The House of Representatives is preparing to vote as early as tomorrow on a proposed $3 trillion stimulus package (aka HEROES ACT) that consists of 1,815 pages of what Senate Republicans are calling the Democrats ultimate “wish list”. Among the proposals is much needed financial support for struggling multiemployer pension plans. We’ve highlighted for years why addressing this situation is so critically important. However, I am concerned that this all-encompassing legislation will not see the light of day, as Senate Republicans are already proclaiming that this legislation is dead on arrival.
As you may recall, the House passed in July 2019, through bi-partisan support, H.R. 397 (the Butch Lewis Act). I would prefer that this legislation be moved by the Senate before tackling the Heroes Act, which will likely be stalled, watered down, or not acted on at all. The participants in critical and declining multiemployer plans have been fighting for government support for years, and any further delays will ultimately create a situation that sees more than 1 million Americans lose their promised, and EARNED, benefits.
The market correction that we are living through right now has further negatively impacted the funded status of these struggling plans and shortened the likely time frame for insolvency and their ultimate destiny at the PBGC, where promised benefits go to die.
A lot has been written about our ability as a nation to incur further increases in the “deficit”. I’d like to encourage anyone that hasn’t taken the time to study Modern Monetary Theory (MMT) to do so, as you will find that a public debt results in a private surplus. Are we spending too much at this time? Only time will tell, but we need to do what we can to save our economic future, which has been crushed with these lock-downs.
I am blessed to have as a friend and former colleague, Charles DuBois, who invited me to learn about MMT some 7 or 8 years ago. I continue to learn so much from Chuck. He shared with me the other day the following:
“If, and only if, a nation is operating below full usage of its real resources, then public sector deficits can be increased with no negative consequences – currently or in the future.” AND
“This proposition holds only for nations with their own free-floating currency, no debt denominated in a foreign currency and an operating central bank e.g. US, UK, Canada – but not the EU, etc.”
Furthermore, inflation is the constraint. We need to insure that we have the economic capacity to meet the heightened demand that the Federal deficit will produce. There are roughly 37 million unemployed Americans anxious to get back to work to help produce those needed goods.
Bottom line: We shouldn’t be focused on the “cost” of saving these critically important pension systems for fear that the deficit will impact our children’s and grandchildren’s ability to get the goods that they will demand. That myth carries no weight, as there is no crowding out impact.