Home » Congress » Democrats to Eliminate 401k Retirement Accounts

Democrats to Eliminate 401k Retirement Accounts

This is so bizarre, reckless, and bad for regular people we can’t make this up if we wanted to:

Powerful House Democrats are eyeing proposals to overhaul the nation’s $3 trillion 401(k) system, including the elimination of most of the $80 billion in annual tax breaks that 401(k) investors receive.

House Education and Labor Committee Chairman George Miller, D-California, and Rep. Jim McDermott, D-Washington, chairman of the House Ways and Means Committee’s Subcommittee on Income Security and Family Support, are looking at redirecting those tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute.

“system of guaranteed retirement accounts to which all workers would be obliged to contribute. ”

Gee, that sounds like … wait for it … Social Security! And we all know how well that worked out — it’s bankrupt in 2017 and will require either massive tax increases, or massive cuts in benefits (or both). And just like the Fannie and Freddie collapse, the politicians tell us the system is fine and won’t be bankrupt (of course, what happens in 2017 when taxes taken in can’t pay benefits they don’t want to talk about) — and just like Fannie/Freddie all those same politicians will say “we never saw this coming…”, and it will be deja vu, all over again. How many trillions will the next bailout cost?

And those guys want to start a new retirement plan? We can see the ads now “The new Secure Community Retirement Wealth Distribution (SCReWeD for short) — brought to you by the same people who brought you subprime mortgages, Social Security insolvency, trillion dollar bailouts, and the Fannie and Freddie collapse”. Something tells us there won’t exactly be truth when they try and sell this mess to voters.

Whether this new scam (oops, plan) replaces social security (unlikely) or be a new tax on top of social security (probably) isn’t clear, but combine the House Democrats with a Senate majority and a friendly Obama administration signing any stinking pile of festering goo they send him, do you really want to find out? How high can your taxes go? How fast can your retirement be raided? (Gingrich was correct recently calling them “Team RePO” for Reid/Pelosi/Obama)

But it gets worse when you see how the plan actually works:

Under Ghilarducci’s [Teresa Ghilarducci, professor of economic-policy analysis at the New School for Social Research in New York] plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5 percent of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would pay 3 percent a year, adjusted for inflation.

So they kill your 401k, force you to pay a tax (oops, contribution) of 5% more of your salary to the government, and only offer investments in government IOU’s (oops, bonds) paying 3% per year (unless they change the rate later). Yeah, that’s a safe investment — I’ll take the stock market and it’s long-term returns, thank you very much — even with the current downturn.

“I want to spend our nation’s dollar for retirement security better. Everybody would now be covered” if the plan were adopted, Ghilarducci said.

She has been in contact with Miller and McDermott about her plan, and they are interested in pursuing it, she said.

Just like Obama told Joe the plumber he wanted to “spread the wealth around” (not exactly true, Obama didn’t mean spread the wealth around, but spread Joe’s wealth around), only this time not only raise your taxes and spread your income around, raid your retirement savings and spread that around as well. More specifically, make sure everyone is beholden to the government for retirement, and remove choice. Aren’t the Democrats supposed to be pro-choice? Only if it involves abortion and throwing babies in the trash if they’re born alive (oops, “survived a medical procedure”).

When it comes to your retirement, no choice allowed, and instead of making your own decisions you’ll only get what the government chooses you should get — and they can change it anytime they like, as often as they wish, as you don’t really own anything, just a bag of IOU’s.

“I have altered our agreement, pray I don’t alter it further.” — Darth Vader

Even worse, Obama with a Democrat controlled Congress passes legislation at will like insane proposals like this — only which have a majority Democratic leadership and President behind them (Team RePO at work).

For more, just Google for “George Miller Jim McDermott 401k” for lots more; it really is as bad as it looks.

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9 Comments

  1. Read the paper before you jump to your conclusions. The key word is “let” people turn their 401Ks into a government run plan. It’s actually an opportunity to turn your 401K from stack market based to US Savings Bonds based.

    Here’s the pdf file with the actual paper.
    http://www.house.gov/ed_workforce/testimony/2008-10-07-TeresaGhilarducci.pdf

    I’t will be less money for people than a 401K, but less risk than the stock market.

  2. Thanks for the link, that was even funnier (and sadder) than we thought. She says:

    Because there is a long run retirement crises, not in Social Security, but in the heavily tax-subsidized, private, voluntary, and commercial tier (page 2) … American workers know we have a short term and long term pension crises but it is not with Social Security but with the voluntary, self-directed, commercial- account – based (page 5)

    If she doesn’t know Social Security is bankrupt in 2017 (we’ve written on it before – search for the article), she’s unqualified to speak on anything economic. In (or about) 2017 Social Security taxes won’t be sufficient to pay benefits. Either raise taxes or slash benefits.

    But to deny the problems of Social Security? Sounds like Congressional Democrats who kept stating Fannie and Freedie were “fundamentally sound” — right up until they collapsed. And you want them to run a new program?

    She’s not on a good start, but next imposing a new 5% tax gets worse:

    Every worker (not in an equivalent defined benefit plan) would save 5% of their pay into their Guaranteed Retirement Account to which the government pays a 3% inflation-indexed guaranteed return.  Workers would earn pension credits based on these accumulations.

    That is why workers’ contributions would be mitigated by a $600 a year contribution from the federal government indexed for inflation which will be paid for by scaling back substantially the tax breaks for 401(k) type accounts. (Page 2)

    Notice the “WOULD SAVE” — doesn’t sound optional.

    So the *conversion* of 401k to this new scam is optional, but the new 5% tax isn’t. 401k’s and IRA’s are not “defined benefit” plans, they’re defined contribution. So no, it’s not optional — it’s a new 5% tax — the question is will they eliminate the 7% (employee-paid) Social Security tax? Unlikely.

    Naturally, they’ll debate and change the proposal much in the coming months — but with the same Congressional leadership who denied the problems with Fannie/Freedie working on it, the idea can only get worse.

    And to trade the flexibility of 401k’s for only 3% return? Why? The worst part is how they’ll pay for this mess — by destroying 401k accounts.

    What a disaster.

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