Senate Parliamentarian Ruling Keeps Pension Bailout Alive

US Senate Parliamentarian Elizabeth MacDonough, who just last week ruled that a minimum wage hike to $15 could not be included in the $1.9 trillion COVID-19 relief bill, has given her blessing to allow multiemployer pension reform to be included in the package.

As the Senate’s parliamentarian, also referred to as the Senate referee, the unelected MacDonough is the nonpartisan interpreter of the Senate’s rules. Her ruling means the bill can move forward in the Senate’s reconciliation process, which requires a simple majority vote.

Had she ruled against allowing pension reform to be included, the bill would have required a 60-vote majority to pass, and, with the Senate split 50-50 between Democrats and Republicans, there is little chance it would pass, and the reform would have to be stripped from the bill.

But because the bill can proceed with a simple majority vote, it is expected to pass as Democrats have a tie-breaking vote in Vice President Kamala Harris.

The Butch Lewis Emergency Pension Plan Relief Act of 2021 (EPPRA), which is included in the bill, would create a special financial assistance program under which the Pension Benefit Guaranty Corporation (PBGC) could make cash payments to financially troubled multiemployer pension plans so they can continue paying retirees’ benefits. The money would be provided to the PBGC through a general Treasury transfer.

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Multiemployer pension plans eligible for the program would include plans in critical and declining status, and plans with significant underfunding that have more retirees than active workers in any plan year beginning in 2020 through 2022. The plans would have to apply for the special financial assistance, and, if approved, the payment made by the PBGC would be in the form of a single, lump sum.

The amount of financial assistance would be equal to the amount required for the plan to pay all benefits due during the period beginning on the date of enactment and ending on the last day of the plan year ending in 2051. Plans would also be required to invest the amounts in investment-grade bonds or other investments as permitted by PBGC.

The House of Representatives passed the COVID-19 relief bill, known as the American Rescue Plan, on Feb. 27, and it is now headed to the Senate for a vote. Democratic congressional leaders are hoping to get the bill to President Joe Biden’s desk for him to sign into law by March 14.

“I’m pleased our pension protection package will remain in the critical relief bill,” Sen. Ron Wyden, D-Oregon, chairman of the US Senate Finance Committee, said in a statement.

“This economic crisis has hit already struggling pension plans like a wrecking ball, and the retirement security of millions of American workers depends on getting this package across the finish line.”

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Tags: American Rescue Plan Act, Butch Lewis Act, Coronavirus, COVID-19, Multiemployer Pension Plans, PBGC, Pension Benefit Guaranty Corporation, Pension Reform, relief bill, Ron Wyden, single employer, Stimulus

A huge consumer cash stash will be the rocket fuel that will power the economy back to its former perch, once the coronavirus is dwindling. That’s the conventional wisdom. But how huge is this cash hoard?

It’s a massive $2.9 trillion in the world’s largest economies. And this vast hoard “creates the potential for a powerful recovery from the pandemic recession,” a Bloomberg Economics report proclaimed.

Households in the United States, China, United Kingdom, Japan, and the biggest euro-area nations piled up all this money because they were homebound and weren’t spending it in shops, restaurants, and all the other locales of normal living. The additional cash amassed is above what people normally would save.

The US, as the world’s largest economy, claims half that total, a whopping $1.5 trillion, a sum that still is expanding. On an order of magnitude, that’s almost as much as the gross domestic product (GDP) of South Korea.

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The optimists, according to the report, “are betting on a shopping spree as people return to retailers, restaurants, entertainment venues, tourist hot spots, and sports events as well as accelerate those big-ticket purchases they held back on.”

The study does acknowledge, though, that instead of getting spent, the cash might be channeled to meeting debts or kept in savings, perhaps to guard against another downturn—which wouldn’t have as much of a salutary effect on US growth as a spending spree would. Should Americans spend all this cash, economic growth would soar by as much as 9%, rather than the 4.6% now forecast for 2021 GDP, Bloomberg Economics figured. The Bloomberg 4.6% projection is in line with others, such as one by the Conference Board.

“Summer 2020 turned out to be a false dawn, but it also showed how quickly economies can bounce back when COVID-19 controls are removed,” said Maeva Cousin, senior euro-area economist at Bloomberg Economics. “Could the same thing happen in 2021? Massive cash buffers from households’ lockdown savings are one reason we are confident demand should rebound sharply.”

The picture elsewhere among major economies is uniformly buoyant. Chinese households saved $430 billion more than they ordinarily would have. In Japan, they salted away an extra $300 billion, and in the UK, $160 billion. In the biggest euro-area economies, the amount put away was $465 billion.

One reason these cash-holding consumers likely would go spend their boodle is that banks aren’t paying much in interest, the report conjectured.

Certainly, the report pointed out, those on the lower end of the economic spectrum haven’t saved a lot, if anything, as they needed any spare money to get by.

Plus, any rebound might take a while to get going. “Short term, a lot depends on post-pandemic behavior—which may take time to revert to pre-pandemic norms,” said Yelena Shulyatyeva, senior US economist for Bloomberg Economics.

“Medium term,” she added, “whether the extra funds go to consumption, paying down debt, or even stay in the bank as a rainy-day fund, that’s a positive for growth.”