Congress, our elite, can't manage a feat that the rest of us do every day: live within our means. Well, I suppose some of us don't, but those people end in ruin, not in comfy wood-paneled offices with cushy jobs. So now because our country has hit the "debt ceiling" we're going to start spending out of the civil service's pension fund.
The Treasury Department has started drawing from the civil service pension fund to avoid hitting the $8.2 trillion national debt limit. The move to tap the pension fund follows last month's decision to suspend investments in a retirement savings plan held by government employees.
In a letter to Congress this week, Treasury Secretary John W. Snow said he would rely on the Civil Service Retirement and Disability Fund to avoid bumping up against the statutory debt limit. He said the Treasury is suspending investments and will redeem a portion of the money credited to the fund.
Once Congress raises the debt limit, the Treasury will "restore all due interest and principal" to the pension fund as soon as possible, Snow said. He made a similar promise when the Treasury announced that reinvestment of some assets in the Thrift Savings Plan's government securities fund, or G Fund, had been suspended.
How about "once Congress stops spending more than it takes in"? Congress never pays its bills, and no consumer credit company would keep raising its credit limit! But rather than insisting that Congress live within our means, Treasury Secretary John Snow just enables their overspending by moving money around.
Colleen M. Kelley , president of the National Treasury Employees Union, said last month that federal employees should not have their pension accounts "used as a rainy day fund. . . . No private-sector employer would ever be allowed to do this."
Actually that's not at all true, and the Civil Service Retirement and Disability Fund is the exception, not the rule! A vast number of private pension funds are underfunded and will never be able to pay retirees what they promised.
There has been a rash of pension defaults in recent years, with nearly 600 funds passing off their responsibility for $14.3 billion from fiscal year 2000-2004 to the Pension Benefit Guaranty Corporation. (The PBGC is a government chartered corporation that insures pension plans.) The latest default to make news was in March, 2005, when United Airlines defaulted on pensions for 121,500 employees, the largest default in U.S. pension history. Other airlines are rumored to be looking to follow suit.
The PBGC estimates that 75% of all the corporate pensions it covers are underfunded, and that all together those funds are short by an estimated $95.7 billion. If the problem becomes severe enough, hundreds of billions of dollars in taxpayer money will be needed to bail out the pension system, and even that won’t be enough to fulfill all the retired workers’ expectations. The risk is very high, since already the PBGC is itself underfunded by over $20 billion, making it difficult for the organization to do its job of protecting workers when corporations mismanage their pensions.
As all young professionals know, we're going to be on our own when we retire, and we'd better be prepared for it. Our elders are raiding our futures because of their poor planning, and I only hope that our generation can do better for our kids.