OT Democratic leaders in the U.S. House discuss confiscating 401(k)s, IRAs
Don Tiberone
RALEIGH — Democrats in the U.S. House have been conducting hearings on
proposals to confiscate workers’ personal retirement accounts —
including 401(k)s and IRAs — and convert them to accounts managed by
the Social Security Administration.
Triggered by the financial crisis the past two months, the hearings
reportedly were meant to stem losses incurred by many workers and
retirees whose 401(k) and IRA balances have been shrinking rapidly.
The testimony of Teresa Ghilarducci, professor of economic policy
analysis at the New School for Social Research in New York, in
hearings Oct. 7 drew the most attention and criticism. Testifying for
the House Committee on Education and Labor, Ghilarducci proposed that
the government eliminate tax breaks for 401(k) and similar retirement
accounts, such as IRAs, and confiscate workers’ retirement plan
accounts and convert them to universal Guaranteed Retirement Accounts
(GRAs) managed by the Social Security Administration.
Rep. George Miller, D-Calif., chairman of the House Committee on
Education and Labor, in prepared remarks for the hearing on “The
Impact of the Financial Crisis on Workers’ Retirement Security,”
blamed Wall Street for the financial crisis and said his committee
will “strengthen and protect Americans’ 401(k)s, pensions, and other
retirement plans” and the “Democratic Congress will continue to
conduct this much-needed oversight on behalf of the American people.”
Currently, 401(k) plans allow Americans to invest pretax money and
their employers match up to a defined percentage, which not only
increases workers’ retirement savings but also reduces their annual
income tax. The balances are fully inheritable, subject to income tax,
meaning workers pass on their wealth to their heirs, unlike Social
Security. Even when they leave an employer and go to one that doesn’t
offer a 401(k) or pension, workers can transfer their balances to a
qualified IRA.
Mandating Equality
Ghilarducci’s plan first appeared in a paper for the Economic Policy
Institute: Agenda for Shared Prosperity on Nov. 20, 2007, in which she
said GRAs will rescue the flawed American retirement income system
(www.sharedprosperity.org/bp204/bp204.pdf).
The current retirement system, Ghilarducci said, “exacerbates income
and wealth inequalities” because tax breaks for voluntary retirement
accounts are “skewed to the wealthy because it is easier for them to
save, and because they receive bigger tax breaks when they do.”
Lauding GRAs as a way to effectively increase retirement savings,
Ghilarducci wrote that savings incentives are unequal for rich and
poor families because tax deferrals “provide a much larger ‘carrot’ to
wealthy families than to middle-class families — and none whatsoever
for families too poor to owe taxes.”
GRAs would guarantee a fixed 3 percent annual rate of return, although
later in her article Ghilarducci explained that participants would not
“earn a 3% real return in perpetuity.” In place of tax breaks workers
now receive for contributions and thus a lower tax rate, workers would
receive $600 annually from the government, inflation-adjusted. For low-
income workers whose annual contributions are less than $600, the
government would deposit whatever amount it would take to equal the
minimum $600 for all participants.
In a radio interview with Kirby Wilbur in Seattle on Oct. 27, 2008,
Ghilarducci explained that her proposal doesn’t eliminate the tax
breaks, rather, “I’m just rearranging the tax breaks that are
available now for 401(k)s and spreading — spreading the wealth.”
All workers would have 5 percent of their annual pay deducted from
their paychecks and deposited to the GRA. They would still be paying
Social Security and Medicare taxes, as would the employers. The GRA
contribution would be shared equally by the worker and the employee.
Employers no longer would be able to write off their contributions.
Any capital gains would be taxable year-on-year.
Analysts point to another disturbing part of the plan. With a GRA,
workers could bequeath only half of their account balances to their
heirs, unlike full balances from existing 401(k) and IRA accounts. For
workers who die after retiring, they could bequeath just their own
contributions plus the interest but minus any benefits received and
minus the employer contributions.
Another justification for Ghilarducci’s plan is to eliminate
investment risk. In her testimony, Ghilarducci said, “humans often
lack the foresight, discipline, and investing skills required to
sustain a savings plan.” She cited the 2004 HSBC global survey on the
Future of Retirement, in which she claimed that “a third of Americans
wanted the government to force them to save more for retirement.”
What the survey actually reported was that 33 percent of Americans
wanted the government to “enforce additional private savings,” a
vastly different meaning than mandatory government-run savings. Of the
four potential sources of retirement support, which were government,
employer, family, and self, the majority of Americans said “self” was
the most important contributor, followed by “government.” When broken
out by family income, low-income U.S. households said the “government”
was the most important retirement support, whereas high-income
families ranked “government” last and “self” first (www.hsbc.com/
retirement).
On Oct. 22, The Wall Street Journal reported that the Argentinean
government had seized all private pension and retirement accounts to
fund government programs and to address a ballooning deficit. Fearing
an economic collapse, foreign investors quickly pulled out, forcing
the Argentinean stock market to shut down several times. More than 10
years ago, nationalization of private savings sent Argentina’s economy
into a long-term downward spiral.
Income and Wealth Redistribution
The majority of witness testimony during recent hearings before the
House Committee on Education and Labor showed that congressional
Democrats intend to address income and wealth inequality through
redistribution.
On July 31, 2008, Robert Greenstein, executive director of the Center
on Budget and Policy Priorities, testified before the subcommittee on
workforce protections that “from the standpoint of equal treatment of
people with different incomes, there is a fundamental flaw” in tax
code incentives because they are “provided in the form of deductions,
exemptions, and exclusions rather than in the form of refundable tax
credits.”
Even people who don’t pay taxes should get money from the government,
paid for by higher-income Americans, he said. “There is no obvious
reason why lower-income taxpayers or people who do not file income
taxes should get smaller incentives (or no tax incentives at all),”
Greenstein said.
“Moving to refundable tax credits for promoting socially worthwhile
activities would be an important step toward enhancing progressivity
in the tax code in a way that would improve economic efficiency and
performance at the same time,” Greenstein said, and “reducing barriers
to labor organizing, preserving the real value of the minimum wage,
and the other workforce security concerns . . . would contribute to an
economy with less glaring and sharply widening inequality.”
When asked whether committee members seriously were considering
Ghilarducci’s proposal for GSAs, Aaron Albright, press secretary for
the Committee on Education and Labor, said Miller and other members
were listening to all ideas.
Miller’s biggest priority has been on legislation aimed at greater
transparency in 401(k)s and other retirement plan administration,
specifically regarding fees, Albright said, and he sent a link to a
Fox News interview of Miller on Oct. 24, 2008, to show that the
congressman had not made a decision.
After repeated questions asked by Neil Cavuto of Fox News, Miller said
he would not be in favor of “killing the 401(k)” or of “killing the
tax advantages for 401(k)s.”
Arguing against liberal prescriptions, William Beach, director of the
Center for Data Analysis at the Heritage Foundation, testified on Oct.
24 that the “roots of the current crisis are firmly planted in public
policy mistakes” by the Federal Reserve and Congress. He cautioned
Congress against raising taxes, increasing burdensome regulations, or
withdrawing from international product or capital markets. “Congress
can ill afford to repeat the awesome errors of its predecessor in the
early days of the Great Depression,” Beach said.
Instead, Beach said, Congress could best address the financial crisis
by making the tax reductions of 2001 and 2003 permanent, stopping
dependence on demand-side stimulus, lowering the corporate profits
tax, and reducing or eliminating taxes on capital gains and dividends.
Testifying before the same committee in early October, Jerry Bramlett,
president and CEO of BenefitStreet, Inc., an independent 401(k) plan
administrator, said one of the best ways to ensure retirement security
would be to have the U.S. Department of Labor develop educational
materials for workers so they could make better investment decisions,
not exchange equity investments in retirement accounts for Treasury
bills, as proposed in the GSAs.
Should Sen. Barack Obama win the presidency, congressional Democrats
might have stronger support for their “spreading the wealth” agenda.
On Oct. 27, the American Thinker posted a video of an interview with
Obama on public radio station WBEZ-FM from 2001.
In the interview, Obama said, “The Supreme Court never ventured into
the issues of redistribution of wealth, and of more basic issues such
as political and economic justice in society.” The Constitution says
only what “the states can’t do to you. Says what the Federal
government can’t do to you,” and Obama added that the Warren Court
wasn’t that radical.
Although in 2001 Obama said he was not “optimistic about bringing
major redistributive change through the courts,” as president, he
would likely have the opportunity to appoint one or more Supreme Court
justices.
“The real tragedy of the civil rights movement was, um, because the
civil rights movement became so court focused that I think there was a
tendency to lose track of the political and community organizing and
activities on the ground that are able to put together the actual
coalition of powers through which you bring about redistributive
change,” Obama said.
Fred
> http://www.carolinajournal.com/articles/display_story.html?id=5081
>
> RALEIGH — Democrats in the U.S. House have been conducting hearings on
> proposals to confiscate workers’ personal retirement accounts
I hear that Obama is also considering free abortion coupons given out
starting in elementary schools (or have five abortions, get #6 free),
criminal penalties for not recycling, outlawing SUVs, making Fox News
broadcast on UHF and mandatory conversion to Islam.
--
-Fred
theBZA
> http://www.carolinajournal.com/articles/display_story.html?id=5081
>
> RALEIGH � Democrats in the U.S. House have been conducting hearings on
> proposals to confiscate workers� personal retirement accounts �
> including 401(k)s and IRAs � and convert them to accounts managed by
> the Social Security Administration.
>
> Triggered by the financial crisis the past two months, the hearings
> reportedly were meant to stem losses incurred by many workers and
> retirees whose 401(k) and IRA balances have been shrinking rapidly.
>
> The testimony of Teresa Ghilarducci, professor of economic policy
> analysis at the New School for Social Research in New York, in
> hearings Oct. 7 drew the most attention and criticism. Testifying for
> the House Committee on Education and Labor, Ghilarducci proposed that
> the government eliminate tax breaks for 401(k) and similar retirement
> accounts, such as IRAs, and confiscate workers� retirement plan
> accounts and convert them to universal Guaranteed Retirement Accounts
> (GRAs) managed by the Social Security Administration.
>
discussing plans." So much for the "liberal media. "
Jabba
> http://www.carolinajournal.com/articles/display_story.html?id=5081
>
> RALEIGH — Democrats in the U.S. House have been conducting hearings on
> proposals to confiscate workers’ personal retirement accounts —
> including 401(k)s and IRAs — and convert them to accounts managed by
> the Social Security Administration.
>
> Triggered by the financial crisis the past two months, the hearings
> reportedly were meant to stem losses incurred by many workers and
> retirees whose 401(k) and IRA balances have been shrinking rapidly.
Goddam those democrats. The worst economic crisis in a century and
here they are worried about working people's retirement funds. Why
can't they sit back and enjoy watching the market fuck these people up
the ass like the rest of us?
Don't get me wrong, over the long term the free market is a
demonstrably better place for your money, no doubt. But I think this
might be a good time to review all the options -- don't you?
--
jabba
citizen of the empire