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Monday, February 22, 2010

 

"Are the Democrats Coming After Your Savings?

Excellent discussion from Powerlineblog.com.

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"Are the Democrats Coming After Your Savings?

Source Powerlineblog.com

February 20, 2010 Posted by John at 7:45 PM

"Beginning around 40 years ago, the federal government implemented one of the wisest domestic policy initiatives of modern times. In an effort to equalize the tax treatment of employees and self-employed individuals, a series of statutes permitted self-employed persons to save pre-tax money for retirement and to accumulate funds in retirement accounts that are not taxed until money is withdrawn post-retirement. Those programs have been broadened over the years to include employees, as well as the self-employed, in 401K accounts. Over the last four decades, Americans have saved hundreds of billions of dollars in such retirement accounts. I haven't seen figures lately, but the total of such savings is most likely in the trillions.

Now we have an improvident federal government that has spent itself into a state of near-bankruptcy. It can survive only by selling Treasury bills to Americans and foreigners, but as the government's debts accumulate, international demand for T-bills slackens. So the Democrats are looking for money. They can't help noticing that Americans have saved many billions of dollars--private property, theoretically, but under contemporary constitutional jurisprudence, subject to pretty much any whim that may come out of Washington.

Argentina showed the way in 2008, as we noted here, by nationalizing private retirement funds on the ground that "the private system never achieved what was needed."

Now, the Democrats may be poised to imitate Argentina's theft. Investor's Business Daily reports:

You did the responsible thing. You saved in your IRA or 401(k) to support your retirement, when you could have spent that money on another vacation, or an upscale car, or fancier clothes and jewelry. But now Washington is developing plans for your retirement savings.

BusinessWeek reports that the Treasury and Labor departments are asking for public comment on "the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams."

In plain English, the idea is for the government to take your retirement savings in return for a promise to pay you some monthly benefit in your retirement years.

They will tell you that you are "investing" your money in U.S. Treasury bonds. But they will use your money immediately to pay for their unprecedented trillion-dollar budget deficits, leaving nothing to back up their political promises, just as they have raided the Social Security trust funds.

In other words, the government will allow you the "opportunity" to give Washington your savings, in return for which the government will give you unmarketable T-bills or other unreliable promises to pay some minimal rate of return. The program likely will be "voluntary" to begin with, but that makes no sense--you can buy T-bills in your retirement account any time you want. So the only possible point is to make the exchange mandatory. The government steals your savings in exchange for an IOU.

Will it happen? Clearly the Obama administration, inspired by Argentina, is exploring the option. Today, we have the first administration in American history that aspires to be a banana republic. But can they get away with confiscating millions of Americans' savings? I doubt it. Because first on the list of those who have accumulated wealth in reliance on the laws governing private savings accounts are lawyers. Most people don't realize it, but even lawyers of modest ability typically have, after three or four decades of diligent savings, seven-figure retirement accounts. (This is one reason why influential Democrats don't care whether Social Security goes bust. They wouldn't dream of depending on it.) Lawyers are the heart and soul of the Democratic Party; public employee unions are more important in some ways, but they are junior partners in the Dems' coalition.

If the Obama administration were to announce an intent to confiscate Americans' retirement savings, the howls that would arise from lawyers (and others, too, of course) would be deafening. I don't think the administration could get away with it. Which doesn't mean they won't try, as the current efforts by the Departments of the Treasury and Labor indicate.

Still, others disagree. Earlier today I learned that a relative on Wall Street has stopped accumulating funds in his retirement accounts precisely because he thinks they may be confiscated by the Obama administration. Instead, he is acquiring untraceable, tangible assets--gold and silver--that the government won't be able to steal without a physical search of his property.

That's not good for the economy, of course. When citizens who have the ability to invest in our economy don't dare do so, for fear that their savings will be stolen by the government, we are reverting to an earlier and far poorer economic era. But that, apparently, is what the Obama administration wants. Here, as in so many other ways, we are sailing in uncharted waters.

SCOTT adds: Among many other items available on the Web, this Fox Business story by Robert Powell provides additional information regarding the Treasury/Labor request for comments."

http://www.powerlineblog.com/archives/2010/02/025646.php


Comments:
And now they're saying lets bring the "savings Bond " back, we can really tighten the screws on the American public. >Change< is finally setting in, they're getting desparate....!
Yep.
I worked on the railraod back in the 60s. The railroad had their own retirement acct's paid for by the R R and the employee. It was a nice acct as we put in more money to the acct compared to S S. I left the R R after a few years but was not vested yet and the funds were transferred to my S S acct. That did not bother me.
But I was talking to a R R man a few years back and he told me that the feds took all the R R accts and tranfered them to the S S accts of the R R workers. The point is that R R retirement was paying more to the retire than S S would. A loss in monthly income for the R R man. That is what he told me anyhow.

It used to be that a company couldn't touch the pension money, then they made the rules so that if a company was taken over, the new owners could get at the money -- that's what the buy-out mania of the 80's was about. Now, when a company goes into the crapper, the PBGC takes over and your pension takes a severe haircut. With regard to the 'conversion' of retirement accounts -- look up "conversion" in a legal dictionary -- there has been testimony before Congress (I maty have linked to it before), to promote the matter. Quis custodiet ipsos custodes?
*may* grrr
Thanks Maddog! People were warned now they're getting exactly what they voted for. Pity we who knew better are getting shafted while everyone else awakens from the spell.
Thanks JAP! They're doing everything they can to confiscate all our private property no matter what it is. Central planners always think they know better how to use someone else's money than those who earned it honestly.
Thanks Time*treat! Hostile takeovers seem to be the modern day equivalent of war lords or pirates of ancient times.
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