Sunday, November 09, 2008

Former Hoosier Economist Leads Call To End 401(k)s

Teresa Ghilarducci is a former economics professor at Notre Dame University and served as a board member of PERF during the Bayh-Obannon era. Ghilarducci is now a professor at New School for Social Research in New York and could become a key economic adviser during an Obama administration. Her plan is to "spread the wealth" by eliminating 401(k)s, IRAs and other private retirement accounts in favor of a Guaranteed Retirement Account (GRA) managed by the Social Security Administration. Carolina Journal reported on Ghilarducci's little-noticed testimony before a hearing of the House Committee on Education and Labor last month:

Triggered by the financial crisis the past two months, the hearings reportedly were meant to stem losses incurred by many workers and retirees whose 401(k) and IRA balances have been shrinking rapidly.

The testimony of Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, in hearings Oct. 7 drew the most attention and criticism. Testifying for the House Committee on Education and Labor, Ghilarducci proposed that the government eliminate tax breaks for 401(k) and similar retirement accounts, such as IRAs, and confiscate workers’ retirement plan accounts and convert them to universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.
Ghilarducci's plan is based on a paper she wrote last year entitled, "Agenda for Shared Prosperity." The article in Carolina Journal quotes from Ghilarducci's paper her claim that private retirement accounts “exacerbate[] income and wealth inequalities” because tax breaks for voluntary retirement accounts are “skewed to the wealthy because it is easier for them to save, and because they receive bigger tax breaks when they do.” Under Ghilarducci's plan, 401(k)s, IRAs and other private investment vehicles would be eliminated and converted into GSAs. All workers would have 5% of their income automatically deducted from their paychecks and deposited into a GSA. The employer would be responsible for one half of the contribution but would receive no deduction for the contribution. Capital gains would be taxed annually. If you die, you are allowed to bequeath only one half of your GSA to your family. If you die after you retire, your heirs receive your contributions to your GSA, plus your interest but minus contributions paid to you before your death and contributions made by your employer.

According to Ghilarducci's plan, individuals simply don't have the ability to make investment decisions on their own. She said, “[H]umans often lack the foresight, discipline, and investing skills required to sustain a savings plan.” The Carolina Journal points out what happened in Argentina after the government seized private retirement accounts to pay for government programs and to deal with a ballooning national deficit. "Fearing an economic collapse, foreign investors quickly pulled out, forcing the Argentinean stock market to shut down several times. More than 10 years ago, nationalization of private savings sent Argentina’s economy into a long-term downward spiral."

This is pretty scare stuff. I suspect Sen. Evan Bayh would quickly distance himself from his former appointee's views if pressed on the issue. If you want to permanently destroy this country, I couldn't think of any better plan to do it than the one she's putting forward and which likely has the support of Big Labor. With Democrats fully in charge of the political branches of government, what's to stop them from attempting massive "wealth redistribution" as Obama told Joe The Plumber that he favored?

Hat tip to Atlas Shrugs.

8 comments:

HOOSIERS FOR FAIR TAX said...

Over at HFFT, I simply cut and pasted that Carolina Journal article.

What I didn't expect was the number of hits we got. IN fact I received a record number of google hits searching "401k confiscation".

People seem to know what is going on.

Nick said...

I heard a clip of this woman being played on a conservative talk show. She also used the term "spreading the wealth." Amazing.

I'm glad she thinks humans are too dumb to make financial decisions, but the government is.

Sean Shepard said...

Government policies and economic mismanagement destroy our economy and then they blame investors or the market for failing. THEN, government folks come in and want to take it all over.

Like Glenn Beck says, "blood is shooting out of my eyes".

If they were to seek to confiscate 401ks and IRAs in favor of some big government "spread the wealth" program I would be very shocked if there weren't armed masses in the streets demanding redress.

Advance Indiana said...

One would think, Sean, but I have a horrible feeling about what is going to happen to our country over the next few years.

Sir Hailstone said...

5% by employee, with employer match. so does that mean self-employed folks like yourself get dinged for 10% and have no control over how your money is invested? And this is on top of the 7.5% with employer match for social (in)security?

Sean - If my 401K were doing better I'd agree with you. ;) Seriously thought, it's a great time to buy into a 401K. Buy low - cash out when its high.

Shofar said...

Sean,

That's why they want to eliminate the right of the individual to own and posses firearms. Just for the simple fact that when the majority of people in this country finally understand what has happened, the people, the ignorant masses, won't have anyway of fighting back against the abuses and tyranny we are about to face. God help us all!

Advance Indiana said...

The social security payroll tax is on top of the 5% payroll deduction for the GSA.

varangianguard said...

The only "sharing of the wealth" here is to the Federal Government. Just another form of taxation. No redistribution of the wealth from the rich to the poor. Just more money to the porkmeisters in congress.