Democrats to kill 401(k)s for … privatized Social Security?

posted at 9:30 am on October 23, 2008 by Ed Morrissey

In 2005, George Bush proposed privatizing a portion of Social Security contributions to allow workers to control their own funds and hopefully outperform the woefully inadequate entitlement system.  The partial privatization would eventually have helped postpone or eliminate the insolvency of Social Security, but Democrats screeched that the GOP wanted to steal benefits from Grandma and effectively killed the debate.  To this day, they accuse Republican candidates of supporting Bush’s partial privatization plan as though it were the equivalent of Teapot Dome.

So why are Democrats now looking to partially nationalize existing 401(k) plans into the exact same kind of private/public pension system?

Powerful House Democrats are eyeing proposals to overhaul the nation’s $3 trillion 401(k) system, including the elimination of most of the $80 billion in annual tax breaks that 401(k) investors receive.

House Education and Labor Committee Chairman George Miller, D-California, and Rep. Jim McDermott, D-Washington, chairman of the House Ways and Means Committee’s Subcommittee on Income Security and Family Support, are looking at redirecting those tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute.

Hmm …. “a system of guaranteed retirement accounts to which all workers would be obliged to contribute.”  That sounds very, very familiar, doesn’t it?  Don’t we already do this with Social Security?

A plan by Teresa Ghilarducci, professor of economic-policy analysis at the New School for Social Research in New York, contains elements that are being considered. She testified last week before Miller’s Education and Labor Committee on her proposal.  …

Under Ghilarducci’s plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5 percent of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would pay 3 percent a year, adjusted for inflation.

The current system of providing tax breaks on 401(k) contributions and earnings would be eliminated.

That means your employer can no longer write off their contributions to your 401(k), and your capital gains would be taxable year-on-year.  In other words, it becomes just another investment or savings account, with no tax benefit at all, and no employer contribution.  Instead, Uncle Sam would give you your “matching” funds — up to a whopping $600 per year!  Whoopee!

As Michelle Obama says, you could buy a pair of earrings every year … except, of course, you can’t.  It’s in The Lockbox, defined by politicians as Locked Away from You but Accessible to Us.  It goes there along with 5% of your gross earnings, apparently to play with the 7% of your gross earnings that already goes to Social Security.  And what do they do with the money?  They give you government bonds as your only investment option.

Maybe you’ll be lucky, and they’ll have Franklin Raines running the agency issuing those bonds.

The Democrats want to end the private retirement system that has allowed Americans to become a vast investor class and put them back in thrall of the federal government.  This is nothing more than a second welfare system that would sit on top of the crumbling Social Security entitlement.  It would leave the American working and middle classes with no retirement option other than a government handout.

If the Democrats control both Congress and the White House, kiss your 401(k)s goodbye, and get into the bread lines first before the crowd arrives. (via Q&O)


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Wait a minute. I just noticed this. A tax break on retirement investment is a government “subsidy”? What? The government refraining from taking our money is a “subsidy” now?

aero on October 23, 2008 at 1:42 PM

This is just a first step. They have to nationalize the 401k system, and then when SS collapses they will say it is too large to fail. It will be rolled into the newly nationalized 401k system to use it’s 4 trillion dollars to prop up SS, and then we will be truly broke. The last step will be when foreign nations quit lending us money, and when that happens then the cataclysm will begin. We can’t avoid it, but this will mark the end of socialism, and we can begin to build again.

DFCtomm on October 23, 2008 at 1:50 PM

I’m not sure if they think, as you do, that the government will soon begin encouraging them to die off sooner than they might otherwise, or if they’re simply expressing resentment of my resentment. Either way, they’re wrong about the pie analogy. There won’t be even a crumb of their piece of the pie left for the next generations (in fact, their piece of the pie was eaten before they got there, too). This won’t change, even if the socialist government begins engaging in active euthanasia after the age of 70. (Can’t get the image of the blinking red palm-lights from “Logan’s Run” out of my head!)

aero on October 23, 2008 at 12:43 PM

Logan’s Run, indeed!

Like I said, I’m second wave boomer. First wavers are 10 years older than I am and they will be the ones to suck the last drop out of the system. I knew a long time ago that I’d never get any of the money I’ve continually put into the system my entire life back. I am, right now, where you see yourself in the future.

My advice is to do what I have tried to do. Do not depend on anyone but yourself. I had been doing pretty well with my own retirement funds, until the bottom literally dropped out of the market. We’re back to where we were in 2003 right now, and I’m not convince we’re not going lower with the lunacy the dems are proposing.

I can’t blame the boomers for thinking that they deserve the money they paid into the system their entire lives. I also do not blame the resentment of the young who know for a fact that they’re not going to get that last chair (excellent analogy by the way).

SS is just one more example of why socialism just won’t work. Obama must be defeated. And we must rectify the headlong leftward tilt of the American People.

I also predict that when McC/Palin win, the markets will very quickly turn around as the threat of Obambi and the socialist dem’s policies will be rendered null and void. Investors will jump in and buy at these historically low stock prices and we, (the smart ones anyway), will ride the wave back up and make up for lost time.

The market is anticipating an Obambi regime and is pre-emptively making plans to limit their exposure.

techno_barbarian on October 23, 2008 at 2:01 PM

I’m trying to decide if I want a plastic shopping basket or a metal one for my bag lady days.

Queen0fCups on October 23, 2008 at 2:09 PM

….And we must rectify the headlong leftward tilt of the American People.

techno_barbarian on October 23, 2008 at 2:01 PM

We are an ever shrinking minority, so how do you propose to rectify the tilt? Obama or no Obama we aren’t going to stop it. The tilt will continue and even Republicans are going to continue to be pulled left.

DFCtomm on October 23, 2008 at 2:17 PM

The tilt will continue and even Republicans are going to continue to be pulled left.

DFCtomm on October 23, 2008 at 2:17 PM

You may be correct about that. However, when the dems lose this election we’ll be in uncharted territory. The leftist ideology will have been discredited and the media will finally lose what little credibility they have. That will open the doors to the possibility of the completely disillusioned to ask the dems very uncomfortable questions.

If we can actually hold many of them to account and place the blame accurately where it belongs for a whole host of America’s ills, sentiment and momentum may indeed swing our way.

I agree with you, even if we do actually win this thing, and I think we will, there is an enormous amount of work to be done, and none of it will be done quickly.

We’re in for pain any way things go, it seems. I think that we may have to back up through stages. The dems are defeated, then we’ll have to go through the RINO phase that McC represents, and hopefully we’ll get to turn more truely Conservative with Palin.

But like I said, either way it goes, we’ll be in uncharted territory.

techno_barbarian on October 23, 2008 at 2:53 PM

The McCain campaign needs to jump on this big time–cut an ad explaining the huge sums of 401K money invested in the stock market, and predicting a crash like 1929 if this bill passes, and promising a veto to “save your retirement investment” if McCain is elected and Congress passes this bill.

I E-mailed the McCain campaign about it, but does Allah or Ed have an inside line to the McCain campaign to get their attention?

Steve Z on October 23, 2008 at 3:26 PM

hey I grew up on that cheese back on the Rez… mmmm cheese… American Cheese by the log… mmmmm

Kaptain Amerika on October 23, 2008 at 3:30 PM

All I can say is, I’m glad stories like this are getting out before the election.

BigD on October 23, 2008 at 9:47 AM

Exactly–the Democrat/Socialists have tipped their hand! But the McCain campaign, the RNC, NRCC, and NRSC need to jump on this BIG TIME.

Ads: How to Save your Retirement from being Stolen by the Democrats, and avoid another 1929 Crash: Give McCain a Veto on this Bill, and give us Republican Senators to Filibuster it!

Steve Z on October 23, 2008 at 3:34 PM

The Dems want to have the government control retirement and health care so that if costs rise in the former as people live longer, they can take care of that with cuts to the latter.

PackerBronco on October 23, 2008 at 3:41 PM

About five years ago the socialist Argentinean government took control of all saving accounts in the country. In exchange the government gave people a government bond worth nothing today. Yesterday I read in the Wall Street Journal, the Argentinean Government will nationalize all private retirement accounts in order to use the fund to keep the government running. These people can kiss their money good buy and all their hard work is for nothing. I believe that the same thing will happen in this country if people don’t wake up and start reading between the lines. Obama is the false prophet and he will destroy this great nation. Wake up you liberal zombies.

pukara61 on October 23, 2008 at 4:14 PM

The leftist ideology will have been discredited and the media will finally lose what little credibility they have.

techno_barbarian on October 23, 2008 at 2:53 PM

I would like to believe you techno, but do you have any grasp of how deep the Western culture is in the Media’s pocket? Every time The View gets a ratings win, the latest Hollywood blockbuster brings in $500,000,000, or the big ratings of a CNN Election Night broadcast means they win, again. And they OWN us– but we are too seduced to shut them off. And until we do, they will run the boards.

leftnomore on October 23, 2008 at 5:57 PM

FACT ONE: The Democratic Party is the political arm of the Marxist Media. They took it over in 1968.

FACT TWO: All of you who suck at the TV tit every night are only making things worse. SHUT. IT. OFF.

Stay away from the theaters, and NEVER buy a leftist newspaper. Find your Bible, sit down and read it for 15 minutes. This is the only hope the USA has now for the future. Don’t say you weren’t warned.

leftnomore on October 23, 2008 at 6:01 PM

Socializing 401K’s? Isn’t that stealing? The stupidity of 50% of the american population is just amazing….

pullingmyhairout on October 23, 2008 at 6:38 PM

If this putrid plan ever reaches the level of serious public discussion, count on the Dow dropping to, oh, maybe 3,000. 401K funds are probably the major source of money that goes into stocks. Imagine what would happen to share prices if most of the money that would go into them in the future is suddenly scheduled to evaporate by Congressional fiat.

“The bottom falling out of the market” hardly begins to describe it.

Cicero43 on October 23, 2008 at 8:27 PM

Two advantages to the left. Obama has promised over a trillion in new spending and tax revenues are down with the recession. We have printed over $1.5 trillion in new paper as part of the rebates/Bribeouts/bailouts. There is not enough money in he evil rich to make the Obama promise come true. How do you fix that? Simple…you remove over $80 billion a year in unpaid tax revenue and you steal a good bit of it, put it in a program like SS, and spend it, while offering another worthless government IOU.

Win-win for the left. They destroy capitalization and make folk completely dependent on government for retirement.

JIMV on October 23, 2008 at 8:47 PM

I must be stupid or something. I thought pyramid scams had been outlawed!?

OldEnglish on October 23, 2008 at 8:50 PM

Not for the government..SS has always been a ponzi scheme

JIMV on October 23, 2008 at 8:52 PM

JIMV on October 23, 2008 at 8:52 PM

Ah, I see. One law for us, and no law for them. Nice!

OldEnglish on October 23, 2008 at 8:54 PM

I would like to believe you techno, but do you have any grasp of how deep the Western culture is in the Media’s pocket? Every time The View gets a ratings win, the latest Hollywood blockbuster brings in $500,000,000, or the big ratings of a CNN Election Night broadcast means they win, again. And they OWN us– but we are too seduced to shut them off. And until we do, they will run the boards.

leftnomore on October 23, 2008 at 5:57 PM

They don’t own my, my friend. I cut my uverse back to basics and about the only thing we use it for is listening to music. And now that I’ve discovered Pandora, I don’t even listen to the music part much any more.

I’ve pretty much completely unplugged from the mass media. Screw them. Their advertisers do not get my eyeballs or my dollars.

It’s the only way to defang them. Unplug and speed the process of media moving completely to the internet and away from a broadcast network system.

The msm is a dying dinosaur. It just hasn’t realized it yet. Their reign is coming to a close. Look at their P&Ls. They’ve been headed way down for a long time now. They will not survive.

Like I said earlier, we’re in uncharted waters. When McC wins, the left is going to go nuts and the media will be left sputtering excuses and accusations, but the People will see through it all.

I remain optimistic.

techno_barbarian on October 23, 2008 at 10:51 PM

Not for the government..SS has always been a ponzi scheme

JIMV on October 23, 2008 at 8:52 PM

Close. SS is, oddly enough, built on a uniquely human sort of pyramid scheme. The entire premise of SS is that there will always be enough young taxpayers to pay for the crowd of old geezers. To accomplish that end the birthrate of the USA must always be increasing. Incidentally a good number of conservatives who are rabidly Big Family LOVED this concept because it effectively gave government sanction and protection to their views* – if only because of the govt’s self-interest in the matter.

Of course it all fell apart eventually. SS was doomed the moment the Baby Boom ended. Then came the continuing genocide against the unborn. Biiiig trouble. Add that and 20 million illegals who take from but do not pay into the system and it’s Game Over even if the funds hadn’t been looted, which they have.

*See programs like WIC, child tax credits, etc, etc.

Dark-Star on October 23, 2008 at 11:12 PM

I go through my day completely amazed and disheartened by how many of my own family and friends are oblivious to the disaster that they are walking into. Most if not all of them are so uninformed and devoid of facts and after just a few minutes of speaking logically with me, they seem to give up their liberal talking points and start to get it, but within a day or two they become mindless robots again. How anyone cannot see through this scheme of trashing 401K to fund socialistic wealth spreading programs is beyond me.
Sad

oped01 on October 24, 2008 at 12:07 AM

Check out Investor’s Business Daily’s editorial today on this Democratic Party idea. They point out that Argenitina’s nationalizing of the nation’s savings plans has precipitously dropped the stock market value. The same would happen here as stocks in companies are converted to Treasury Bills. Investment money would dry up to expand companies and saver’s would have little real return on savings and thus would save the minimum in such government run plans. This at a time when our national savings rate is too low anyway.

McDermott and Miller have ingeniously solved the problem of the retirement of the baby boomers. Consficate their savings and replace them with special T-Bill that can be reneged on at any time and pay such a wretchedly low return, that no one can afford to retire. Work until you die, the worker’s paradise come to America.

KW64 on October 24, 2008 at 12:52 PM

Tat would put me in a higher tax bracket so I could be patriotic and give more of my money to the government!

It’s the only way I have to lower my gross income for tax purposes.

PaKeystoner on October 24, 2008 at 2:28 PM

RothIRA and Roth401k are next. The Democrats will steal our money that we saved diligently and too which we followed the rules, to give it to people who did jack about their retirement.

Just like those of us screwed on the housing side of things. Those who went out and bought more house than they can afford will benefit from the Gov’t bailing them out and restructuring their loans. Those of us who played by the rules, get the shaft.

James on October 24, 2008 at 4:16 PM

Insanity.

hillbillyjim on October 24, 2008 at 5:18 PM

McDermott and Miller have ingeniously solved the problem of the retirement of the baby boomers. Consficate their savings and replace them with special T-Bill that can be reneged on at any time and pay such a wretchedly low return, that no one can afford to retire. Work until you die, the worker’s paradise come to America.

KW64 on October 24, 2008 at 12:52 PM

I have thought for years that the dems
solution would be manditory euthanasia
at ‘retirement’ age. But getting people
to work as long as possible first would
put an extra twist on it.

Mulligan on October 24, 2008 at 7:36 PM

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