Demand that Congress Pass the “Keep Your Hands Off My 401(k) Act of 2010”


As I wrote in January:

Last May, I wrote about the rumor that the Obama administration might seize funds from American’s 401k and IRA accounts.

Last week, Bloomberg pointed out:

The Obama administration is weighing how the government can encourage workers to turn their savings into guaranteed income streams following a collapse in retiree accounts when the stock market plunged.

The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort…

There is “a tremendous amount of interest in the White House” in retirement-security initiatives, Borzi, who heads the Labor Department’s Employee Benefits Security Administration, said in an interview.

In addition to annuities, the inquiry will cover other approaches to guaranteeing income, including longevity insurance that would provide an income stream for retirees living beyond a certain age, she said.

“There’s been a fair amount of discussion in the literature taking the view that perhaps there ought to be more lifetime income,” Iwry, a senior adviser to Treasury Secretary Timothy Geithner, said in an interview…

One proposal raised by Iwry as co-author of a paper while at the Retirement Security Project, before joining the administration, has reached Congress. A bill requiring employers to report 401(k) savings both as an account balance and as a stream of income based on an annuity was introduced on Dec. 3 by Senators Jeff Bingaman, a New Mexico Democrat, Johnny Isakson, a Georgia Republican, and Herb Kohl, a Wisconsin Democrat.

I quoted Karl Denninger’s warning that a government “option” for investing retirement funds in treasuries could soon become mandatory.

A couple of weeks ago, Newt Gingrich (yes, that Newt Gingrich) wrote:

Washington is developing plans for your retirement savings.

BusinessWeek reports that the Treasury and Labor departments are asking for public comment on “the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams.”

In plain English, the idea is for the government to take your retirement savings in return for a promise to pay you some monthly benefit in your retirement years.

They will tell you that you are “investing” your money in U.S. Treasury bonds. But they will use your money immediately to pay for their unprecedented trillion-dollar budget deficits, leaving nothing to back up their political promises, just as they have raided the Social Security trust funds.

This “conversion” may start out as an optional choice, though you are already free to buy Treasury bonds whenever you want. But as Karl Denninger of the Market Ticker Web site reports: ” “Choices’ have a funny way of turning into mandates, and this looks to me like a raw admission that Treasury knows it will not be able to sell its debt in the open market–so they will effectively tax you by forcing your “retirement’ money to buy them.”

Moreover, benefits based on Treasury bond interest rates may be woefully inadequate compensation for your years of savings. As Denninger adds, “What’s even worse is that the government has intentionally suppressed Treasury yields during this crisis (and will keep doing so by various means, including manipulating the CPI inflation index) so as to guarantee that you lose over time compared to actual purchasing power.”

This proposal follows hearings held last fall by House Education and Labor Committee Chairman George Miller, D-Calif., and Rep. Jim McDermott, D-Wash., of the Ways and Means Committee focusing on “redirecting (IRA and 401 k) tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute,” as reported by

The hearings examined a proposal from professor Teresa Ghilarducci of the New School for Social Research in New York to give all workers “a $600 annual inflation-adjusted subsidy from the U.S. government” in return for requiring workers “to invest 5% of their pay into a guaranteed retirement account administered by the Social Security Administration.”

Argentina provided a precedent in 2008, taking over that country’s private retirement accounts for forced investment in government bonds to cover spiraling deficits. Ambrose Evans-Pritchard editorialized at the time in Britain’s Daily Telegraph that this may be “a foretaste of what may happen across the world as governments discover . . . that the bond markets are unwilling to plug the (deficit) gap. . . . My fear is that governments in the U.S., Britain and Europe will display similar reflexes.”…

Congressional Republicans should introduce legislation to block the government from ever proceeding with anything like this. Call it the “Keep Your Hands Off My 401(k) Act of 2010.”

Gingrich’s article – like Gingrich himself – is highly partisan. He has helped create a false partisan divide-and-conquer strategy in this country, distracting people from realizing that we are all Americans. And instead of admitting that both the Republican and Democratic parties are just two branches of the fat cat party (and that both promote socialism for the rich), Gingrich pretends that only the Democrats are socialists.

So is this just partisan fearmongering, or is Gingrich raising authentic concerns about retirement savings?

I don’t know. But it doesn’t matter.

Specifically, there is no harm – and tremendous benefit – to outlawing extremely dangerous acts, even if no one is positive they will be committed. If no one is going to carry out such acts, then no harm no foul. If they are, it will help to clarify that such acts are illegal and will be harshly punished.

If folks in government aren’t really considering seizing retirement savings, then they shouldn’t oppose the “Keep Your Hands Off My 401(k) Act of 2010”. Right?

These are not the type of acts concerning which expensive regulation would minimize a small harm. The cost of saying Keep Your Hands Off My 401(k) would not be expensive, because it would not involve monitoring against a large number of small infractions, but simply making one big bad act illegal.

Gingrich might be a partisan hack who is writing about this for strictly partisan reasons. But his idea is such a good one, that both Democrats and Republicans should jump on board.

Note: 99% of the Democrats in Congress and the White House are political hacks as well. I am not trying to cheer-lead for the Dems. Both parties have sold their souls to the powers-that-be.

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