United Airlines — as did US Airways before it — hopes to take off now that it unloaded its excess baggage onto the Pension Benefit Guaranty Corporation. But it could be taxpayers left holding the bag.
The skies might be a little friendlier for United, which is trying to emerge from Chapter 11 bankruptcy. A judge allowed it to jettison $9.8 billion of pension liability onto the PBGC in exchange for up to $1.5 billion in notes and convertible stock in United’s parent company.
The PBGC insures corporate pensions, although not necessarily for face value. Companies pay the premiums. But the agency is far overextended. PBGC obligations currently exceed its assets by $23.3 billion.
Companies in other industries also are on the verge of begging for similar billion-dollar bailouts. The PBGC estimates it soon could be on the hook for an additional $96 billion if other struggling concerns such as American car and auto parts companies also do a fiscal crash and burn.
If corporations continue taking the easy way out by making pension promises they cannot hope to keep, only to dump them onto the PBGC, this nation’s economy could be on a nonstop flight to economic ruin.
The short-term fix is to raise the premiums corporations pay for PBGC rescues. The long-term fix, of course, is for corporations and labor to negotiate responsible contracts.