A judge agreed to let United Airlines
dump its pension obligations on the federally funded Pension Benefit Guarantee Corporation. I'm firmly of the opinion that this decision will lead to a bailout of corporations by the feds that will make the multi-billion dollar Savings and Loan Bailout of the 1980's look like loose change.
Why? Consider the position of the "legacy" airlines like American, United, and Delta. United has now dumped a huge drag on its balance sheet. That will let them restructure costs to make them leaner and meaner than their competitors. What can the competitors do in response? Why, go into bankruptcy and get the same deal, of course.
It won't just be the airlines, either. Once the rest of the corporate world catches on that bankruptcy means nothing negative long term and is a good opportunity to dump their pension obligations - look out. There will be a wave of bankruptcies for the sole purpose of dumping pension obligations. Any industry with traditional pensions is at risk for this behavior. That means manufacturing, trasportation, services, you name it.
The PBGC is not set up to accept responsibility for all these pensions. Even the United default alone will stress the system. The option will be for the PBGC to reduce pensions ever further from the level they guarantee already (which I think is $60,000), or go bust. It's unlikely that even a Republican Congress would let the PBGC go bust so we can expect another huge federal bailout that will cost taxpayers either through higher taxes (unlikely) or much greater deficits (bingo!).
Meanwhile the workers who were told they'd be taken care of in the future by their pensions in exchange for past labor concessions get screwed as do the honest managers from previous decades who set up these pension systems and ensured their health until the current loot and burn corporate mentality came into vogue.
Another stealth tax hike brought to you by the pro-business administration.