U. S. Congress Commits Another Incredibly Stupid Fiscal Action, Does Everything It Can to Prevent Paying for Federal Programs

Just What the Pension Worriers Wanted – Less Pension Contributions

So rigid are Conservatives with respect to taxes, and so afraid are the rest of the Congress of being accused of raising taxes or fees for Federal programs that they will do anything regardless of how reckless to keep from increasing taxes or fees.  Case in point is the student loan program and the Federal flood insurance program.

One can understand how keeping interest rates low on student loans is good national policy.  It is far more difficult to understand why taxpayers should subsidize wealthy home owners who build in flood prone areas and then expect cheap Federal flood insurance to bail them out (pun intended).  But the Congress exists to serve the interests of people who build homes in flood plains and coastal areas that flood, so there is no question that the undeserving homeowners should feed at the Federal trough.

The problem of course is money, not enough money to pay for reduced student loan interest and low cost flood insurance premiums.

The revenue shortfall was about $10 billion, while the cost of freezing student-loan rates for another year was a further $6 billion. Conservative lawmakers were eager to keep the popular bill from adding to the federal budget deficit.

So what did these clever lawmakers do?  They did this.

To cover the shortfall, lawmakers agreed to increase the levy on private-sector workplace pension plans by the Pension Benefit Guaranty Corp. U.S. companies will be allowed to lower their contributions to defined-benefit pension plans, which has the effect of boosting the taxes they pay to the federal government.

That’s right, the Congress implemented rules that will allow companies to make less contributions to their pension plans, plans which for many companies are already underfunded.  In the long run this means more plans will fail and more plans will be then funded by taxpayers, in short a disaster all around.  But until then popular programs stay in place and homeowners, many of whom are virulent Conservatives who despise government help for the poor will get low cost flood insurance.

And those Congress people will get re-elected, because they produced government programs without anyone having to pay their full cost.