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[Commentary] © 2003 Philip Hyde, The Timesizing Wire™, Box 622 Cambridge MA 02143 USA (617) 623-8080

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Eroding Retirement, Jan-Feb/2003

2/26/2003   eroding retirement -

• [a speck of good news on this page for a change -]
  Bush's plan for pensions is now given low priority, by Edmund Andrews, NYT, C1.
  WASHINGTON...- Less than a month after pResident Bush proposed a radical overhaul and expansion of individual retirement and savings accounts [ie: proposed death-by-privatization of Social Security], the White House has abandoned the idea as a legislative priority.
  [Another Bush administration reversal - one radical cockamamie idea after another that this shmuck has to reverse.]
  ...In large part, the backpedaling reflects hostile reactions from Republicans who were not consulted in advance and were taken aback by the sweep of the Bush administration's proposals..\.. "For us, the jobs and growth package is the No. 1 priority," said Rob Nichols, a spokesman for..\..Treasury Secy John Snow [who] has studiously avoided [mentioning] the pension and savings proposals [lately]..\..
  [which would be nice if his "jobs and growth package" had the remotest chance of helping the economy - but since it ignores and worsens, as do most mainstream economists, the fundamental problem = the unspendable over-concentration of spending power in a kind of 'black hole' at the top of the nation's income brackets, it too will be reversed - or just fade away.]
  Mr. Bush's $674B "economic growth package"...is focused on eliminating taxes on most dividends and accelerating the taxcuts [for the wealth] that Congress approved in 2001....
  [This is the worst administration since Woodrow Wilson invented the League of Nations and then with black&white thinking kept the U.S. from joining it, thus guaranteeing another round of "the war to end all wars." "It left the United States discredited, isolated, shorn of its prestige, and branded as a hypocrite and a renegade." Thomas Bailey, "Woodrow Wilson and the Great Betrayal" (1945), p.285. In the midst of it (1919), Wilson collapsed and practically disappeared from public view for a year.]

1. Fidelity Investments to give $217 million to top retirees, by John Hechinger, WSJ, C1.
   ...The nation's largest mutual-fund company..\..despite its struggles in a...stock-market decline, will pay out $217m to "a number of senior executives" who retired in January.... A confidential offering document circulated recently to institutional investors...doesn't say...how many..\.. Boston-based Fidelity...also known as FMR Corp. and controlled by the Johnson family and Chairman Edward Johnson III, closely guards its compensation practices..\..
   Several hundred top executives and money managers [do] have the chance to buy stock in Fidelity during their careers, which the company then buys back when they leave the firm. ...The departing executives...are expected to receive their windfall in cash this year, except for about $75m in promissory notes and other debt..\.. The big payout demonstrates the often-rich rewards that can come with long service time at closely held Fidelity.
   ...Some of the execs who retired in January included Vice Chairman James Curvey, a former president and COO who retired after 20 years and remains a director and confidant of the Johnsons;
   • Ron Rhoda, pres. of the company's life insurance unit;
   • Jim Messenger, pres. of the brokerage technology; and
   • Fred Henning, head of corporate services....
   [Hmm, if it's just these 3, they average 217/3= $72 million apiece, far beyond what anyone can spend even if they live to be 100.]

2. [Then there's the rest of us who have to rely on Medicaid -]
   Getting poor on purpose - States crack down on families that shed assets to get free nursing-home care..., by Michelle Higgins, WSJ, D1.
   States and counties have begun to crack down on people who purposely make themselves poor so the government will pay for their nursing home care.
   For years, thouands of middle-class and even affluent retirees - terrified that long-term healthcare costs would wipe out their savings - have transferred their assets to relatives in order to qualify for Medicaid, the govt's health plan for the poor. Their goal is to make themselves poor by Medicaid's definition, generally meaning they have no more than $2,000 in assets, excluding their house and their car.
   The upshot is that families, in some cases with net worths of $millions, are going through contortions to spend or give away all their money. Some simply write giant checks to their children, while others splurge on their house. Technically, a person can have a $multimillion mansion and still be considered for Medicaid - though many states will try to recoup some of the money after s/he dies....

• US Airways Group Inc. - Pilots union objects in court to plan to terminate pension, Dow Jones via WSJ, B4.
  ...to the carrier's proposed termination of the group's defined-benefit pension plan a day after the carrier failed to make $19.7m in payments due on aircraft-backed public debt....

• Golden years? - For GM retirees, it feels less like 'Generous Motors' - Pensioners still have it good, but rising benefit costs spark fears of cutbacks - Blue and white collars chafe, by Zaslow & White, WSJ, front page.
  PORT ST. LUCIE, Fla...- A dozen General Motors Corp. [GM] retirees gathered for lunch...here recently....
  • The former white-collar, salaried workers groused that GM makes them pay more for their benefits while catering to the demands of the powerful United Auto Workers union. "When they worked overtime, they got time-and-a-half," said Ralph Gumbinger...a former salaried employee in what is not GM's truck division. "We'd work until midnight and not get an extra penny. Now their benefits are far superior to ours."
    [The more fool you.]
  • The blue-collar retirees shot back that they didn't feel sorry for their white-collar counterparts. "When we were making $500 a week, they were making $1,500," said Norman Allard...an hourly retiree who used to load cars on freight trains at a plant in Framingham MA.
  GM's half a million retirees are in good shape compared with those from companies in other industries who are struggling with slashed pensions or plummeting 401k's....

• Shifting the burden of funding pensions - Onus on individual employees under White House proposals, by Mary Walsh, NYT, C1.
  [So we're going from secure, government-guaranteed old-age pensions like we instituted in the Great Depression to stop old people from starving, back to individual initiative, which for the poor, is impossible? Two responses -
  1. This takes us back to the brutality of the 1920s and all previous years.
  2. If this is up to individual employees, why do we need government involvement at all? Let government get completely OUT of it, and stand on the sidelines enjoying the spectacle of starving homeless elderly Americans - and quit using their involvement, as it is obviously intended, for a subsidy to the financial industry = yet another case of makework to which governments that block sharework are sooo prone.
  [Has the AARP been sleeping through all this? Where is their voice, their clout? They appear to have been pansy-fied as seriously as the Dems.]
  The savings accounts proposed by the Bush administration are meant to produce fundamental changes in the way Americans think about saving for retirement....
  ["Fundamental changes" by a "conservative" administration??? "Meant to change the way Americans think" - what is this mind control???]
  and to shift the primary responsibility from the business community to the individual....
  [Not true. The business community and the individual are superficial in this shift. The real shift in costs is from those who have far-in-excess money, the wealthy, to the rest of the population, who do not have way more spending power than they can spend. The real shift is from the hugely concentrated 'black hole' of relatively idle spending power in the top income brackets to the other brackets. (Why aren't more economists talking about this???) This shift is merely another great Dismantling of a Money Centrifuge by the short-sighted, insulated and increasingly isolated wealthy, and it will generally further deepen recession and hasten America's slide into the Third World. It doesn't matter how much money the "richest country in the world" has - if 1% of the population has 99% of the money, that country is still a dirt-poor and unstable Third-World nation, where life is cheap and conditions are sordid for most citizens.]

• GE and Coca-Cola will reduce executive retirement benefits, by Theo Francis & Kathryn Kranhold, WSJ, B5.
  ...under pressure from shareholders and the AFL-CIO....
  ['ey, at least it's 'appenin' to The Quality, fer a change.]
  GE, Fairfield, Conn., said it will end a deferred-compensation plan paying top executive 12% in annual interest or more on money they set aside from their paychecks. Coca-Cola, Atlanta, said it will phase out an executive pension plan that is more generous than the one available to most workers. The AFL-CIO had submitted a shareholder proposal to each company criticizing the plans as overly generous, and asking holders to cut back benefits to newly enrolled executives in the plans. The labor federation also filed similar proposals with 5 other companies. "The size of these benefits are [sic] galling to shareholders and to frontline employees," said William Patterson, the labor group's director of corporate investment. "The fact that it's surreptitious compensation only makes the size ... more egregious."...

1. 2/08 Bethlehem Steel seeks to end retirees' benefits, Reuters via NYT, B4.
   ...Bethlehem...which has agreed to be bought by the International Steel Group, said yesterday that it wanted to terminate health and life insurance benefits for substantially all of its retired workers and their dependents...on March 31 for the 95,000 people "because we cannot pay the obligations."
   [In these circumstances, the personal assets of all the executives involved, down to the average net worth of all the victims, should be used to pay the obligations.]
   Bankruptcy court approval is needed to eliminate the benefits....
   [Imagine the recession-clinching impact this will have.]

2. 2/10 S&P warns firms in Europe over pension funding, by Silvia Ascarelli, WSJ, A12.
   LONDON - In the latest sign of widening concerns over company pension deficits, Standard & Poor's warned that it might downgrade a dozen European companies because of huge unfunded liabilities.
   [So the global, CEO-sloppifying labor glut has degraded Euro companies as well as American.]
   Until now, most of the fears had focused on US and UK companies, but S&P's list includes 7 blue-chip continental firms. For instance, a downgrade of German steel group, ThyssenKrupp could push the company into junk-bond territory....
   The announcement also marks a fundamental shift in S&P's attitude toward long-term liabilities for pensions and other retirement-related costs, such as healthcare costs for US retirees and "end-of-career" bonus payments in France. For the first time, S&P is making good on its threat to treat those liabilities as if they were debts that had to be paid in the future....
   [rather than what? ignorable externalities? or God forbid, assets? In any event, it's yet another blow that makes you wish you had been born 10-20 years earlier so you could hit the retirement window while the global economy still roughly worked - before the world's wealthiest grabbed all the spending power they could - despite having insufficient time to actually spend any substantial fraction thereof - and basically thereby starving the goose that had been laying the golden eggs.]

1. Where need, finances clash - Income keeps many from assisted living - Elderly priced out of assisted living, by Alice Dembner, Boston Globe, front page.
   Richard Fairchild longs to move but remains in a nursing home.... [photo caption]
   'I came back from the dead. Now, I just want a chance to live.... Assisted living would be ideal for me. Everything's there. They have a nurse available. They remind you to take your pills.' ...

2. Bush retirement proposals alter landscape - 'Tectonic shift' gives workers new tax-free investment plans, but some options may disappear, by Aaron Lucchetti, WSJ, C1.
   [The Wall Street Journal is still giving the Bushwhacker the benefit of the doubt, but then there's the New York Times -]
   New plans to aid savings may harm financial firms - Small pension managers and insurers at risk - Small businesses may end their retirement programs, by Joseph Treaster, NYT, C3.
   [And his own fellow Republicans are not quite "goin' along to git along" -]
   Republicans tell Bush savings plan is doomed - White House seen signaling willingness to back off initiative, by Jim VandeHei, Boston Globe, E1.
   [Bush does yet another reversal of a stupid idea.]

• [just received current issue of AARP organ -]
  See your pension shrivel - Treasury's proposed rule could pave way for controversial plans - 'Bad news for older workers' - "[Just as] the worker comes close to getting the golden ring, the rules of the game are changed", by Trish Nicholson, AARP Bulletin, Feb 2003, p.8.
  [Do we need to point out that impoverishing millions of America's senior citizens is going to create further pressure toward recession? Here's a second article, same issue -]
  As we see it - Punctured pensions, by Exec. Dir. William Novelli of AARP, AARP Bulletin, p. 27.

• Bush's retirement-savings plan, pointer summary (to A8), WSJ, front page.
  ...would strip away many rules designed to keep employer plans from favoring highly paid workers.
  [and the target article is called -]
  Retirement-savings proposal has small but significant changes, by Theo Francis & Ellen Schulz, WSJ, A8.
  [The Bush junta's usual M.O. - small but signficant attacks on America, in every direction they can think of. George Bush Jr., the King John of America. It's only when a really bad ruler showed up in history that people realized they couldn't leave good government to chance and set up layer after layer of design guarantees. Of course, there's always a sincere(?) fool(!) like Bush who comes along and screws up sooo many things so fast that the nation loses its balance and goes into a stumble that lasts for centuries. In King John's case, England was lucky - he screwed up so much and ticked off so many powerful people so fast that the barons banded together at Runnymede and forced the S.O.B. to sign the Magna Carta (1215).]
  ...By eliminating most of the so-called nondiscrimination tests and modifying others, employers would keep the tax advantages of offering a retirement plan to their workers, while spending less on them....
  [Thus damaging the consumer base further and conducing a little more strongly to recession, the Bush assumption being, presumably, that the consumer base is a gigantic infinite ocean-like resource that cannot be damaged no matter what punishment he or anybody else inflicts on it.]

• U.S. pension insurer posts gap of $3.64 billion, after surplus, by Jeff Bater, WSJ, B8.
  ...a $7.7B surplus the year before....
  [or the Times version -]
  Pension insurer [Pension Benefit Guaranty Corp.] cites $3.64 billion deficit and suspects worse, by Mary Walsh, NYT, C3.
  ...said it was studying whether the way businesses now calculate pension values was masking even deeper weaknesses in the system....

1. Bush team weighs big shift in IRA tax policy, by John McKinnon, WSJ, D3.
   [Ohno-o-o Mr. Bill, er, Georgie!]
   [Followup -]
   Bush to propose expansion of IRA-like investments, by Treaster & Walsh, 1/31/2003 NYT, front page.

2. US Airways seeks reworking of pilots' pension plan, by Mary Walsh, NYT, C1.
   US Airways is planning to ask the government to take over its pension plan for pilots, a step that would sharply reduce their benefits...
   [Hooboy, that government agency is already grossly overburdened - see 1/25/2003 below. So here's the supposedly reassuring "pledge" -]
   but the airline is also pledging to give pilots a rich new retirement plan after reorganizing to make up for the loss.
   [Ri-i-ight.]
   The airline has told the pilots that it will take steps either today or tomorrow to begin terminating the underfinanced plan, a step intended to help the airline emerge from bankruptcy....
   [Sounds like the Bushster on war - it would go "the administration has told Americans that despite its underfinanced warplan it will take steps either today or tomorrow or the next day to begin to start to commence to initiate terminating the grace period for Saddam, a step intended to help the administration emerge from its bankrupt ideas for the economy. Well, maybe we shouldn't get too worked up on behalf of airline pilots. The inside subhead on this story (C7) says -]
   A pilot can easily build up a pension of $100,000 a year.
   [Poor babies! No wonder the airlines are bankrupt.]

3. [and here's another doozy, this one from the Boston Globe -]
   Broken promises - Retired partners of Hill & Barlow to lose pensions, by Scott Nelson, BG, C1.
   John Saltonstall Jr., 86, for many years a major player in Boston politics, is fighting the elimination of his retirement benefits by Hill & Barlow, the law firm for which he worked from 1945 to 1979.... [photo caption]
   [Hey, now that The Great Trashing of American Pensions is reaching the brahmins, maybe we'll see it stopped - as when civil rights marchers finally got some respect and some action once the children of US senators started marching with them - and getting threatened by the KKK & co. just like the plebs.]
   ...Hill & Barlow LLP, the law firm for which he worked...has informed Saltonstall that his company pension runs out this week. Laid low by economic recession and its own lack of direction, Hill & Barlow capped the most volatile 6 months in Boston legal history by voting on Dec. 7 to dissolve itself [see 12/10/2002]. Now the firm's managing partner, Charles Dougherty [must be a real putz], finds himself facing down a long list of creditors while telling a dozen of the firm's former partners - including Saltonstall - that there's nothing left for them....
   [Doncha just LUVVIT when lawyers shaft lawyers?!]

• Decline in pension plans' value leads to $508m charge, WSJ, B5.
  Georgia-Pacific Corp., Atlanta [also] will contribute an additional $105m in cash to make up for declines in the value of the company's pension plans. In an SEC filing, the forest-products company said that...the cash will be contributed in fiscal 2003. The company said the market value of the assets in its pension plans, had declined because of stock-market declines in 2002....
  [Hmm, a $508m charge but only a $105m replenishment.]

• $8 billion surplus withers at agency insuring pensions - Large deficit is expected - Payments to retirees continue, but corporate bankruptcies put benefits at risk, by Mary Walsh, NYT, front page.
  ...The Pension Benefit Guaranty Corp..\..the federal agency that insures the pensions of some 44m Americans, has been pounded by a succession of big corporate bankruptcies and has burned through its entire $8B surplus in one year.... Though it can continue to make its current payments, the agency is expected to disclose a deficit of $1-2 billion at the end of this month.
  [Phew, $10B gone in one year thanks to the whole downdraft of the economy due to the uprush of spending power into the very top income brackets - the "Great Leak Upwards" - due to CEOs' suicidal short-term preference for downsizing instead of timesizing in response to technological worksavings. Well, this downdraft of pension funds will accelerate the downdraft hereafter and push the world toward utopia (modernized economies with worksharing and beyond) or oblivion (Iraq and N. Korea form a real axis and decide to take as many of us down with them as they can) - hats off to Bucky Fuller who wrote a book called "Utopia or Oblivion" in 1969.]
  Its soundness is likely to deteriorate further in the coming months, as more bankrupt companies find themselves unable to fulfill their promises to tens of thousands of present and future retirees. US Airways, United Airlines and Kmart are among the companies struggling to emerge from bankruptcy protection under the weight of large underfunded pension plans.... Businesses support the agency's operations by paying premiums for each person covered by the insurance, and they are sure to resist any [premium] increase....

• As steel industry consolidates, workers' benefits begin to shift, by Robert Matthews, WSJ, A3.
  Back-to-back takeover bids in the U.S. steel industry last week signaled a quickening pace toward consolidation of the sector and foreshadowed what could be an important shift in how an ailing industry doles out benefits to its workforce and retirees.
  Some 30 U.S. steel companies have filed for Chapter 11...in the past 5 years, weighed down mainly by huge health and pension obligations.
  [And top-executive compensation packages, regardless of performance?]
  As the companies' financial circumstances have deteriorated further, the Pension Benefit Guaranty Corp., a quasi-public insurance agency, has begun taking over these retirement liabilities....
  [More government bailouts that equate to a consumption-shrinking, recession-inducing transfer of wealth from taxpayers to top executives.]
  The steel industry's circumstances could have implications for other sectors that are struggling with how to pay health and pension benefits agreed to in better economic times.... "The airlines are going through now what the steel industry was going through a year ago," says Dan Meckstroth, an economist with the Manufacturers Alliance, a trade association based in Arlington, Va.... [And] General Motors Corp. says its pension fund is currently $19B underfunded, a measure that reflects the difference between the fund's current assets and its expected future liabilities....

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