Would Obama, Dems Kill 401(k) Plans?
October 23, 2008 10:47 AM ET James Pethokoukis Permanent Link Print
I hate to use the "S" word, but the American government would never do something as, well, socialist as seize private pension funds, right? This is exactly what cash-strapped Argentina just did in the name of protecting workers' retirement accounts (Efharisto, Fausta's Blog). Now, even Uncle Sam isn't that stupid, but some Democrats might try something almost as loopy: kill 401(k) plans.
House Democrats recently invited Teresa Ghilarducci, a professor at the New School of Social Research, to testify before a subcommittee on her idea to eliminate the preferential tax treatment of the popular retirement plans. In place of 401(k) plans, she would have workers transfer their dough into government-created "guaranteed retirement accounts" for every worker. The government would deposit $600 (inflation indexed) every year into the GRAs. Each worker would also have to save 5 percent of pay into the accounts, to which the government would pay a measly 3 percent return. Rep. Jim McDermott, a Democrat from Washington and chairman of the House Ways and Means Committee's Subcommittee on Income Security and Family Support, said that since "the savings rate isn't going up for the investment of $80 billion [in 401(k) tax breaks], we have to start to think about whether or not we want to continue to invest that $80 billion for a policy that's not generating what we now say it should."
A few respectful observations:
1) McDermott is right when he says the savings rate isn't going up. But the savings rate doesn't include gains to money you invest in the stock market. It ignores the buildup of net worth. (If you bought a share of XYZ Corp. in January at $100, for instance, and its value doubled by December, the savings rate measure would still value that investment at $100. In short, the savings rate is a phony number.)
2) So based partly on the above faulty logic, the $4.5 trillion, as of the start of the year, invested in 401(k) plans doesn't count as savings.
3) Ghilarducci would have workers abandon the stock market right at the bottom of the market. A stupid idea, according to Warren Buffett: "I don't like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I'll follow the lead of a restaurant that opened in an empty bank building and then advertised: 'Put your mouth where your money was.' Today my money and my mouth both say equities."
4) Ghilarducci would offer a lousy 3 percent return. The long-run return of the stock market, adjusted for inflation, is more like 7 percent. Look at it this way: Ten thousand dollars growing at 3 percent a year for 40 years leaves you with roughly $22,000. But $10,000 growing at 7 percent a year for 40 years leaves you with $150,000. That is a high price to pay for what Ghilarducci describes as the removal of "a source of financial anxiety and...fruitless discussions with brokers and financial sales agents, who are also desperate for more fees and are often wrong about markets." Please, I'll take a bit of worry for an additional $128,000.
5) What effect would this plan have on an already battered stock market? Well, I would imagine it would send it even lower, sticking a shiv into the portfolios of everyone who didn't jump aboard. But I am sure the Chinese would love to jump in and buy all our cheap stocks to fund the retirement of their citizens.
My bottom line: If you believe in the long-run dynamism of the American economy, then you have to believe in the stock market. Listen to superinvestor Buffett, not the prof from the New School.
Saturday, October 25, 2008
Thursday, October 23, 2008
A Liberal Majority - taken from the Wallstreet Journal
Get ready for 'change' we haven't seen since 1965, or 1933.
If the current polls hold, Barack Obama will win the White House on November 4 and Democrats will consolidate their Congressional majorities, probably with a filibuster-proof Senate or very close to it. Without the ability to filibuster, the Senate would become like the House, able to pass whatever the majority wants.
AP
Though we doubt most Americans realize it, this would be one of the most profound political and ideological shifts in U.S. history. Liberals would dominate the entire government in a way they haven't since 1965, or 1933. In other words, the election would mark the restoration of the activist government that fell out of public favor in the 1970s. If the U.S. really is entering a period of unchecked left-wing ascendancy, Americans at least ought to understand what they will be getting, especially with the media cheering it all on.
The nearby table shows the major bills that passed the House this year or last before being stopped by the Senate minority. Keep in mind that the most important power of the filibuster is to shape legislation, not merely to block it. The threat of 41 committed Senators can cause the House to modify its desires even before legislation comes to a vote. Without that restraining power, all of the following have very good chances of becoming law in 2009 or 2010.
- Medicare for all. When HillaryCare cratered in 1994, the Democrats concluded they had overreached, so they carved up the old agenda into smaller incremental steps, such as Schip for children. A strongly Democratic Congress is now likely to lay the final flagstones on the path to government-run health insurance from cradle to grave.
Mr. Obama wants to build a public insurance program, modeled after Medicare and open to everyone of any income. According to the Lewin Group, the gold standard of health policy analysis, the Obama plan would shift between 32 million and 52 million from private coverage to the huge new entitlement. Like Medicare or the Canadian system, this would never be repealed.
The commitments would start slow, so as not to cause immediate alarm. But as U.S. health-care spending flowed into the default government options, taxes would have to rise or services would be rationed, or both. Single payer is the inevitable next step, as Mr. Obama has already said is his ultimate ideal.
Editorial-page writer Joe Rago explains just how bad it could get in 2009. (Oct. 21)
- The business climate. "We have some harsh decisions to make," Speaker Nancy Pelosi warned recently, speaking about retribution for the financial panic. Look for a replay of the Pecora hearings of the 1930s, with Henry Waxman, John Conyers and Ed Markey sponsoring ritual hangings to further their agenda to control more of the private economy. The financial industry will get an overhaul in any case, but telecom, biotech and drug makers, among many others, can expect to be investigated and face new, more onerous rules. See the "Issues and Legislation" tab on Mr. Waxman's Web site for a not-so-brief target list.
The danger is that Democrats could cause the economic downturn to last longer than it otherwise will by enacting regulatory overkill like Sarbanes-Oxley. Something more punitive is likely as well, for instance a windfall profits tax on oil, and maybe other industries.
- Union supremacy. One program certain to be given right of way is "card check." Unions have been in decline for decades, now claiming only 7.4% of the private-sector work force, so Big Labor wants to trash the secret-ballot elections that have been in place since the 1930s. The "Employee Free Choice Act" would convert workplaces into union shops merely by gathering signatures from a majority of employees, which means organizers could strongarm those who opposed such a petition.
The bill also imposes a compulsory arbitration regime that results in an automatic two-year union "contract" after 130 days of failed negotiation. The point is to force businesses to recognize a union whether the workers support it or not. This would be the biggest pro-union shift in the balance of labor-management power since the Wagner Act of 1935.
- Taxes. Taxes will rise substantially, the only question being how high. Mr. Obama would raise the top income, dividend and capital-gains rates for "the rich," substantially increasing the cost of new investment in the U.S. More radically, he wants to lift or eliminate the cap on income subject to payroll taxes that fund Medicare and Social Security. This would convert what was meant to be a pension insurance program into an overt income redistribution program. It would also impose a probably unrepealable increase in marginal tax rates, and a permanent shift upward in the federal tax share of GDP.
- The green revolution. A tax-and-regulation scheme in the name of climate change is a top left-wing priority. Cap and trade would hand Congress trillions of dollars in new spending from the auction of carbon credits, which it would use to pick winners and losers in the energy business and across the economy. Huge chunks of GDP and millions of jobs would be at the mercy of Congress and a vast new global-warming bureaucracy. Without the GOP votes to help stage a filibuster, Senators from carbon-intensive states would have less ability to temper coastal liberals who answer to the green elites.
- Free speech and voting rights. A liberal supermajority would move quickly to impose procedural advantages that could cement Democratic rule for years to come. One early effort would be national, election-day voter registration. This is a long-time goal of Acorn and others on the "community organizer" left and would make it far easier to stack the voter rolls. The District of Columbia would also get votes in Congress -- Democratic, naturally.
Felons may also get the right to vote nationwide, while the Fairness Doctrine is likely to be reimposed either by Congress or the Obama FCC. A major goal of the supermajority left would be to shut down talk radio and other voices of political opposition.
- Special-interest potpourri. Look for the watering down of No Child Left Behind testing standards, as a favor to the National Education Association. The tort bar's ship would also come in, including limits on arbitration to settle disputes and watering down the 1995 law limiting strike suits. New causes of legal action would be sprinkled throughout most legislation. The anti-antiterror lobby would be rewarded with the end of Guantanamo and military commissions, which probably means trying terrorists in civilian courts. Google and MoveOn.org would get "net neutrality" rules, subjecting the Internet to intrusive regulation for the first time.
It's always possible that events -- such as a recession -- would temper some of these ambitions. Republicans also feared the worst in 1993 when Democrats ran the entire government, but it didn't turn out that way. On the other hand, Bob Dole then had 43 GOP Senators to support a filibuster, and the entire Democratic Party has since moved sharply to the left. Mr. Obama's agenda is far more liberal than Bill Clinton's was in 1992, and the Southern Democrats who killed Al Gore's BTU tax and modified liberal ambitions are long gone.
In both 1933 and 1965, liberal majorities imposed vast expansions of government that have never been repealed, and the current financial panic may give today's left another pretext to return to those heydays of welfare-state liberalism. Americans voting for "change" should know they may get far more than they ever imagined.
If the current polls hold, Barack Obama will win the White House on November 4 and Democrats will consolidate their Congressional majorities, probably with a filibuster-proof Senate or very close to it. Without the ability to filibuster, the Senate would become like the House, able to pass whatever the majority wants.
AP
Though we doubt most Americans realize it, this would be one of the most profound political and ideological shifts in U.S. history. Liberals would dominate the entire government in a way they haven't since 1965, or 1933. In other words, the election would mark the restoration of the activist government that fell out of public favor in the 1970s. If the U.S. really is entering a period of unchecked left-wing ascendancy, Americans at least ought to understand what they will be getting, especially with the media cheering it all on.
The nearby table shows the major bills that passed the House this year or last before being stopped by the Senate minority. Keep in mind that the most important power of the filibuster is to shape legislation, not merely to block it. The threat of 41 committed Senators can cause the House to modify its desires even before legislation comes to a vote. Without that restraining power, all of the following have very good chances of becoming law in 2009 or 2010.
- Medicare for all. When HillaryCare cratered in 1994, the Democrats concluded they had overreached, so they carved up the old agenda into smaller incremental steps, such as Schip for children. A strongly Democratic Congress is now likely to lay the final flagstones on the path to government-run health insurance from cradle to grave.
Mr. Obama wants to build a public insurance program, modeled after Medicare and open to everyone of any income. According to the Lewin Group, the gold standard of health policy analysis, the Obama plan would shift between 32 million and 52 million from private coverage to the huge new entitlement. Like Medicare or the Canadian system, this would never be repealed.
The commitments would start slow, so as not to cause immediate alarm. But as U.S. health-care spending flowed into the default government options, taxes would have to rise or services would be rationed, or both. Single payer is the inevitable next step, as Mr. Obama has already said is his ultimate ideal.
Editorial-page writer Joe Rago explains just how bad it could get in 2009. (Oct. 21)
- The business climate. "We have some harsh decisions to make," Speaker Nancy Pelosi warned recently, speaking about retribution for the financial panic. Look for a replay of the Pecora hearings of the 1930s, with Henry Waxman, John Conyers and Ed Markey sponsoring ritual hangings to further their agenda to control more of the private economy. The financial industry will get an overhaul in any case, but telecom, biotech and drug makers, among many others, can expect to be investigated and face new, more onerous rules. See the "Issues and Legislation" tab on Mr. Waxman's Web site for a not-so-brief target list.
The danger is that Democrats could cause the economic downturn to last longer than it otherwise will by enacting regulatory overkill like Sarbanes-Oxley. Something more punitive is likely as well, for instance a windfall profits tax on oil, and maybe other industries.
- Union supremacy. One program certain to be given right of way is "card check." Unions have been in decline for decades, now claiming only 7.4% of the private-sector work force, so Big Labor wants to trash the secret-ballot elections that have been in place since the 1930s. The "Employee Free Choice Act" would convert workplaces into union shops merely by gathering signatures from a majority of employees, which means organizers could strongarm those who opposed such a petition.
The bill also imposes a compulsory arbitration regime that results in an automatic two-year union "contract" after 130 days of failed negotiation. The point is to force businesses to recognize a union whether the workers support it or not. This would be the biggest pro-union shift in the balance of labor-management power since the Wagner Act of 1935.
- Taxes. Taxes will rise substantially, the only question being how high. Mr. Obama would raise the top income, dividend and capital-gains rates for "the rich," substantially increasing the cost of new investment in the U.S. More radically, he wants to lift or eliminate the cap on income subject to payroll taxes that fund Medicare and Social Security. This would convert what was meant to be a pension insurance program into an overt income redistribution program. It would also impose a probably unrepealable increase in marginal tax rates, and a permanent shift upward in the federal tax share of GDP.
- The green revolution. A tax-and-regulation scheme in the name of climate change is a top left-wing priority. Cap and trade would hand Congress trillions of dollars in new spending from the auction of carbon credits, which it would use to pick winners and losers in the energy business and across the economy. Huge chunks of GDP and millions of jobs would be at the mercy of Congress and a vast new global-warming bureaucracy. Without the GOP votes to help stage a filibuster, Senators from carbon-intensive states would have less ability to temper coastal liberals who answer to the green elites.
- Free speech and voting rights. A liberal supermajority would move quickly to impose procedural advantages that could cement Democratic rule for years to come. One early effort would be national, election-day voter registration. This is a long-time goal of Acorn and others on the "community organizer" left and would make it far easier to stack the voter rolls. The District of Columbia would also get votes in Congress -- Democratic, naturally.
Felons may also get the right to vote nationwide, while the Fairness Doctrine is likely to be reimposed either by Congress or the Obama FCC. A major goal of the supermajority left would be to shut down talk radio and other voices of political opposition.
- Special-interest potpourri. Look for the watering down of No Child Left Behind testing standards, as a favor to the National Education Association. The tort bar's ship would also come in, including limits on arbitration to settle disputes and watering down the 1995 law limiting strike suits. New causes of legal action would be sprinkled throughout most legislation. The anti-antiterror lobby would be rewarded with the end of Guantanamo and military commissions, which probably means trying terrorists in civilian courts. Google and MoveOn.org would get "net neutrality" rules, subjecting the Internet to intrusive regulation for the first time.
It's always possible that events -- such as a recession -- would temper some of these ambitions. Republicans also feared the worst in 1993 when Democrats ran the entire government, but it didn't turn out that way. On the other hand, Bob Dole then had 43 GOP Senators to support a filibuster, and the entire Democratic Party has since moved sharply to the left. Mr. Obama's agenda is far more liberal than Bill Clinton's was in 1992, and the Southern Democrats who killed Al Gore's BTU tax and modified liberal ambitions are long gone.
In both 1933 and 1965, liberal majorities imposed vast expansions of government that have never been repealed, and the current financial panic may give today's left another pretext to return to those heydays of welfare-state liberalism. Americans voting for "change" should know they may get far more than they ever imagined.
Tuesday, October 14, 2008
It's a beautiful sunny day in southwest Washington. The sky is a china blue with big puffy clouds floating in the sunshine. I'm meeting some friends for happy hour this afternoon. It should prove to be a lot of fun chatting, eating and of course having a drink or two.
My brother in law and sister put in a huge pond this summer. He designed it and did all the work too, placing the rocks just so. It took him nearly 2 months to complete the pond itself , and landscaping will be done next spring. It took a week to fill the thing, and within another week algae was growing. The water is crystal clear, but they have a string algae problem that will need to be treated very soon. It is a fabulous water feature with two huge waterfalls. I hope to put some pictures up soon. Madison just loved it, and went swimming in it before the weather turned too cool.
Steve's birthday is coming up this month and I am raking my brain for gift ideas. What do you buy someone who has nearly everything? I think men are so hard to buy for.
I hope you are all having a good day. See you tomorrow.
My brother in law and sister put in a huge pond this summer. He designed it and did all the work too, placing the rocks just so. It took him nearly 2 months to complete the pond itself , and landscaping will be done next spring. It took a week to fill the thing, and within another week algae was growing. The water is crystal clear, but they have a string algae problem that will need to be treated very soon. It is a fabulous water feature with two huge waterfalls. I hope to put some pictures up soon. Madison just loved it, and went swimming in it before the weather turned too cool.
Steve's birthday is coming up this month and I am raking my brain for gift ideas. What do you buy someone who has nearly everything? I think men are so hard to buy for.
I hope you are all having a good day. See you tomorrow.
Monday, October 13, 2008
Chicago Annenberg Challenge
This piece written by Stanly Kurtz will enlighten you. Please take a few minutes and read it!
http://article.nationalreview.com/?q=MTgwZTVmN2QyNzk2MmUxMzA5OTg0ODZlM2Y2OGI0NDM=
http://article.nationalreview.com/?q=MTgwZTVmN2QyNzk2MmUxMzA5OTg0ODZlM2Y2OGI0NDM=
Birds of a Feather
Here we are with only 20 odd days left until the presidential election, and I must admit I am worried sick that Obama may be elected. With all the information that is available to us, I am astounded that so few individuals are taking any real interest in this election. I believe that so many of us are simply sitting back on our laurels and not taking this too seriously. What will move people to become involved?
My blessed mother was very interested in politics and all through my childhood I remember hearing her discuss the different agendas of the day with family and friends. Perhaps that is why my sister and I are so interested. It certainly made us more aware of our world and this wonderful country we live in.
I am appalled by the flippant attitude of the left. They have used the same old defense mechanisms for years. When questioned about Obama's involvement with people like William Ayers the defense is: "Obama was 8 years old when Ayers bombed the Pentagon." Well Obama wasn't 8 years when he started a long term working relationship with this domestic terrorist. He wasn't 8 years old when he launched his political career out of Ayer's livingroom. He wasn't 8 years old when Ayers maintained that he was not sorry for what he did. In fact he doesn't feel he did enough!
I learned at an early age that birds of a feather flock together; that you are judged by the company you keep. So what are the people of the United States thinking? This (among other grievances) is a travisty of justice!
If you are on the fence about this election please do not vote for a 3rd party. You will be wasting your vote. We know that one of the two major parties will win. I will honest in saying that McCain was not my pick for the Republican ticket, but given the alternative I have no choice but to vote for him and trust that he will do the better job.
I hope that when you go to the polls next month that you do some research before you cast your vote. Don't be a sheeple. You, your children and grandchildren may live to seriously regret it.
My blessed mother was very interested in politics and all through my childhood I remember hearing her discuss the different agendas of the day with family and friends. Perhaps that is why my sister and I are so interested. It certainly made us more aware of our world and this wonderful country we live in.
I am appalled by the flippant attitude of the left. They have used the same old defense mechanisms for years. When questioned about Obama's involvement with people like William Ayers the defense is: "Obama was 8 years old when Ayers bombed the Pentagon." Well Obama wasn't 8 years when he started a long term working relationship with this domestic terrorist. He wasn't 8 years old when he launched his political career out of Ayer's livingroom. He wasn't 8 years old when Ayers maintained that he was not sorry for what he did. In fact he doesn't feel he did enough!
I learned at an early age that birds of a feather flock together; that you are judged by the company you keep. So what are the people of the United States thinking? This (among other grievances) is a travisty of justice!
If you are on the fence about this election please do not vote for a 3rd party. You will be wasting your vote. We know that one of the two major parties will win. I will honest in saying that McCain was not my pick for the Republican ticket, but given the alternative I have no choice but to vote for him and trust that he will do the better job.
I hope that when you go to the polls next month that you do some research before you cast your vote. Don't be a sheeple. You, your children and grandchildren may live to seriously regret it.
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