Posted by
David Smith on Thursday, October 11, 2007 8:21:24 PM
Did you hear about Sen. Hilary Clinton's newest retirement account proposal? Proposed giving every baby in the country $5,000 in an account to be invested for their future use in buying a house, getting an education, or starting a business.
Well, nevermind, because the Senator threw that baby proposal out with the bathwater.
Now we see the Senator calling instead for every American to receive $1,000 per year towards 401 (k) accounts, undoubtedly managed by the Federal Government. After all, her statement was something to the effect of, "Can we finally put to death the idea of privatizing Social Security?"
OK, first of all, 401 (k) accounts are phenomenally good and extremely successful. Even a person who lost all money invested in Enron in the early 2000's has regained their portfolio value if they were fully diversified. And to those sad individuals who unwisely bet their retirement on Enron by putting all invested capital into that option, I'll bet they've learned otherwise, too.
401 (k) accounts work for precisely this reason: They are not under the purvey of the Federal Government!! They are privatized, and other than the pathetic Enron issue, nobody ever complains about this option. In fact, corporations would be ecstatic to support your 401 (k) investing with (free!!) matching funds were it not for the case that Social Security costs them 12% of your salary on top of your salary.
I don't see what all the fuss over privatizing Social Security is. Shrinks the size of the Federal Government, reduces both the taxes that we pay as well as what employers pay. Do you think the companies would be willing to pay a little bit more, say 3-5% more in salary and benefits, if they could eliminate their Social Security suspport?
I'll take 12% in personal contribution with an employer match any day of the week! And I'll take it over participating in Social Security twice on Sunday!!
But the idea of Sen. Clinton overseeing a program that she claims would only cost $25-30 Billion a year is just ridiculous! First, there are roughly 300 million people in this country and at Sen. Clinton's $1,000 / year rate, it would easily top $300 Billion using conservative, simple math.
Perhaps Hillary has learned President George Bush's "fuzzy math?" Where does one get $30 Billion confused with $300 Billion?? Bad math skills, folks. Bad math skills!
Then the matter of oversight and administration comes into questiton. Which Federal Organization will oversee the mattter and orchestrate the vast resources that will be needed in order to successfully implement this plan?
Answer: None that exists today; This group would have to implement some sort of new bureacracy to oversee this mess, and if you think that could be accomplished for under $30 Billion annually, you are smoking--and inhaling!--bad grasss.
In implementing this program, we must ask ourselves, how is the economy doing? From my perspective, it is trucking along at a brisk pace and has been, with rare exception, since the early 90's. This is due to tax-cutting measures being implemented. Interesting to note that when the first President Bush stated, "Read my lips..." and then proceeded to raise taxes, the economy took a downturn later than cost him a possible second term. Bush 2 comes in, lowers tax rates--especially on the "poor"!--and the economy is flying again! This is not to bash Democrats or former President Bill Clinton--it involves Republicans raising and lowering taxes and the results of such moves!!
Since we have these two instances of Republicans raising and lowering taxes and the empirical data suggesting that raising taxes will usually have this effect on the economy, as will lowering taxes, we must ask the following: What will happen, regardless of responsible Party, if the next Congress and President eliminate the Bush tax measures of 2002?
Answer: The economy will take a downturn!
Now, consider Sen. Clinton's proposals pertaining to Healthcare Insurance and this retirement account proposal, both of which will be paid for by taxpayers. If taxes are raised to pay for these programs, which will be necessary, we will experience a downturn in the economy as previously discussed and empirical evidence supports. This means less money in the people's pockets. Easy to understand, right?
Now, consider the impact on these programs. As more and more negative impact is felt on the economy due to higher taxes, more and more people will begin to rely on these programs, in turn raising need for more and more funding. This increases the need for higher taxes which furthers the negative impacts on the economy which increases the burden on these programs which in turn forces Congress to raise taxes to pay for more and more people on these programs.
Cyclical, predictable, and empirical. Raise taxes and it gets worse--period. Economics 101, free of charge.
Take the opposite approach. Eliminate government entitlements--for arguments' sake, let's discuss Social Security.
Eliminate Social Security, for arguments' sake, and reduce the taxes associated on individuals and employers. This alone will be a HUGE savings in expense for employers. Now, let me ask you this--do you think employers would prefer increasing contributions to employee's self-directed retirement plans like 401 (k) if they can eliminate all matching contributions to their employees' Social Security accounts? HECK YES!!
Here it comes--did you see it coming? The government is not given the authority to engage in retirement planning!! Not in the Constitution. And if you quote the "general welfare" crap like one of my (fellow) Christian buddies did last week, I'll punch you in the elbow! Gross misinterpretation of the term. It is not up to the government to "Secure" our "Social" position. The Declaration of Independence guarantees only the inalianable right to the "pursuit of happiness," not it's "Security."
If you want Securities, call Merrill-Lynch. It is their business to help make you rich, and in the process of doing so for millions of people, to make billions of dollars in profit in return, which we then in return tax at a 38% clip.
I like that!!
Sen. Clinton has yet to realize that 401 (k) is not the business of government, either, apparently. If she thinks that pouring money into this as a government program will solve anything, then she is sorely mistaken.
Actually, truth be told, I think this is Hillary's clever way of admitting that President Bush's privatization proposal is the best thing out there to solve Social Security's woes.
She just wants to use 401 (k)'s and make them government programs instead!