When a company offers employees a pension plan, the workers assume – or at least hope – the money will be there when they retire.
But in Portugal, the government has decided to use the pension fund from one of that country’s biggest companies to pay down Portugal’s huge deficits. Portugal is seizing the company’s $3.7 billion pension fund – which workers are counting on for retirement – and will use it for deficit reduction instead.
Oh, the government says the workers need not worry – that they can simply “rely” on Portugal’s version of the Social Security system.
But that’s a shell game! Portugal is robbing Peter to pay Paul. If it is seizing a company’s pension funds to pay the nation’s debts, why should the workers who would have been covered by the pensions think that money will be available to them in some government program when they eventually need it? The government will have spent it already!
Does any of this sound familiar? The United States’ own annual deficits are far in excess of $1 trillion, and few in Congress are taking real responsibility to solve that problem. Any suggestion of tax hikes is unwise, because higher taxes ultimately reduce government revenue as they destroy economic growth. They are no answer to cutting deficits – especially since Congress tends to spend new tax revenue rather than use it for debt reduction.
But with Congress seemingly unwilling to tackle the real problem – excessive spending – what options does that leave? Will our own government find a pretext to seize private pensions the same way it has raided Social Security funds? Will it then tell workers who were relying on those pensions simply to “trust” that Social Security will provide for them? With Social Security set to go broke a couple decades or so from now, does that sound like a good idea?
We may not think much about what’s happening in Portugal. But its troubles should warn us about the alarming things that happen when spending is so out of control that government gets desperate to find any new source of revenue.