I hope everyone is enjoying the holiday today and not spending TOO much time on the internet (though spending Christmas on the internets is an interestingly weird experience). Thanks to all of you who read the site and listen to the show.
Peace and Blessings be with you all.
Now Playing: Episode 360
Biden and Palin square off while international intrigue heats up in Africa and the Middle East.
Links Mentioned: Africom … Frank Rich on Palin …
Wow — eliminate the PBGC? But what happens when companies go bankrupt? Having some sort of insurance seems like the sort of societal safety net everyone would agree on. Plus, don’t companies already contribute towards the PBGC? Couldn’t they just tighten up the regulations, make it more regulated? Or are you really ready to Norquist this thing (i.e., not only throw out the baby, but drown it in the bathtub water as well)?
It’s a hard call, I agree. But Lowenstein argues convincingly that the very existence of the PBGC creates a moral hazard, where companies figure “well, i pay into the PBGC anyway, so I can just underfund my pension because the safety net is in place anyway.”
But if everyone paying into the system thinks this way, there’s no way the insurance can actually work. It becomes a Ponzi scheme of sorts.
So I don’t think you can actually regulate this, because the moral hazard is woven into the actual payments that fund the PBGC in the first place.
And again, as I said, I’d rather choose option (3) and have more solvent pension funds.