“Why do you rob banks, Willy?”
asked a reporter one day of bank robber Willy Sutton. The answer, to
Willy, at least, was obvious:
“Cause that’s where the money is.”
Funny how naturally that line comes to
mind when you think of the plans that House Education and Labor
Committee Chairman George Miller (D-CA); and Rep. Jim McDermott
(D-WA), Chairman of the House Ways and Means Committee’s
Subcommittee on Income Security and Family Support, have for your
retirement savings plan and the plans you have set up for your
employees.
Socializing 401k Plans: An
Opportunity to Seize Control
It is remarkable that moments of crisis
in America always seem to be invitations for power grabs as
Americans, frightened by the current circumstances, hand over power
and liberty to the government in return for promises of safety and
security. Benjamin Franklin anticipated this when he wrote: "Those
Who Sacrifice Liberty For Security Deserve Neither."
Our 401ks are suffering, yet another victim of the global recession
set off by forcing the financial sector to follow political and
social rather than fiscal necessities. That kind of social
experimentation always leads to trouble, yet the same party
that proudly brought on the housing crisis wants to take over your
retirement plan!
“The
savings rate isn’t going up for the investment of $80 billion,”
Miller 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.”
Miller has been thinking about it, and
this is what he and his fellow democrats have come up with:
Eliminate the 401k tax breaks
Buy up 401ks at pre-crash values
and pay a straight 3% interest on contributions
Make those contributions of 5% of
net salary mandatory
Administer 401ks as part of the
Social Security system
Pay-out 401k funds along with
Social Security payments
In short, the plan is to take control
of the most popular retirement tool in the nation, make it mandatory,
determine how the money thus brought under government control should
be invested and dole it out to retirees as the government sees fit.
These are the same folks who have been
pilfering Social Security funds for decades, taking money for other
needs and hoping that current workers paying into the fund will be
able to keep it afloat. What makes you think that your retirement
money would be safe? Social Security is yet another bubble and people
have been predicting its demise for years. Perhaps this proposal, to
socialize 401ks, is an effort to ease the pain of an impending Social
Security meltdown, but I doubt it. Like all too many actions taken by
the US Government of late, it is a chance to take control over more
and more of the economy.
The Downside of Socializing 401ks
If they don't make it mandatory, that
is, if they don't make this into another payroll deduction from the
employee's check, then no one would do it. People would find other
ways to squirrel away money for their golden years. The reason people
make contributions to these plans is the fact that the employer
matches their donation up to a certain point and that these plans
offer tax incentives that make saving through these plans attractive.
Get rid of these incentives and the only reason people will bother
with 401ks any longer will be fact that they will become mandatory,
an additional 5% tax on earnings over and above Social Security.
According to John Belluardo, president
of Stewardship Financial Services Inc. in Tarrytown, New York. “A
lot of people contribute to their 401(k)s because of the match of the
employer. Higher-income employers provide matching funds to employee
plans so that they can qualify for tax benefits for their own
defined-contribution plans. If the tax deferral goes away, the
employers have no reason to do the matches, which primarily help
people in the lower income brackets.”
More to the point, it helps people in
the lower income brackets save without relying on the government,
which Christopher Van Slyke, a partner
in Trovena, a La Jolla, California, advisory firm with $400 million
under management, says is at the heart of the issue. “This
is a battle between liberalism and conservatism,” he said. “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.”
The
Bottom Line
To anyone
with the least bit of investment savvy, the idea of making huge
changes to a tried-and-true plan like the 401k because of the events
of the last 90 days is ridiculous, so ridiculous that it cannot
possibly be the reason. Still, the idea is on the table and if the
Democrats take full control of Washington next year, then it is
likely to become law and more trillions of dollars will come under
direct government control.
They say
that controlling the means of production is what makes a socialist
state. If you control capital and can start and stop the flow of
necessary funds, then you do control the means of production. The
more sectors of the economy that come under government control, the
closer we get, a sobering thought that makes one wonder: With Obama,
Pelosi and Reid in charge, once the financial sector is under
government control, what else we will have socialized?
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