Saturday, June 20, 2009

Johnston on the bizarro Robin Hooding of our pension systems

David Cay Johnston in Mother Jones on "Pension Privateers"

John Snow won't have to worry about his retirement. When he left the csx railroad to become George W. Bush's second treasury secretary, he took with him a $2.5 million annual pension. The figure was based on 44 years of employment at csx, never mind that Snow had been there for only 25 (during which, incidentally, he brutally cut safety and maintenance, to the point where a jury awarded a widow $50 million in punitive damages after a derailment—money paid by the taxpayers because of a little-known law that insulated Snow and his company from the costs of his egregious judgment). That kind of boost is unheard of for the rank and file, but not at all uncommon for corporate executives and owners.

Snow's case is typical of the way corporate executives have, for the past 35 years, managed to gild their retirement benefits even as they hollowed out workers' pensions. It started with the 1974 Employee Retirement Income Security Act, the law ostensibly designed to ensure that workers could collect the retirement benefits they'd earned. erisa brought some important reforms—including establishing the federal Pension Benefit Guaranty Corporation (pbgc) to help workers whose pensions went bust—but it also was riddled with favors to business. And in the decades since, legions of lobbyists have helped create numerous new loopholes, exemptions, and special deals. The result is two separate and unequal pension systems: Executives get the equivalent of antebellum mansions, while workers get leaky shacks liable to collapse at the first harsh economic wind. Here are 10 of the key ways in which it happened. (Be warned: This stuff gets a bit technical. Washington is full of people who are very well paid to figure out insanely complex ways to take money from you and me.)
Click the link to read the ten ways that this has happened.

I doubt many people have heard of the CSX scam, but it's one of the numerous examples recounted in Free Lunch of American democracy becoming a means for redistributing wealth from the many to the very few. Johnston previously talked about the CSX affair with Bill Moyers

BILL MOYERS: You have a chapter in here about an economics professor who embraced the idea of getting government out of the way of business. And yet then he turned around and made cultivating government his business, quote, leaving behind a trail of death and costs that were shifted onto the taxpayers. And he went on to become our government's Treasury secretary.

DAVID CAY JOHNSTON: John Snow was a brilliant young economics professor and lawyer who wrote about how the government system of regulating transportation was inefficient and causing difficult costs. And in the Ford administration-- had a prominent role in promoting deregulation of trucking. Then he got a job with the CF-- what's now the CSX Railroad.

BILL MOYERS: And what is CSX?

DAVID CAY JOHNSTON: It's one of the largest railroad companies in America. And that railroad, the-- his mentor, Hays Watkins, won an award from INDUSTRY WEEK magazine. And the whole reason for the reward was their success at milking the government for favors. And Snow, throughout his career, spent an enormous amount of time going and meeting not with presidents of the United States but with the congressmen and senators and the staff members and the bureaucrats you're never going to hear about in the Transportation Department and the Appropriation Department to get all the rules and favors that he wanted.

And one of the worst rules is this. If you're on an Amtrak train and there is an accident and something happens to you, the damages that occur are always paid by the taxpayer, even if, as in the case I tell about in the book, there was a known unsafe condition that CSX caused in its zeal to cut costs and to increase Mr. Snow's salary.

Even though Snow was warned and warned this is dangerous, we're not doing enough for safety. There were official investigations. They stuck to their policy. They saved $2.4 billion dollars. Well, people died because of it. One widow pressed her case, got all the way to the Supreme Court with it. Got $50 million in damages awarded by a jury. Couldn't today 'cause Governor Jeb Bush in Florida signed a law to prevent this from happening again. But got $50 million in damages. Didn't cost CSX a penny. They just handed the bill to the taxpayers and said, "You get to pay."

BILL MOYERS: Because this is a law.

DAVID CAY JOHNSTON: That's the law.

BILL MOYERS: Passed by Congress.

DAVID CAY JOHNSTON: That's right. And this is a moral hazard. It's another thing that Adam Smith warned us about. You shouldn't be able to say, "I get the rewards and you the taxpayer are going to take up all the risks."

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