Legacy benefits

Back in the 1950’s the CEO of a company had a ten or twenty year plan. He laid out the policies that would guide the corporation to a strategy of long term growth. When you went to work for these companies it was employment for life or as they said from the womb to the tomb. Somewhere in the late 60’s things began to change. The pressure on the CEO to perform shortened his horizon and the stockholders demanded better returns. By the late 70’s the next quarterly dividend was the new target for the CEO and if he did not perform, investors would sell the stock and move the money to some other company.
Then he was faced with the union and their threat to strike which of course would completely destroy the dividend so he told his negotiators that they must avoid a strike at all cost. The union was told that there was very little room for wage increases but the company could offer to increase the pension and other long term benefits like health care at early retirement. These type benefits were referred to as legacy benefits since they accrued at some future date.
Fast forward to today and we find General Motors with 200,000 employees and 670,000 retirees and they spend about $5,000 per car to pay for legacy benefits. Toyota and Honda who have very few retirees spend far less so GM goes broke. This was an early warning signal to what is going on in other areas.
Unionized Municipal employees get together and help elect certain individuals to the city council and later negotiate contracts with these people. The city says we don’t have much money for wages but we can offer you a better pension plan.
The teachers union selects candidates for the school board and helps to elect them and later they negotiate with these same people. The school board says we don’t have much money to offer in wages but we can increase your pension.
Forty years ago the federal government came to me and said, John from now on we will be taking money from your check so we can provide you with health care when you are 65. I said never mind I will take care of my own expenses and they said that was not an option. So I was forced to sign up for Medicare just as I was forced to sign up for Medicaid.
The day of reckoning is here and we all face the same situation that General Motors faced and there is not much we can do about it. You can whine and complain about the unfairness of it all but these various groups over the years have promised more than they can deliver. It’s plain and simple. The benefits we thought were there are not there