Government To Confiscate 401(k)s and IRAs For Mandatory Savings Tax?
Paul Joseph Watson
Tuesday, November 11, 2008
Under the pretext of combating the financial crisis, Democrats in Congress have been conducting hearings on proposals to confiscate private retirement accounts and turn them into government-controlled accounts managed by the Social Security Administration, by implementing a new tax in the guise of mandatory savings scheme.
Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, testified before Congress last month, proposing that 401(k)s and IRAs be confiscated and converted into universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.
The GRAs would be enforced by means of a mandatory savings tax equating to 5 per cent of an individual’s annual paycheck deposited to the GRA. Social Security and Medicare taxes would still be payable, employers would no longer would be able to write off their contributions and capital gains would be taxable year-on-year. In addition, workers could bequeath only half of their account balances to their heirs, unlike full balances from existing 401(k) and IRA accounts.
Justifying government intervention, Ghilarducci cited a 2004 HSBC global survey in claiming, “a third of Americans wanted the government to force them to save more for retirement.” In actual fact, the survey concluded that Americans wanted the government to “enforce additional private savings,” a vastly different meaning than mandatory government-run savings, as Karen McMahan points out.
The mandatory savings account scheme is actually a brainchild of lifelong Republican and former chairmen of the New York Fed, Peter Peterson, who proposed “mandatory savings accounts,” also called “forced savings accounts,” back in 1999.
During a Seattle radio interview on October 27, Ghilarducci explained the motive behind the plan, stating, “I’m just rearranging the tax breaks that are available now for 401(k)s and spreading – spreading the wealth.”
Unfortunately, as we have again painfully learned in light of the Federal Reserve’s refusal to identify where $2 trillion of taxpayers’ money has gone, governments that propose “spreading the wealth” under socialist-style financial reforms almost always collect the wealth under the pretext of being the saviors before greedily hoarding it all for themselves.
Ghilarducci let slip the true agenda being the move in her testimony before Congress and also acknowledged that social security payments are a form of taxation when she stated, “Should we mandate savings in a recession? Yes, as long as fiscal policy provides for short-term stimulus. No one is proposing we suspend Social Security taxes in recessions. Households need a source of disciplined savings over the business cycles.”
As Jim Capo highlights, “Not only does Ghilarducci promote Peterson’s call for mandatory savings, she also fesses up to the crime that is our Social Security system. Social Security is not the mandatory retirement savings plan it was sold as to the American people. It is simply another tax. Ghilarducci admits the bait and switch in one breath and in the other proposes the next bait and switch. Except, this time it will be different.”
“So, shock! Democrats and Republicans alike are now proposing a new mandated retirement savings plan. Like offering voters a choice between growing the government at 4% or 6%, all that is really being debated is whether our new “savings” tax will go through the federal government or not, before these protection racket proceeds are turned over to the crime syndicates in New York and London for ultimate management and control.”
Would the government risk a widespread revolt and potential riots by confiscating 401(k)s and IRAs? They probably wouldn’t brazenly do it under that banner, but in the name of financial reform and saving the economy, Americans could find their voluntary retirement savings stolen and replaced by a government promise of a completely devalued mandatory savings account.
As the Lew Rockwell blog notes, the intention of the move is clear, but it will be down to American citizens whether or not the government is allowed to get away with it.
Think of it as an ATM for the government. Part two would be confiscating current 401Ks and IRAs and rolling them into the GRAs. Knowing that could be very politically unpopular (riots, perhaps?), Ghilarducci said, “Short term, I propose that since 401(k) accounts and the like are financial institutions — the bank about where 38% of the workforce can intend to save for their retirement — Congress let workers trade their 401(k) and 401(k) – type plan assets (perhaps valued at mid-August prices) for a Guaranteed Retirement Account composed of government bonds (earning a 3% return, adjusted for inflation).” —- “Short term”? And surely, we’ll all “retire” on 3% (or less) returns.”
“So the battle will be to allow “voluntary” rollover or not, to confiscate or not. You know what a democratic congress and its left-wing, academia elites want to do, but what will they be able to get away with doing? I suppose that depends upon peoples’ reaction and their ability to make enough noise to make any confiscation or mandatory savings too unpopular to jam down our throats.
Argentina has already vowed to push through similar measures in the name of rescuing the wider financial system. Last month, the government of the South American country signed a bill to mandate the National Social Security Administration takeover of $30 billion worth of private pensions.
The move sent stock markets plummeting with critics accusing the government of stealing the pensions to get their hands on extra money at a time of economic crisis, as citizens protested across the country.