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Biden Celebrates $90 Billion Bailout of Private Union Pension Plans

President Joe Biden jetted off to Cleveland on Wednesday evening to announce the official launch of a $90 billion bailout of union retirement plans—one that's completely paid for with federal borrowing.

The bailout was approved last year as part of the American Rescue Plan, the $1.9 trillion emergency spending bill that was ostensibly meant to combat COVID-19 but included an impressive array of spending that had nothing to do with public health. The bailout will direct funds to more than 200 nearly insolvent multiemployer pension plans, which are established jointly by unions and the private companies that contract with them through collective bargaining agreements.

"With today's actions, millions of workers will have the dignified retirement they earned and they deserve," Biden told the cheering crowd at a Cleveland high school.

Millions of union workers, that is. If you're not part of that select club, there's no bailout coming your way—even as a sagging economy eats into private retirement savings, inflation makes every saved dollar worth less, and Social Security looms on the brink of insolvency.

Oh, and you'll have to pay back (with interest!) the money borrowed to make this bailout (and the rest of the American Rescue Plan) possible. Sounds like a great deal, right?

As I detailed for Reason shortly after the American Rescue Plan passed last year, the multiemployer pension plan bailout is arguably the least defensible provision in a bill that was full of indefensible spending. The borrowing and spending is bad enough, but lawmakers also jettisoned a Republican-backed effort that would have at least attached some strings to the funds in the form of additional federal oversight of the bailed-out pensions.

What happened to the private multiemployer pension systems will sound familiar to anyone who has followed the slow collapse of public sector pension plans in many states. A 2018 study by the Government Accountability Office found that the Central States Pension Fund, one of the largest and most deeply indebted private multiemployer funds, would have 91 percent of the assets necessary to cover future costs if it had achieved its target annual financial return of 7.4 percent every year since 2000. Instead, the fund has earned an average of less than 5 percent annually and was on pace to run out of money by 2025. (It's also worth noting that there are more than 1,400 multiemployer pension plans out there; most are well-managed and not at risk of insolvency.)

"These pension plans failed to protect workers and retirees, and their trustees refused to make the changes necessary to make good on their promises" said Reps. Virginia Foxx (R–N.C.) and Rick Allen (R–Ga.), respectively the top Republicans on the Education and Labor Committee and the Health, Employment, Labor, and Pensions Subcommittee, in a joint statement on Wednesday. The American Rescue Plan, they added, "creates perverse incentives for further mismanagement and underfunding and leaves the taxpayer holding the bag.

For the roughly 3 million workers enrolled in the sinking multiemployer plans, the situation may well have been dire. But it wasn't an emergency. Congress had been bickering for years over how to deal with this problem—until the American Rescue Plan offered an opportunity for a party-line vote to approve a bailout for a constituency that reliably votes Democratic.

In that regard, this is something of a no-brainer. Biden delivered a major win to his labor union allies, put the cost on the taxpayers' tab, and took a victory lap for doing it.

"I promised you I would be the most pro-labor, pro-union, pro-worker President in our history," Biden said Wednesday in Cleveland. "I see you, I hear you, and I'll always have your back."

And everyone else gets to pay for it.