- Biden’s stimulus bill includes $86 billion in pension funding, which Democrats say is necessary.
- Republicans disagree, saying pension funding has nothing to do with pandemic relief.
- Pension plans were at risk prior to COVID-19, and the aid will help around 10 million Americans.
- Visit the Business section of Insider for more stories.
President Joe Biden’s $1.9 trillion stimulus plan passed the House on Wednesday, setting it up to become law this week, but where the money in the bill is going remains controversial. One of the controversial recipients: pension plans.
Democrats included $86 billion in direct aid for pension funds in the stimulus bill, which will help the 10.7 million active and retired workers who fall under multiemployer pension plans, and lawmakers say doing so is a necessary component of pandemic relief.
“Wall Street’s reckless bets that crashed our economy in 2008 hit union pensions like a knife in the ribs,” Sen. Elizabeth Warren of Massachusetts said on Twitter on Tuesday. “Big banks got a bailout, but workers and retirees got hung out to dry – and COVID made it all worse. Democrats made this right for America’s workers.”
But Republican lawmakers – who have consistently opposed the size of the bill – argue that pension funding has nothing to do with pandemic relief.
It’s true that years before the pandemic, millions of pension plans were at risk.
When the US economy fell into recession in 2008, those who invested their savings in target-date funds experienced significant losses due to losses in the market. The National Public Pension Coalition chalked the loss up to “Wall Street greed,” given that many Americans invested in hedge funds and private equity as part of their pensions plans. Later, in 2018, lawmakers held a hearing on the solvency of multiemployer pension plans, when the Multiemployer Program had a deficit of $65 billion in 2017 and would fail a few years later without more funding.
Here’s how the coronavirus did – and didn’t – contribute to pension plans’ shortage.
The argument against pension funding
The $1.9 trillion price tag on the stimulus bill is a cap, and if lawmakers want more funding within the bill for a specific issue, then funding must be taken away from something else. Republicans argue that funding for pensions is taking money away from areas that Americans need more, like unemployment benefits.
Insider spoke to Marc Goldwein, head of policy at the Committee for a Responsible Budget, on February 16, and he said that although a solution is needed to salvage multiemployer pensions, pension funding has nothing to do with pandemic relief.
“That multiemployer pension bailout in the bill cost about $56 billion, which would be enough to extend unemployment benefits to the end of September, and possibly a bit further,” Goldwein told Insider.
While Senate Democrats did end up extending unemployment benefits through September, it came at the cost of decreasing the benefits from $400 to $300 each week.
Sen. Chuck Grassley of Iowa introduced a proposal separate from the stimulus bill to help failing pension plans on March 5, and he said in a statement that without his plan, taxpayers will “be on the hook for another bailout down the road.”
“Not only is their [the Democrats’] plan totally unrelated to the pandemic, but it also does nothing to address the root cause of the problem,” Grassley said.
And Republican Sen. Bill Hagerty of Tennessee said on March 3: “Just to show you how bad this bill is, there’s more money in this to bail out union pension funds than all the money combined for vaccine distribution and testing.”
-Senator Bill Hagerty (@SenatorHagerty) March 4, 2021
The argument for pension funding
Democrat Sen. Sherrod Brown of Ohio said in a statement on March 6 that of the 10 million people under multiemployer pension plans, 1.5 million are in plans that are quickly running out of money.
“Many of these troubled plans cover workers who are on the front lines of the COVID-19 public health crisis, such as trucking, food processing, grocery store workers, and others,” Brown said. “Even before the pandemic, workers, businesses, and retirees faced a crisis and were in dire need of our help.”
Although Republicans say that funding for pension plans can be done in a separate bill, Brown and Democrats argued it is relevant to pandemic aid given that workers under those plans have been on the front lines during the pandemic.
And Rep. Bobby Scott of Virginia, who pushed for the measure on the House side, told HuffPost on Sunday that failure to provide pension aid now could be costlier down the road if retirees need government aid, like food stamps, to get by.
The bill is now headed to Biden’s desk with no Republican support, and Republican lawmakers have said that if Biden had included them more in the process, the outcome might have been different.
For example, after meeting with 10 Republican senators on February 1 to discuss a smaller stimulus bill, those senators said the lack of outreach from Biden afterward played into their inabilities to support the package.
Republican Sen. John Thune of South Dakota told reporters on February 23 that the lack of consultation “makes it hard for any of our members, even those that might be inclined to do so, to vote for it. To vote for anything.”
With passing his stimulus plan being a priority, Biden has not yet said how he will choose to approach future spending bills, but should the next bill be on infrastructure, the president expressed willingness to work with both parties.
“There are not many Republican or Democratic roads and bridges,” Biden told reporters on February 11. “I really, honest to God, never have thought of … infrastructure as being a partisan issue,” he added.