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Highway Robbery

Willie Sutton, one of America’s most notorious bank robbers, when asked why he robbed banks, allegedly replied, “Because that’s where the money is.”

It’s a funny and oft-repeated line, but the U.S. Congress has just employed the “Sutton rule” in a way that isn’t funny at all.

You see the federal transportation authorizations bill (often called the “highway bill”) was set to expire on September 30. And the transportation trust fund – the source of vital support for U.S. highways and public transit – was about to dry up.

This created yet another fiscal crisis that Congress needed to fix before it went on its summer recess, August 1. As usual, the Democratic Senate and the Republican House were at odds.


‘Smooth’ operators

When all was said and done the Senate agreed to a short-term reauthorizations bill, which contained a House provision that partially financed transportation through a process euphemistically called “pension smoothing.”

Pension smoothing is an insidious little fiscal device (which has also been used in the past by Democrats) that reduces the contributions employers are required to make to their employees’ pension funds.  While that increases employers’ federal tax liability, it’s less expensive than paying a pension fund enough to safeguard workers’ retirements. 

The federal government benefits from the increased revenue generated by the higher taxes levied on employers who cut the amount of money they contribute to their employees’ pension funds.

And, why are they targeting pension funds?  You guessed it – because that’s where the money is – workers’ money.  Short-term, money that really belongs to workers is being taken to subsidize government and increase employer profits.  A better name for this highway bill might be “highway robbery.”


Folly

It’s not hard to see the folly that is embedded in this scheme.

Employers will eventually have to increase contributions to sustain their pension funds, which will decrease their taxes and reduce government revenue.  And, inevitably, at least some employers will not be able to come up with the money – leaving their employees without the retirement they earned and had every right to expect.  Pensions provided by private employers are at least partially insured by the Pension Benefit Guaranty Corporation (PBGC); however the PBGC itself is woefully underfunded and is in danger of not providing all supposedly “guaranteed” benefits.

It seems Congress has learned nothing from the “Great Recession.”  It’s still encouraging the rich to play dangerous games with other people’s money.

This should provide us all with extra incentive to engage in local transit action to demand that Congress pass a real, long-term funding bill that will restore and extend U.S. public transit without resorting to “highway robbery.”

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