Posted on 11/29/2008 11:41:32 AM PST by DivaDelMar
RALEIGH — Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers’ personal retirement accounts — including 401(k)s and IRAs — and convert them to accounts managed by the Social Security Administration.
Triggered by the financial crisis the past two months, the hearings reportedly were meant to stem losses incurred by many workers and retirees whose 401(k) and IRA balances have been shrinking rapidly.
The testimony of Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, in hearings Oct. 7 drew the most attention and criticism. Testifying for the House Committee on Education and Labor, Ghilarducci proposed that the government eliminate tax breaks for 401(k) and similar retirement accounts, such as IRAs, and confiscate workers’ retirement plan accounts and convert them to universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.
Rep. George Miller, D-Calif., chairman of the House Committee on Education and Labor, in prepared remarks for the hearing on “The Impact of the Financial Crisis on Workers’ Retirement Security,†blamed Wall Street for the financial crisis and said his committee will “strengthen and protect Americans’ 401(k)s, pensions, and other retirement plans†and the “Democratic Congress will continue to conduct this much-needed oversight on behalf of the American people.â€
Currently, 401(k) plans allow Americans to invest pretax money and their employers match up to a defined percentage, which not only increases workers’ retirement savings but also reduces their annual income tax. The balances are fully inheritable, subject to income tax, meaning workers pass on their wealth to their heirs, unlike Social Security. Even when they leave an employer and go to one that doesn’t offer a 401(k) or pension, workers can transfer their balances to a qualified IRA.
Mandating Equality
Ghilarducci’s plan first appeared in a paper for the Economic Policy Institute: Agenda for Shared Prosperity on Nov. 20, 2007, in which she said GRAs will rescue the flawed American retirement income system (www.sharedprosperity.org/bp204/bp204.pdf).
The current retirement system, Ghilarducci said, “exacerbates income and wealth inequalities†because tax breaks for voluntary retirement accounts are “skewed to the wealthy because it is easier for them to save, and because they receive bigger tax breaks when they do.â€
Lauding GRAs as a way to effectively increase retirement savings, Ghilarducci wrote that savings incentives are unequal for rich and poor families because tax deferrals “provide a much larger ‘carrot’ to wealthy families than to middle-class families — and none whatsoever for families too poor to owe taxes.â€
GRAs would guarantee a fixed 3 percent annual rate of return, although later in her article Ghilarducci explained that participants would not “earn a 3% real return in perpetuity.†In place of tax breaks workers now receive for contributions and thus a lower tax rate, workers would receive $600 annually from the government, inflation-adjusted. For low-income workers whose annual contributions are less than $600, the government would deposit whatever amount it would take to equal the minimum $600 for all participants.
In a radio interview with Kirby Wilbur in Seattle on Oct. 27, 2008, Ghilarducci explained that her proposal doesn’t eliminate the tax breaks, rather, “I’m just rearranging the tax breaks that are available now for 401(k)s and spreading — spreading the wealth.â€
All workers would have 5 percent of their annual pay deducted from their paychecks and deposited to the GRA. They would still be paying Social Security and Medicare taxes, as would the employers. The GRA contribution would be shared equally by the worker and the employee. Employers no longer would be able to write off their contributions. Any capital gains would be taxable year-on-year.
Analysts point to another disturbing part of the plan. With a GRA, workers could bequeath only half of their account balances to their heirs, unlike full balances from existing 401(k) and IRA accounts. For workers who die after retiring, they could bequeath just their own contributions plus the interest but minus any benefits received and minus the employer contributions.
Another justification for Ghilarducci’s plan is to eliminate investment risk. In her testimony, Ghilarducci said, “humans often lack the foresight, discipline, and investing skills required to sustain a savings plan.†She cited the 2004 HSBC global survey on the Future of Retirement, in which she claimed that “a third of Americans wanted the government to force them to save more for retirement.â€
What the survey actually reported was that 33 percent of Americans wanted the government to “enforce additional private savings,†a vastly different meaning than mandatory government-run savings. Of the four potential sources of retirement support, which were government, employer, family, and self, the majority of Americans said “self†was the most important contributor, followed by “government.†When broken out by family income, low-income U.S. households said the “government†was the most important retirement support, whereas high-income families ranked “government†last and “self†first (www.hsbc.com/retirement).
On Oct. 22, The Wall Street Journal reported that the Argentinean government had seized all private pension and retirement accounts to fund government programs and to address a ballooning deficit. Fearing an economic collapse, foreign investors quickly pulled out, forcing the Argentinean stock market to shut down several times. More than 10 years ago, nationalization of private savings sent Argentina’s economy into a long-term downward spiral.
Income and Wealth Redistribution
The majority of witness testimony during recent hearings before the House Committee on Education and Labor showed that congressional Democrats intend to address income and wealth inequality through redistribution.
On July 31, 2008, Robert Greenstein, executive director of the Center on Budget and Policy Priorities, testified before the subcommittee on workforce protections that “from the standpoint of equal treatment of people with different incomes, there is a fundamental flaw†in tax code incentives because they are “provided in the form of deductions, exemptions, and exclusions rather than in the form of refundable tax credits.â€
Even people who don’t pay taxes should get money from the government, paid for by higher-income Americans, he said. “There is no obvious reason why lower-income taxpayers or people who do not file income taxes should get smaller incentives (or no tax incentives at all),†Greenstein said.
“Moving to refundable tax credits for promoting socially worthwhile activities would be an important step toward enhancing progressivity in the tax code in a way that would improve economic efficiency and performance at the same time,†Greenstein said, and “reducing barriers to labor organizing, preserving the real value of the minimum wage, and the other workforce security concerns . . . would contribute to an economy with less glaring and sharply widening inequality.â€
When asked whether committee members seriously were considering Ghilarducci’s proposal for GSAs, Aaron Albright, press secretary for the Committee on Education and Labor, said Miller and other members were listening to all ideas.
Miller’s biggest priority has been on legislation aimed at greater transparency in 401(k)s and other retirement plan administration, specifically regarding fees, Albright said, and he sent a link to a Fox News interview of Miller on Oct. 24, 2008, to show that the congressman had not made a decision.
After repeated questions asked by Neil Cavuto of Fox News, Miller said he would not be in favor of “killing the 401(k)†or of “killing the tax advantages for 401(k)s.â€
Arguing against liberal prescriptions, William Beach, director of the Center for Data Analysis at the Heritage Foundation, testified on Oct. 24 that the “roots of the current crisis are firmly planted in public policy mistakes†by the Federal Reserve and Congress. He cautioned Congress against raising taxes, increasing burdensome regulations, or withdrawing from international product or capital markets. “Congress can ill afford to repeat the awesome errors of its predecessor in the early days of the Great Depression,†Beach said.
Instead, Beach said, Congress could best address the financial crisis by making the tax reductions of 2001 and 2003 permanent, stopping dependence on demand-side stimulus, lowering the corporate profits tax, and reducing or eliminating taxes on capital gains and dividends.
Testifying before the same committee in early October, Jerry Bramlett, president and CEO of BenefitStreet, Inc., an independent 401(k) plan administrator, said one of the best ways to ensure retirement security would be to have the U.S. Department of Labor develop educational materials for workers so they could make better investment decisions, not exchange equity investments in retirement accounts for Treasury bills, as proposed in the GSAs.
Should Sen. Barack Obama win the presidency, congressional Democrats might have stronger support for their “spreading the wealth†agenda. On Oct. 27, the American Thinker posted a video of an interview with Obama on public radio station WBEZ-FM from 2001.
In the interview, Obama said, “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.†The Constitution says only what “the states can’t do to you. Says what the Federal government can’t do to you,†and Obama added that the Warren Court wasn’t that radical.
Although in 2001 Obama said he was not “optimistic about bringing major redistributive change through the courts,†as president, he would likely have the opportunity to appoint one or more Supreme Court justices.
“The real tragedy of the civil rights movement was, um, because the civil rights movement became so court focused that 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 through which you bring about redistributive change,†Obama said.
Karen McMahan is a contributing editor of Carolina Journal.
In fact, under FairTax people will actually increase purchasing power based on having more cash on hand, since savings accounts and investment accounts are no longer subject to taxation. Imagine being able to save up for retirement, buy a house, buy a car, or buy any big-ticket item in cash or with a much smaller loan because you can actually afford a bigger down payment.
There are two kinds of FReepers--those who know how to use the FR search, and those, like you and I, who just can't seem to get it right. Personally, I don't mind repeat postings of items that are of current interest. Those who want to look at all of the history can figure out how to use the search. And, they don't have to look at your thread if they think they've seen it already. End of off-topic rant.
I’d like to note that it didn’t take a constitutional amendment to create the socialist insecurity system. That was supposed to be a government retirement account. That little experiment has generated a 60 trillion dollar unfunded liability. Time to face facts: The New Deal nullified the Constitution.
Did it take a constitutional amendment to confiscate gold? Was gold purchased with previously taxed dollars? Why is a traditional or roth IRA any different?
The idiots who are now in charge will embrace this. I don’t think there are enought self-sufficient, self-actuating individuals remaining to fight it. Don’t believe it can’t or won’t happen here. The COMMUNISTS are in charge and they will do this in the name of “protecting us” and the sheople will embrace it.
I think they could do it with Roth IRA’s as well as Traditional IRA’s.
I’m sure the gold they confiscated during the 30’s was purchased with post-tax dollars, so I don’t see that as a bar.
This will be done in the name of “protecting us” from the evil, greedy bastards on Wall Street. They will paint them as evil incarnate and the sheople will embrace it. Nevermind the fact that this whole mess originated because Congress stuck their willy in the banking soup by requiring banks to issue sub-prime loans. They are never going to take responsibility for this, but they will use it to confiscate our wealth.
PRECISELY! That's why I am going to pull every dime out of my IRA's and 401(k) and buy a bunch of mason jars.
What if the O does this via executive order?
If they “give” you a government account with like balance, have they violated the 5th Amendment protection against taking private property without just compensation?
Don’t wait for the COMMUNIST SOB to be inaugurated. If you are going to do this and spread it over two years, pull some before 12/31 and some before 1/20.
You are welcome and I appreciate your tolerant response.
I pay income tax but not much and if Obama is true to his word, he will eliminate my taxes altogether because I am a retired geezer. That just doesnt seem fair to me; I have enjoyed living in a country that provides for me.
Krauthammer has an OpEd that addresses that called: Bailouts don’t Bode well for Market Economy. The government tells us to save money on the one hand and are angry because we don’t take our rebates and buy consumer products on the other hand.
I dont think he can do it by executive order. Well, technically, there is no real definition of what can and cant be done by executive order, I cant think of any executive order of this sort. This is precisely the kind of thing that requires Congress to pass a law (which is why they had hearings). Congress does not have the “audacity” to do this.
If Obama were to try this, there is little doubt in my mind the Supreme Court would overrule him. But I don’t think he is stupid enough to do it. It would destroy the RAT party ... for a very long time.
Not to mention that the mutual fund/hedge fund/bank/brokerage lobbies will make sure this never happens. Without them, campaign coffers will be pitiful.
SEE: http://www.the-privateer.com/1933-gold-confiscation.html
The Gold Confiscation Of April 5, 1933
From: President of the United States Franklin Delano Roosevelt
To: The United States Congress
Dated: 5 April, 1933
Presidential Executive Order 6102
Forbidding the Hoarding of Gold Coin, Gold Bullion and Gold Certificates By virtue of the authority vested in me by Section 5(b) of the Act of October 6, 1917, as amended by Section 2 of the Act of March 9, 1933, entitled
An Act to provide relief in the existing national emergency in banking, and for other purposes~’,
in which amendatory Act Congress declared that a serious emergency exists,
I, Franklin D. Roosevelt, President of the United States of America, do declare that said national emergency still continues to exist and pursuant to said section to do hereby prohibit the hoarding gold coin, gold bullion, and gold certificates within the continental United States by individuals, partnerships, associations and corporations and hereby prescribe the following regulations for carrying out the purposes of the order:
Section 1. For the purpose of this regulation, the term ‘hoarding” means the withdrawal and withholding of gold coin, gold bullion, and gold certificates from the recognized and customary channels of trade. The term “person” means any individual, partnership, association or corporation.
Section 2. All persons are hereby required to deliver on or before May 1, 1933, to a Federal Reserve bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion, and gold certificates now owned by them or coming into their ownership on or before April 28, 1933, except the following:
(a) Such amount of gold as may be required for legitimate and customary use in industry, profession or art within a reasonable time, including gold prior to refining and stocks of gold in reasonable amounts for the usual trade requirements of owners mining and refining such gold.
(b) Gold coin and gold certificates in an amount not exceeding in the aggregate $100.00 belonging to any one person; and gold coins having recognized special value to collectors of rare and unusual coins.
(c) Gold coin and bullion earmarked or held in trust for a recognized foreign government or foreign central bank or the Bank for International Settlements.
(d) Gold coin and bullion licensed for the other proper transactions (not involving hoarding) including gold coin and gold bullion imported for the re-export or held pending action on applications for export license.
Section 3. Until otherwise ordered any person becoming the owner of any gold coin, gold bullion, and gold certificates after April 28, 1933, shall within three days after receipt thereof, deliver the same in the manner prescribed in Section 2; unless such gold coin, gold bullion, and gold certificates are held for any of the purposes specified in paragraphs (a),(b) or (c) of Section 2; or unless such gold coin, gold bullion is held for purposes specified in paragraph (d) of Section 2 and the person holding it is, with respect to such gold coin or bullion, a licensee or applicant for license pending action thereon.
Section 4. Upon receipt of gold coin, gold bullion, or gold certificates delivered to it in accordance with Section 2 or 3, the Federal reserve bank or member bank will pay thereof an equivalent amount of any other form of coin or currency coined or issued under the laws of the Unites States.
Section 5. Member banks shall deliver alt gold coin, gold bullion, and gold certificates owned or received by them (other than as exempted under the provisions of Section 2) to the Federal reserve banks of there respective districts and receive credit or payment thereof.
Section 6. The Secretary of the Treasury, out of the sum made available to the President by Section 501 of the Act of March 9, 1933, will in all proper cases pay the reasonable costs of transportation of gold coin, gold bullion, and gold certificates delivered to a member bank or Federal reserve bank in accordance with Sections 2, 3, or 5 hereof, including the cost of insurance, protection, and such other incidental costs as may be necessary, upon production of satisfactory evidence of such costs. Voucher forms for this purpose may be procured from Federal reserve banks.
Section 7. In cases where the delivery of gold coin, gold bullion, or gold certificates by the owners thereof within the time set forth above will involve extraordinary hardship or difficulty, the Secretary of the Treasury may, in his discretion, extend the time within which such delivery must be made. Applications for such extensions must be made in writing under oath; addressed to the Secretary of the Treasury and filed with a Federal reserve bank. Each applications must state the date to which the extension is desired, the amount and location of the gold coin, gold bullion, and gold certificates in respect of which such application is made and the facts showing extension to be necessary to avoid extraordinary hardship or difficulty.
Section 8. The Secretary of the Treasury is hereby authorized and empowered to issue such further regulations as he may deem necessary to carry the purposes of this order and to issue licenses there under, through such officers or agencies as he may designate, including licenses permitting the Federal reserve banks and member banks of the Federal Reserve System, in return for an equivalent amount of other coin, currency or credit, to deliver, earmark or hold in trust gold coin or bullion to or for persons showing the need for same for any of the purposes specified in paragraphs (a), (c), and (d) of Section 2 of these regulations.
Section 9. Whoever willfully violates any provision of this Executive Order or these regulation or of any rule, regulation or license issued there under may be fined not more than $10,000, or,if a natural person may be imprisoned for not more than ten years or both; and any officer, director, or agent of any corporation who knowingly participates in any such violation may be punished by a like fine, imprisonment, or both.
This order and these regulations may be modified or revoked at any time.
/s/
Franklin D. Roosevelt
President of the United States of America
April 5, 1933
Don’t delude yourself. This administration is going to make FDR look like a piker in comparison.
Realistically, I think the country has changed too much since FDR for such an order to be politically viable. Unlike FDR’s time, there are simply too many prosperous people, with the means and motive to fight tooth and nail.
As in they didn't confiscate all of it? Or, they didn't confiscate it at all?
I do believe that they did grab hold of all of it, paid for it eventually at half price, and then outlawed the owning of gold bullion by the average citizen for quite a while.
See: http://mises.org/story/3056
Outlawing the ownership of gold pretty much means a forced sale to the government, which is close enough to confiscation for me.
They did not confiscate all of it. Many people hid their gold. Those with a lot of gold put it in European banks vaults (and the fortunate chose Switzerland rather than Germany or France as their banking location).
Where were all those people on November 4th?
If you want to really roil the markets, confiscating 20% of the 401k/IRA accounts and scaring the rest into overseas gold would do wonders.
Dow 500, here we come.
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