Tag Archive | "stock market"

401(k) Plans and Private Pensions Seized Under Obama?

Tags: , , , , , , ,


Sounds like Socialism will be on the rise if Obama becomes President of the United States.   Will Obama and the Dems in congress allow the seizure of 401(k) plans and private pension funds in the name of ”protecting workers’ retirement accounts”?

It appears that some Democrats on the Hill might try to kill 401(k) plans.

From usnews.com :

House Democrats recently invited Teresa Ghilarducci, a professor at the New School of Social Research, to testify before a subcommittee on her idea to eliminate the preferential tax treatment of the popular retirement plans. In place of 401(k) plans, she would have workers transfer their dough into government-created ” guaranteed retirement accounts” for every worker. The government would deposit $600 (inflation indexed) every year into the GRAs. Each worker would also have to save 5 percent of pay into the accounts, to which the government would pay a measly 3 percent return. Rep. Jim McDermott, a Democrat from Washington and chairman of the House Ways and Means Committee’s Subcommittee on Income Security and Family Support, said that since ” the savings rate isn’t going up for the investment of $80 billion [in 401(k) tax breaks], we have to start to think about whether or not we want to continue to invest that $80 billion for a policy that’s not generating what we now say it should.”

A few respectful observations:

1) McDermott is right when he says the savings rate isn’t going up. But the savings rate doesn’t include gains to money you invest in the stock market. It ignores the buildup of net worth. (If you bought a share of XYZ Corp. in January at $100, for instance, and its value doubled by December, the savings rate measure would still value that investment at $100. In short, the savings rate is a phony number.)

2) So based partly on the above faulty logic, the $4.5 trillion, as of the start of the year, invested in 401(k) plans doesn’t count as savings.

3) Ghilarducci would have workers abandon the stock market right at the bottom of the market. A stupid idea, according to Warren Buffett: I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: ‘Put your mouth where your money was.’ Today my money and my mouth both say equities.

4) Ghilarducci would offer a lousy 3 percent return. The long-run return of the stock market, adjusted for inflation, is more like 7 percent. Look at it this way: Ten thousand dollars growing at 3 percent a year for 40 years leaves you with roughly $22,000. But $10,000 growing at 7 percent a year for 40 years leaves you with $150,000. That is a high price to pay for what Ghilarducci describes as the removal of a source of financial anxiety and…fruitless discussions with brokers and financial sales agents, who are also desperate for more fees and are often wrong about markets.” Please, I’ll take a bit of worry for an additional $128,000.

5) What effect would this plan have on an already battered stock market? Well, I would imagine it would send it even lower, sticking a shiv into the portfolios of everyone who didn’t jump aboard. But I am sure the Chinese would love to jump in and buy all our cheap stocks to fund the retirement of their citizens.

Bottom line: If you believe in the long-run dynamism of the American economy, then you have to believe in the stock market. Listen to superinvestor Buffett, not the prof from the New School.

[tags]socialism, communisim,pension plans, 401k, retirement, obama, economy, stock market[/tags]

McCain says Obama policies will deepen recession

Tags: , , , ,


Lagging in the polls, Republican presidential candidate John McCain unleashed a blistering attack Monday on his Democratic rival, saying the race comes down to a simple question: “Country first or Obama first?”

In his first public appearance since Friday night’s debate, McCain said Democrat Barack Obama advocates tax-and-spend policies that “will deepen our recession,” and voted against funding for equipment needed by troops in Iraq and Afghanistan.

“That is not putting the men and women of our military first,” he said.

McCain stressed his own record of opposing Republicans on key issues, and said, “When it comes time to reach across the aisle and work with members of both parties to get things done for the American people – my opponent can’t name a single occasion in which he fought against his party’s leadership to get something done for the country. That is not putting the interests of the country first.”

The speech was McCain’s first outside Washington since he announced abruptly last week he was suspending his campaign to concentrate on helping Congress agree on a bailout for the troubled financial industry. He drew heated criticism from Democrats who accused him of nearly derailing negotiations that were headed for success, and even some Republicans conceded privately he appeared impetuous and had not helped his own cause.

Recent polls also suggest Obama has regained a lead he held in the race before the Republican National Convention, where McCain’s choice of Palin energized conservatives and led to a short-term surge in his poll ratings.