Lessons from Retirement Insurance
March 20, 2008 Health Care

How many of you are factoring in Social Security income in your retirement plans? My family is expecting zilch, and we are saving accordingly. I would gladly argue that the Ponzi scheme known as “Social Security” has little chance of being anything near useful by the time Gen X (or is it Y … which am I) gets old. So, Uncle Sam really boinked the pooch on that one.

OK, so government plans to provide retirement income are blowing up, and that didn’t have to happen. But maybe other government programs to ensure a secure retirement for all Americans are working better? Like pension insurance? From behind the veil, isn’t a legitimate role for government to act as a giant insurance policy? Well, it isn’t exactly setting records for performance here either.

The Pension Benefit Guaranty Corporation is, by statute, supposed to be self-financing. It receives no tax revenue and is not officially backed by the full faith and credit of the U.S. government. Rather, the PBGC relies on premiums paid by sponsors of defined benefit pension plans, assets acquired from terminated plans, investment returns, and bankruptcy recoveries. However, because Congress and

not the PBGC has the sole authority to set premiums, the PBGC itself had little ability to prevent the significant deterioration of its net financial position as the record claims have accumulated since the start of this decade. The PBGC had a peak surplus-assets in excess of liabilities- of $9.7 billion at the end of fiscal year 2000. Since then, the net financial position of the PBGC turned to an $18.9 billion deficit as of the end of fiscal year 2006, with assets of $61.1 billion and liabilities of $80.0 billion (PBGC, 2006a). The net financial position of the Pension Benefit Guaranty Corporation seems likely to deteriorate further in the coming decades. Many analysts and policy makers have been wondering aloud whether the PBGC might eventually need an infusion of taxpayer dollars, a worry that has invited uncomfortable comparisons to the large taxpayer bailout in the late 1980s of the federal government program that insured deposits in the U.S. savings and loan industry, which, like the Pension Benefit Guaranty Corporation, was originally intended to be self-financing.

That is from Jeffrey Brown in the latest Journal of Economic Perspectives. Do read it if you can grab a copy. The point here is what leads anyone to believe that somehow the government will get national health insurance right? Proponents say that they do not wish to nationalize health care (i.e. provide it directly), rightly so – look at the failure of Social Security. They also say that they want to provide insurance for all. The record of the PBGC doesn’t leave me sanguine about that working too well either. And need I say anything about Medicare? 

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