The History of Pension Raiding During the Reagan Era

America: What Went Wrong, a chilling account by Donald L. Barlett & James B. Steele, was published in 1992. Their book was a thorough presentation revealing the graft and corruption endemic to greedy 'corporatists' then and it still stands as an even sterner, more penetrating warning for today.
Clips:

"While tens of millions of workers have fared poorly under the existing system, corporate managers and takeover artists have profited handsomely from it. They did so by raiding pension funds-a practice made possible by the way the federal government wrote the rule book.

"During the 1980's, nearly 2,000 businesses dipped into their pension funds and removed $21 billion. That is enough to provide pensions of $800 a month to a quarter-million retired workers. And their spouses. For the rest of their lives. The $21 billion does not count the billions that businesses diverted to other uses after substituting inferior pension plans for the plans that had been in place for decades.

"As noted, earlier, Congress wrote the rule book in such a way as to permit companies to terminate a pension plan, by for it workers unguaranteed annuities that will pay the accrued benefits, and keep what is left over. The losers in the transaction were the employees, who virtually always end up with smaller retirement checks than under the older plan. What's more, most companies that terminated their defined benefit plans-plans that promise a specified amount to a retiree-replaced them with defined contribution plan, meaning, in most cases, even lower retirement benefits in the future.

"Under a defined contribution plan, an employer agrees set aside a fixed amount of money for an employee's retirement. How much the employ eventually depends on how well that money is invested. In most cases, it is substantially less than a defined benefit plan would provide. Most significantly, neither the annuities nor the defined contribution plans carry a government guarantee.

"About 23,000 former and current employees at the Cannon Mills Company textile plants in North Carolina, South Carolina, and Georgia learned that lesson the hard way. For years, workers at Cannon Mills, headquartered in Kannapolis, North Carolina, were covered by a pension plan that was insured by the PBGC. That changed in 1982 after a corporate raider by the name of David H. Murdock appeared on the scene.

"Murdock now is chairman and chief executive officer of the Dole Food Company, whose products include Dole pineapples and bananas, and he is a member of the Forbes 400, the Who's Who of the nation's rich. Murdock, with a personal fortune that Forbes estimates at $1.3 billion, is involved in a number of businesses and is a major fund-raiser for the Republican Party. In February 1988, he hosted a $10,000 per person reception at his sixty-four room Bel Air, California, home once owned by the late hotel baron Conrad Hilton. There, donors mingled and posed for photographs with his friend, Ronald Reagan."

Barlett & Steele are still very relevant and on point as this quote labeled Rigging the Game, makes clear:

"Worried that you are falling behind, not living as well as you once did?
"Or expected to?
"That you are going to have to work extra hours, or take a second job, just to stay even with your bills?
"That the company you have worked for all these years may dump you for a younger person?
"Or that the pension you have been promised may not be there when you retire?
"Worried, if you are on the bottom rung of the economic ladder, that you will never see a middle-class lifestyle?
"Or, if you are a single parent or part of a young working family, that you will never be able to save enough to buy a home?
"That you are paying more than your fair share of taxes?
"Worried that the people who represent you in Congress are taking care of themselves and their friends at your expense?
"You are right. Keep worrying.

"For those people in Washington who write the complex tangle of rules by which the economy operates have, over the last twenty years, RIGGED THE GAME-BY DESIGN AND DEFAULT-TO FAVOR THE PRIVILEGED, THE POWERFUL AND THE INFLUENTIAL. AT THE EXPENSE OF EVERYONE ELSE.

"Seizing on that opportunity, an army of business buccaneers began buying, selling and trading companies the way most Americans buy, sell and trade knickknacks at a yard sale. They borrowed money to destroy, not to build. THEY CONSTRUCTED FINANCIAL HOUSES OF CARDS, THEN VANISHED BEFORE THEY COLLAPSED.

"Caught between the lawmakers in Washington and the dealmakers on Wall Street have been millions of American workers forced to move from jobs that once paid $15 an hour into jobs that now pay $7. IF, THAT IS, THEY AREN'T ALREADY THE VICTIMS OF MASS LAYOFFS, PRODUCTION HALTS, SHUTTERED FACTORIES AND OWNERS WHO ENRICH THEMSELVES BY DOING THAT DAMAGE AND THEN WALKING AWAY.

"As a result, the already rich are richer than ever; there has been an explosion in overnight new rich; life for the working class is deteriorating, and those at the bottom are trapped. FOR THE FIRST TIME IN THIS CENTURY, MEMBERS OF A GENERATION ENTERING ADULTHOOD WILL FIND IT IMPOSSIBLE TO ACHIEVE A BETTER LIFESTYLE THAN THEIR PARENTS. MOST WILL BE UNABLE EVEN TO MATCH THEIR PARENTS' MIDDLE-CLASS STATUS.

"Indeed, the growth of the middle class-one of the underpinnings of democracy in this country-has been reversed. BY GOVERNMENT ACTION."

[emphasis Added in BOLD]


Original Part 1 and Part 2 of this Posting.