U.S. Airways Asks to Skip Pension Payment
I found this item over at Atrios' site. You have probably heard about U.S. Airways' filing for bankruptcy (the second time in 2 years) already. Not only is U.S. Airways asking to skip a payment, but may also ask to terminate the plans. Nice, eh?
Actually this is why Social Security needs to be reformed. Reforming Social Security so that it is a mandatory savings program that is invested in a broad based index fund with the principle insured by the government would help solve two problems here.
The first problem is the problem with pensions that skip payments or are reduced as a company encounters financial difficulty. By switching from a pay-as-you-go system to one that is a mandatory savings/investment plan would allow people to become less reliant on corporate pension plans.
Also, consider how much Social Security pays out when one retires. It is nowhere near enough for many people. Factor in the long term problem of running out of money and this problem becomes a much more relevant one as one means of restoring solvency to the system is to...reduce payments. And this brings us to the next problem: solvency...or lack there of, of Social Security.
Social Security as it is currently structured is subject to "shocks" due to shifts in the demographics. Right now the Boomers are very close to retiring and that will mean many, many, many more retirees drawing funds from Social Security. Further, due to advances in health care this demographic bulge is believed to be permanent, not temporary. This problem happened before, and the "solution"--i.e., raising taxes and reducing benefits, didn't work. It was supposed to make the program viable till somewhere around 2055 or so.
With a mandatory savings/investment program this problem would disappear as well. Now there would literally be an account with each individuals name on it. You could get periodic statements like people do with their 401k's, and so forth.
Social Security reform has many, many benefits. Unfortunately it is a political football in that every time a politician tries to address the problem the other side screams that they want to kill the elderly (well okay, the only ones screaming that, that I know of are the Democrats). As an economist I would have expected better of Duncan Black.