Friday, September 30, 2016

The Obama-Clinton Coal Bailout

They’re teeing up taxpayers to save the mineworkers’ pension.


By Review & Outlook
The Wall Street Journal
September 30, 2016

Democrats have a three-stage strategy when they want to destroy an industry: Pick a politically vulnerable target, then pile on new regulatory costs, and finally demand that taxpayers bail out the victims of the destruction. We’re now in phase three in President Obama’s war on coal, with Democrats demanding that Congress save the United Mine Workers pension fund.

The United Mine Workers of America (UMWA) runs a multi-employer pension plan that has struggled as coal has shrunk under Mr. Obama’s political assault and competition from natural gas. For every worker there are now 10 retirees. Liabilities have exploded as bankrupt companies have stopped paying for their workers and retirees.

Benefits are underfunded by $5.6 billion, or about $600,000 per worker, and the pension plan is projected to go broke by 2025. A retiree who worked 30 years would then receive a maximum of $12,870 per year from the federal Pension Benefit Guaranty Corporation (PBGC) versus $24,250.

Congress has tried to help coal miners avoid this fate. In 1992 Congress authorized the U.S. Treasury to divert interest from the Abandoned Mine Land Reclamation Fund, which is financed by taxes on coal production, to the union’s retiree health care. In 2006 Congress allowed taxpayers to be billed if interest from the reclamation fund doesn’t cover the cost of the union’s generous health-care benefits. In 2015 interest transfers accounted for $32 million while taxpayers chipped in $142 million.

Now the union wants taxpayers to underwrite the pensions. Legislation propping up the union’s pension fund has gained steam as both parties mine for votes in the Rust Belt. Last week the Senate Finance Committee approved a bill that would allow up to $490 million in taxpayer subsidies and interest from the reclamation fund to be redirected to the union’s retiree health and pension benefits.

The Congressional Budget Office estimates that backfilling the pension and retiree health benefits would cost $3.5 billion over the next decade. Although the federal government helped establish the UMWA pension plan in 1947, taxpayers have never been liable for benefits beyond what is guaranteed by the PBGC. Congress has also never provided financial assistance to any private, state or local pension plan.

The mineworkers’ predicament is real, but shoring up their pensions would set a dangerous and expensive precedent. About 1,238 of the country’s 1,361 defined-benefit multiemployer plans are underfunded to the tune of $611 billion.

The PBGC itself is forecast to go broke by 2025, which would result in benefits being slashed by up to 90%. In 2014 Congress passed legislation allowing endangered multi-employer plans to reduce benefits to up to 110% of the PBGC guarantee as long as disabled and elderly pensioners are held harmless. The goal was to prevent a cascade of insolvent plans from toppling the pension insurer.

Yet the UMWA hasn’t proposed adjusting benefits. While reductions might not be enough to salvage the plan at this late stage, PBGC Director Joshua Gotbaum has suggested a “partition” that transfers “orphans” that were offloaded by a bankrupt company to a new plan supported by the PBGC. This would make benefits for current workers sustainable.

But the union figures it can get Congress to cut another check, which Mr. Obama would be happy to endorse. In 2010 a top official at the Department of Interior warned that similar legislation would “add significant new costs, and eliminate savings sought by the Administration.” But having targeted coal for extinction, Mr. Obama and Hillary Clinton have joined the bailout chorus to reduce the political fallout.

The Senate bill is also backed by at least nine Republicans including Tom Cotton (Ark.), Pat Toomey (Pa.) and Rob Portman (Ohio). Companion legislation in the House has drawn nearly 50 GOP co-sponsors.

The Senate has left town, but the bill may come up during the lame duck. By agreeing to rescue coal miners’ pensions, Republicans would be teeing themselves up for more bailouts. You can bet Democrats will later try to bludgeon Republicans into saving the Teamsters’ pensions too. This is the bigger reason Democrats are suddenly championing the coal miners they did so much to put out of work.


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