The Coming Bailout of State Pension Plans

Published in The Wall Street Journal.

In “Prelude to a State Pension Bailout” (op-ed, March 1), Andrew C. Biggs is doubtless right that the coming bailout of hopelessly insolvent multiemployer pension plans will lead to further bailouts of other broke pension plans. These will be justified with the argument that the pensions were “promised”—but by whom? They weren’t promised by the taxpayers, only by the defaulting plans and a government insurance program that is itself insolvent. How very clever it was to set up the Pension Benefit Guaranty Corporation and promise it would never call on the taxpayers: This very same illusion created Fannie Mae and Freddie Mac and their subsequent bailout. The multiemployer pension plans are deeply in need of structural reform, and so are many public-employee pension plans, and so is the PBGC. If indeed, as Mr. Biggs argues, the political urge to bail them out is irresistible, the opportunity for reform thereby created should not be missed. The unquestionable governing principle must be that bailouts require reform: No reform, no bailout.