People, mostly union and retired city workers, protest in front of the US Courthouse where Detroit's bankruptcy eligibility trial was held in October 2013 in Detroit, Michigan. (Photo: Bill Pugliano/Getty Images)
This post originally appeared at Common Dreams.
In October of 2008, while the economy was in the early stages of what the IMF called “the worst recession since World War II,” The Washington Post reported that the “stock market’s prolonged tumble has wiped out about $2 trillion in Americans’ retirement savings in the past 15 months, a blow that could force workers to stay on the job longer than planned.”
Thanks, in other words, to Wall Street’s reckless and criminal behavior, workers who were promised a secure retirement were cheated out of the benefits they worked hard — for decades — to attain.
Which brings us to 2016: Just over a week ago, The Washington Post reported (déjà vu?), “More than a quarter of a million active and retired truckers and their families could soon see their pension benefits severely cut — even though their pension fund is still years away from running out of money.”
Why? “Like many other pension plans,” Jonnelle Marte explains, “the Central States Pension Fund suffered heavy investment losses during the financial crisis that cut into the pool of money available to pay out benefits.” This fact has pushed what is “one of the nation’s largest pension funds” to “reduce benefits for retirees,” provided that such a move will “improve the solvency of the fund.”
If the Treasury Department approves the cuts, it would set a precedent that “could encourage dozens of other pension plans across the country that are facing financial struggles to make similar cuts.”
So, one of the last remaining sources of economic security for millions — as The Post correctly observed back in 2008, “For many Americans, pensions and 401(k) plans are their only form of savings” — is crumbling under the weight of a financial collapse sparked, in large part, by the actions of large financial institutions (actions for which these institutions’ chief executives were never held accountable).
Put another way: It’s socialism for the rich, while everyone else picks up the costs.
Observe, for instance, the instructive example of former South Financial Group CEO Mark Whittle, reported in detail by ProPublica. Whittle conveniently retired in October of 2008, just weeks before his institution was bailed out by taxpayers to the tune of $347 million.
Because Whittle retired prior to the bailout of South Financial, he was able to skirt the so-called golden parachute limits, which prevent companies from using government money to reward their departing employees with outrageous severance packages. For his part, Whittle enjoyed an $18 million package, which included “a $4 million cash severance payment” and a “$9 million pension benefit.”
Here’s what analyst Paul Hodgson had to say: “If you and I decided to retire, we might get what’s left of our 401(k). But for some reason the rules seem to be different for executives. They get severance even though they’re retiring.”
As recent events have shown, even a worker’s 401(k) is no safe bet. CEOs, however, play by a different set of rules.
For another example, take Jeffrey Immelt, whose company — General Electric — was bailed out by the government in the midst of the economic meltdown. “In all,” The Wall Street Journal reports, “Mr. Immelt’s pension is valued at about $4.8 million a year for life.”
While not a Wall Street firm, General Electric has profited greatly from its activity in the financial services industry, and it was, for its efforts, placed on the too-big-to-fail list (and has recently made it known that it wants off).
GE Capital, the financial wing of General Electric, was, as Matt Taibbi reported, for some time under investigation for being “involved in a wide-ranging scheme (one that also involved most of America’s biggest banks, from Chase to Bank of America to Wachovia) to skim billions of dollars from America’s cities and towns by rigging the auctions banks set up to help towns earn the highest returns on the management of municipal bond issues.” The case, and thus the investigation, ultimately ended on a technicality.
So, the CEOs and top executives of companies that have an extensive record of involvement in questionable (to say the least) activity and that have to be bailed out by the taxpayers are at no risk of losing a dime of their lavish pension plans (and, on some occasions, they are rewarded for their efforts with massive bonuses); but, average workers, who had nothing to do with the crisis, are forced to absorb the costs.
— Matt Taibbi
As Taibbi noted in another piece examining how Wall Street has for years been “grabbing money meant for public workers,” politicians have, to keep their business partners safe from accountability, adopted such methods as “using scare tactics and lavishly funded PR campaigns to cast teachers, firefighters and cops — not bankers — as the budget-devouring boogeymen responsible for the mounting fiscal problems of America’s states and cities.”
“It’s a scam of almost unmatchable balls and cruelty,” Taibbi concluded, “accomplished with the aid of some singularly spineless politicians.” Indeed. And much of the same can be said about the American economy, broadly.
In short, the middle class and the poor must endure lectures on the virtues of personal responsibility, self-sufficiency and free enterprise from the same people who have been feeding greedily at the public trough, crashing the economy and walking away with their pension plans and severance packages in hand for decades.
If this isn’t the definition of a rigged system — a system that gives the rich a free ride while forcing the public to clean up the mess and suffer the consequences — I’m not sure what is.
Broadly, the disparity in retirement savings between CEOs and the average American family is striking: As a 2015 report by the Center for Effective Government and the Institute for Policy Studies detailed, “just 100 CEOs have as much in their company retirement assets as the entire retirement savings of 41 percent of American families (50 million families total).”
“And what few realize,” notes Sarah Anderson, director of the Institute for Policy Studies’ Global Economy Project, “is that the trends of expanding CEO pensions and increasing worker retirement insecurity are inextricably linked.”
