Stocks Plunge as Coronavirus Toll Becomes Clearer, Smaller Stocks Crushed
1:54
Stocks fell sharply on Wednesday as investors came to grips with the idea that the shutdowns will last longer and the economic toll be steeper than many had hoped.
The Dow Jones Industrial Average dropped 973.65 points, or 4.4 percent, to 20943.51. Both the S&P 500 and Nasdaq fell by 4.41 percent. The Russell 2000, made up of smaller companies, fell 7 percent, reflecting how tough the coronavirus contraction will be on small and mid-sized businesses.
Stock futures moved down on Tuesday night following President Donald Trump’s warning that the U.S. should prepare for a “very, very painful” two weeks. Florida on Wednesday announced a statewide “stay at home” order, once more highlighting how widespread the economic dislocation from the pandemic has become.
Walmart was the only Dow stock to rise for the day, eeking out a 0.46 percent gain. Boeing, American Express and Dow were the worst performers.
Target was the second-best performing S&P stock, rising 2.47. The best was gold miner Newmont Mining, rising 2.63 percent. Cruiseline operator Carnival shares fell by 33 percent, making it the worst performer in the S&P 500, followed by Royal Caribbean Cruises, down 19.89 percent, and United Airlines, which dropped 18.7 percent.
All 11 sectors of the S&P declined. The best sector was consumer staples, which fell just 1.83 percent. The worst were financials, real estate, and utilities, all down by more than 5 percent
Jobs melting away fast as coronavirus wreaks havoc on economy
Jobless Claims Soar to 3,283,000, Biggest Jump Ever
Think Tank Estimates 14 Million Jobs Lost by Summer
‘Astronomical Increase’
Trump’s DHS Starts to Import 85,000 H-1B Graduate Gig Workers
CEOs Keep 1 Million Indian Graduates in U.S. Jobs, Legally
Companies Lobby Trump's DHS to Preserve Huge Foreign Workforce
NewsFlash! H1B Registration Cap Hit, USCIS to Post Results by March 31st - Murthy Law Firm | U.S...
Lawsuit: Managers Violated Americans' Civil Rights by Hiring H-1B Workers
THE LOOTING
OF AMERICA:
BARACK
OBAMA AND HIS CRONY BANKSTERS set themselves on America’s pensions next!
http://mexicanoccupation.blogspot.com/2015/04/obamanomics-assault-on-american-middle.html
The new aristocrats,
like the lords of old, are not bound by the laws that apply to the lower
orders. Voluminous reports have been issued by Congress and government panels
documenting systematic fraud and law breaking carried out by the biggest banks
both before and after the Wall Street crash of 2008.
Goldman Sachs, JPMorgan Chase, Bank of America and every other major US
bank have been implicated in a web of scandals, including the sale of toxic
mortgage securities on false pretenses, the rigging of international interest
rates and global foreign exchange markets, the laundering of Mexican drug
money, accounting fraud and lying to bank regulators, illegally foreclosing on
the homes of delinquent borrowers, credit card fraud, illegal debt-collection
practices, rigging of energy markets, and complicity in the Bernie Madoff Ponzi
scheme.
The Next Looming Economic Contagion: Pensions Collapse
Democrats to seek aid for troubled union
pensions in next relief package
Report: States Face $1
Trillion in Unfunded Liabilities
“Job losses now underway far exceed anything the country has seen before.”
Jobs melting away fast as coronavirus wreaks havoc on economy
by Jay Heflin
Layoffs have skyrocketed, nearly half of all U.S. companies expect to announce furloughs, and 37% have begun a hiring freeze as the virus reaches into every nook and cranny of commercial life.
Gap on Monday announced that it was shutting its doors across North America and Europe on April 1 and would furlough their workers. The company will halt wages but pay “applicable benefits” until stores reopen, it said.
Other prominent retailers announced massive layoffs in recent days. Macy’s and Kohl’s announced Monday that they furloughed staff and closed their doors.
They're unlikely to open again until late spring or until the virus is checked. It has already infected more than 184,180 people in the United States and killed at least 3,720, according to Johns Hopkins University data. Deborah Birx, the White House coronavirus task force coordinator, said Tuesday that the expected peak of infection and death is still some two weeks away.
The White House recommended that everyone practice social distancing for another month, and stay home if possible. More and more states are issuing stay-at-home orders and extending them further into the future, meaning that all nonessential businesses will remain closed.
A gallon of regular gasoline is selling for less than $1 in some states, slaughtering jobs in the oil industry. Houston's Halliburton Co. has furloughed 3,500 workers. More than a million jobs in the oilfield service sector could be cut this year as the coronavirus slashes projected sales, according to a report by Rystad Energy.
Job losses now underway far exceed anything the country has seen before.
More than 47 million people could be laid off, the Federal Reserve Bank of St. Louis estimated, and the unemployment rate could exceed 30%.
Such losses would far exceed the worst numbers of the 2008 financial crisis and eclipse those of the Great Depression.
Forecasters expect new jobless claims to be released Thursday by the Labor Department will be higher than the record 3.2 million reported last week.
Pictet Wealth Management projected that new claims could exceed 6 million for the week ending March 28, meaning 9 million people in total will have applied for unemployment insurance benefits in just the past two weeks. Other projections are not so dire; Goldman Sachs estimates job losses at 5.2 million, and Citigroup forecasts 4 million. The median projection is 3.5 million lost jobs, according to Bloomberg.
Rachel Greszler, a research fellow at the Heritage Foundation, expects the unemployment rate to at least double for March, from the historic low of 3.5% in February.
“Based on last week’s increase in claims [of 3.2 million], we’re probably about at 5.3% as of last week. If we see a similar jump this week, then we’ll be a little over 7% or 7.2%,” she told the Washington Examiner. "So, I would not be surprised if we are at least at 7% and potentially much higher, as high as 9%."
The monthly unemployment rate has not been 7% or higher since October of 2013, according to the Labor Department.
Wells Fargo projects that the spread of the virus will increase the jobless rate to 3.8% for the first quarter and 7.3% in the second quarter. The unemployment rate then would drop below 7% through 2021.
The $2.3 trillion relief bill signed by President Trump last week includes many hundreds of billions of dollars in loans and grants designed to help businesses keep employees on their payrolls even as they face, in many cases, a total loss of income.
In recognition of the fact that millions will have lost jobs almost immediately, and indeed that officials want to see many workers staying at home rather than venturing to workplaces where they could spread the virus, the bill also contains aid to people who have been laid off or furloughed, meant to tide them over.
The bill provides an additional $600 a week on top of normal state unemployment benefits. It also provides tax rebates of $1,200 an adult.
Bullard Says Unemployment Could Rise to 30%
JOHN CARNEY
The unemployment rate in the U.S. could hit 30 percent, Federal Reserve Bank of St. Louis President James Bullard said in Bloomberg News interview.
“This is a planned, organized partial shutdown of the U.S. economy in the second quarter. The overall goal is to keep everyone, households and businesses, whole,” Bullard said. “It is a huge shock and we are trying to cope with it and keep it under control.”
That would be the highest rate of unemployment since the Great Depression.
Bullard said he expects economic growth to plunge 50 percent in the second quarter but for the economy to bounce back later in the year, so long as the appropriate measures are taken by the fiscal and monetary authorities.
“I would see the third quarter as a transitional quarter,” Bullard said. The next six months, however, could be very strong. “Those quarters might be boom quarters,” he said.
Bullard also said the Fed was far from being “out of bullets,” as some Fed watchers have claimed.
“There is more that we can do if necessary,” he said. “There is probably much more in the months ahead depending on where Congress wants to go.”
Jobless Claims Soar to 3,283,000, Biggest Jump Ever
Jobless claims rose to 3,283,000 last week, reflecting only the first round of mass layoffs due to the coronavirus pandemic.
Jobless claims are considered the closest thing we have to a real-time indicator of economic conditions, reflecting claims from the prior week. Many pieces of economic data come out with lags of a month or more, which makes it had to rely upon them when the economy experiences a sudden shock.
The three million claims surge easily tops the 1982 record of 695,000.
Claims jumped in all 50 states and the District of Columbia. Nine states reporting increases of at least 100,000 from the prior week.
The largest number of claims came from Pennsylvania, with 378,900.
A New York Labor Department office in Manhattan, New York City, on March 6, 2015. (Spencer Platt/Getty Images)
Think Tank Estimates 14 Million Jobs Lost by Summer
As policymakers and investors anxiously eye the Labor Department’s jobless claims report, due for release Thursday, a Washington-based think tank has made a dire forecast of 14 million jobs lost by summertime.
“Our best guess at this point is that the national economy could lose 14 million jobs by summer 2020,” said The Economic Policy Institute (EPI) in a note that blamed the COVID-19 outbreak for the dismal figures.
“These estimates assume $1 trillion in fiscal stimulus—in other words, even with $1 trillion in stimulus, the job losses will be enormous,” the EPI wrote on March 25.
CCP VIRUS SPECIAL COVERAGE
The 14-million forecast is an upwards revision over figures it published last week.
“Sadly, our predictions were likely too optimistic,” the think tank said in a report published March 25. The EPI noted that job loss estimates are “rapidly evolving, with new forecasts from different macroeconomic analysts being released on an almost daily basis.”
Bianca Medici (L), a corporate recruiter for CDM Media, speaks with job applicants during a National Career Fairs job fair in Chicago on April 22, 2015. (AP Photo/M. Spencer Green)
EPI broke down their unemployment estimates by state. Percentage-wise, Nevada is projected to lose 14.2 percent of total private-sector employment. The state’s leisure, hospitality, and retail sectors account for over 40 percent of all private-sector jobs.
By absolute numbers of jobs lost, California is projected to have the most, at over 1.6 million. As a share of total private-sector employment, this number translates into 10.9 percent.
The think tank called for “at least $2.1 trillion in federal stimulus through 2020 to restore the country to reasonable economic health.”
Negotiators said Wednesday that U.S. senators and Trump administration officials reached an agreement on the massive economic stimulus bill.
The Senate will vote on the $2 trillion package later in the day and the House of Representatives is expected to follow suit soon after.
Senate Majority Leader Mitch McConnell (R-Ky) said Wednesday the package includes checks to help Americans pay bills during job layoffs related to the outbreak, expanded unemployment insurance, and emergency loans to small businesses.
‘Astronomical Increase’
The U.S. Department of Labor figures due Thursday are expected to shatter the old record for the greatest number of new unemployment claims filed in a single week.
Some economists project that the United States could see around 3 million new unemployment insurance claims when figures are released for the week of March 15-21. That would be around 12 times as many as the previous week and would triple the all-time record of 695,000 set in 1982.
“It’s going to be an astronomical increase,” said Constance Hunter, president of the National Association for Business Economists and chief economist at the accounting firm KPMG. “We don’t have any recorded history of anything like this.”
Trump’s DHS Starts to Import 85,000 H-1B Graduate Gig Workers
President Donald Trump’s deputies announced Friday that they had begun the process of importing 85,000 H-1B gig workers to take white-collar jobs that will be needed after October by the millions of American graduates who are now losing jobs in the coronavirus crash.
“This is just an unspeakable action,” said Marie Larson, a co-founder of the American Workers Coalition, which opposes the many visa worker programs that have transferred at least one million white-collar jobs to foreign workers. “I don’t believe President Trump ordered this — the swamp went ahead with this,” she said.
“If the H-1B program is just for filling jobs that Americans cannot fill amid for labor shortages, then this would not be happening,” said John Miano, a lawyer with the Immigration Law Reform Institute. “But it is not a labor-shortage program — it is a cheap labor program to displace Americans,” he said.
The 2020 lottery “is in your face that that is the purpose of the program.”
The agency announced Friday that it had received enough corporate requests to snatch up all of the 2020 supply of H-1B visas.
This annual supply includes 20,000 visas for foreigners who pay for graduate degrees at American colleges, plus 65,000 visas for graduates who are directly imported from India, China, and other countries. Non-profits — such as hospitals and universities — are allowed to also import an unlimited number of “cap-exempt” H-1Bs for white-collar jobs.
Roughly 100,000 new H-1B workers arrive each year. But they are allowed to stay for many years, so companies have gradually built up a resident workforce of roughly 900,000 H-1B workers, alongside several hundred thousand additional white-collar workers carrying L-1, OPT, CPT, E-3, B-1, TN, H4EAD documents.
The annual application and lottery process are managed by DHS’s U.S. Citizenship and Immigration Services [USCIS] agency, which announced Friday afternoon:
USCIS has received enough electronic registrations during the initial period to reach the FY 2021 H-1B numerical allocations (H-1B cap). We randomly selected from among the registrations properly submitted. We intend to notify petitioners with selected registrations no later than March 31, 2020, that they are eligible to file an H-1B cap-subject petition for the beneficiary named in the applicable selected registration.
The work visas will not be sent to the lottery winners for several weeks after the companies submit petition packages with justifications for each visa. The deadline for submitting the petitions is June 30.
Those justifications include a so-called “Labor Condition Application” document approved by the Department of Labor. The LCAs describe the intended job for each H-1B worker. Business advocates use the LCA process to claim that imported workers do not displace Americans.
But the LCA process does not require the companies to show that Americans cannot be hired for the job. Also, the LCA documents are rubber-stamped by the department. A department spokesman told Breitbart News:
Under current law, “[t]he Secretary of Labor shall review such an [LCA] application only for completeness and obvious inaccuracies” and, unless the application is incomplete or obviously inaccurate, the Department must certify the LCA within seven days of receiving the employer’s application. [Emphasis added.]
Govt data shows 1 million Indian contract-workers get white-collar jobs in tech, banking, health etc.
The Indian hiring ignores many EEOC laws & is expanding amid gov't & media silence.
It is a huge economic & career loss for US college grads.#S368 #H1B http://bit.ly/2Sy3uw6
The Indian hiring ignores many EEOC laws & is expanding amid gov't & media silence.
It is a huge economic & career loss for US college grads.#S368 #H1B http://bit.ly/2Sy3uw6
CEOs Keep 1 Million Indian Graduates in U.S. Jobs, Legally
Trump’s deputies now know which companies asked for 2020 visas and how many visas they won in the lottery, said Larson.
Those companies can tell Americans why they are hiring foreign workers when so many American graduates are jobless amid the coronavirus crash, she said:
We want USCIS to name the companies that have won the lottery to bring in foreign workers for American jobs. What specific specific skills do these people have that American workers supposedly do not have?
All Americans must demand that these companies make public why they need these people and why they could not hire American workers. We need the media to question each and every one of these companies to ask them why they could not hire Americans for these jobs. We need Americans to stand up during this massive unemployment — which is unprecedented even under the Great Depression and we have not hit the peak. This is a time for everyone to rise up.
It is incumbent on President Trump to ensure that he keeps his [2016] campaign promise to put American workers first. One way he can do that is to ensure the American public gets the answer it deserves on why Americans are not getting these jobs.
Trump’s failure to set curbs on the H-1B program has angered many of the swing-voting university graduates who supported him in 2016. In March 2016, after much zig-zagging, Trump declared:
The H-1B program is neither high-skilled nor immigration: these are temporary foreign workers, imported from abroad, for the explicit purpose of substituting for American workers at lower pay. I remain totally committed to eliminating rampant, widespread H-1B abuse and ending outrageous practices such as those that occurred at Disney in Florida when Americans were forced to train their foreign replacements. I will end forever the use of the H-1B as a cheap labor program, and institute an absolute requirement to hire American workers for every visa and immigration program. No exceptions.
“The people surrounding President Trump don’t have his back — they are not helping him keep his campaign promise,” Larson said.
In February 2020, a U.S. judge struck down the token H-1B curbs set by USCIS managers since Trump’s election.
The current head of DHS, Chad Wolf, formerly served as a lobbyist for the NASSCOM outsourcing industry, which imports most of the H-1B gig workers. The group’s mix of Indian and U.S. companies use the H-1B program to extract salaries and wealth from the American college graduate class, and they split the gains among both countries’ executives and investors, plus the visa workers and India’s government.
The public & GOP blocked the business push in Congress to keep 100K+ visa workers in US jobs.
Next, biz asks agencies for the labor giveaway, with deceptive op-eds & earnest pleas from elite professional trade associations.
OK, so who lobbies back?#H1Bhttps://bit.ly/3bsaaTk
Next, biz asks agencies for the labor giveaway, with deceptive op-eds & earnest pleas from elite professional trade associations.
OK, so who lobbies back?#H1Bhttps://bit.ly/3bsaaTk
Companies Lobby Trump's DHS to Preserve Huge Foreign Workforce
But many of the H-1B visa workers are hired by Indian-run staffing companies to quickly fill open slots in a wide variety of Fortune 500 companies. For example, many of the contract jobs are in technology, accounting, health care, design, banking, finance, engineering, science, teaching, and insurance, and even in the fashion industry. The companies include Tata, Infosys, HCL, and Tech Mahindra.
The little-publicized outsourcing industry boosts investors’ stock prices by cutting salaries for millions of American graduates. It also pushes many older American professionals out of jobs and prevents millions of American graduates from getting on the first rung of their career ladders.
The H-1Bs and staffing companies are often used by American executives and hiring managers out of sheer laziness, insiders tell Breitbart News.
The gig workers provided by the staffing companies are often unskilled, unproductive, and expensive, said a former executive assistant at a banking company who helped managers replace many American professionals with Indian H-1Bs. But they are compliant because the jobs pay far more than Indian or Chinese jobs and because they hope to win green cards, she said.
American executives do not want to go to the trouble of hiring and managing independent and innovative American professionals — but do want to promise short-term cost savings during their periodic calls with Wall Street investors, she said. “It was not about [workers’] skills, not about anything else, it was about money,” she said. “They want credit for saving the company money, so they won’t look at anything that goes against the [cost saving] narrative.”
Multiple lawsuits and testimony from Americans show how the H-1B program undermines professionalism, innovation, and Americans’ careers.
The 2020 lottery was applauded by immigration lawyers who import H-1B workers for business groups.
“I’ll keep you posted on when I start seeing updates for my registrations!” an immigration lawyer told her clients. “Yes, we had a substantial increase in submissions compared to last year,” she told one questioner.
“NewsFlash! H1B Registration Cap Hit, USCIS to Post Results by March 31st,” said a post by the Murthy Law Firm, which has offices in Indian, Seattle, and Maryland.
NewsFlash! H1B Registration Cap Hit, USCIS to Post Results by March 31st - Murthy Law Firm | U.S...
American professionals have organized to lobby against the H-1B program via several groups, including the American Workers Coalition, U.S. TechWorkers, and ProUSworkers, and White Collar Workers of America.
The new TechsUnite.US site was created to help U.S. graduates anonymously collaborate.
In turn, these groups are backed up by a few sites that track the scale and location of the outsourcing industry in each legislator’s district. “The scope of this thing is really unbelievable,” said one researcher.
Other sites document the conflicts created by diverse foreign business practices in the United States. The non-political MyVisaJobs.com site also provides much information about H-1B outsourcing and green card rewards in multiple industries.
DoJ/EEOC do nothing as US & Indian execs trade US jobs to Indian #H1B workers, cutting Americans out of careers, homes & families.
This trade choked innovation in Silicon-V, slammed insurance & banking. #SenMikeLee & #S386 will expand it to healthcare http://bit.ly/2vIHAOp
This trade choked innovation in Silicon-V, slammed insurance & banking. #SenMikeLee & #S386 will expand it to healthcare http://bit.ly/2vIHAOp
Lawsuit: Managers Violated Americans' Civil Rights by Hiring H-1B Workers
THE LOOTING
OF AMERICA:
BARACK
OBAMA AND HIS CRONY BANKSTERS set themselves on America’s pensions next!
http://mexicanoccupation.blogspot.com/2015/04/obamanomics-assault-on-american-middle.html
The new aristocrats,
like the lords of old, are not bound by the laws that apply to the lower
orders. Voluminous reports have been issued by Congress and government panels
documenting systematic fraud and law breaking carried out by the biggest banks
both before and after the Wall Street crash of 2008.
Goldman Sachs, JPMorgan Chase, Bank of America and every other major US
bank have been implicated in a web of scandals, including the sale of toxic
mortgage securities on false pretenses, the rigging of international interest
rates and global foreign exchange markets, the laundering of Mexican drug
money, accounting fraud and lying to bank regulators, illegally foreclosing on
the homes of delinquent borrowers, credit card fraud, illegal debt-collection
practices, rigging of energy markets, and complicity in the Bernie Madoff Ponzi
scheme.
The Next Looming Economic Contagion: Pensions Collapse
As
the stock market implodes in response to COVID-19, there is an underlying economic virus
that will soon be evident: America's grossly underfunded
pensions. With the market down 40% in from its high point (before
rebounding March 24), many corporations may default on their pension
promises. consumption and thus gross sales will decline (further
dampening corporate profits), and the widespread weakness of pensions will be
exposed. This in turn will cause a vicious cycle in which retirees
and those planning retirement will have fewer disposable dollars and will
divert more money to retirement savings — further weakening consumption and
undermining the effectiveness of interest rate adjustments by the Federal
Reserve.
The
problem of underfunded pensions has been loudly proclaimed for
years. It is hard to ignore article titles like "The Coming
Pension Crisis Is So Big that It's a Problem for Everyone" (Forbes, 5/20/2019), "'Their house is
on fire': The pension crisis sweeping the world" (Financial Times, 11/17/2019), and "Pension
Plans for Millions of Americans Are on the Brink of Collapse" (NPR, 11/28/2018).
Yet
these warnings have been ignored. Now we must
face the consequences.
America
is on the brink of a realization of just how much corporations and legislatures
have "planned for the best, in denial of the worst." In
both corporate boardrooms and legislative budget-making, employees will look
back and see that what has been done is nothing short of fraud. But
it's too late now — we cannot roll back the investment clock.
Left unchecked, this crisis will decimate the
retirement future of millions. Over the years, the number of retirees has grown
dramatically, while the number of active participants and employers has decreased. This imbalance,
combined with the market decline from the Great Recession, has put many of
these vital pension plans on an unsustainable path[.] ... To make matters
worse, the Pension Benefit Guaranty Corporation (PBGC) multiemployer program,
the funding backstop for plans that have run out of money, is also projected
to collapse by 2025. The
dissipation of the PBGC would leave retirees with about 2% of what they had
counted on for retirement[.] ... The collapse of the entire system would
further compound the pension crisis at hand and have a domino effect on our economy,
potentially leading to widescale business closures, layoffs and rising
unemployment.
The
current decline was foreseen — and the warnings ignored. The
imminent implosion will quickly exceed all municipal defaults in U.S. history
combined. Worse, state pensions are some of the greatest offenders
in playing "kick the can" with beneficiaries' contributions. Legislators
everywhere have played this game of promising costly benefits to unionized
state labor organizations (especially teacher unions) and then diverting
required contributions to other budgetary preferences using unrealistic predictions
of returns on existing investments, accounting gimmicks, and absurdly low
estimates of future benefits.
There is
no federal Pension Benefit Guarantee Corporation for state plans —
the PBGC insulates only private-sector defined benefit plans under ERISA. State
workers may perceive that the government will always pay, but states don't
print currency, and they are limited by reality:
When states and local governments reduced their
employer contributions to their public pension funds during the Great
Recession, they in effect borrowed from those pension funds. If
governments hope to meet their contractual obligations to their employees, they
must pay these delayed pension contributions back at some point.
But
most states did not pay them back. This analysis from the Federal
Reserve Bank of Cleveland addresses the legal recourse of pension beneficiaries
when the state lacks the financial resources to keep its word in a time of
crisis:
[O]ur legal system provides judges with the
flexibility to adapt broad constitutional principles to the extreme and exigent
necessities of their times. In such times, federal courts typically
defer to states' "police" (sovereign) powers, a decision which
essentially allows the state, as a sovereign entity, to resolve an issue as it
sees fit. The US Supreme Court has made a similar ruling, deciding
that "[t]he contract clause must be construed in harmony with the reserved
power of the State to safeguard the vital interests of her
people. Reservation of such essential sovereign power is read into
contracts." In other words, when "vital interests"
are at risk, defending contracts may be of secondary importance. [A]
state may have all the legal authority it needs to shed its insurmountable
liabilities and force its creditors to accept any deal it offers.
What
remains now is to ponder the extent of the federal bailout that will be granted
to employees whose pensions are evaporating before their
eyes. When Sears sought bankruptcy protection, the PBGC undertook to
step in for some 90,000 employees. How many can
it rescue now, even with a federal infusion of
cash? The present situation promises to be exponentially larger.
If
President Trump is the voice seeking aid for private pensions, Nancy Pelosi and the Democrats will likely
strangle a rescue plan or try to attach socialist conditions. But
how much money would be required for the federal government to also rescue
underfunded state pensions?
In
June 2019, the Pew Charitable Trusts provided a 2017 snapshot of state pension
shrotfalls:
[T]he pension funding gap — the difference
between a retirement system's assets and its liabilities — for all 50 states
remains more than $1 trillion, and the disparity between well-funded public
pension systems and those that are fiscally strained has never been greater[.]
... In 2017, the state pension funds in this study cumulatively reported a
$1.28 trillion funding gap[.] ... Even after nine years of economic recovery,
most state pension plans are not equipped to face the next downturn.
A
serious hurdle to a federal rescue is this moral hazard — states that had been
most neglectful in funding their pensions would have the most to gain.
Whichever
way this shrinking pie is sliced, there will be only crumbs for retirees and
workers. The coming economic whirlwind is going to pick up
this Dorothy's house of pensions
neglect, and no one knows where it will land.
Democrats to seek aid for troubled union
pensions in next relief package
|
April 01, 2020 12:01 AM
House Democrats
planning a new and sweeping economic relief package to respond to the
coronavirus say they’ll include federal aid for troubled union pensions.
Democrats have just
begun drafting the relief bill, which they said would include enhanced family
paid leave, more money for food stamps, and new worker safety requirements.
The pension bailout, if
included in the measure, could cost tens of billions of dollars if it matches a
pension relief package the House passed last year.
Speaker Nancy Pelosi, a
California Democrat, told reporters she believes President Trump has signaled
interest in aiding troubled pension programs but that it was excluded from the
$2.2 trillion package signed into law last week because Senate Republicans, led
by Majority Leader Mitch McConnell, did not want it in the bill.
“President Trump was
actually supportive, but Mitch McConnell was not,” Pelosi told reporters. “And
so, he said we'll save it for the next bill. Well, here's the next bill.”
House Democrats earlier
this month introduced an economic relief package, but it was rejected by Senate
lawmakers, who negotiated the $2.2 trillion bipartisan deal with the Trump
administration.
The sidelined House
proposal included the language in the House-passed Butch Lewis Act, a
multiemployer pension bailout measure with a nearly $100 billion price tag. It
would provide low-interest loans to the nation’s most underfunded union pension
plans to help them stave off looming insolvency, and it would provide an
additional $71 billion in direct cash assistance to those struggling pension
plans. The measure would help ensure pension benefits for 1.3 million workers.
Pelosi did not indicate
this week whether the draft of the new economic relief bill will include the
Butch Lewis Act, but a Democratic aide confirmed it, acknowledging the plan
would have to be bipartisan.
“Our proposal is the
Butch Lewis Act, but, more importantly, we need and want multiemployer pension
reform that works,” a senior Democratic aide told the Washington
Examiner. “We are not so committed to an approach that we can’t negotiate a
solution.”
The House-passed bill
won support from dozens of House Republicans, but it never received
consideration in the Senate.
The plan has generated
opposition from some economists who argue it does nothing to address the
underlying flaws in the pension programs that now threaten their solvency.
About 125 multiemployer
pension plans will become insolvent in the next two decades, and some will go
broke in the next few years, the Congressional Budget Office said.
“It’s a way to kick the
can down the road, and you are using a lot of taxpayer money,” Rachel Greszler,
a research fellow in economics, budget, and entitlements at the Heritage
Foundation, told the Washington Examiner.
Greszler pointed to a
Sept. 6 letter from the CBO that warned of the looming collapse of many union
pension plans, even if Congress passes a pension bailout.
“About one-quarter of
the affected pension plans would become insolvent in the 30-year loan period
and would not fully repay their loans,” the CBO wrote. “Most of the other plans
would become insolvent in the decade following their repayment of their loans.”
Greszler said it would
make more sense for the federal government to shore up the Pension Benefit
Guaranty Corporation, or the PBGC, which is also headed for insolvency, and to
put in place reforms to help pension plans survive, such as a slight reduction
in benefits.
Democrats and many
Republicans said Congress has no choice but to act to stop the pensions from
becoming insolvent.
The vast majority of
union pension plans are grossly underfunded and will have to cut benefits to
retired workers without federal help.
Congress last year
passed legislation to protect the pensions and healthcare for 92,000 mine
workers.
Senate Republicans also
introduced their own multiemployer pension reform plan they said is “designed
in a balanced way to avoid tipping more plans into a poorer-funded condition
and also to avoid exposing taxpayers to the full risks associated with the
largely underfunded multiemployer system and pushing the PBGC into insolvency.”
The measure was authored by
Senate Finance Committee Chairman Chuck Grassley, an Iowa Republican, and
Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander, a
Tennessee Republican.
“We need to act
quickly, but we can’t just pour money into failing and mismanaged funds,”
Grassley said. “Our plan will provide relief and reform now. Without it, our
retirees will be left without the future they worked for.”
The AFL-CIO opposes the
Grassley-Alexander plan, arguing it puts too much of the responsibility on the
unions by requiring them to provide much higher premiums to the PBGC.
“This document contains
no federal financial assistance whatsoever,” AFL-CIO officials said in a
statement. “Contrast this to the over $700 billion that the government provided
to the banks and Wall Street in 2008 and other corporate tax giveaways in
recent years. It is punitive in nature, imposing hefty new costs that even
healthy plans will be unable to survive.”
Democrats will have to
negotiate a bipartisan solution with the Senate, which is run by Republicans.
They'll also have to convince McConnell, of Kentucky, that any pension bailout
belongs in a new coronavirus relief measure.
"I’m not going to
allow this to be an opportunity for the Democrats to achieve unrelated policy
items that they would not otherwise be able to pass," McConnell said
Tuesday on the Hugh Hewitt show.
Report: States Face $1
Trillion in Unfunded Liabilities
States are facing more than $1 trillion in
unfunded future liabilities related to health and life insurance benefits for
their retired employees, a growing shortfall that amounts to about $3,100 for
every person in the United States, according to a new report by the American
Legislative Exchange Council (ALEC).
ALEC, which has come under attack by
left-wing advocacy groups in recent years, describes itself as “the nation’s
largest nonpartisan, voluntary membership organization of state legislators,
with more than 2,000 members across the nation.”
Its mission is “to discuss, develop, and
disseminate model public policies that expand free markets, promote economic
growth, limit the size of government, and preserve individual liberty.”
The new study, the latest in an annual series from ALEC’s Center for State Fiscal
Reform, comes after critics have complained for years that cash-strapped states
don’t adequately fund their retiree-related obligations, which has allowed
those sums to accumulate.
Its authors say that, “in the end,
government must be held accountable for its actions.” Without policy changes,
these liabilities could lead to future tax increases or force cuts to core
public services in states.
Making governments use “more prudent
actuarial assumptions and increasing transparency prevents state governments
from making impossible promises and allowing unfunded liabilities to
accumulate,” the report states.
These unfunded benefit programs for retired
public employees fall under a category that fiscal analysts call “other
post-employment benefits,” or OPEB. OPEB excludes public pension plans but
includes benefits to retired workers such as health insurance, life insurance,
supplemental Medicare insurance, and more. The study examined 132 OPEB plans
from fiscal 2013 to 2017, drawing on the most current Comprehensive Annual
Financial Reports (CAFRs) and Actuarial Valuation Reports.
“While a trillion dollars is a rounding
error in Washington, D.C., at the state level, it’s a huge threat to government
programs and taxpayers,” Jonathan Williams, chief economist and executive vice
president of policy at ALEC, told The Epoch Times in an interview.
Jonathan Williams of the American
Legislative Exchange Council. (Courtesy American Legislative Exchange Council)
“Governments, if they want to spend more
money on new programs, need to view OPEB liabilities as a threat, so I think
there is something for both parties to like from tackling these liabilities.”
Public pensions have generally been
prefunded at 80 percent in order to be considered healthy, “but now a lot of us
are thinking 100 percent is better.” OPEB items, by contrast, have generally
not been prefunded at all, he said.
“OPEB liabilities have flown under the
radar, but they have become more visible as a result of federal accounting rule
changes that force states to list them on their balance sheets,” Williams said.
Even so, they have been “overshadowed” by fiscal problems in Detroit and Puerto
Rico.
“Unfortunately, this new transparency has
left us with these very huge liabilities,” he said.
The states with the largest OPEB
liabilities are California ($166.6 billion), New Jersey ($130.4
billion), New York ($129.3 billion), Texas ($115.7 billion), and Illinois
($64.4 billion), according to the study. The states with the smallest OPEB
liabilities are Nebraska and South Dakota, which Williams said are tied at zero
because they don’t pay for retired employees’ health care, followed by Kansas
($285,000), Oklahoma ($9.1 million), and Utah ($210.9 million).
“There is a lot of doom and gloom in the
report,” but there are also a handful of states that are doing a good job
getting a handle on their OPEB liabilities, Williams said.
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