Apparently, President Obama and the Democrat Congressional Leadership Needs Your 401(k) More Than You Do…. The following is an excerpt from the Whiskey and Gunpowder email newsletter for this week:
Forewarned is forearmed!
Will the Feds Fund Deficits with 401(k)s?
By Dan Denning
January 18, 2010
The writing is on the wall for retirement assets held in conventional ways. A report last week in Business Week shows that the U.S. Feds have 401(k) assets in their sights.
“The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.
“Annuities generally guarantee income until the retiree’s death, and often that of a surviving spouse as well. They are designed to protect against the risk that retirees outlive their savings, a danger made clear by market losses suffered by older Americans over the last year, David Certner, legislative counsel for AARP, said in an interview.”
This is the beginning of a money grab by the Feds for the $3.6 trillion in assets held by U.S. 401(k)s. The Feds need that money to finance the deficit.
But right now, the Feds can’t just take that 401(k) money. Well, they could. But it would crash stocks and infuriate the public, leading to some civic violence. What’s more, it would feel like theft as well as looking (and being) like it. So they have to dress the plan up as something that’s better for savers.
They’re trotting out the idea that a defined benefit pension plan is better than defined contribution plan (which is true, if it’s funded well).
- A defined benefit plan guarantees you income in your old age years.
- A defined contribution plan (what we have now) just guarantees money flows into the stock market (which is good for the financial services industry, but don’t guarantee you’ll have any money when you really need it later in life).
The U.S. Treasury Department and the Obama administration are exploring ways to encourage U.S. savers to buy more annuities or investment vehicles composed of “safe” assets. What constitutes safe? Why 30-year U.S. government bonds of course! Thus, the government can encourage people to buy what the Chinese and the Japanese and most other U.S. creditors don’t want to touch any longer.
It’s obvious what the Fed’s get out of this: a ready source of new funds to buy their bonds. This kicks the can of unsustainable deficit spending down the road a few months, or perhaps a few years. But it doesn’t change the fundamentally destructive path of U.S. fiscal policy.
What it does tell you is that mischief is afoot among the wealth stealers of the modern nation state… (T)hey are beginning their cash grab. This takes the form of higher taxes. But the big bounty is the retirement savings of millions of Americans.
If you think that’s balderdash or won’t happen, you’re being naïve. It won’t happen overnight. But it will happen gradually. It’s evolving towards that already. If they can’t get it through tax or royalty revenues, the tax posse will get it by any means necessary, which means your super assets are an obvious target.
Alarmist? Irresponsible? You decide. But we can see the evolution of this as clear as day, even if saying it in public is bad form or taboo. But now is the time to say the taboo things.
The Daily Reckoning Australia