Socialism Continues on the March
Here's an interesting bit from Investment News: http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20081007/REG/810079894/0/FRONTPAGE
It deserves to be dissected, Bartish style, so here we go:
A wide range of sweeping changes to the 401(k) system were proposed Tuesday at a hearing on how the market crisis has devastated retirement savings plans.
Chief among them was eliminating $80 billion in tax savings for higher-income people enrolled in 401(k) retirement savings plans.
Translation: "This is $80 billion that the government isn't getting because 401(k)s are tax-free. We want it." Wait, the chutzpah gets more brazen.
This was suggested by the chairman of the House Committee on Education and Labor.
“With respect to the 401(k), it appears to be a plan that is not really well-devised for the changes in the market,” Rep. George Miller, D-Calif., said.
“We’ve invested $80 billion into subsidizing this activity,” he said, referring to tax breaks allowed for 401(k) contributions and savings.
"We've invested???" What the heck are these people smoking? The government didn't invest a d@mn thing, individuals did. "Subsidizing" is usually something government does when it gives money to industries or individuals for particular activities. The government can't give this money. It's not theirs, it's yours, if you've got a 401(k).
With savings rates going down, “what do we have to start to think about in Congress of whether or not we want to continue and invest that $80 billion for a policy that is not generating what we … say it should?” Mr. Miller said.
Translation: "We don't think Congress is getting enough money because these investments are tax-free. We need to think of some way to get at that money." Here's a wacky thought: if Congress isn't getting $80 billion that it wanted or expected (and my heart bleeds for them, truly), why don't they cut spending and learn to live within their means like the rest of us?
Congress should let workers trade their 401(k) assets for guaranteed retirement accounts made up of government bonds, suggested Teresa Ghilarducci, an economics professor at The New School for Social Research in New York. When workers collected Social Security, the guaranteed retirement account would pay an inflation-adjusted annuity under her plan.
This is actually pretty hilarious. Remember the ruckus Congress kicked up when Bush suggested that individuals be allowed privatize/invest a small percentage of their Social Security in funds of their own choosing? If I remember the objections correctly, opponents of privatizing Social Security didn't like the notion of the government not controlling all of the money coming into Social Security. And then there was the red herring about potential losses: "Suppose the market goes down, and the person who invested the private part of their Social Security deductions ended up with nothing?"
Now this college professor wants Congress to take your privately invested funds (of your choice) and replace them with a government annuity--what amounts to a Social Security payment--sometime in the future. We're already facing a crisis because millions of people paid into Social Security in the prime of their earning years, only to now face a potentially bankrupt Social Security system. Does anyone truly believe that this bait and switch would work? So what happens if we hand over our funds to the government and those investments increase in value? (And in the long run, they will--we know it, and so does this professor. Otherwise, why would they be so eager to get their hands on them?) The end result here is that government would get profit from your investments and you would have to get by on whatever annuity they're willing to parcel out to you. No, I refuse.
“The way the government now encourages 401(k) plans is to spend $80 billion in tax breaks,” which goes to the highest-income earners, Ms. Ghilarducci said.
That simply results in transferring money from taxed savings accounts to untaxed accounts, she said.
“If we implement automatic [individual retirement accounts] or if we expand the 401(k) system, all we’re doing is adding to this inefficiency,” Ms. Ghilarducci said.
Only Congress would consider tax dollars that they aren't getting "spending." And notice, again, the reference to "higher-income people" and the "highest-income earners." As if people in the middle class don't have 401(k)s. Wrong again. Fifty percent of the American public owns stock, either through 401(k)s, IRAs, direct purchases, or other investment vehicles. That's why the attacks on "the rich" and "big companies" are disingenuous. If big companies are prospering (profiting), 50% of Americans benefit through increased dividends in their 401(k) and pension plans. If large companies are in trouble, as they are now, everyone's future is threatened.
Rep. Robert Andrews, D-N.J., raised the issue of which investment advisers are allowed to offer workers investment advice.
The Department of Labor is considering “loopholes” that would allow advisers to offer “conflicted investment advice if the advisers work for subsidiaries of financial services companies that sell the investments,” he said.
What business is it of Congress who people get advice from? Didn't Congress try to separate investment departments from financial services departments already? What ever became of that?
With American workers facing $2 trillion in losses from retirement plans over the past year and Democrats expected to gain seats in the House and the Senate, actions being contemplated by the committee are an important harbinger of what could come out of Congress next year.
I love the bit about "Democrats expected to gain seats in the House and Senate." It sounds like flat, unemotional, unbiased, "objective" journalism, but it's a flat-out assumption. The elections haven't happened yet. Democrats passed the bailout package, and the bailout hasn't worked. Yes, there will be some backlash against Bush, but what about the Congress that came up with the bill? Certainly there is the possibility of backlash at them, too, right? Wow. What an interesting amount of foolishness for such a short article. Watch your wallets, folks. And your investment portfolios.