Multiemployer pensions are jointly run by labor unions and employers, often within the same or related industries. The most prominent, the financially troubled Central States plan, covers roughly 400,000 workers and retirees from more than 1,000 trucking companies. These pensions run on a mutual-insurance basis: Participating employers must cover the benefits promised by any employer that either goes bankrupt or withdraws from the plan. The reward for this unusual funding mechanism is much looser funding requirements and lower premiums to the Pension Benefit Guaranty Corp.—the federal agency that acts as a pension safety net.

But the mutual-insurance system is itself a critical flaw: Sometimes whole industries decline and pension funding disappears, as with trucking. Federal rules made the problem worse by allowing businesses to withdraw without funding all promised benefits.

Multiemployer pensions also significantly overestimated their future investment returns. In a 2017 study, the Government Accountability Office found that if Central States had received the 7.5% annual return it assumed from 2000 to 2014, it would have ended that period 91% funded. Instead, Central States received only 4.9% returns, leaving its funding at 40% and declining.

Today, more than 100 multiemployer pensions face “critical and declining” funding, according to the PBGC. Central States’ portfolio is expected to run dry in 2025, with other plans to follow. The PBGC’s multiemployer insurance fund will be exhausted by 2027.

Ordinarily, insolvency means pension freezes and benefit reductions, but multiemployer pensions are run by labor unions, a key Democratic constituency. And so the House Covid bill plans to dole out an estimated $86 billion from 2022 to 2024 to 186 pensions, enabling these plans to pay full benefits through 2051. With no incentive to cut costs, there’s little reason to think the pensions will be solvent after 2051. Look forward to more spending down the road.

Bailout supporters argue they’re helping impoverished workers make ends meet, but that doesn’t add up. The average monthly benefit from a plan like Central States is a seemingly modest $1,400. But that average is skewed downward by large numbers of employees who retired after only a few years of service. The one-third of Central States retirees who receive more than $2,000 a month—plus Social Security benefits—make a bailout expensive. No one in this group is even close to being in poverty.

But leave aside the many problems with this bailout—including that the plans’ insolvency has nothing to do with Covid, and Democrats reduced the duration of extended unemployment benefits to help fund the pensions.

The larger worry is that Congressional Democrats’ willingness to bail out private-sector multiemployer pensions signals they would do the same for state and local employee plans. Public-employee pensions operate under the same loose funding rules as multiemployer pensions, and public plans in Illinois, Kentucky, New Jersey, Texas and other states are no better funded than the worst multiemployer plans.

Many public pensions have a history of poor stewardship, increasing benefits in good times and failing to make their pension contributions when the economy turns downward. Will a Democratic Congress turn away unionized public employees when it already has bailed out union-run private sector pensions? At this point, the assumption has to be no.

Mr. Biggs is a resident scholar at the American Enterprise Institute.