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.
Steven L.
> 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.
This article is incorrect on a number of points.
The proposal does *NOT* involve "confiscating" existing IRA and 401(k)
accounts. You would still have whatever moneys you invested in them.
But any more money invested in them would lose all the tax breaks
currently given to those accounts. Meaning that employers would almost
certainly stop any company match. And no new IRA or 401(k) accounts
could be opened any more.
My take:
Personally, I think this proposal goes too far. But I have said for a
long time that the whole 401(k) concept needs to be rethought, in light
of what we have learned about Americans' investing habits and the
behavior of the stock market.
Unlike a defined-benefit pension plan, a 401(k) plan requires every
worker to be a skilled investor--that's asking too much. And even then,
risk is not shared among many workers; each worker has to take on his
own investment risk. Thus the worker has to invest aggressively to
attempt to meet his retirement goals, but incurs high risk as a result.
Those problems can be fixed without limiting the worker to a government
pool account in government bonds. A better choice would be index funds
or even more aggressive stock market investments. But because it's a
government pool doing the investing, it can afford to ride through
market declines much better than an individual investor can. So much
better that the pool could offer a guaranteed income out of dividends.
In this sense, my proposal resembles a government-sponsored annuity.
--
Steven L.
Email: sdli...@earthlinkNOSPAM.net
Remove the NOSPAM before replying to me.
com...@webtv.net
proposing the govt seize all our pensions,401k,ia,etc. president clinton
got mad as hell ans held a pess conference of his own the next day
stating;" that was not and is not my idea"..
on nov.2,2008 a democRAT congresswoman introduced legislation to seize
our retirement funds and dump them into the phony social security fund
which does not even exist...social securit payments are made out of the
"general fund" not any "scial security fund"...the original fund was
raided by democrats for their social programs many years ago.
DISOBEY !
-herb
"Steven L." <sdli...@earthlink.net> wrote in message
news:gtidna9HfPBjkIjU...@earthlink.com...
I agree with you that Congress doesn't even have the power to confiscate
retirement assets, at least directly.
I think we have a right to ask what the American People have gotten in
return for all of this lost government revenue. It seems all we did was
make a lot of charlatans rich and a lot of account holders insecure about
retirement. From what I read, they would consider putting future
contributions into 3% government bonds which would beat recent long-term
stock market returns and decrease the cost of funding the now titanic (pun
intended) public debt.
What has happened in the markets, recently, would rule out your index fund
suggestion.
-herb
Steven L.
But it certainly wouldn't beat the *long-term* stock market return,
which is around 11% for the S&P 500.
> What has happened in the markets, recently, would rule out your index fund
> suggestion.
Not at all. It would make my proposal *more* worthwhile, because the
assets of millions of workers would be pooled into one big pool invested
in index funds. Even if those funds declined 50% in a bear market,
there would be enough assets in the pool to pay off retiring workers
until the market turned around again.
That is, in fact, how defined-benefit pension plans worked. They were
often invested in the stock market. They could ride through market
declines, because the assets of all the workers in the corporation
(which for General Motors could be over 10,000 workers' worth in its
heyday) were pooled. Even in bear markets, retiring workers at GM got
every penny to which they were entitled.
All I'm proposing is to create a "defined-benefit pension plan" invested
in the stock market, but run by the GOVERNMENT instead of by individual
corporations.
-herb
>>>
I hope you don't think that all former, defined-benefit programs always
remained solvent and everybody got what they expected. I'm no expert but I
remember seeing lots of articles about pension funds in danger of going
belly up. I know that there is a federal facility to take over these (sound
familiar?).
You sound like you are proposing a Social Security program that invests in
stocks. I know the temptation to make more than the 2% that the current
'trust fund' makes but there would always be a risk and the potential for
corruption would be immense. What indexes would we invest in and who would
decide, for instance.
I know an argument can be made for the 11% average return but certainly not
in the last 10 years.
I think they should just leave it alone and another generation of investors
should reflect on the meaning of the word 'risk.'
-herb
Doobie Keebler
> 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 —
.
> the House Committee on Education and Labor. . .
CORRECTION: "Members of the Committee on Education and Labor have been
conducting hearings. . ."
The headline is false framing.
The eharings are held by both Democrats and Republicans.
(More partisan bullshit from right-wing fear-mongers, will it never
end?)
.
.
http://edlabor.house.gov/about/members.shtml
Full Committee, 110th Congress
Republicans
* Howard P. "Buck" McKeon, Ranking Member (CA-25)
* Thomas E. Petri (WI-06)
* Peter Hoekstra (MI-02)
* Michael N. Castle (DE-At Large)
* Mark E. Souder (IN-03)
* Vernon J. Ehlers (MI-03)
* Judy Biggert (IL-13)
* Todd Russell Platts (PA-19)
* Ric Keller (FL-8)
* Joe Wilson (SC-02)
* John Kline (MN-02)
* Cathy McMorris Rodgers (WA-05)
* Kenny Marchant (TX-24)
* Tom Price (GA-06)
* Luis G. Fortuño (PR)
* Charles W. Boustany, Jr. (LA-07)
* Virginia Foxx (NC-05)
* John R. "Randy" Kuhl, Jr. (NY-29)
* Rob Bishop (UT-01)
* David Davis (TN-01)
* Timothy Walberg (MI-07)
Democrats
* George Miller, Chairman (CA-07)
* Dale E. Kildee (MI-05)
* Donald M. Payne (NJ-10)
* Robert E. Andrews (NJ-01)
* Robert C. Scott (VA-03)
* Lynn C. Woolsey (CA-06)
* Rubén Hinojosa (TX-15)
* Carolyn McCarthy (NY-04)
* John F. Tierney (MA-06)
* Dennis J. Kucinich (OH-10)
* David Wu (OR-01)
* Rush D. Holt (NJ-12)
* Susan A. Davis (CA-53)
* Danny K. Davis (IL-07)
* Raúl M. Grijalva (AZ-07)
* Timothy H. Bishop (NY-01)
* Linda T. Sánchez (CA-39)
* John Sarbanes (MD-03)
* Joe Sestak (PA-07)
* Dave Loebsack (IA-02)
* Mazie Hirono (HI-02)
* Jason Altmire (PA-04)
* John Yarmuth (KY-03)
* Phil Hare (IL-17)
* Yvette Clarke (NY-11)
* Joe Courtney (CT-02)
* Carol Shea-Porter (NH-01)
com...@webtv.net
are aboutthe bll he congresswoman introduced into the congressional
house.
DISOBEY !
com...@webtv.net
criminal democRATS....these rich socialist bastards will blame
EVERYTHING on you and take your money away...that is what they do....
roosevelt,JFK ,truman are all dead.... these new democrats are
greedy,evil,SADISTIC criminals who love to hurt people.....ya shoulda
voted for "john wayne mccain."
but it probably would not have mattered since many of the states had
rigged the ballot box in favor of obama...
DISOBEY !
com...@webtv.net
what they did when they got their hands on the soial securty mney;" put
it into the general fud and spend all the money, then tell you that you
stink because you do not pay eough taxes! BWAA HAHHAHAHHA
YOU ARE SELFISH !
YOU ARE NOT PATRIOTIC ! HAHHAHAHHAHAHAHHAHAHHAHAHHAHAHAHHAHAHHAHAHAHHAHA
DISOBEY !
Steven L.
But the problem is that these congressional Democrats are not willing to
leave 401(k) plans alone. If they have their way, they will abolish the
option of tax-sheltered investment in the stock market for most workers,
and forcibly replace it with investment in Government bonds which earn a
far lesser return over the long term.
I'm not proposing an alternative to Social Security. I'm proposing an
alternative to this Democratic plan.
com...@webtv.net
democRATS try to seize the pension funds.....
DISOBEY !