Book Cooking

Sweet deal for a couple of airlines. Their employees? Well, maybe not so much. Bloomberg (05.24.07):

"U.S. airlines including AMR Corp.'s American Airlines and Continental Airlines Inc. would be able to cut their employee pension contributions by $2 billion under a provision written into an Iraq war spending measure.

The bill approved by the House of Representatives today would permit the airlines to assume an 8.25 percent annual discount rate in calculating the value of their pension obligations, rather than the 6 percent they use now."

U.S. Airlines May Get $2 Billion Break From Iraq Bill

"Higher discount rates lower the pension obligation and pension expense." Some examples of all the monkey business you can get away with with pension discount rates are here.

"The White House estimated airlines may reduce their pension contributions $2 billion over 10 years, spokesman Tony Fratto said. 'Experience powerfully suggests they would take advantage of it,' Fratto said in an interview."

Powerfully suggests? Ha, ha. Funny guy, that Tony.

Bottom line is the airlines are shifting even more of the risk of default to the Pension Benefit Guaranty Corporation, a government agency generously funded by you, the taxpayer. How is the PBGC doing? Law.com (11.17.05):

"The deficit at the federal insurer for corporate pension plans may have narrowed to $22.8 billion for the fiscal year, but the Pension Benefit Guaranty Corp. said Tuesday it is still in dire straits.

The PBGC's deficit is down slightly from its record $23.3 billion at the end of fiscal 2004, primarily due to a profit of $529 million.

Law.com - PBGC Deficit Narrows, but Future Still Grim

"Nonetheless, the report showed that PBGC's exposure to losses from pension plans sponsored by financially weak employers rose to $108 billion from $96 billion the year before."

If the shit really hit the fan, the PBGC would be absolutely screwed: "measured on a termination basis, total underfunding in the single-employer defined benefit plans it insures exceeded $450 billion as of September 30, 2005." Not to mention the erstwhile pensioners who kicked in all that hard-earned dough all that time.

And the CEOs of these companies? Well now that's an entirely different matter.

Ain't free, unfettered markets just a thing of beauty?

Oh and this legislation raises the minimum wage (first raise in almost ten years) from $5.15 to $7.25 an hour. By 2009. Don't spend it all in one place, you ingrates.