This week, Rosneft, the largest state-owned oil company in Russia, has formally requested a $42 billion loan from a fund set aside to pay pensions in the out years to Russian citizens. This request is in response to Western sanctions that are beginning to have a detrimental effect on the Russian oil and gas industry.
The phenomenon is not new. Governments have taken even private pension funds before in their desire to remain solvent and pay current bills in lieu of peace of mind for their citizens. Argentina and Hungary are recent examples. The question is, can it happen here in the United States?
Argentina, which recently defaulted on its debt for the third time in just over a decade, has a habit of nationalizing private pension funds and shuffling money around public accounts in a giant public shell game. Hungary gave its citizens an offer it couldn’t refuse during the 2008 financial crisis: move your private pension fund to the state, or lose your private pension fund.
The current situation in Russia is somewhat different as you have a state-owned company, one that pays a large share of Russian federal revenue in taxes, looking to raid a public fund set up for pensions in order to maintain funding in light of Western sanctions.
Whether or not this has already happened in the United States is open for debate. The Social Security Trust Fund was set up to fund future recipient liabilities. What has happened over the decades is that Congress has spent that money and issued bonds which, at maturity, will replace these funds plus interest. So yes, the money has been spent on other priorities; but the government has promised to pay it back.
Democrats go to great lengths to explain how the fund has not been raided as Congress has put the full faith and credit of the United States on the line to replace these funds as they are due. However, in reality, the money has been spent. It’s probably safe to say that retirees will not receive the benefits they were promised upon entering the workforce. There will be taxes, means testing, and other ways to whittle away the money that was not supposed to be an entitlement but an insurance policy. At the end of the day, Social Security is turning into just another wealth redistribution scheme.
Private pension funds are another matter. The budget deficit has been coming down in a head-fake that could give big-spenders ammunition to head off austerity measures that need to be implemented to get our fiscal house in order. But we can’t relax on our debt and spending issues. The federal deficit is scheduled to skyrocket in the out years as Obamacare and other additional outlays kick in.
Could it happen here? Could the federal government take your 401k in order to pay entitlements to others? Answer yourself this question: The federal government has total unfunded liabilities of almost $100 trillion. What do you think?
The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.