I’ve written on this topic before back in January, but back at that time I kinda got the idea that this whole notion was less something that might actually become a reality, than it was more a topic of discussion regarding something that Barry “Almighty” would like to use as a “tool” to cover the massive amount of debt he has created. The "chatter" regarding this little scheme has increased of late to the point that now has me asking, "So, how long before Uncle Sam comes for our private pensions to be used as a method to balance the public budget?" It’s very quickly becoming a reasonable question to ask. After all, it's much easier to confiscate the savings of the American people than it is to actually reduce our out of control spending. Right? Just ask our resident alarmist, “Little” Timmy “The Tax Cheat” Geithner who is busy ringing alarm bells all across Washington, D.C., warning of the disastrous outcome if an agreement to raise the debt ceiling is not made and soon. “A default would call into question, for the first time, the full faith and credit of the U.S. government,” Geithner wrote in a letter Friday to Sen. Michael Bennet, D-Colo. Well, how else can one describe the irresponsible spending that has taken place over the course of the last two years. As has been said on any number of occasions, it is the fact that what we “do not have” is a revenue problem, what we “ do have” is a spending problem! And therein lies the cause to our burgeoning debt “crisis.” This is “NOT” brain surgery!
After weeks of Timmy making such warnings, nearly nonstop, the United States has now come up against its $1.43 trillion debt ceiling and near as I can tell the sky has not fallen, nor has the World stopped turning. In response, GOP leaders have made what is a very reasonable demand in that cuts in federal spending need to be made that would be equal to any increase in the limit while maintaining a strong line against tax increases. As Congress squares off over a debt ceiling vote, we’re told that Timmy and the Treasury Department has been busy scrambling to find cash in the "couch cushions" in and effort to temporarily tie things over. One of the ways they will work to scare up a little extra cash is by putting off saving for the retirements of federal workers, in effect, short-term “borrowing” from public pension funds. By suspending investments into the civil service retirement and disability fund, as well as putting off reinvestments into another big retirement bucket known as the G-Fund, Treasury could “claw back” up to $202 billion, at least according to estimates made by Reuters. That sounds like a lot, but it’s just 10 percent of the $2 trillion the agency says it needs to stay afloat until after Election Day 2012, and it will have to be put back. So once again it sounds like we're robbing Peter to pay Paul, the typical method for Democrats when it comes to doing the books.
Holding off public pension payments could be cast as prudent short-term scrambling to avoid a serious problem with U.S. Treasury holders. Taken another way, such moves could instead be seen as the first step toward an eventual tax or outright “seizure” of private savings in tax-favored retirement plans. That simply can happen here, you say? Well not that long ago I was willing to bet that we wouldn’t ever have to deal with socialized medicine in this country, but look at us now. The seizure of private pensions has happened in plenty of indebted countries, such as Argentina and Hungary, and it just happened last week in Ireland. Hungary seized $14 billion from private pensions, according to The Christian Science Monitor, while Bulgaria and Poland demanded partial government control of private savings. Earlier, Ireland dipped into state pension funds to bail out banks and, more recently, finding itself unable issue new debt, the Irish finance ministry announced it would tax private savings at a rate of 0.6 percent of assets over a four-year period, a decision it expects to raise $668.2 million per year. So with the precedent having now been set, in a sense, it’s not much of a stretch to imagine Barry now trying the same stunt here in America. And speaking of Ireland, it has now asked America for financial assistance even though we too are broke. So I guess we're simply expected to borrow more money from Communist China so that we can then lend it to the Irish in order to help them take care of their insolvency problem. Does this screwy little financial scenario make sense to anyone?
So what “deep pockets” could Treasury and Congress target next in the coming years to cover their excesses? Hold on to your hats, make that your wallets, folks, those so-called “deep pockets and/or wallets” are yours! Like you didn’t already know that, right? Despite reports that Americans are woefully unprepared for retirement, Americans with access to private 401(k) plans have been good about saving. Americans held $3.1 trillion in 401(k) plans as of Dec. 31, according to the Investment Company Institute. That makes for a very tempting target for Barry "Almighty" and the congressional Democrats. So the cash cow that could be used to subsidize our Barry "Almighty" created debt may be…YOU! Fidelity Investments, which manages 11 million participants in 16,500 employer-sponsored plans, says savings are at the highest level in years. The average account balance is at $74,900, up 12 percent from the previous year and at an all-time high, Fidelity told Bloomberg News. Vanguard Investments said of its 3.5 million participants' average account balances hit $79,077 recently. For long-term savers, the average was higher, Fidelity noted, at $191,000 for those who had saved for 10 continuous years and $233,800 for those over the age of 55 who had saved for 10 years consecutively. Now, I’m pretty sure those who make up Barry’s core constituency more often than not are busy spending more of their income on booze, drugs and hookers than they are on their retirement. So this potential scheme of Barry’s will, most likely, have very little effect, if any, on whether or not these folks support this blatant abuse of power. Also it remains a pretty sure bet that 99 percent of them will still vote for him. After all, he not robbing from them.
While those retirement savings are technically tax-free until their holders take distributions, the government could very easily force earlier distributions and then simply tax them more heavily. Currently, the “minimum required distributions” age is 70½. That affects all IRA-type funds except tax-free Roth IRAs, including SEP and Simple IRAs commonly used by small business owners. Potentially, the deal on Roth IRAs could be undone, too. Megan McArdle at “The Atlantic” believes both traditional IRAs are in danger due to normal tax increases and that tax-free Roth accounts eventually will be tapped, too. The government raised the income limits for conversions of Roth IRAs and fearful Americans responded. Conversions subsequently spiked fourfold in 2010, Fidelity Investments said in February. That means a short-term spike in tax collection as people pay for the conversions now but then tax-free growth for years to come, unless, of course, Uncle Sam gets desperate. And trust me when I say, Uncle Sam is going to get desperate, that’s a forgone conclusion because there is no desire whatsoever to curb our out of control spending. This binge that Barry has us on has got to be brought under control or the resulting hangover may prove to be terminal.
“I think that Congress is going to go after all of it,” McArdle writes. “But Congress doesn't have to do anything special to get money out of traditional IRAs; it just has to raise income taxes. (401ks and traditional IRAs are taxed at ordinary income tax rates). Roth IRAs, on the other hand, represent a sizable pool of tax-free assets.” The shear arrogance involved here not only of our president but of the Democrats in Congress as well, that they can somehow manipulate the system to steal from the American people money they have saved for their retirements is appalling. Congress might end the tax break on municipal bonds, too. As Jason Zweig at The Wall Street Journal points out, the muni bond tax break has been a perennial target of politicians over the years. Now, the idea of removing the tax break, a major support for retiree income, is on the table. We know that because the recent Barry deficit commission brought it up. The Congressional Budget Office figures killing the tax exemption would save $143 billion from 2012 to 2021. With us having accrued a debt of over $1.6 Trillion just this year, thanks to the rabid spending of Barack Hussein Obama, what does the “saving” of $143 billion really amount to in the big scheme of things other than the robbing from American their retirement savings.
It seems that something is going to have to give. Angel Gurria, Secretary General of the Paris-based Organization for Economic Co-operation and Development (OECD), recently warned that the developed countries face a “Mount Everest” of debt that will take a generation to unload. Really? “We have unsustainable deficits throughout the OECD countries. And that includes the United States and includes Japan. That also includes the whole of Europe, practically the whole of Europe,” Gurria told CNBC. Growth will continue, Gurria said, and countries will begin to address their individual problems, but the really tough decisions are still years away, he warned, as legions of workers in the biggest economies quit work and begin to draw promised pensions and health benefits. “We’re going to find ourselves in a very uncomfortable situation in two, three, four years' time. Then we’re going to have to come down from there, and by that time, we’re going to have the aging process come in. So, it’s going to take a generation to get out of this situation of the debt in the OECD countries.” So if the "really" tough decisions are still supposed to be years away, doesn't it make sense to start toward a more rational fiscal policy now so that those decisions become a little less tough, or perhaps won't need to be made at all? This insane pace of spending that has been underway practically since day one by Barry "Almighty," has got to be reduced, and quickly!
So what is it that Barry and his socialist cadre of cheerleaders of his bogus economic revitalization policies see as being the solution to this ongoing scenario, at least here in America? This little band of malcontents comprised exclusively of uniquely worthless academics, bureaucrats, members of the state-controlled media and patently corrupt politicians. What they have in mind is the confiscating of all that money which you have been scrimping and saving all these years to put toward your retirement. What a deal, right? Because you see, this slime bag president of ours, and his rat pack in Congress, don’t have to worry about their retirements, because, thanks to your tax dollars, those are all covered. So in effect you’ll be paying for the retirement of all these corrupt politicians, just not your own. Ah, “Hope and Change,” don’t ya just love it? One gain, proof that "change" just for the sake of change is not always what's needed.
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