June 13, 2010

We Must Vote on Principle

This is an intellectual exercise, so relax and clear your thoughts and put your thinking cap on. Today we are going to look at a politician's vote on one bill and analyze that bill and that vote in the context of who this politician really is. Next, we will analyze you the voter in the context of who you think this politician is. I don't like picking on individual persons as there are so many targets in Washington that it's like shooting fish in a puddle, but in this case it is necessary for the point to be made.

The bill in question is HR4 of the 109th Congress in August of 2006. As always they gave it a wonderful name that we can all get behind; The Pension Protection Act (PPA) of 2006, signed into law by President George W. Bush on August 17, 2006 (1). Now on the initial reading most Americans would be perplexed as to why I would pick this bill to write negatively about. After all it simply allows the government to force businesses to honor their pension plans and to ensure that the plans are being properly funded for the obligations for which they are liable. And therefore the politician in question voted for this bill. In fact a Republican house member sponsored the bill. I feel better already. The federal government is going to make sure that my pension plan is solvent. Really? Not so fast. As with all things politic, there is more here than meets the eye. This is complicated and I apologize if your brain hurts should you have the intellectual fortitude to actually read the bill and other references here and see the true depth of the issue.

This bill allows the federal government through law and tax code to force private businesses to fund pension plans as the government sees fit, specifically setting minimum contributions dependent on fund liabilities. It also limits the benefits that certain members of a business can take at certain times. Of course it's only the 'rich' guys we're after here so we can all get behind that as well. This bill was a typical Washington D.C. knee jerk response to the United Airlines default on their pension plan in 2005. After this incident the Pension Benefit Guarantee Corporation (PBGC) was required to pick up the pension liabilities. The PBGC was created as part of the Employee Retirement Income Security Act (ERISA) of 1974 (2). ERISA was created to force businesses to file reports with the federal government concerning their pension plans. The enforcement wing is of course the Internal Revenue Service (IRS) as usual. I could go on, but this is hard enough as is so lets wrap it up.

What we have here is a government program ERISA set up to make business accountable for their pension plans to the federal government. This bill required the creation of another government body PBGC to in turn guarantee said pension plans in case the company defaulted. As always these kinds of government interference create unintended consequences. In this case you have a corporation run by the government to guarantee pensions, therefore, the incentive for business to ensure solvency is actually lessened. After all, the fund will be bailed out by the taxpayer if it should default. So guess what? They began defaulting. This in turn caused more regulation to prevent the PBGC from having to pick up the tab. And for good measure let's make sure that company bigwigs can't gain from plans about to default. Again, what may sound good is not so good. At the core is the federal government having power over the way businesses are run. This requires businesses to make large donations to politicians to gain access into the writing of future bills. This makes politicians beholding to the big money men. This type of legislation is typically much more destructive to smaller companies thereby diminishing the competition for the larger ones. While these bills appear to be punishing large business they always have caveats to allow the companies liability to be taken over by the government and are therefore ultimately beneficial to the bigwigs in the corporation that we think we are punishing. Further research shows that many organizations want changes to the latest legislation (3). And that in turn will require future regulation to fix whatever they come up with next. It never ends, and more importantly, it never fixes the original problem; it simply diverts liability to us the taxpayer, because once government gets involved, then government is responsible. Currently there is a real danger that the PBGC will itself default leaving us to once again pick up the tab (4).
Now, lets review. We have a politician who votes for a bill to allow federal control of private business pension plans. The stated goal of all of the government interference is to protect the public from defaulting plans. Plans have been defaulting at an ever greater rate. The government programs themselves are becoming insolvent. Ask yourself, what kind of a politician does this? One of three. Socialist. Short sighted career politician. Idiot. For sure, it is not a small government conservative or traditionalist libertarian. So who is this politician? Senator John McCain. And the bills sponsor? None other than John Boehner the current Republican minority leader of the U.S. House of Representatives. Now I ask you; is this the impression that these gentlemen have given to their constituents over the years? Ones who believe that the federal government has the constitutional authority and expertise to run the pensions for all American business? Or do they pretend to be small government conservatives, especially around election time?

And now to you the voter. Who did you think these men were? John McCain won the presidential primary for President of the United States in the Republican party; the party of small government. John Boehner continues to win handily, usually unopposed in his district. Again, a Republican. Obviously, there are enough conservatives out there who believed that these men were small government conservatives. They are anything but. What, you may ask, is the conservative solution to pension problems? The constitutional solution is that fraud is against the law and should be prosecuted to the full extent of the law. If individuals within a business knowingly underfund a pension for the purpose of increasing their own profit, they should go to prison for a very long time. Lawsuits should be filed to recover whatever assets possible to cover a pensions liabilities. But wait, officers of corporations are exempt from some of this liability. In most cases their personal assets cannot be used to pay these lawsuits. And who gave them that illogical protection? Why the federal government of course. The question for you the voter is this; is the cure better or worse than the problem? In 99.9% of the cases where the federal government gets involved, the answer is no. In fact government intervention requires more government intervention until the inevitable complete collapse and bail out by the tax payer. The damage really can't be quantified because it must be taken congruently with the increase of power by politicians who turn around and do it all over again in another aspect of our lives, while being bribed by people who want them to use that power to their benefit.

The above demonstration of the complete inadequacy of government to solve problems is complicated. The solution is simple. If your legislator votes for a single bill that exceeds the constitutional authority of the U.S. government, they should be summarily voted out of office. Shouldn't they get one or two breaks if they are otherwise voting right and going to prayer breakfasts? If your pet relieves themselves on the rug, do you only punish them occasionally? If so, I understand why your pet relieves themselves on your rug. No; one strike and your out! All voters need to review their expectations of the federal government. The job of the government is to level the playing field and give you the opportunity to have your day in court. Otherwise, they should stay completely out of private business. If you do not understand the damage done by the voters returning these people to power, this republic will fall. Future generations will lose their liberty and prosperity. Millions will suffer. In the end it will only be returned by the sacrifice of much blood and treasure. Is your temporary comfort worth that cost?

by: Keith D. Rodebush


(1) - http://thomas.loc.gov/cgi-bin/bdquery/z?d109:H.R.4:@@@D&summ2=m&

(2) - http://aging.senate.gov/crs/pension7.pdf (The 'Summary' takes 76 pages)

(3) - http://www.nysna.org/images/pdfs/union/ppa_info/ppa_brochure.pdf

(4) - http://www.foxbusiness.com/story/markets/industries/government/pbgc-line-ask-bailout/

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