It’s hard to believe that the bond rating of General Motors may soon fall to junk, but it’s true. Last week, GM announced an expected loss of $850 million, about $1.50 a share, for the first three months of 2005. The company slashed its profit forecast by $2 billion for the year.

It’s troubling news, obviously, for GM’s shareholders and employees. But if more Americans paid attention to the troubles facing General Motors, they might grasp the urgency of America’s Social Security crisis. General Motors is going bankrupt for the same reason Social Security is going under: unfunded liabilities in the form of promised benefits to retirees.

Over the decades, union leaders have won such generous pension and healthcare benefits for GM employees that today GM is the world’s largest private consumer of health care, covering the medical costs of more than 1 million people. Health care represents more than $1,000 worth of cost, on average, in every vehicle General Motors produces, its chairman, Richard Wagoner, has said.

GM spends more on health care than on steel. The health-care costs – about $5.5 billion a year and growing – are fixed. GM’s unfunded health-care obligations amount to $57 billion. GM also holds America’s largest private pension obligation. The company estimates its total future American pension costs at $87 billion.

The company’s total market valuation stood last week at $16.39 billion. General Motors was once the leading car manufacturer in the world. Today, it’s a pension fund and a health maintenance organization with a relatively small car-making operation on the side.

GM assumed these obligations to retirees at a time when its actuaries didn’t count on the greater life expectancy that retirees now enjoy. They didn’t expect health-care costs to grow so rapidly. They failed to foresee that foreign competitors, unburdened with the same fixed costs, would reduce GM’s market share as its growing liabilities make it less and less competitive.

It’s now apparent that unless GM manages to change its underlying cost structure, it will be forced into bankruptcy. Then the automobile-making parts of the company could be restarted without the retirement and health-care obligations to retirees – or, at least, with benefits at a remarkably reduced rate. The realities of the marketplace might leave GM employees and retirees without any benefits at all.

Like the autoworkers and General Motors, Americans and their representatives in Congress face massive unfunded liabilities – exceeding $10 trillion – in Social Security. When Social Security was created in 1935, government actuaries also didn’t count on people living longer. While there were 16 workers for every retiree in 1950, there are only three workers for every retiree today.

The Social Security system depends on wage growth and an expanding labor force, but – like the GM executives who failed to see Toyota around the corner – the architects of Social Security failed to anticipate labor competition from such nations as China and India. By 2018, the Social Security system will be in deficit, paying more in benefits than it collects in taxes. The “trust fund” will run out of assets in 2042 and face increasing shortfalls.

Which means that the Social Security Administration will be selling more and more government bonds out of the trust fund to finance retirement benefits after 2018. But as the General Motors experience highlights, the market can only take so much debt. When unfunded liabilities are not addressed, eventually the debt turns to junk.

America’s obligations to its retirees threaten the government with the kind of consequences that GM faces. “Failure to address the imbalances between our promises to future retirees and our ability to meet those promises would have severe consequences for the economy,” the chairman of the Federal Reserve Board, Alan Greenspan, testified last week. “Unless the trend is reversed, at some point these deficits would cause the economy to stagnate or worse.”

It’s a sad fact that government-run programs don’t benefit from the self-correcting mechanisms of the free market. But Congress could learn from the private businesses that face serious pension crises, and the troubles in the airline industry may be instructive.

Bankrupt US Airways already terminated its defined-benefit pension plans. United Airlines, also bankrupt and looking to shed its pension obligations, has only $1.2 billion to cover $4.1 billion in promised future benefits, according to the Pension Benefit Guaranty Corporation. The pension plans at Northwest Airlines are underfunded by $3.8 billion. American Airlines shells out $300 million a year just for its retirees’ health care.

So what have the airlines done to survive? In November, union pilots at Delta Airlines ratified a contract that froze their pension plan and started a defined-contribution plan, similar to a 401(k). The profitable airlines, such as Southwest and JetBlue, have offered profit-sharing and 401(k) plans rather than pensions to employees all along. The defined-benefit pension plans – whether administered by General Motors or the Social Security Administration – rest on shakier foundations.

Critics of Social Security reform like to argue that personal savings accounts would introduce too much uncertainty to the nation’s retirement system. But the actual experience of pension programs in the economy tells a different story. On the one hand, there are personal retirement accounts. On the other, junk bonds and bankruptcy.