Insights: Government red tape, Union pension cuts
Published: January 2nd, 2015
An investment tip for 2015: Buy red tape. And companies that profit from it.
There’s explosive growth in government red tape. In 2014, almost 80,000 pages of new regulations were issued. In 2015, President Obama plans an equal number of additional rules and regulations.
The companies that handle the details for bureaucrats are making a fortune. The top 25 federal contractors are being paid $175 billion a year. Once upon a time, these were mostly defense contractors. But as Obama downsizes the military and increases social programs like health care, that’s now where the big money is.
Defense contractors like General Dynamics have been getting into the health care management business, such as handling information systems for Medicare and Medicaid.
Taxpayers pay a bundle for all this red tape. So if you buy stock in these government contractors, at least you might get dividends and get some of your money back.
In other news, labor unions are joining businesses and cutting back on pensions.
Congress and President Obama have just approved a change in pension law. Union-run retirement funds are now allowed to reduce the benefits paid to already-retired union members.
Labor leaders begged Congress to make this change for pension funds with under funding of 20 percent or more. These labor plans cover about 10-million union members.
The new law also allows some employers to cut retirement benefits. But unions have lost their moral authority to complain that businesses are just greedy.
Many are the same unions that just spent tens of millions of dollars on the 2014 elections, as they do every election cycle. It’s fair to wonder how that expense reduced their ability to pay retirement benefits.
Among unions, companies, and government, a lot of benefits have been promised to win people over—promises that are turning out to be unaffordable.