Robin Hood robbed the rich to pay the poor; now Uncle Sam is robbing the old to pay the young — raiding pension funds to keep student-loan rates artificially low.
President Obama’s much-touted plan to put a one-year freeze on student interest rates was signed into law with great fanfare this month. But the bill’s supporters hadn’t said where the money to subsidize the lower rates would come from.
Columnist Daniel Indiviglio of Reuters dug up the details this week, calling the bill financial “hocus-pocus.” The student-loan scheme was buried in a transportation bill. In it, the government raided its pension-guarantee fund to the tune of $6 billion — although the fund is already running a deficit of $26 billion.
The student-loan bill puts the pension system in jeopardy. To cover future payouts, pension contributions will need to rise by as much as $50 billion a year. The fund’s already broke; now, thanks to this reckless bill, it’s one step closer to total collapse.
Plus, the bill lowers accounting standards for pension funds, letting them contribute less money than before while forecasting the same future return. That is, the president and Congress are pretending that a system that’s already broke will magically prosper in the future with even less direct investment.
The Pension Benefit Guaranty Corp is designed to insure private retirement plans. Millions of present and future retirees depend on it. Putting it at risk is simply irresponsible…