If Uncle Sammy backstops UAW pensions with a special plan, that opens pandora's box for every other under-funded pension in the US -- which is a LOT of them. More than you can possibly realize, because the size of the retired workforce on pensions here is so much larger than Canada's. Half of the PBGC's payouts go to steel company pensioners, for example.

But let's start with the whopper of a scandal: public pensions - ie, state and local government employees. The most recent estimates by accounting groups that study state finances are that there is a $1 Trillion shortfall in just public employee pensions. The band-aid fix to this has been to peddle pension obligation bonds - about $50B in the last 25 years, but more than half of that since 1997/1998 or so.

The worst obligations are, of course, from the worst-run states -- eg, California and CalPERS are exhibit "A" in the hall of morons. Last year, as the 'smart money' was getting out of private equity, residential and other deals, CalPERS was getting in. They're down quite a tidy bit - not as much as the SP500, but plenty more than a pension fund should be - something like 27%. So much for the Democrat dogma that pensions are so much safer than 401(k)'s and IRA's. They're safer to the extent that you don't have them managed by the same crop of idiots believing their own pablum on Wall Street. If your pension manager is drinking the same kool-aid, you lose too.

So how did these huge public pension liabilities get where we are today? How do the states get away with this? They're not held to GAAP. They get to use a different set of FASB standards for government accounting. Even as the private sector was being forced to put forth true and honest liabilities for pension plans on their books, the public sector was given a pass.

Now let's take private sector pensions: Latest estimates are that, taken together, private sector pensions are underfunded by $0.5 Trillion (500 billion). That could get worse if we see a wave of bankruptcies. But the nut of this issue is that the PBGC has not had to pay dollar-for-dollar on underfunded or broken pension plans. They pay something on the pension, just not all of it. The PBGC is in the hole too.

Can the US afford another $1.5T to make defined benefit pensions whole? No. We've already thrown over $12T in committments and money into the market & economy in a very short time. There's at least 10's of billions more in paper that is going to default, with God only knows how much more CDS written over the top of that paper. At some point, the government has to say 'no mas.' If Obama makes good on 100% of UAW pensions, then the steel workers and everyone else taking a cut on their pension bennies from PBGC is going to start rattling their cup, demanding that their pensions be made whole by Uncle Sugar. That would likely push the total liablity over $1.75 to $2T on total pension shortfalls that retirees would be demanding be made good by Uncle Sugar.