United Airlines was allowed by a bankruptcy judge to default on its pensions. Taxpayers will be picking up the slack, but some beneficiaries will see their benefits decline sharply. What does it mean? Alex Tabarrok says this is a warning to people who don’t want to replace Social Security with private accounts. Josh Marshall’s readers point out that this is exactly why Social Security must be preserved.
Update: To be correct, pensions in default are covered by the Pension Benefit Guaranty Corporation. So taxpayers won’t make up the difference to pay for these pensions in default, rather the other pension programs that participate in the PBGC will pay higher fees to cover the defaulters. Obviously, though, if enough pensions default that’s not sustainable. (For example, see what happened to the FSLIC in the S & L scandal in the eighties.)