3 min read

Miss a child-support payment, and you can lose your driver’s license. Miss several, and you can end up in jail. Fail to meet obligations of more than $3 billion and, no worries, U.S. taxpayers will pick up the bill.

It’s more difficult for a deadbeat dad to escape his obligation to pay child support than it is for a major corporation to pass its pension obligations off on taxpayers to the tune of $3.2 billion over five years.

Now is the time to call these companies exactly what they are: deadbeats, corporate welfare queens.

On Tuesday, U.S. Bankruptcy Court released United Airlines from the obligations of funding four employee pension plans, the largest pension default in U.S. history. The federally funded Pension Benefit Guaranty Corp. is now responsible for the pensions, which cover 134,000 people.

US Airways dropped responsibility for its pensions in January, saddling taxpayers with another $3 billion in liabilities. Delta Airlines, seeing the court-sanctioned escape route, is considering doing the same thing.

The airlines are joining a substantial list of large corporations that have slinked away from their pension costs, including Bethlehem Steel, Pan American Airlines and TWA. Can Ford and General Motors, two American manufacturing giants whose stocks were downgraded to junk status, be far behind?

For years, American corporations have bought labor peace by promising generous health and pension benefits to workers, who often accepted the IOUs for security in retirement over higher wages. Those same workers now face harsh cuts in their benefits. Some US Airways retirees have watched helplessly as their pension benefits have been cut by as much as 50 percent.

Judge Eugene Wedoff, according to The Associated Press, called the move unavoidable. “The least bad of the available choices here,” the judge said, “has got to be the one that keeps an airline functioning, that keeps employees being paid.”

At this point and from the viewpoint of the court, perhaps Wedoff is right, but there are systematic problems in the country’s pension system that should be addressed. According to a 2004 analysis by the Cato Institute, a libertarian think tank in Washington, D.C., the PBGC had a deficit of $11.2 billion at the end of 2003 and U.S. companies have unfunded pension obligations of more than $350 billion. Congress has made the problem worse by not increasing the premiums that companies pay for PBGC protection – set at $19 per employee per year since 1991 – and by reducing the contributions companies must make to defined-benefit pension plans.

Congress has allowed corporations to cheat on their payments, to build up huge unfunded obligations and then pass the buck to taxpayers and retired workers. It’s corporate welfare that punishes loyal workers and passes risk from corporate investments onto the federal government.

United Airlines might survive now that it has been relieved of its pension obligations, and retired workers surely would prefer reduced benefits over no benefits. But it’s an artificial choice that could have been avoided if Congress had done more to protect pensions to begin with.

Unfortunately, just as private pension plans are evaporating, President Bush is pushing the same outcome for Social Security. The uncertainty created by massive pension defaults illustrates the importance of being able to count on Social Security.

Comments are no longer available on this story