Democratic Leaders In The U.S. House Discuss Confiscating 401(k)s, IRAs

So, how hot are the Dems to implement a Marxian plan to take money away from those who worked to earn it and give it to those who did not work to earn it? Pretty hot, it would seem.

The Dems have been discussing such a plan and are trying to disguise it as some sort of retirement rescue package.

What it comes down to is theft. Theft of your hard earned money. Writing for the Carolina Journal, Karen McMahan provides us with the details we need to know about:

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.

Several things to note about this. First, elimination of the tax breaks means that you, the worker, will have a higher tax bill and therefore less money to take care of your family with. Second, the recommendation is to directly confiscate your money, whether you like it or not. Third, and this should cause everyone the most concern, turn that confiscated money over to the Social Security Administration. Yes, the same Social Security Administration that is in danger of bankrupting the entire Federal Government several years down the road because of mismanagment and paying out more than it brings in.

So, what exactly is the plan being discussed? Let’s see:

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 the wealth.”

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.

By her own admission, Ghilarducci shows that this has nothing to do with fixing Social Security or providing a “fix” to a “broken” retirement system. It is all about confiscating money from people who worked to earn it and giving it to people who did not work to earn it. Notice that the Social Security Taxes are still in place which means you are double-paying into the system. Under this plan, not only do you lose control of your own retirement account, but the government will determine how large it will get, how much of your money to confiscate, who will get that money and you get to pay capital gains taxes on top of it all!

And what are the effects of this plan? Read on:

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.”

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 (2004 HSBC Global survey).

The things to notice here: Ghilarducci basically lied about the HSBC survey she quoted. Also note that this plan is a back door to another inheritance tax. Lastly, from the real survey results, you can see that the lower income households are looking at this plan as a means of getting more money without actually having to work for it.

It does not surprise me that the Dems are seriously looking into a plan like this. It is everything their presidential candidate embraces in terms of a Marxist redistriubution of the wealth.

We need to keep a close eye on these Dems and let them know that we will not tolerate them dragging the United States into the socialist hell that is Europe and most third-world nations.

You can access the complete article on-line here:

Dems Target Private Retirement Accounts
Karen McMahan
Carolina Journal
November 4, 2008

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