Using Retirement Funds to Balance the Budget


Up here in New Hampshire, we have some experience with politicians trying to use public workers’ retirement funds to balance the budget.

Back when Craig Benson was Governor, he wanted to use money from the public employee retirement system to balance the state budget.

But up here in New Hampshire, the public didn’t let him get away with that.  In 1984, Granite State voters amended our state Constitution to protect our employees’ retirement benefits.  New Hampshire Constitution Article 36-a [Use of Retirement Funds] provides:

“The employer contributions certified as payable to the New Hampshire retirement system … shall be appropriated each fiscal year … All of the assets and proceeds, and income there from, of the New Hampshire retirement system … shall be held, invested or disbursed as in trust for the exclusive purpose of providing for such benefits and shall not be encumbered for, or diverted to, any other purposes.”

Down in Washington DC, the federal government hasn’t been quite so careful.  Down in DC, public employee retirement funds are regularly used to balance the budget.

In fact, when the federal government hit the debt ceiling in May 2011, public employee retirement contributions were used to keep the federal government going for more than two months (until Congressional Republicans finally agreed to increase the debt limit).

At last report,

  • more than $800 billion of the federal debt was owed to the federal employees’ retirement system;
  • more than $600 billion of the federal debt was owed to military employees’ retirement programs;
  • more than $45 billion of the federal debt was owed to the Postal Service Retiree Health Benefits Fund.

State and local employees also own a significant chunk of the federal debt.  At last report, pension systems for state and local government employees held almost $190 billion in Treasury securities.

Adding it all up, the nation owes about $1.6 trillion to the various public employees’ retirement systems.  (That’s direct debt – not including unfunded liabilities.)

That’s only slightly more than what tax cuts for the wealthiest 5% have cost the Treasury since 2001.

Should we really be surprised that right-wing Republicans are trying so hard to “reform” public pensions?

The business lobbying group ALEC (“American Legislative Exchange Council”) has led the crusade.  “Taxpayers are no longer willing to bear the increasing cost of these plans… They are demanding reforms that will bring these plans into line with pension and OPEB benefits offered in the private sector.”  (What an interesting comparison!  Federal law generally prohibits private sector pension plans from loaning money to the company that sponsors the plan.)

As Chairman of the House Budget Committee, Rep. Paul Ryan followed ALEC’s lead – almost word-for-word.

Up here in the Granite State, we believe that government should fulfill the promises it has made to its employees.  We even amended our state constitution to ensure that public employees’ retirement funds would be used only to pay retirement benefits.

It’s time for the country to stop using public employee retirement funds to pay the cost of extending tax cuts for the wealthy.

It’s time for Congressional Republicans to stop trying to weasel out of their obligations to federal employees.

It’s time to keep the country’s promises.  (Now that’s a conservative value.)

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Wait!  That $45 billion borrowed from the Postal Service Retiree Health Benefits Fund deserves a closer look.

The Post Office is losing money.  Most of that deficit is being caused by Congressionally-mandated payments to the Postal Service Retiree Health Benefits Fund.   That mandate dates back to the Postal Accountability and Enhancement Act of 2006.

Guess what else happened in 2006?  Just months before Congress decided to have the Postal Service pre-fund retiree benefits (and loan that money to the US Treasury), the country had hit the debt ceiling, and had borrowed from the federal employees’ retirement system to pay the bills.

(No, by the time 2006 rolled around, the Bush tax cuts hadn’t “jump started” the economy or started to erase the federal debt.  So Congress used federal employees’ retirement contributions as a Rainy Day Fund.)

Kind of convenient, isn’t it?  The country needs to borrow money, and suddenly there’s a new Fund to borrow from.

Only now, that Fund is drowning the Postal Service in debt.

Promises, promises…

A lot of promises were made, back when the Bush tax cuts were first enacted.

Back in 2001, the Heritage Foundation projected that:

  • “Under President Bush’s plan, an average family of four’s inflation-adjusted disposable income would increase by $4,544 in fiscal year (FY) 2011, and the national debt would effectively be paid off by FY 2010.”
  • “The plan would save the entire Social Security surplus and increase personal savings while the federal government accumulated $1.8 trillion in uncommitted funds from FY 2008 to FY 2011.” (“Uncommitted funds” is a fancy way of saying “surplus”.)

Did your family’s disposable income increase by $4,544 last year? (Wondering how the top 1% are doing? Browse through “How to Spend It” here.)

Has the national debt been paid off?
Is the Social Security surplus “safe”?
Has your family been able to increase your savings?

What happened to the $1.8 trillion federal surplus that was supposed to appear, after the tax cuts stimulated the economy and the “job creators” created jobs?

Lots of promises were made, back when Republican Leadership was forcing the Bush tax cuts through Congress. [Historical footnote: both the 2001 tax cuts and the 2003 tax cuts were passed in a way that made them exempt from Senate filibuster. In 2003, the Senate vote was 50-50 after Republican Senators John McCain, Lincoln Chafee and Olympia Snowe voted “nay”; and Vice President Dick Cheney cast the deciding vote to enact the bill.]

Those promises never panned out. But now, Republican leaders in Congress are acting as if high-income taxpayers are somehow entitled to the low tax rates they have been enjoying for the last decade

What’s up with this idea of “entitlement”?

Millions of American workers have paid into the Social Security system for decades, based on the promise that we would get Social Security benefits when we retired. Isn’t it reasonable for all of us workers to think we’re entitled to the benefits we contributed to? But now, Congressional Republicans are insisting on “adjustments to eligibility and benefits in the Social Security and Medicare programs.”

One man – Dick Cheney – cast the deciding vote to give the wealthy their tax cuts; but now Congressional Republicans think those tax cuts are somehow sacred. Just two days ago, Senate Minority Leader Mitch McConnell told a hometown newspaper that any “fiscal cliff” deal “must not raise taxes on wealthy.”

Sense of “entitlement”?

“Gifts” from the government?

The Bush tax cuts were supposed to “jump-start” our economy. They were supposed to “trickle down” and enrich working families. They were supposed to eliminate the country’s debt. They didn’t do any of that – but now Congressional Republicans want us to pay the price, through cuts to our Social Security and Medicare benefits.

Didn’t they get the memo? Romney-Ryan lost.