I’ll try not to be as “doom and gloom” as I want to be. But I’ll allow myself one uber-pessimistic sentence to vent. Here we go: The shortsighted dummies in Washington now seem dead-set on sticking their dirty little hands into my wallet once again, this time to nationalize 401(k) plans as a quick cash grab to fund their agenda, and we’ll all suffer because of it. Ok. Technically it was a run-on sentence, but I had a lot to say and only one sentence to say it!
Our generation has witnessed an unprecedented growth in the size of government. It’s tentacles now touch every part of our lives. From regulation of traditionally private enterprises to administering and funding health care, we’re left to wonder where will the growth stop. Well apparently the Democrats in Washington want to keep pushing the envelope. Their latest grab is 401(k) retirement plans.
For all you young adults out there – just because I said retirement doesn’t mean you get to stop reading. This affects us now.
First, some explanation. In February the White House released its “Annual Report on the Middle Class” in Obama’s new Middle Class Task Force laid out ways to improve retirement security. Currently most workers join a 401(k) in which they pay a certain amount of their salary into a tax deferred investment vehicle that allows them to save for retirement. Advantages include: the employee gets to choose the type of investment and risk level, the money is contributed before it is taxed so you save on taxes, and many employers will match what you put in.
Enter the Democrats governing mantra: “Anything the private sector can do we can do better. We can do anything better than you.” To that end the Middle Class Task Force recommended:
“The creation of Guaranteed Retirement Accounts (GRAs), which would give workers a simple way to invest a portion of their retirement savings in an account that was free of inflation and market risk, and in some versions under discussion, would guarantee a specified real return above the rate of inflation.”
Sounds wonderfully benign when you describe it like that. It’s kind of like saying, the public option would have provided patients with more health care choices. Unfortunately, the reality is much different.
Supporters of the GRA have already testified before Congress with proposals to eliminate the favorable tax treatment afforded to 401(k) plans. Government run GRAs would be there to pick up the slack. How they would do that is explained in another government document – a “Request for Information” regarding the “annuitization” of 401(k) plans issued by the Department of the Treasury.
The problem with Americans, as suggested by the Treasury document, is that they aren’t good at saving. They complain that the vast majority of people take their 401(k) earnings in a lump sum once they reach retirement age. Democrats don’t like this idea. Apparently they disapprove of how people spend their money. They say that the only way to make sure people spend wisely is to convince/force them into an annuity providing monthly payments rather than a lump sum. Paternalism at its worst.
All this is bad, but why should young adults be concerned? The answer…just take a look at Social Security. Social Security is a government run retirement plan which everyone pays into. Just take a look at your last paycheck (if you’re lucky enough to have one in this economy) and you’ll notice that you were forced to contribute a substantial amount to Social Security. You’d like to think that this money would be going to a trust fund saved up for when you retire. You’d be wrong. In actuality the Social Security trust fund is a drawer full of IOUs from the federal government.
In a slick budgetary move, designed to make their bottom line look better, the government takes the money paid into Social Security, spends the funds on government programs, while not counting the borrowed money against the deficit. Brilliant! Until you realize that our generation is going to be on the hook for all of this mismanagement.
If GRAs are passed we should expect to see the same thing. The government is seriously hard up for cash. If they were a college student they would be living off ramen and Busch Light. To alleviate this money problem in the short term the government could spend the money currently sitting in retirement accounts, toss out some more IOUs, and defer payment for the GRA annuities for a few decades.
This is the culture that young adults must fight against. The idea that anything goes in the effort to boost today’s bottom line – even if it may cost the next generation trillions. Such short-sightedness must come to an end. Politicians must be made to understand that what matters is what benefits us in the long term not them in the short term. And frankly, our generation already has enough on its plate. Trillion dollar deficits as far as the eye can see. A national debt that doubles in five years and triples in ten. $76 trillion in unfunded government entitlement liabilities. We simply cannot afford to pay for the nation’s retirement as well.
Alright I know I promised I wouldn’t be “doom and gloom.” There really wasn’t a way around it. We’re faced with problems that Washington is refusing to acknowledge even exist. It’s enough to make me want to move, to try and run away from our government’s profligacy. I’ve always wanted to spend some time in Europe!…oh wait.
by Brandon Greife, Political Director of the College Republican National Committee