Obama budget caps tax-deferred retirement contributions to … half of what he’ll get

posted at 2:31 pm on May 3, 2013 by Ed Morrissey

Yesterday, I linked Liz Peek’s column from The Fiscal Times pointing out that Barack Obama’s new budget has oddly stringent caps on tax-deferred savings in IRAs and 401Ks.  Liz asked why Obama wants to punish savers.  Today, Allen Sloan asks in the Washington Post why Obama wants twice as much in retirement benefits than the rest of Americans can build in tax-deferred savings, at least under the budget Obama proposes:

For starters, the point at which Obama wants to eliminate the ability of you and your employer to deduct contributions to your retirement account isn’t actually the $3.4 million in his budget proposal — that’s just an estimate. The real number is how much a couple age 62 would have to pay for an annuity that yields $205,000 a year. That $3.4 million — which applies to the combined values of your pension and retirement accounts — is subject to a sharp downward change in the future because annuity issuers charge significantly less for an annuity when interest rates are higher than they do today, with rates at rock-bottom levels.

I’ll grant you that $205,000 a year — the current IRS maximum for what a pension fund can pay a recipient — is serious money in many places. But it doesn’t buy you a rich retirement lifestyle in, say, New York’s Manhattan, where $205,000 is equivalent to $88,000 in Manhattan, Kans. The Manhattan-­Manhattan distinction, from Money magazine’s cost-of-living calculator, is an example of the difference between being rich statistically and being rich in reality.

Second, I can’t get past Obama’s wanting to limit savers’ tax-favored accounts to only about half the value of what he stands to get from his post-presidential package. Based on numbers from Vanguard Annuity Access, I value his package at more than $6.6 million. (My calculations are at fortune.com/sloan.)

That’s right, $6.6 million. And that doesn’t include the IRA into which Obama has been socking away the $50,000-a-year maximum contribution, using money from his book royalties. Or the $18,000 (plus cost of living) a year he will get at age 62 for his service in the Illinois Senate, or any other benefits he or his wife may realize from past or future jobs.

Let’s revisit Liz’s column at this point to find out exactly how much Obama thinks he’ll get by capping everyone else’s tax-deferred savings:

The proposal is expected to save the government only $9 billion over the next 10 years – a drop in the budget bucket. This suggestion is not aimed at balancing our books, but at preventing the industrious from getting ahead. This, at a moment when it is clear that the nation should be promoting, and not discouraging savings, when Social Security looks likely to become another welfare program rather than a broad-based retirement account, and when the government boasts about reducing – not adding — red tape. And when, by the way, young people have been scorched by the financial crisis and are skittish about investing. Young people who live in a time that celebrates conspicuous consumption and not thrift.

The savings rate in our country fell to 2.6 percent in the first quarter of this year, the lowest rate since the end of 2007. This is not good news. Savings provide the capital we need for investment, as well as the monies that Americans need for retirement.

While President Obama was discouraging savings by high earners, he was including suggestions for a National Infrastructure Bank and “Fast Forward Bonds” aimed at leveraging private capital for repair of the nation’s outdated roads and airports.

Does anyone else see a contradiction here?

If we want to grow the economy, we want to encourage investment — especially the kind of long-term investment that IRAs and 401Ks provide.  People seem to forget that these retirement plans were a fundamental reason for the massive expansion in capital during the 1980s.  They unleashed American middle class wealth into capital markets, fueling the revolutionary growth of the stock market and creating a generation of prosperity.  Prior to that period, the investor class in the US was about 15%; afterward, it was 70% or more.

Clearly, Obama has other priorities than growing the economy and encouraging long-term investment. He wants to expose more income to taxation and take even more capital out of the private markets, because at a certain point, you’ve made enough money.  You have, anyway.

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Trackbacks/Pings

Trackback URL

Comments

He is more equql than YOU, fools.

Schadenfreude on May 3, 2013 at 2:33 PM

Clearly, Obama has other priorities than growing the economy and encouraging long-term investment. He wants to expose more income to taxation and take even more capital out of the private markets, because at a certain point, you’ve made enough money. You have, anyway.

Not only…at a certain point he and Pelosi want to ‘manage’ your funds…because you are too stupid to do it.

Schadenfreude on May 3, 2013 at 2:34 PM

Where have we seen the “You proles are worth only half of what I’m worth” meme? Oh yes – the vilification of those who make half the $400,000/year Presidential salary.

Steve Eggleston on May 3, 2013 at 2:35 PM

Do as He says, not as He does.

myiq2xu on May 3, 2013 at 2:35 PM

Hey demorat liberal suckers, you voted for this. How does it feel to join the ranks of us serfs, you pathetic fools.

Bishop on May 3, 2013 at 2:35 PM

Do I break out the Judge Smails quote again? Why not?

“Al Czervik will never get into Bushwood.” – Judge Barry Smails

Steve Eggleston on May 3, 2013 at 2:37 PM

Obama has nothing to worry about. The LSM will still make him look good, even if this doesn’t pass Democrat opinion. The LSM will simply blame Republicans for not tolerating a bad idea.

Liam on May 3, 2013 at 2:38 PM

Why the heck are there any limits on retirement contributions in the first place? CAN you add more than the limits to your 401K or IRA, if they are after tax dollars?

Sheesh; you’d think we would do everything to encourage saving. Just reading Bastiat (from the early 1800′s!) shows the difference between a saver and a spender.

As for Obamacricy, what else is new?

Vanceone on May 3, 2013 at 2:39 PM

boy Il. really pays well for voting present or yes to killing babies doesn’t it.

dmacleo on May 3, 2013 at 2:40 PM

#$@# #@$

I just read last night- 50% of Americans don’t even have $2000 saved.
Via a link from AP’s post above.
Talk about insane.

Then we have this…every step he takes shatters something..intentionally.
And the sheep lick it up on way to slaughter.

bazil9 on May 3, 2013 at 2:40 PM

Communism is always for the other guy.

The Communist elites continue to acquire their wealth [just like they did in the Soviet Union - where they had their Black Sea dachas and their caviar - while the proletariat that they loved starved and froze to death in their single room, State-run hovels] and remain vile, hypocritical pigs – betraying their own alleged convictions.

And the cattle will elect the next Bolshevik, the Unmade Bed, in 2016.

OhEssYouCowboys on May 3, 2013 at 2:41 PM

Troll-free thread.

Well, maybe not.

Akzed on May 3, 2013 at 2:42 PM

dont eat salt,drink soda,go to church,slander Islam,own a gun or save $ or work. Barry~
PS. Eat your veges and grow a garden.

bazil9 on May 3, 2013 at 2:42 PM

Obama: “well you see I’m entitled to that because I’m very smart and I have to sacrifice my ability to be greedy and lustful to achieve this enlightened position… Y’all just got your money through luck and theft.”

Skywise on May 3, 2013 at 2:42 PM

That’s right, $6.6 million. And that doesn’t include the IRA into which Obama has been socking away the $50,000-a-year maximum contribution, using money from his book royalties. Or the $18,000 (plus cost of living) a year he will get at age 62 for his service in the Illinois Senate, or any other benefits he or his wife may realize from past or future jobs.

Guess who said this :

I mean, I do think at a certain point you’ve made enough money.

burrata on May 3, 2013 at 2:43 PM

Whether you agree or disagree with the policy, you must understand his intention is noble.

nonpartisan on April 22, 2013 at 8:05 PM

bigmacdaddy on May 3, 2013 at 2:43 PM

I just read last night- 50% of Americans don’t even have $2000 saved.
Via a link from AP’s post above.
Talk about insane.

bazil9 on May 3, 2013 at 2:40 PM

Why save when you have an entire political party from top to bottom promising to pay all your bills from birth to death, and another political party sidling up alongside and whispering that they too might be willing to pay for everything.

Bishop on May 3, 2013 at 2:44 PM

He’s gonna die someday like Chavez, with a useless stolen fortune.

22044 on May 3, 2013 at 2:45 PM

Dang I’m surprised bho didn’t demand that he gets YOUR ira’s and 401K’s and give YOU a percentage of what it is worth to live on?
Afterall, at some point you have enough money!
L

letget on May 3, 2013 at 2:45 PM

He is more equal than YOU, fools.

Naturally. And he and the other elites prefer to remain as more equal as possible.

I just read last night- 50% of Americans don’t even have $2000 saved.
Via a link from AP’s post above.
Talk about insane.

Yup….with the laughable interest rates, the immediate need to keep up with rising expenses as income levels decline, the attitude of spend it now and enjoy, and the promise of government care from cradle to grave, why bother.

hawkeye54 on May 3, 2013 at 2:45 PM

That’s his way of tapping into middle class assets without the middle class realizing they’re being taxed more.

The Rogue Tomato on May 3, 2013 at 2:48 PM

It’s just another means to his end of eliminating the middle class. It’s none of his damn business how much a person saves for retirement and it sure as Heck isn’t his place to decide for us hw much of anything is too much. His inner Marxist s showing. He should be vilified for the presumption that he, or any if his arrogant, elitist, smug fellow travelers can tell us how much is “enough”.

Charlemagne on May 3, 2013 at 2:48 PM

Bishop on May 3, 2013 at 2:44 PM

I understand the “how”.
I was raised differently and not a f@cking
tic. I know the ones clinging to the dog.

Although, some young people I know want work
and want the ability to save, elderly who lost
a significant chunk of their $ hard earned and saved/invested.
Now what? .005% on a CD?
A 180% mind f@ck.

bazil9 on May 3, 2013 at 2:48 PM

I mean, I do think at a certain point you’ve made enough money.

burrata on May 3, 2013 at 2:43 PM

Good stuff, b … and don’t forget:

Obama – the hypocritical, Marxist pig

OhEssYouCowboys on May 3, 2013 at 2:49 PM

I mean, I do think at a certain point you’ve made enough money.

Yup….a certain point for himself, and a completely different point for us.

hawkeye54 on May 3, 2013 at 2:49 PM

So anyone heard the latest from the choomer who runs guns for jihadies and drug cartels ?
He is cursing Americans again, this time in mexico .

burrata on May 3, 2013 at 2:51 PM

That’s his way of tapping into middle class assets without the middle class realizing they’re being taxed more.

Sorta like tapping into your paycheck with the concept of tax withholding. Devious.

hawkeye54 on May 3, 2013 at 2:51 PM

That’s his way of tapping into middle class assets without the middle class realizing they’re being taxed more.

The Rogue Tomato on May 3, 2013 at 2:48 PM

Well said.

bazil9 on May 3, 2013 at 2:52 PM

We punish people who save money, and reward those who don’t. That’s why it’s called progressive paradise.

JeremiahJohnson on May 3, 2013 at 2:53 PM

Guess who said this :

I mean, I do think at a certain point you’ve made enough money.

burrata on May 3, 2013 at 2:43 PM

It’s a question of emphasis.

Akzed on May 3, 2013 at 2:53 PM

Just imagine if you can, the amount of money that could be invested in our country’s economy in the form of tax-deferred IRA’s and practically every other kind of private investment you can think of. Now, think of all the potential revenue that could be generated, and the amount of money the government could make, even at a reduced tax rate structure.

It makes that poodle pile 9 billion dollars and unnecessary suffering look… stupid.

Can you imagine?

Obama can’t.

Turtle317 on May 3, 2013 at 2:54 PM

Not only…at a certain point he and Pelosi want to ‘manage’ your funds…because you are too stupid to do it.

Schadenfreude on May 3, 2013 at 2:34 PM

They want that money. Badly.

txhsmom on May 3, 2013 at 2:55 PM

Hey..what happened to the Chilean model?
Cain and Newt…down the memory hole.
I was feeling groovy about that.

bazil9 on May 3, 2013 at 2:56 PM

They want that money. Badly.

txhsmom on May 3, 2013 at 2:55 PM

The amount is estimated at $19 trillion.

Danged right they want their hands on it.

Liam on May 3, 2013 at 2:57 PM

“All that money and we have no control over it? We need to fix that.”

Liam on May 3, 2013 at 3:05 PM

Dang I’m surprised bho didn’t demand that he gets YOUR ira’s and 401K’s and give YOU a percentage of what it is worth to live on?
Afterall, at some point you have enough money!
L

letget on May 3, 2013 at 2:45 PM

Already been proposed. Didn’t go over well, but they’ll try again.

iurockhead on May 3, 2013 at 3:05 PM

You’ll have to pardon King Barry. He didn’t take any Econ courses when he was in college. He preferred Alinksy.

GarandFan on May 3, 2013 at 3:07 PM

Hey..what happened to the Chilean model?
Cain and Newt…down the memory hole.
I was feeling groovy about that.

bazil9 on May 3, 2013 at 2:56 PM

Unfortunately, the same thing that happened to Cain and Newt. The collective morons in this country aped for socioeconomic destruction rather than saving what’s left of the country.

cajunpatriot on May 3, 2013 at 3:08 PM

You just fail to see the brilliance of “The Obama”. Numbpartisan

RickB on May 3, 2013 at 3:10 PM

Not only…at a certain point he and Pelosi want to ‘manage’ your funds…because you are too stupid to do it.

Schadenfreude on May 3, 2013 at 2:34 PM

Matt Yglesias agrees with that sentiment.

Jeff Weimer on May 3, 2013 at 3:10 PM

It’s a question of emphasis.

Akzed on May 3, 2013 at 2:53 PM

and shared sacrifices too !

“If everybody took an attitude of shared sacrifice, we could solve our deficit and debt problem next week,”

preached the guy for whom going to work means partying, rapping, shooting hoops, blowing lines, chooming, boytoying, vacationing every few weeks, golfing and plotting , financing aiding and abetting jihad on us.

burrata on May 3, 2013 at 3:11 PM

I absolutely despise this POSPOTUS

SteveInRTP on May 3, 2013 at 3:16 PM

We didn’t build that. And, without investment, we won’t be building it, either.

trigon on May 3, 2013 at 3:21 PM

Not only…at a certain point he and Pelosi want to ‘manage’ your funds…because you are too stupid to do it.

That, and they want to take a cut for their management fees, and you also have too much money so you need to share it with others less producti, er, fortunate, and they know better who needs your money more than you do.

hawkeye54 on May 3, 2013 at 3:22 PM

Why save when you have an entire political party from top to bottom promising to pay all your bills from birth to death, and another political party sidling up alongside and whispering that they too might be willing to pay for everything.

Bishop on May 3, 2013 at 2:44 PM

Because you know, and I know that they can’t.

And I’m not giving up my good beer and T-bones when I retire.

So, I save. Even though the gov’t is doing everything they can to discourage savers.

BacaDog on May 3, 2013 at 3:22 PM

Speechless:

“Most of the guns used to commit violence here in Mexico come from the United States,” President Obama said during a speech at Mexico’s Anthropology Museum. “I think many of you know that in America, our Constitution guarantees our individual right to bear arms. And as president, I swore an oath to uphold that right, and I always will.”

“But at the same time, as I’ve said in the United States, I will continue to do everything in my power to pass common-sense reforms that keep guns out of the hands of criminals and dangerous people. That can save lives here in Mexico and back home in the United States. It’s the right thing to do,”

can_con on May 3, 2013 at 3:23 PM

It’s none of the governments business how much I have for retirement. I was shocked earlier this year when my dad showed me a letter from the IRS telling him that age 70 1/2 he has to take out “X” amount from his 401K and IRA or face a 50% tax rate?!?!?!?! WTF!!!! They get to tell you how much of YOUR money you have to take out???

TXChas on May 3, 2013 at 3:24 PM

can_con on May 3, 2013 at 3:23 PM

Obama wants only applause and accolades, for the moment. It’s what he lives for.

Liam on May 3, 2013 at 3:26 PM

So, I save. Even though the gov’t is doing everything they can to discourage savers.

Of course it discourages savers. Because what is in your personal savings isn’t theirs to use and makes you independent upon almighty government if you have sufficient savings.

Personal independence is anathema to Leftist government.

hawkeye54 on May 3, 2013 at 3:29 PM

Never forget the fundamental RULE of d-cRAT socialist extremism: Your money is NOT yours but belongs to the GOVERNMENT, which has a “right” to limit what you can keep (i.e., “your allowance”) to whatever they want it to be, including ZERO.

This “rule” was OBOZO’s motivation for his proposal to limit the amount we can have in an IRA (his rule doesn’t apply to him, naturally.)

TeaPartyNation on May 3, 2013 at 3:29 PM

Obama wants only applause and accolades, for the moment. It’s what he lives for.

It’s all he’s lived for and self-centeredness is what he was raised on and encouraged to soak up. He was made the narcissist he is today with many helping hands.

hawkeye54 on May 3, 2013 at 3:33 PM

It’s all he’s lived for and self-centeredness is what he was raised on and encouraged to soak up. He was made the narcissist he is today with many helping hands.

hawkeye54 on May 3, 2013 at 3:33 PM

All true. Still, I’m left wondering what is so great and excellent and perfect about him?

Liam on May 3, 2013 at 3:36 PM

Can he even do that to money that has already been paid into “qualified” plans ?
I mean, there is a bit of paperwok associated with setting them up and some of that details how money is taken out.

I am quite sure that even some Democrats, who have done some astute financial planning, may have an issue with this. It will be their pockets getting picked.

Jabberwock on May 3, 2013 at 3:42 PM

I’m left wondering what is so great and excellent and perfect about him?

He’s been great at redistributing our treasury to his party’s supporters and his corporate cronies and leading our nation to financial ruin, the perfect frontman for those managing things behind the WH scene, and makes an excellent stooge for the affecting the fundamental transformation they want this nation to experience.

hawkeye54 on May 3, 2013 at 3:45 PM

He’s been great at redistributing our treasury to his party’s supporters and his corporate cronies and leading our nation to financial ruin, the perfect frontman for those managing things behind the WH scene, and makes an excellent stooge for the affecting the fundamental transformation they want this nation to experience.

hawkeye54 on May 3, 2013 at 3:45 PM

Wish I raised my son and daughter to be that way! /////////////// (sarc out the azz)

Liam on May 3, 2013 at 3:58 PM

We are moving from CT to KY (yeah us!) and I have seriously considered using money from our 401K to buy a house instead of getting another mortgage. I truly believe that at some point in the not too distant future the government will “regulate” 401k’s and take everyones money with a promise of a guaranteed annuity. That is way too much money sitting there for them to ignore it for too much longer.

The only thing holding me back is that 10% penalty. That is a huge hit for wanting to use the money we have saved over the years.

Johnnyreb on May 3, 2013 at 4:22 PM

If you Rethuglicans wanted better retirement packages, you should have joined a greedy-union, either in private industry or government. This’ll teach ya.

slickwillie2001 on May 3, 2013 at 4:39 PM

I was shocked earlier this year when my dad showed me a letter from the IRS telling him that age 70 1/2 he has to take out “X” amount from his 401K and IRA or face a 50% tax rate?!?!?!?! WTF!!!! They get to tell you how much of YOUR money you have to take out???

TXChas on May 3, 2013 at 3:24 PM

That’s how IRAs have always worked. You get to save for retirement tax free, but you have to actually use the money during your retirement years. Otherwise, these programs would be nothing more than giant tax-avoidance schemes.

cam2 on May 3, 2013 at 4:41 PM

Johnnyreb on May 3, 2013 at 4:22 PM

lol@yeah Us!

My thought is with yours.
I am self employed. No ER contrib to/or 401K ect..
Lost half of the one I had after the crash..only 2 yrs worth.
Skipped the ROTH IRA and am paying off my property instead.
That’s where my current savings are directed at.
I don’t know if it is the smartest option but the points you and others raise,make me reluctant to invest in any vehicle they are eyeing.
Good luck! KY is wonderful.

bazil9 on May 3, 2013 at 4:42 PM

I mean, I do think at a certain point you’ve made enough money.

Emphasis, like words, has meaning.

Midas on May 3, 2013 at 4:50 PM

The sad truth is the Left has succeeded in downgrading private property ownership from a constitutional right to a government-controlled privilege. The very notion of government-compelled redistribution of wealth is incompatible with this fundamental civil right.

Stripped of our right to own property – the fruits of our own labor – we are left as slaves rather than citizens. Yet how many in the GOP have defended this principle?

The Left needs to be reminded that the Civil War was fought to end slavery, and their side lost.

Rich H on May 3, 2013 at 6:24 PM

I value his package at more than $6.6 million.

Fill in stupid joke here: ________________

Attila (Pillage Idiot) on May 3, 2013 at 7:36 PM

I value his package at more than $6.6 million.

Fill in stupid joke here: ________________

Attila (Pillage Idiot) on May 3, 2013 at 7:36 PM

Is that a Chris Matthews quote?

SagebrushPuppet on May 3, 2013 at 8:17 PM

I am quite sure that even some Democrats, who have done some astute financial planning, may have an issue with this. It will be their pockets getting picked.

Jabberwock on May 3, 2013 at 3:42 PM

They’ll work it the same way as always: those who are favored will be warned to get their money out before the hammer strikes.

AesopFan on May 3, 2013 at 8:38 PM

I am quite sure that even some Democrats, who have done some astute financial planning, may have an issue with this. It will be their pockets getting picked.

Jabberwock on May 3, 2013 at 3:42 PM

They’ll work it the same way as always: those who are favored will be warned to get their money out before the hammer strikes.

AesopFan on May 3, 2013 at 8:38 PM

Yep, like the bank haircut in Cyprus, and Congress threw out the insider-traiding bill.

slickwillie2001 on May 3, 2013 at 10:02 PM

Johnnyreb, check out your 401k plan. Mine allows one to borrow up to 50k from the an for a primary residence. The interest goes back into the plan. You are essentially borrowing money from yourself and are not subject to the 10 percent penalty.

Tenwheeler on May 4, 2013 at 10:03 AM

It does have a time limitation if you leave your job and it is a company sponsored plan

Tenwheeler on May 4, 2013 at 10:05 AM

Why save when you have an entire political party from top to bottom promising to pay all your bills from birth to death, and another political party sidling up alongside and whispering that they too might be willing to pay for everything.

Bishop on May 3, 2013 at 2:44 PM

Because you know, and I know that they can’t.

And I’m not giving up my good beer and T-bones when I retire.

So, I save. Even though the gov’t is doing everything they can to discourage savers.

BacaDog on May 3, 2013 at 3:22 PM

Private spending reduces private reserves at a rapid pace. Private investing impedes private spending. Decreasing the ability to invest bolsters the ease at which to encourage more private spending. No need to discuss that public spending is funded by taxes that are funded by restricting private investing.

My concern is that if there is ever a political shift, is if the replacement troops will revert the measures in place from the previous administration. I do not have trust that either party has the grit to take cash away from the insolvent masses.

ericdijon on May 4, 2013 at 1:39 PM