Sunday, December 20, 2015

Redistribution: The 401k Grab

The next front in the left's redistribution-of-wealth 'struggle' to make things 'fair' is in our retirement accounts.  Those 401k's and IRA's where private citizens privately manage their own retirement funds, and do so with a FAR higher rate of return than union pensions and Social Security.

We've seen other redistribution schemes win presidential elections in 2008 and 2012, pass with Congressional majorities, and even win the blessing of the Supreme Court.  Some small, like Cash for Clunkers, Tanning Salon tax, Solyndra, and auto-maker bailouts.  And some large: Progressive Tax Code, ObamaCare, Stimulus, Quantitative Easing (QE), Zero Percent Interest Rate Policy (ZIRP), and trillion-dollar deficit spending.

So, to sit back and think nationalizing private retirement accounts is not possible would be ignorant of both recent history and the events from 98 years ago.  Redistribution, with comforting promises of hope and change, always come first.  Only tremendous suffering follows.

The Set Up

The timing has to be right, but the groundwork can start now.

We've seen more than one Global Warming Summit get snowed out.  We've seen the math that says crop yields will go up with the temperature changes the left believes will occur if we do not address climate change stop Capitalism immediately.  We've also seen the science that says this movement is a fraud.  For the Global Warming folks to get any traction, they must exploit hot weather as it occurs.  This is tough to plan for and organize around, hence the failed attempts so far.

The same for the retirement-redistribution movement.  Timing is everything.  The Liberals Progressives Communists have to act when retirement accounts suffer and account holders panic.

Despite the $20T in debt (was $6T under Bush), the stock market has had record gains.  That may be more related to the increase in money supply to $4.5T (was $800B under Bush), and the funneling of that new money into the markets.  (Of course, do your own research as I am the product of the public schools.)

If QE were to end (the last QE was two years ago), and if ZIRP were to end ('ended' last week after 9 years), one might expect the economy to slow a bit.  "But we have such a strong economy," say those in power at the moment.  They will point to the 5.5% unemployment rate, but not the 9.9% U6 Unemployment rate.  They will point to iPhone sales, but not the fact 35.4% of Americans are receiving government assistance. 

And we are not alone here in the States.  The global economy isn't doing any better.  The price of oil has dropped two-thirds off its recent highs.  New supply gets some credit, but demand plays the bigger role here.  Are the benefits of Capitalism (innovation, faster growth, improved quality of living, increased trade, and retirement savings increases) linked at all to oil consumption?  Is it possible the economy is not doing as well as some say?

Selling a retirement 'modernization' policy that redistributes the trillions in wealth to a government IOU program, with promises of continued account growth, is easier in an economic decline than it is during an economic boom.  One question to ask yourself: Looking at the national and international scene today, do you think it is more likely an unexpected event or discovery will trigger a 10% jump in stocks, hiring, and/or personal income?  Or, is it more likely that a 10% drop would occur?

Ask the same, but with "25%" as the number.  Ask: 50%. 

Last, imagine the panic that will enable a total redistribution of retirement accounts, by consensus.

Meet the New Communists

Big government enthusiasts, Tony James and Teresa Ghilarducci, are setting the ground work for the redistribution of retirement accounts from the individual American citizen to the government.  Calling the 401k retirement plans "a faulty experiment," Tony concludes:
There’s really no alternative. It needs to be mandated.
The Individual Retirement Account (IRA) is available to any American who may or may not have access to a 401k plan.  It is, by definition, exactly an alternative.  Tony knows this, but assumes you do not.

I have used both types of accounts, and despite my public school education, my accounts have made more than the 1% return the government currently brags of Social Security. 

Control is the Goal

Bernie, Hillary, Pajama Boy, and every other leftist wants to control everything in your life, including your wallet.  They talk about it when they drink coffee.  They think about it when they go to bed.  They dream about it as they sleep.  And they get up in the morning to pursue it. With enthusiasm.  It is in their DNA.

To gain control over your health care, they had to first paint the picture of everyone getting top-quality care.  The actual results: lower quality and higher prices for all.  Promises broken but goal attained: control.

What conditions must exist for a majority consensus behind the redistribution of private retirement funds?  Envy, from the envy crowd, isn't enough this time.  But panic, caused by liberal policies within the private sector, will be enough.  Of all the solutions that will be offered if/when the market drops 50%, only Obama's will be simple, easy, and attractive to the historically ignorant and panic-stricken.  He'll promise to restore prior balances as he confiscates remaining balances.  His IOUs will be "backed by the full faith and credit of the United States of America." 

What could go wrong?

Political Solutions (assuming you trust politicians):
Double down on 401k and IRA accounts.  Remove the deposit limits, and tax incentive limits, for 401k's and IRA's.  If an employee wants to save 80% of his salary tax free, he should be allowed to.  Or even better, turn all accounts into IRA accounts by replacing all federal taxes (Income, gas, etc.) with a single-rate consumption tax.

Further protect retirement savings from litigation and confiscation with an amendment.  "The right to save for retirement shall not be infringed."

Individual Solutions:
Ann Barnhardt has advocated moving digital assets into hard assets (real estate, gold, etc.) with this truism: "You don't own it unless you can stand in front of it with an assault rifle."

Jim Rickards offers an asset allocation suggestion, based on the hard times he sees coming, in his latest book, The Death of Money.

Story and photo - New York Times
Dow and Oil charts - MarketWatch
Unemployment chart - MacroTrends
Welfare Data:  Statistic Brain

See Also:
David Mills (via Doug Ross) - IF YOU LIKE YOUR 401(k), YOU CAN KEEP YOUR 401(k): Obama Labor Dept. Sets Stage for Nationalizing Retirement Accounts
The Obama administration has its sights set on an incredible amount of your money. By some estimates, Americans are holding well over $10 trillion in private retirement accounts.

For a country with debt that is clearly "unsustainable" (source: the non-partisan Congressional Budget Office), flashing that kind of figure to a Democrat politician is akin to showing a kilo of heroin to a desperate junkie.

...the real goal of the Obama administration is to nationalize your retirement account and to invest it in debt that will become increasingly unsellable in the open market.

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