The Barack Obama We Hardly Know......(Now we're getting some where !)

Is Barack Obama a socialist? A Marxist? It is hard to believe that question could even be seriously asked of a major party political candidate.

Nevertheless, there have been a few times that voters have gotten a glimpse of Obama in unguarded moments. Glimmers that remind me of the left-wing academic whom I ran into a number of times while we were both at the University of Chicago Law School.

— When Charlie Gibson asked Obama in April why he supported higher capital gains taxes, even if that meant less government revenue and thus less money to give to those Obama wants to help, Obama didn’t challenge Gibson’s claim. Instead he said: “I would look at raising the capital gains tax for purposes of fairness.”

— In the middle of October, when speaking to “Joe the Plumber,” Obama justified higher taxes this way:

"It is not that I want to punish your success. I just want to make sure that everyone who is behind you, that they have a chance for success too. I think that when you spread the wealth around, it is good for everyone.”

A bombshell was released this weekend when a copy of an interview by Obama on WBEZ-FM, Chicago Public Radio, from 2001 was found (bold italics added):

"The Supreme Court never ventured into the issues of redistribution of wealth, and of more basic issues such as political and economic justice in society ... and one of the, I think, tragedies of the civil rights movement was, um, because the civil rights movement became so court focused, I think there was a tendency to lose track of the political and community organizing and activities on the ground that are able to put together the actual coalition of powers ...........

We need to call him $inator Redistributor!

Saturday, October 25, 2008

Would Obama, Dems Kill 401(k) Plans?

October 23, 2008 10:47 AM ET | James Pethokoukis |

I hate to use the “S” word, but the American government would never do something as, well, socialist as seize private pension funds, right? This is exactly what cash-strapped Argentina just did in the name of protecting workers’ retirement accounts (Efharisto, Fausta’s Blog). Now, even Uncle Sam isn’t that stupid, but some Democrats might try something almost as loopy: kill 401(k) plans.

House Democrats recently invited Teresa Ghilarducci, a professor at the New School of Social Research, to testify before a subcommittee on her idea to eliminate the preferential tax treatment of the popular retirement plans. In place of 401(k) plans, she would have workers transfer their dough into government-created “guaranteed retirement accounts” for every worker. The government would deposit $600 (inflation indexed) every year into the GRAs. Each worker would also have to save 5 percent of pay into the accounts, to which the government would pay a measly 3 percent return. Rep. Jim McDermott, a Democrat from Washington and chairman of the House Ways and Means Committee’s Subcommittee on Income Security and Family Support, said that since “the savings rate isn’t going up for the investment of $80 billion [in 401(k) tax breaks], 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.”

A few respectful observations:
1) McDermott is right when he says the savings rate isn’t going up. But the savings rate doesn’t include gains to money you invest in the stock market. It ignores the buildup of net worth. (If you bought a share of XYZ Corp. in January at $100, for instance, and its value doubled by December, the savings rate measure would still value that investment at $100. In short, the savings rate is a phony number.)
2) So based partly on the above faulty logic, the $4.5 trillion, as of the start of the year, invested in 401(k) plans doesn’t count as savings.
3) Ghilarducci would have workers abandon the stock market right at the bottom of the market. A stupid idea, according to Warren Buffett: “I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: ‘Put your mouth where your money was.’ Today my money and my mouth both say equities.”
4) Ghilarducci would offer a lousy 3 percent return. The long-run return of the stock market, adjusted for inflation, is more like 7 percent. Look at it this way: Ten thousand dollars growing at 3 percent a year for 40 years leaves you with roughly $22,000. But $10,000 growing at 7 percent a year for 40 years leaves you with $150,000. That is a high price to pay for what Ghilarducci describes as the removal of “a source of financial anxiety and...fruitless discussions with brokers and financial sales agents, who are also desperate for more fees and are often wrong about markets.” Please, I’ll take a bit of worry for an additional $128,000.
5) What effect would this plan have on an already battered stock market? Well, I would imagine it would send it even lower, sticking a shiv into the portfolios of everyone who didn’t jump aboard. But I am sure the Chinese would love to jump in and buy all our cheap stocks to fund the retirement of their citizens.

My bottom line: If you believe in the long-run dynamism of the American economy, then you have to believe in the stock market. Listen to superinvestor Buffett, not the prof from the New School.

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