Less than three months before midterm elections, trying to prove that the republican majority in Congress can do something useful for a change, and about to launch an expensive campaign for a preemptive strike against Iran, our President announced the signing (without a “signing statement”) of a newly hatched law loaded with goodies to save private sector pension plans and hopefully stem the abandonment of current plans in bankruptcy courts.

This new law sounds very much like the original Social Security Act of 1935 in that it asks companies to enroll all of their employees, in this case with 401(k) or IRA plans instead of payroll taxes. It also raises the caps on pretax dollars that can be invested in these accounts and allows individuals ninety days to opt out if they’re crazy enough to do so, while also providing a few other incentives and goodies that people could have taken advantage of all along.

However, buried in the new good sounding law is a benefit for the federal government that’s similar to what happens to the surplus/profits from Social Security’s taxes. The law raises the premiums for the Pension Benefit Guarantee Corporation (PBGC) for companies that can afford this insurance – another government entitlement program that has always been a slush fund for the Beltway Bandits.

Although the PBGC claims that taxpayer dollars are not involved in its operation, this is flagrantly false, another deception to add to the list of lies from the District of Corruption.

The PBGC program is recorded under the “Intragovernmental Holdings” (IH) portion of the national debt where 137 so-called “trust funds” hold nothing but “special” nonmarketable Treasury bonds – the tools of fraud.

Ninety-seven percent of the $3.6 trillion debt in IH is held by 32 entitlements, including the PBGC, where these “holdings” can be redeemed only with taxpayer dollars. There’s no two ways about it, although the government would like you to believe the ridiculous story that a not-for-profit organization completely dependent on taxpayer support can somehow owe itself.

Unlike Social Security where only the excess/surplus from payroll taxes are stolen by the government, and now total $1.8 trillion in a combination of dedicated taxes spent elsewhere and annual interest simply dumped into the account, the PBGC is a much smaller account where the Beltway Bandits take all of the contributions, where every cent is immediately confiscated and spent elsewhere. The PBGC has no operational cash to do anything, particularly anything useful.

Whatever amount individual companies contribute to the PBGC goes immediately into the Treasury’s general fund where it’s spent by Congress and the Administration. Therefore, raising the rates increases the booty in the short term and takes the PBGC off the hook in the long run as companies switch to and phase into the IRAs and 401(k)s that are not insured. At least, that's the hope.

It's a very crafty plan to get the government out of this particular insurance business. If it works, if companies all switch to the 401(k) risk scheme, maybe they'll try it with FEMA's flood insurance and even Social Security and Medicare. It puts companies and individual employees in the "do it yourself" retirement insurance business where they should be anyway.

In other words, the PBGC is just the test case, the trial run, or as the Madison Avenue hucksters said in the fifties; "run it up the flagpole and see if anyone salutes." If it works, they can then try it elsewhere while avoiding the negatives that have come to be associated with "privatization."

At the close of fiscal 2005, the PBGC held a mere $12.997 billion ($13 billion) which, in federal parlance, is a pittance. But it is already being eaten up by companies, particularly airlines and the auto industry, defaulting on or dramatically reducing their pension plans. Taxpayers are now covering withdrawals with money from the general fund and the average taxpayer doesn't notice that it's happening.

If the PBGC currently made any investment whatsoever in real markets, even the short term money market, it would be listed with the eighteen real trust funds managed by the government where their own Thrift Savings Plan retirement example dominates the list.

If the new Pension Reform Act can raise the rates for PBGC insurance, and perhaps also get smaller companies to participate, it will greatly increase the money available for the government to steal in the short term and until companies transition to 401(k) type investment programs.

There may be a great deal more potential in this new pension reform act than meets the eye. But until we see the effects of a transition to 401(k) style retirement plans and the placing of investment responsibilities on the shoulders of retirees themselves it looks more like the government's need for more money.

When desperate for money in an election year, try everything.