Second of two parts
When it comes to accounting, the devil is in the details. A new Financial Accounting Standards Board (FASB) rule taking effect in December requires greater transparency for union pension plans and threatens to bankrupt organized labor.
In order to survive, unions need a bailout and fast. This presents a political problem — if unions go bankrupt, so do Democrats. Eleven of the top 20 largest political contributors are labor unions, and nearly all of that money is spent campaigning against Republicans.
By bailing out unions, Democrats are bailing out themselves.
Unions have known for years that their multiemployer pension plans have unfunded liabilities that could run hundreds of billions of dollars.
That's why unions have been loath to accurately report their pension liabilities — requiring transparency could devastate whole industries as banks and creditors will likely refuse to lend money to companies on the hook for such outrageous pension obligations.
Fortunately for them, it's much cheaper for unions to buy the White House and Congress than to fund their pensions properly. Even by their normally profligate standards, unions went for broke in 2008, spending $400 million electing Democrats. In 2010, “Democrats are relying more than ever this year on another outside force to help even the playing field: organized labor,” reports the New York Times.
Despite being beholden, Democrats have been unable to enact the two laws unions most desire.
Democrats pushed hard but unsuccessfully for Card Check. That legislation would remove the secret ballot in union elections. By making union votes public, labor organizers would know who to target and intimidate in order to pressure them to change their vote.
With new unions, they could use mandatory binding arbitration to force additional businesses to infuse cash into their failing multiemployer pension plans.
The other piece of legislation is, not surprisingly, a bailout bill offered by Sen. Bob Casey, D-Pa., and co-sponsored by Senate Majority Whip Richard Durbin, D-Ill. (A similar piece of legislation is being offered in the House by Rep. Earl Pomery, D-N.D.) The bill would make failing union pension plans fully backed by the Pension Benefit Guaranty Corp., a government-sponsored entity.
In the plain language of the bill, “obligations of the corporation which are financed by the fund created by this subsection shall be obligations of the United States.” It creates a fund that these pension plans will be able to go to that will be filled by taxpayer funds as needed through the normal appropriations process.
In this sense, Casey's bill is an entitlement for the 7 percent of Americans still in labor unions. There is literally no dollar figure in the bill, but the PBGC had a deficit of $21 billion last year and it's estimated that shoring up failing union pension plans could cost taxpayers another $165 billion.
Rather than make union managers and businesses accountable for their pension mismanagement, these plans would have the full backing of the federal government, removing financial pressures to make the plans fiscally responsible. In the Daily Caller, a Capitol Hill Republican compares the arrangement to Fannie Mae and Freddie Mac's disastrous backing of the housing market.
With Republicans likely to control at least one chamber of Congress after November and post-census redistricting helping the GOP retain control, a lame duck session could be the Democrats last chance to save unions and help keep their campaign coffers filled.
The question is: Will Republicans be able to stop another special-interest bailout before January? If they succeed, it could be the beginning of the end for unions as an influential political force.
Mark Hemingway is an editorial page staff writer for The Examiner. He can be reached at email@example.com.