Well, Joe the Plumber has been the defining moment so far in this Presidential cycle. With a single question, a regular blue collar guy has almost single handed blew up the richest campaign ever. By asking the single question that our "vaunted" MSM has refused to do (gee, should we get illegal aliens in to do the work that these Americans won’t do? Or just offshore the jobs altogether?) and eliciting the single answer that defines Obama ("your money really shouldn’t belong to you – it belongs to who I think it should go to"), the election can be summarized to a single philosophical point:
Do you work for you and your family, or for the State?
Does the sweat of your brow belong to you and your loved ones or the people that brought us the DMV, this fiscal fiasco of failed federal regulation for the sake of social engineering called the sub-prime mortgages, and the failed Katrina response?
Well, Obama has made it clear – instead of using the tax code to merely raise money to fund government activity, he will use it as THE tool for social engineering to give your earnings to those that have not earned it. So, people who have not earned it, will get it. We can argue philosophy all day long, but that is effectively the end result. There is no morality about this, there is no charity about it. It is the law (or will be if Obama gets in and the Republicans are tossed out). Yours will become theirs, plain and simple.
As I have written before, Social Security depends on taxes, benefits, and demography and it is in trouble because feckless Democrat politicians don’t want to change a thing – they will allow it to fail before they would be willing to admit that the costs have become too high. Rather than do the logical thing and model the change in demographics (e.g., people living longer) or costs (i.e., living longer costs more for healthcare),there are a bunch of Democrats who don’t want to stop at just your income. Now, they want to take away your savings by blowing up your 401(K) retirement funds:
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."
Normally, we get to take pre-tax money, often times matched by our employers, and invest that money for our retirement. No government involvement and it is ours to do with as we see fit (following all laws). All ups (and downs) accrue to us and no one else as WE own it ourselves.
This knucklehead, McDermott, believes that our money is his the government’s to hold and invest (Yeah, just like the Social Security IOUs by other government agencies that have pilfered the system already) for our benefit – and give us a lousy 3 percent on it? And what about that involuntary voluntary 5% contribution we’d have to make – just up the FICA rate, eh?
Democrats often declare that Social Security is a "promise" between generations. Sorry, that is just such a pile of steaming dung. It was not a promise but a law (a promise is made between individuals). This is one reason why I do not believe politicians when they talk about "promises" and "discretionary vs non-discretionary". Laws can be made and laws can be unmade.
We all thought that our 401(K) money was ours, by law. So much for that!
A few more observations from John Pethokoukis, who wrote the article:
A few respectful observations:
- 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.)
- 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.
- 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."
- 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.
- 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.
Effectively, if this was passed, you would be reduced to a nominal 3% return on your forced investment (normal rate of return has been about 7%) – so, what is the government going to do with that extra money (for forego that interest)?
This is nothing more than the Dems killing off any kind of competition for Social Security. They all bemoan, from time to time, that we as Americans do not save enough. And yet, for ideological reasons ("people should only rely on government pensions"), they are willing to kill off the 401(K) program by doing away with any tax advantages that you or your employer might be able to take advantage of to save for your self.
And then take advantage of your money in their hands. Remenber – they already take away quite a bit for FICA – and look at the trouble S.S. is in. Boil it down – they are going to try to use your money to cover their poor stewardship of your past money be requiring you to pay even more money.
Do this in the private sector, and you’d be arrested and thrown in the clink for running a Ponzi scheme (taking from Peter to pay Paul).
Hey, that’s what Obama wants to do up front!
