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Cato Daily Dispatch for December 20, 2004

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D.C. Residents Split on Stadium Funding
Pension Guarantor Concerned About United Contract with Pilots
Card: Social Security Benefits for Younger Workers in Doubt

D.C. Residents Split on Stadium Funding

"District of Columbia residents are closely divided on the future of the Washington Nationals, with slightly more than half supporting private financing for a new stadium even if such a requirement means losing the team, according to a new Washington Post survey."

"The survey found that 56 percent of those interviewed favored requiring private funding to pay for half the cost of building a stadium. Nearly as many -- 53 percent -- backed the D.C. Council's amendment even if it proved to be a deal-breaker with Major League Baseball."

The Cato study, "Caught Stealing: Debunking the Economic Case for D.C. Baseball," shows that professional sports teams are not engines of economic development and the government-subsidized stadiums teams demand have little, if any, positive effect on a city's economy.

Professors Dennis Coates and Brad R. Humphreys of, respectively, the University of Maryland, Baltimore County and the University of Illinois, write: "Rooting for the team might provide satisfaction to many local baseball fans. That is hardly a reason for the city government to subsidize the team. D.C. policymakers should not be mesmerized by faulty impact studies that claim that a baseball team and a new stadium can be an engine of economic growth."

Pension Guarantor Concerned About United Contract with Pilots

"The Pension Benefit Guaranty Corp. said it is concerned that terms of a tentative contract UAL Corp. and its pilots union have agreed to 'sets a dangerous precedent,' the Wall Street Journal reports.

"The quasigovernmental pension insurer is worried that the airline is making generous new pension promises while refusing to honor old pension agreements. Last week, the United Airlines parent, which is operating in bankruptcy-court protection, reached accord with the Air Line Pilots Association on a five-year concessionary labor agreement that would give active pilots $550 million in convertible notes if they agree not to fight UAL's efforts to terminate their defined-benefit pension plan and shift that plan onto the PBGC."

In "How to Reduce the Cost of Federal Pension Insurance," Richard A. Ippolito, former chief economist at the PBGC, warns that the agency is poised for a taxpayer bailout similar to the 1980s savings and loan crisis. He recommends transforming the PBGC into a private insurance program that sets premiums according to the amount of risk plan sponsors add to the program.

"Once taxpayers were removed as ultimate guarantors of the insurance, the plans themselves (and most notably the better funded plans) would have an incentive to align premiums with exposure, and plan sponsors would have to face up to the problems that their own underfunding creates," Ippolito writes.

Card: Social Security Benefits for Younger Workers in Doubt

"Asked on ABC's 'This Week' whether President Bush's ideas would remove guarantees of Social Security benefits to younger workers, White House Chief of Staff Andrew H. Card, Jr. said: "Under no one's plan will younger workers receive benefits they've been promised because the Social Security system doesn't have the financial underpinning, the foundation to support the expectations of Social Security 75 years from now, 50 years from now," The Associated Press reports.

"Bush expects to present a plan to Congress in his budget proposals in February."

In "The 6.2 Percent Solution: A Plan for Reforming Social Security," Michael Tanner, director of the Cato Project on Social Security Choice, proposes a plan that allows younger workers to invest their portion of the FICA payroll tax (6.2 percent) in individual accounts. The other 6.2 percentage points of payroll taxes, paid by employers, would be used to cover transition costs.

The Cato plan puts individuals, not the government, first. It protects younger workers and future generations. It puts each citizen in charge of his or her retirement. It allows workers to keep more of their own assets. As Tanner writes: "It would be a profound and significant increase in individual liberty."

Jonathan Block, editor, jblock@cato.org