Congress has fitfully made progress on pension reform, even considering the blowup between House and Senate Republicans over extending business tax exemptions last week. However, it looks like the promising reform measure may contain exemptions so large that one could fly a 787 Dreamliner through them – quite literally. Heritage’s David John recommends a veto on HR 2830, sending a message to Congress regarding their coddling of an industry with a long history of pension underfunding:

Some policies are so bad that they overshadow the good features of legislation. If Congress insists on including special treatment for airlines and potentially other industries in the conference report to the Pension Security and Transparency Act (H.R. 2830), then President George W. Bush should veto it. Various reports suggest that Delta and Northwest could receive up to 20 years to repay the under funding of their pension plans, while American and similar airlines could receive less than that, but still more than the seven years other sponsors of defined benefit pension plans would have to eliminate their under funding. Even more alarming are reports that defense contractors want an extra three years before the new pension funding requirements apply to them. If these reports are accurate, and this special treatment is included in the conference report, President Bush will have more than adequate justification for a veto.

Even though other parts of H.R. 2830 would strengthen pension funding and reduce the probability of a massive taxpayer bailout of the Pension Benefit Guaranty Corporation, the airline provision would open a huge loophole that politically connected industries could use to under fund their pensions. Why should auto parts companies and even auto manufacturers themselves spend billions of dollars better funding their pensions if airlines don’t have to do so? Given a precedent, they will lobby congress for similar relief using the same arguments of their industry’s importance to the national economy and the potential losses their retirees will face. Once congress has fallen for that argument once, it is extremely unlikely to be able to resist future requests for “parity”. Rather than signing such flawed legislation into law, congress should be given the opportunity to re-pass it without the offending provisions.

Airlines employ hundreds of thousands of Americans and the risk to those pensions will require immediate action. This free pass allows the industry to continue its under-the-radar flight on pensions, which hides the instability of the industry’s economic position. Postponing action does not mean that the PBGC would not have to bail out these pension funds; if history is any judge, exemptions and postponements result in less compliance, not more.

Not only does the bill contain these exemptions, putting the retirement of many Americans at risk, the Senate has played their usual pork-barrel games in putting together this legislation. What do scenic prairie roads and the cleanup of abandoned mines have to do with pension reform? To the untrained eye, nothing at all – and yet two Senators have earmarked $50 million and $5 billion for these tasks in HR 2830, respectively.

Rep. Mike Pence has voiced serious reservations about the Abandoned Mine Land Fund under any circumstances. Since 1977, AML has existed on fees charged for coal production, and these fees will expire in 2007. The fees go to cleanup of old mining sites, and also to supplement health-care premiums of miners whose companies have left the industry or gone under altogether. The new proposal starts lowering fees on coal production, increases payments to states and retirees, and forces the federal government to replace the funds – and changes AML from discretionary to mandatory spending. This adds the $5 billion to an already-bloated set of entitlement spending by the federal government, making it ever more difficult to reduce the federal budget.

If George Bush wants to send a message to Congress on earmarks, lobbyists, and entitlements, HR 2830 gives him that opportunity.