymous said...

I agree with your comments on the protection of the pensions under law. However, you are missing one
important indgredient in the retirement equation, social security is a part of each corporate's retirement plan/package. Neither party has
addressed how to maintain this benefit that all Americans pay for.

U.S.Grant said...

Dear Anonymous,

I appreciate you taking the time to read this post and respond, so thank you!

I must respectfully question your faith in the social security system however. Regardless of the fact that yes people and employers do pay into the fund it is not going to sustain itself forever. It was designed in a different time and really has failed to keep up with the needs of today.

Social security is an anachronism and hopefully others like you will catch on to this before it is too late.

It may be unfair but where was fairness ever promised?

Anonymous said...

Thanks for highlighting areas that we as "regular voters" don't necessarily know about.

Fight the smear said...

Where do I start?
I suppose the premise of your argument is a good place to begin:

“In the last few weeks since both the Democratic and Republican conventions, there seems to be an unhealthy focus on the part of the Democratic Party on talking about and promising to fix all of the financial ails of the nation and its citizens.”

I don’t know what your bank account looks like these days, but at the end of every 2 weeks, mine is often left with nothing more than a few pennies. And while onus of fiscal discipline is on the individual, if the Federal Government is able and willing to step in and stretch my dime a little further, I’m certainly not going to complain.
To say that there is an “unhealthy focus” on helping individuals meet or exceed their personal financial goals is quite to the contrary. In my humble opinion, the government can and should focus on the pocketbook of the American consumer as much as humanly possible.

This is of course a fundamental difference in opinion between Conservatives and Progressives. And what people on both sides of the political isle don’t seem to grasp is that neither side is 100% right or wrong. It is the common ground in the middle where we are most likely to find a solution to the “financial ails of the nation and its citizens”.

You bring up a good point regarding the Employee Retirement Income Security Act of 1974 and the Pension Benefit Guaranty Corporation. However these laws put banks higher on the list of priorities than workers.

“Obama will protect pensions by putting promises to workers higher on the list of debts that companies cannot shed; ensuring that the bankruptcy courts do not demand more sacrifice from workers than executives; telling companies that they cannot issue executive bonuses while cutting worker pensions; increasing the amount of unpaid wages and benefits workers can claim in court; and limiting the circumstances under which retiree benefits can be reduced.”

Furthermore, Obama's retirement security plan will automatically enroll workers in a workplace pension plan. Under his plan, employers who do not currently offer a retirement plan, will be required to enroll their employees in a direct-deposit IRA account that is compatible to existing direct-deposit payroll systems. Employees may opt-out if they choose. Experts estimate that this program will increase the savings participation rate for low and middle-income workers from its current 15 percent level to around 80 percent.

In closing, your argument is based purely on conjecture and nothing more.
Your words say it best:

“Candidates that promise to do what has already been done shouldn’t be trusted.”

John McCain and Sarah Palin promise to extend the Bush tax cuts, eventually making them permanent. Further widening the gap between the über-rich and the ultra-poor. They want to continue the same failed economic policies used by the Bush administration over the past 8 years.

We simply can not let this happen – our personal and economic futures are far too important!

U.S.Grant said...

Dear Fight The Smear,

Thank you for taking the time to comment. I of course do disagree. ERISA does not put Banks higher on any priority list, it is not an SEC or FDIC matter. It is purely about protecting the workers right to keep what they have earned, there is not much more one could ask for.

As far as companies that do not offer pensions, they shouldn't have to. It is a business decision that should never be left in the hands of the government. Many small companies can barely afford to pay a competitive wage let alone actually have a pension fund. Such a requirement is a bad deal for business and workers alike.

You seem to forget that the fate of the worker is tied to business.

Furthermore your ill advised discussion of bankruptcy priority claims clearly disregards the entire current purpose of the PBGC which is to provide funding for pensions when companies do fail. You are merely re-inventing the wheel and calling it by another name. To be honest I question whether you have ever actually studied at all any aspect of benefits law.

Again I thank you for your comments and hope you come back to submit again. However when I drive through the low income neighborhoods in my city and see Direct TV dishes, and SUVs there leaves little doubt in my mind your perception of the lower income classes being unable to save out of need is quite out of touch with reality.

fight the smear said...

U.S. Grant,

I appreciate your prompt response to my post. However, I must respectfully disagree with your reply.

First, I should have been more clear. My intent was not to imply that the ERISA puts banks on a higher priority list or that it is an SEC or FDIC matter. I simply meant to state that despite the appearance of protection for the PBGC's interest in the event of termination, the Bankruptcy Code frequently strips the PBGC of the protection provided under ERISA.

The PBGC would like required contributions (a.k.a. minimum contributions) to insured defined benefit pension plans to be considered "administrative expenses" in bankruptcy, thereby obtaining priority treatment ahead of the unsecured creditors (the banks). However, the PBGC has generally lost on this argument, sometimes resulting in a benefit to general unsecured creditors.

In National Labor Relations Bd. v. Bildisco, 465 U.S. 513 (1984), the U.S. Supreme Court ruled that Bankruptcy Code section 365(a) "includes within it collective-bargaining agreements subject to the National Labor Relations Act, and that the Bankruptcy Court may approve rejection of such contracts by the debtor-in-possession upon an appropriate showing." The ruling came in spite of arguments that the employer should not use bankruptcy to breach contractual promises to make pension payments resulting from collective bargaining.

Secondly, your opinion that companies should not be required to offer retirement plans, is just that; your opinion. However, once again your argument misses the point. As I mentioned before - Senator Obama's retirement security plan will automatically enroll workers in a workplace pension plan, where employers who do not currently offer a retirement plan, will be required to enroll their employees in a direct-deposit IRA account. They key here is that employees may opt-out if they so choose. This is simply to encourage savings participation for low and middle-income workers.

Furthermore, Senator Obama supports a variety of tax cuts and business opportunities designed to help small businesses meet the additional costs associated with enrolling employees in a program like this.

I do not claim to have ever studied any branch of law, however a simple Google search puts the above information at the fingertips of anyone who desires it.

Finally – I might add that the Direct TV dishes and SUVs which you see in the low-income neighborhoods of Des Moines are not necessarily indicative of the poverty in Brooklyn NY, the Southside of Chicago, or South-Central LA. This is not to say that poverty in Des Moines isn’t a problem. Rather, I merely point out the possibility that perhaps, it is your perception; that people on the bottom of the totem pole can climb up the ladder as easily as you or I, which is out of touch with reality.