By Rick Manning – The GAO came out with a study late last week in response to a request by a handful of congressional Democrats to determine among other things, why participation in individual 401(k) plans has been limited to about 50 percent of the workforce.
In findings somewhat akin to discovering that fish can swim, the GAO found that the people who contributed at or above the statutory limits in 2007 made more than $126,000 a year.
No kidding? Really? Taxpayers paid the GAO to determine that the people who could afford to put $15,000 a year away for retirement in a single year were people who made the most money?
Yeah, and if they spend another million bucks to study it, they might discover that most birds fly, and squirrels break into bird feeders.
Of course, the purpose behind the Democrat requested study is to try to create a series of studies that justify setting up another government-controlled defined benefit pension system in addition to Social Security.
Significantly, one member of the General Accounting Office’s Retirement Policy Advisory Panel is Theresa Ghilarducci, who is best known for her proposal urging the government to eliminate 401(k) tax deferred savings accounts, and set up government managed retirement accounts instead.
Here is how Ghilarducci describes her idea in a 2008 New York Times opinion piece, “Each person would contribute 5 percent of his or her pay. And the government would provide an annual deposit of, say, $600, and also guarantee a 3 percent return, added to the inflation rate. (In a year with 4 percent inflation, for example, the guarantee would be 7 percent.)”
Read Ghilarducci’s words carefully, when she says each person would “contribute 5 percent of his or her pay”, she means, the government would take a mandatory 5 percent additional money from each person’s paycheck to create another government pension program. Of course, once that worker dies, unlike the 401(k), the underlying 5 percent “contribution” stays behind with the government.
To provide some magnitude on how large this annual “contribution” would be, U.S. workers currently earn about $5.6 trillion a year in wage income, a function of average household wages ($49,777) multiplied by total households (113.5 million). A 5 percent mandatory “contribution” would total just more than $280 billion a year. Ghilarducci would have the government hold that money for workers to collect upon their retirement. She’d probably even put it into a “lock box” with all those Social Security and Medicare dollars that don’t exist anymore.
The reason that Ghilarducci is important to this debate is that no matter how Democrats want to try to spin it, her idea, that tax incentives to save for retirement are unfair because only those who actually pay taxes will benefit, is at the core of the most recent GAO study.
Rather than allowing individuals to save or not, as they choose. Democrats want to put another government program in place to force that decision upon each and every worker.
Rather than allowing individuals to make investment decisions with their retirement savings, Democrats want to have the government do it for you, because they know best.
Rather than allow individuals to take their entire retirement nest egg and spend it when and how they please, Democrats want to dole it out like a child’s allowance keeping whatever is left over after the death of the retiree.
And Democrats with the aid of official sounding Government Accounting Office reports written with the advice of Theresa Ghilarducci, are trying to create the illusion of an official, non-partisan sounding approach to grab another slice of every wage earners dollar. Doing it all for our own good.
Ironically, these are the exact kind of government-controlled defined benefit pensions that are going broke under the name of social security. They are the same kind of pension systems that are failing as public employee pensions. And they are the same kind of defined benefit pension systems that are underwater for many union members.
Now, Democrats hope to repackage this failed idea in the hopes that American’s will be convinced that this time the government means it when they say, trust us, we’re from Washington and we’re here to help.
To quote my Dad, “Fool me once, shame on you. Fool me twice, shame on me.”
Rick Manning is the Communications Director of Americans for Limited Government and a former Labor Department Public Affairs Chief of Staff.