FedUpUSA

Archive for February 18th, 2010

Class Warfare’s Next Target: 401(k) Savings

By NEWT GINGRICH AND PETER FERRARA

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.

This “conversion” may start out as an optional choice, though you are already free to buy Treasury bonds whenever you want. But as Karl Denninger of the Market Ticker Web site reports: “‘Choices’ have a funny way of turning into mandates, and this looks to me like a raw admission that Treasury knows it will not be able to sell its debt in the open market — so they will effectively tax you by forcing your ‘retirement’ money to buy them.”

Moreover, benefits based on Treasury bond interest rates may be woefully inadequate compensation for your years of savings. As Denninger adds, “What’s even worse is that the government has intentionally suppressed Treasury yields during this crisis (and will keep doing so by various means, including manipulating the CPI inflation index) so as to guarantee that you lose over time compared to actual purchasing power.”

This proposal follows hearings held last fall by House Education and Labor Committee Chairman George Miller, D-Calif., and Rep. Jim McDermott, D-Wash., of the Ways and Means Committee focusing on “redirecting (IRA and 401k) tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute,” as reported by InvestmentNews.com.

The hearings examined a proposal from professor Teresa Ghilarducci of the New School for Social Research in New York to give all workers “a $600 annual inflation-adjusted subsidy from the U.S. government” in return for requiring workers “to invest 5% of their pay into a guaranteed retirement account administered by the Social Security Administration.”

Argentina provided a precedent in 2008, taking over that country’s private retirement accounts for forced investment in government bonds to cover spiraling deficits. Ambrose Evans-Pritchard editorialized at the time in Britain’s Daily Telegraph that this may be “a foretaste of what may happen across the world as governments discover .. . that the bond markets are unwilling to plug the (deficit) gap. . .. My fear is that governments in the U.S., Britain and Europe will display similar reflexes.”

This is just the latest chapter in what is developing into a war by the left on America’s seniors. All that class-war rhetoric about “the rich” ends up targeting seniors, who tend to have accumulated the most in savings and investment on average because they have been around the longest.

President Obama, House Speaker Pelosi and Senate Majority Leader Reid targeted seniors for hundreds of billions in Medicare cuts to finance expanded Medicaid for the poor and other new entitlements in the ObamaCare health care takeover legislation. If you liked your health insurance, you were supposed to be able to keep it, except for the 25% of seniors who had chosen Medicare Advantage private health plans for their Medicare coverage.

Even the Medicare actuaries estimated that most of those seniors would lose their Medicare Advantage coverage because of all the ObamaCare cuts for those plans. Obama has even begun rationing for seniors under Medicare by slashing payments to heart and cancer specialists serving seniors under that program.

All of this reflects a fundamental problem underlying socialist economic policies. If the government keeps punishing responsibility and rewarding failure, society ends up with a lot less responsibility and a lot more failure, destroying prosperity in the process.

As former British Prime Minister Margaret Thatcher said, “The trouble with socialism is you run out of other people’s money to spend.” And now they want to spend our retirement savings.

Congressional Republicans should introduce legislation to block the government from ever proceeding with anything like this. Call it the “Keep Your Hands Off My 401(k) Act of 2010.”

• Gingrich is former speaker of the House.

• Ferrara is director of entitlement and budget policy for the Institute for Policy Innovation.

The Chicago Tribune

A highly unusual closed-door meeting of the state Senate lasted about an hour and a half today, and participants said many of the chamber’s 59 Democrats and Republicans attended to hear a presentation on budgeting and the economy from national experts.

Lawmakers barred reporters from the meeting, saying it was a joint gathering of the Democratic and Republican caucuses that was not required to be public under the state Constitution or open meetings law. Reporters were offered the opportunity to get the information from the budget experts at a post-meeting news conference, but Democratic and Republican leaders said they wanted the meeting private to encourage a frank exchange between public officials.

Donald Craven, a longtime attorney for the Illinois Press Association who also has represented the Chicago Tribune on open government issues, said the meeting should have been open no matter how big or small the topic.

“The topic is not important,” Craven said. “If the Senate can go into a joint caucus to talk about this topic, what’s the logical extreme?

 ”Can they also go into a joint caucus to debate the budget bill? Can they go into a joint caucus to debate the hundreds of other bills that go before the state Senate?” Craven asked.

State Senate President John Cullerton did not answer questions when he left the meeting, noting a news conference would follow, but he did not attend it.

So, what’d they see?

Slideshow #1:  http://thecapitolfaxblog.com/StateBudgetUpdate.pdf

Slideshow #2:  http://thecapitolfaxblog.com/FederalFunds.pdf

As you can see from the slideshows, Illinois is not alone.  I expect other state legislators to get the same presentation some point soon.  States are not only ill prepared for what is about to crash down on them, they have woefully underestimated revenue shortfalls.  This also extends to small municipalities, one of which I reside in.  Our city government has estimated a 12% revenue decrease for 2010.   One can only imagine the gaping hole that will be the budget gap that little mathematical error will result in. 

Note to states and municipalities:  wake up and smell the coffee and don’t think for one minute your citizens, after having been asked to foot the bill for a myriad of insolvent banks, two auto companies, a giant stimulus that hasn’t created one darn job (but according to the Administration, hypothetically ‘saved jobs,’) all the while losing their 401ks, jobs and housing values, will be pleased you were so stupid and short-sighted as to miss this freight train coming.  No, you’re going to have to do what the American citizens have been doing, tighten your belt, trim the fat and man up; stop the spending, root out and expose any fraud, cronyism and collusion and then put those who perpatrated it in jail.  ENOUGH is ENOUGH!  And citizens, YOU have a duty to force them to do these things.  The power resides with you.