Thursday, November 6, 2008

Ben Franklin Was Right

"Powerful House Democrats are eyeing proposals to overhaul the nation's $3 trillion 401(k) system, including the elimination of most of the $80 billion in annual tax breaks that 401(k) investors receive. House Education and Labor Committee Chairman George Miller, D-California, and Rep. Jim McDermott, D-Washington, chairman of the House Ways and Means Committee's Subcommittee on Income Security and Family Support, are looking at redirecting those tax breaks to a new system of guaranteed accounts to which all workers would be obliged to contribute. ... The money in turn would be invested in special government bonds that would pay 3 percent a year, adjusted for inflation", 16 October 2008, http://www.workforce.com/section/00/article/25/83/58.php.

Ben Franklin said, "No man's life, liberty or fortune is safe when the legislature is in session". He was right. What's going on here? This is a tax increase. Teresa Ghilarducci, a New School economics professor created this plan in May, which Congress is now considering. Why? To seize $3 trillion in 401(k) assets, that's why. Congress will then give you a TIPS bond. If someone wants to put TIPS in his 401(k), he can do it now. If this plan is adopted, inflation will rise as Congress steals your 401(k)'s real value. This is called a "forced loan" scheme. South American countries resort to them from time-to-time when they need money. Argentina is considering one now. Keynes urged Great Britain adopt a forced loan scheme to pay for World War II, see Time, 27 November 1939, http://www.time.com/time/magazine/article/0,9171,762868,00.html. There is nothing new here.

22 comments:

printfaster said...

IA
This is identical to the Argentine confiscation of retirement plans. Argentina forced all retirements into a government bond account.

I thought it would take a couple of years before we sank to the level of Argentina. Apparently change has now been identified as changing to Argentina.

Or then again maybe Cuba:
http://www.change.gov/americaserves/

How about the return of slavery under a dark democrat ( I refuse to call him black)? This is more community service than what many drunk drivers get on a first offense. Either we are all regarded as slaves or criminals. The former is like Cubans leaving school to cut cane, the latter is a police state where everyone is regarded as a criminal.

Change, it's a beautiful thing. Soon we will all be driving 53 chevys, and riding to work in broken down buses. But we will have universal health care.

Does anyone know where to get a job in Thailand or Singapore? China is not looking so bad.

Anonymous said...

OK, I've never heard of this particular plan ever, or a (and I usually keep very good track on things that affect my 401k).

But this actually sounds more like the ridiculous pre-election fear-mongering (and looking at the date that it was posted, it was pre-election).

And in regards to "printfaster", what's wrong with supporting a voluntary community service program? (hint: it is VOLUNTARY)

Anonymous said...

I agree that this is fear mongering. If you look at what Congress does historically--regardless of which party is in power--they itemize where the "loss" to the tax system is. So big deductions--a la mortgage interest, health insurance, 401k, etc, all make the list as these deductions are a "loss" to tax revenues. They always make the list, nothing is ever done about them.

printfaster said...

You people are totally cupidic. The Obama plan is slavery, from their own website:
"a plan to require 50 hours"

Where is voluntary in this phrase? Kind of like campaign workers called "paid volunteers".

Give it up. You anonymous's have sold out to the fascists. You all will look great in your brown shirts. Make that blue shirts in the Obama Corps.

As for taxing the 401Ks, have you looked at the federal balance sheet? The feds need to steal every last dollar under the sofa. Nothing will escape their claws. We are in a desperate struggle to save the dollar so the rich can keep buying their BMWs. They know they cannot tax the rich or they lose their power and the rich will simply leave the US.

Our balance sheet is worst than Argentina's.

Anonymous said...

I'm a constituent of Congressman Jim McDermott's, and I got in touch
with his office after reading this. They told me in no uncertain terms that this is a false story, that Congressman McDermott is considering no such proposal, and that the "quotes" from Congressman McDermott in various versions of this story are fabrications.

If you'd like to check with his office and verify this yourself, you can reach them at: 206-553-7170.

I look forward to seeing a prominent correction.

Independent Accountant said...

Anonymous:
Who are you trying to intimidate? Not me. I will correct nothing. My post stands. WC Varones picked up the story too at his blog. The quote I took is accurate.

401(k) said...

Here is another article about this: Will The US Government Nationalize Private Retirement Plans? including a link to the original testimony (at house.gov)

Independent Accountant said...

WC Varones led me to this 12 October 2008 article at Investment News: http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20081012/REG/310139971 which also refers to Jim McDermott.

printfaster said...

IA
Your point about intimidation seems to be spot on. If there is anything that will characterize what we have to look forward to under the Obama cult of personality and the democrat Congress is open, bald, and nasty intimidation.

How else could they put through measures to steal your retirement and offer campaign websites where you could compare taxes between O and McCain? Income taxes are but of fraction of the load planned for the burdened public.

Good luck to all as the teeth are bared.

Independent Accountant said...

Printfaster:
Now I'm livid. The story was also picked up at 24 October 2008 by Mark Impomeni. He writes, "Jim McDermott (D-WA) said recently that Democrats had better ideas for the $80 billion that Anericans contribute to their 401(k) plans each year. 'We have to start thinking about whether or not we want to continue to invest that $80 billion for a policy that's not doing what we say it should.'" If Impomeni misquoted McDermott, let McDermott's office say this is a misquote. Source: http://news.aol.com/political-machine/2008/10/24/obama-dems-seek-to-end-401-k-plans/

Anonymous said...

Where is the bit about the 401k assets being nationalized?

Anonymous said...

House Democrats contemplate abolishing 401(k) tax breaks
Mandatory contributions from workers considered

Powerful House Democrats are eyeing proposals to overhaul the nation's $3 trillion 401(k) system, including the elimination of most of the $80 billion in annual tax breaks that 401(k) investors receive.

House Education and Labor Committee Chairman George Miller, D-Calif., and Rep. Jim McDermott, D-Wash., chairman of the House Ways and Means Committee's Subcommittee on Income Security and Family Support, are looking at redirecting those tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute.

A plan by Teresa Ghilarducci, professor of economic-policy analysis at The New School for Social Research in New York, contains elements that are being considered. She testified last week before Mr. Miller's Education and Labor Committee on her proposal.

At that hearing, the director of the Congressional Budget Office, Peter Orszag, testified that some $2 trillion in retirement savings has been lost over the past 15 months.
Under Ms. Ghilarducci's plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5% of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would pay 3% a year, adjusted for inflation.

The current system of providing tax breaks on 401(k) contributions and earnings would be eliminated.

"I want to stop the federal subsidy of 401(k)s," Ms. Ghilarducci said in an interview. "401(k)s can continue to exist, but they won't have the benefit of the subsidy of the tax break."

Under the current 401(k) system, investors are charged relatively high retail fees, Ms. Ghilarducci said.

"I want to spend our nation's dollar for retirement security better. Everybody would now be covered" if the plan were adopted, Ms. Ghilarducci said.

She has been in contact with Mr. Miller and Mr. McDermott about her plan, and they are interested in pursuing it, she said.

"This [plan] certainly is intriguing," said Mike DeCesare, press secretary for Mr. McDermott.

"That is part of the discussion," he said.

While Mr. Miller stopped short of calling for Ms. Ghilarducci's plan at the hearing last week, he was clearly against continuing tax breaks as they currently exist.

SAVINGS RATE

"The savings rate isn't going up for the investment of $80 billion," he said. "We have to start to think about ... whether or not we want to continue to invest that $80 billion for a policy that's not generating what we now say it should."
"From where I sit that's just crazy," said John Belluardo, president of Stewardship Financial Services Inc. in Tarrytown, N.Y. "A lot of people contribute to their 401(k)s because of the match of the em-ployer," he said.Mr. Belluardo's firm does not manage assets directly.

Higher-income employers provide matching funds to employee plans so that they can qualify for tax benefits for their own defined contribution plans, he said.

"If the tax deferral goes away, the employers have no reason to do the matches, which primarily help people in the lower income brackets," Mr. Belluardo said.

"This is a battle between liberalism and conservatism," said Christopher Van Slyke, a partner in the La Jolla, Calif., advisory firm Trovena LLC, which manages $400 million. "People are afraid because their accounts are seeing some volatility, so Democrats will seize on the opportunity to attack a program where investors control their own destiny," he said.

The Profit Sharing/ 401(k) Council of America in Chicago, which represents employers that sponsor defined contribution plans, is "staunchly committed to keeping the employee benefit system in American voluntary," said Ed Ferrigno, vice president in the Washington office.

"Some of the tenor [of the hearing last week] that the entire system should be based on the activities of the markets in the last 90 days is not the way to judge the system," he said.

No legislative proposals have been introduced and Congress is out of session until next year.

However, most political observers believe that Democrats are poised to gain seats in both the House and the Senate, so comments made by the mostly Democratic members who attended the hearing could be a harbinger of things to come.

ADVICE AT ISSUE

In addition to tax breaks for 401(k)s, the issue of allowing investment advisers to provide advice for 401(k) plans was also addressed at the hearing.
Rep. Robert Andrews, D-N.J., was critical of Department of Labor proposals made in August that would allow advisers to give individual advice if the advice was generated using a computer model.

Mr. Andrews characterized the proposals as "loopholes" and said that investment advice should not be given by advisers who have a direct interest in the sale of financial products.

The Pension Protection Act of 2006 contains provisions making it easier for investment advisers to give individualized counseling to 401(k) holders.

"In retrospect that doesn't seem like such a good idea to me," Mr. Andrews said. "This is an issue I think we have to revisit. I frankly think that the compromise we struck in 2006 is not terribly workable or wise," he said.

Last Thursday, the Department of Labor hastily scheduled a public hearing on the issue in Washington for Oct. 21.

The agency does not frequently hold public hearings on its proposals.

E-mail Sara Hansard at shansard@investmentnews.com.

http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20081012/REG/310139971

printfaster said...

Last anon:

Ahh, newspeak:

"Invested" now is coming to mean "confiscated". They are just going to confiscate 5%. Let's see, the income tax started at 1%. These idiots cannot even hold themselves to that modest a confiscation. They simply want to rob more capital from American industry so industry has to back to Congress and beg for more money and favors. Of course to do so, means that they need to supply congressmen with more money and favors and contributions please. The price of palm oil will skyrocket in the next few years with all the palms that will be greased.

The democrats and lawyers of congress can do nothing but torture speech into meaningless blather, turning things like confiscation and excessive expenditure into "investment".

Anonymous said...

Ha ha Printfaster...

Palm oil trucks pulled up to Dirkson, Rayburn...

How about a wiki linking contributions, pending legislation, committee assignments, firms, lobbyists names...

I can see a group of bright, shiny college students connecting the dots... publishing for perusal...

HoosierDaddy said...

I just have a hard time imagining Congress would want to be blamed for the drop in markets as 401ks and IRAs are liquidated en masse. Not to mention the campaign contributions from the Financial Services industry. Barack Obama can raise money from small contributors online. Bob the Congressman probably can't. I bet the choice Bob the Congressman believes in is the one that will pay for his reelection campaign.

Anonymous said...

Hoosier Daddy...

PE Obama just made the template for raising contributions online.

(Actually hattip to Gov Dean for starting down that road)

People in Congress could raise money online from their constituents. But they would have to learn to make outbound communication via email, wiki etc a priority.

Look at the communication that happened when Bailout 1 happened. I heard the House servers were OVERLOADED. America spoke...loudly.

printfaster said...

To those that think that online contributions are the wave of the future, think again.

The online contributions are coming in from legitimate sources and illegitimate sources. Online contributions enable astroturf and foreign contributions to be applied en masse.

Think of online contributions as the means to fill a freezer warehouse anonymously. Much easier than stuffing $100,000 into Mr Jefferson's ("how did that get there?") deep freeze.

Anonymous said...

Printfaster... I'm naive when it comes to the ways of our elected reps... but I believe everything you say about astroturfing (had to google it)1 million ways for corporatists/unions etc to plaster influence around.

Power attracts the desire to influence... Ben Franklin was right.

printfaster said...

Well I must close out the "require 50 hours issue.

From LGF, it appears that "change" will be the mode for the next 4 years. Change that is, from minute to minute.

Here it is, basically, the word "require" got sent to re-education camp and has disappeared until it comes back properly retrained:
--
Earlier today we posted about Barack Obama’s plan to require community service from middle school, high school, and college students. This is how it read at the time:

The Obama Administration will call on Americans to serve in order to meet the nation’s challenges. President-Elect Obama will expand national service programs like AmeriCorps and Peace Corps and will create a new Classroom Corps to help teachers in underserved schools, as well as a new Health Corps, Clean Energy Corps, and Veterans Corps. Obama will call on citizens of all ages to serve America, by developing a plan to require 50 hours of community service in middle school and high school and 100 hours of community service in college every year. Obama will encourage retiring Americans to serve by improving programs available for individuals over age 55, while at the same time promoting youth programs such as Youth Build and Head Start.

Lo and behold. Tonight, after the plan was publicized, Obama has quietly thrown that “requirement” part down the memory hole: America Serves.

The Obama Administration will call on Americans to serve in order to meet the nation’s challenges. President-Elect Obama will expand national service programs like AmeriCorps and Peace Corps and will create a new Classroom Corps to help teachers in underserved schools, as well as a new Health Corps, Clean Energy Corps, and Veterans Corps. Obama will call on citizens of all ages to serve America, by setting a goal that all middle school and high school students do 50 hours of community service a year and by developing a plan so that all college students who conduct 100 hours of community service receive a universal and fully refundable tax credit ensuring that the first $4,000 of their college education is completely free. Obama will encourage retiring Americans to serve by improving programs available for individuals over age 55, while at the same time promoting youth programs such as Youth Build and Head Start.
==

Change is a beautiful thing. Perhaps O could change himself into a frog and hop away. The prince's transformation is over. Apologies seem to the management method of choice.

Independent Accountant said...

Printfaster:
Obama's service "requirement" reminds me of John F. Kennedy's 20 January 1961 inaugural address, "Ask not what your country can do for you--ask what you can do for your country". No thanks, I gave at the IRS. It also reminds me JFK's Peace Corps. More ominously, Germany's Freikorps. Keep your eyes on this guy. Who knows what he'll come up with?

printfaster said...

Frankly this service requirement is looking more like Young Pioneers and Hitler Jugend. I hear stories of the Young Pioneers required to snitch on their parents reporting them to their teachers for nonconformist thinking.

The Hitler Youth were commissioned with the task of handing out ration cards the days before the attack on Poland. They were innocent, and could be trusted with distributing cards to everyone just so.

It all points to a fascist system from a fascist thinker supported by a fascist teachers union. By the way the require thing has infested California among other states. I find forced volunteerism hideous, the same as I find any form of government charity. Government charity always turns into a means of control.

You either are charitable or you are not. Making you do charity or forcing taxes for charity are demeaning. Yes, both are a form of taxation, where taxation is taking your time which is the same as labor which is the same as money.

Government, go away. If the people in society cannot deal with the social issues, then your society is degenerate and will not survive.

Anonymous said...

Der Froschkönig oder der eiserne Heinrich