House Democrat George Miller is calling for a soup-to-nuts re-examination of 401(k) plans in light of dramatic investment losses this year that could lead to a radical overhaul of the popular defined contribution plans.
One proposal under consideration would eliminate the tax-favored treatment of contributions to 401(k) plans and individual retirement accounts; instead, workers would receive a $600 tax credit that would offset contributions to a new mandatory guaranteed plan that would be managed and administered by the federal government. Another proposal would extend 401(k) plans to all workers.
“Maybe we are at a time where fiddling at the margins is not going to serve the American people,” Mr. Miller, D-Calif., said at a House Education and Labor Committee hearing in San Francisco on Oct. 22.
But, what does Mr. Miller really want to do with the money? Well, of course, just ask a professor at the "New School" about her plan based on the wildly successful plans in such countries as Latvia and Poland.
Mr. Miller said he wants to study a proposal to create so-called guaranteed retirement accounts advocated by Teresa Ghilarducci, a professor at the New School for Social Research, New York. The accounts are similar to defined contribution plans in Italy, Latvia, Poland and Sweden, as well as the giant TIAA-CREF system run for U.S. academics.
Under Ms. Ghilarducci's proposal, which was laid out in a briefing paper published late last year by the Economic Policy Institute, Washington, a liberal think tank, 5% of a worker's earnings would be placed in the plan each year, with workers and their employers each contributing half, except where an employer provides an equivalent or better defined benefit plan. Workers would receive a $600 annual tax credit for their contributions, and they could make additional after-tax contributions.
Ms. Ghilarducci said her proposal would apply to corporate and public DC plans.
The accounts would be administered by the Social Security Administration, and the funds would be managed by the federal government's Thrift Savings Plan or a similar governmental agency. Employees would receive a fixed guaranteed 3% real return. If actual investment returns exceed that level for a number of years, the surplus would be distributed to participants, although a reserve fund would be maintained for rocky financial periods.
Uh, so the government would expropriate your money and put it in a plan managed by uh, the government, which will "guarantee" you a return, blah, blah, blah. Don't we have a program like that already? Isn't it called Social Security?
The government does not own your money. People that earn their money own their money. It is their choice what to do with it. We should be figuring out how to phase out the disastrous and morally evil Social Security program which robs and destroys the savings of the productive and impairs capital formation which leads to lower productivity and lower real wages.
Note, that Mr. Miller does not even consider the moral principle involved related to private property not to mention the practical consequences of such a plan. Mr. Miller claims to be truly concerned about recent "losses" in the stock market - losses ironically that have been caused by government intervention in the economy such as Social Security which increases the federal budget deficit, leads to inflation, which causes boom-bust cycles including the latest meltdown. Despite that fact, shouldn't he be concerned with the fact that such a program would represent a 100% loss?