Government Eyeing Private Retirement Plans

 

by Bryan Baumgart - 11/29/2012

The Plot

As explained in a recent NY Times editorial, Teresa Ghilarducci, a professor of economics at the New School originally testified before the House Committee on Education & Labor in 2008.  Her plan explained below has begun picking up traction among lawmakers. Under Ghilarducci's plan, tax free contributions to private retirement accounts would be eliminated and money currently located in private 401(k)s would be seized by federal edict and used to establish government run pensions she refers to as Guarantee Retirement Accounts (GRA's). The funds would be placed with the terribly mismanaged Social Security Administration. You would then be required to surrender 5% of your pay into the GRA's until you retire. If you die before collecting the money, it goes to Washington rather than your heirs, even if you worked hard and did a fantastic job of saving and investing your hard earned money. Failure to comply would be punishable by fines and jail time. Ghilarducci's congressional testimony can be seen here.

The Problem

Many Americans have chosen or have not been able to contribute enough money to private retirement accounts. Couple that with unfunded public pensions, a failing social security fund, and devastating effects of the economic downturn on 401(k)s, and we are left with  a large number of Americans nearing retirement without any way to fund it.

Class Warfare

Liberals have derided the fact that only half of Americans own and actively manage their 401(k)s. Of that 50%, very few are able to contribute the maximum 17% allowing them to take full advantage of the tax breaks. They claim private retirement accounts favor the wealthy and demand seizure of 401(k)s in the name of economic justice!

Why Now?

The government has found itself underwater and the leg cramps are beginning to set in. Realizing Washington is missing out on an estimated $50 - $70 billion dollars worth of tax revenue each year; officials have introduced plans to end those tax credits, initially offered to encourage savings by individuals. (*Note: Many liberals will claim a higher estimate, intentionally assuming that all 401(k) money is invested in bonds when in reality, two thirds of 401(k) assets are invested in equities where gains are taxed only when realized and both dividends and gains are taxed at a preferential rate of at most 15 percent.)

Realizing that $50 - $70 billion dollars is only a drop in the bucket of our $1 trillion dollar + annual deficit, officials are considering extending their plot to include seizing private 401(k)s to purchase government bonds in order to cushion the government's spending problem.


The Cold Hard Truth

"The government is making a play to suck the last bit of capital from capitalism." - Rush Limbaugh

There is no arguing that America faces a looming crisis as the 401(k) generation nears a significantly underfunded retirement. The question is what should be done about it?  Does a government that promised tax free contributions have a right to renege on that promise?  Does a government that encouraged private savings have a right to turn around and seize the fruits of one's labor to help alleviate the problem they created?  Does anyone really believe that the government would do a better job looking out for your retirement than you would?  The government has already spent and bankrupted our saving in the social security trust fund?

Should reform start by addressing WHY American's have not been willing or able to contribute to their 401(k)s?

There is no question that reform is necessary! The question is...how should that reform look?

Reaganomics Vs. Obamanomics: Facts And Figures

Peter Ferrara

In February 2009 I wrote an article for The Wall Street Journal entitled “Reaganomics v Obamanomics,” which argued that the emerging outlines of President Obama’s economic policies were following in close detail exactly the opposite of President Reagan’s economic policies.  As a result, I predicted that Obamanomics would have the opposite results of Reaganomics.  That prediction seems to be on track.

When President Reagan entered office in 1981, he faced actually much worse economic problems than President Obama faced in 2009.  Three worsening recessions starting in 1969 were about to culminate in the worst of all in 1981-1982, with unemployment soaring into double digits at a peak of 10.8%.  At the same time America suffered roaring double-digit inflation, with the CPI registering at 11.3% in 1979 and 13.5% in 1980 (25% in two years).  The Washington establishment at the time argued that this inflation was now endemic to the American economy, and could not be stopped, at least not without a calamitous economic collapse.

All of the above was accompanied by double -igit interest rates, with the prime rate peaking at 21.5% in 1980.  The poverty rate started increasing in 1978, eventually climbing by an astounding 33%, from 11.4% to 15.2%.  A fall in real median family income that began in 1978 snowballed to a decline of almost 10% by 1982.  In addition, from 1968 to 1982, the Dow Jones industrial average lost 70% of its real value, reflecting an overall collapse of stocks.

President Reagan campaigned on an explicitly articulated, four-point economic program to reverse this slow motion collapse of the American economy:

1.  Cut tax rates to restore incentives for economic growth, which was implemented first with a reduction in the top income tax rate of 70% down to 50%, and then a 25% across-the-board reduction in income tax rates for everyone.  The 1986 tax reform then reduced tax rates further, leaving just two rates, 28% and 15%.

2.  Spending reductions, including a $31 billion cut in spending in 1981, close to 5% of the federal budget then, or the equivalent of about $175 billion in spending cuts for the year today.  In constant dollars, nondefense discretionary spending declined by 14.4% from 1981 to 1982, and by 16.8% from 1981 to 1983.  Moreover, in constant dollars, this nondefense discretionary spending never returned to its 1981 level for the rest of Reagan’s two terms!  Even with the Reagan defense buildup, which won the Cold War without firing a shot, total federal spending declined from a high of 23.5% of GDP in 1983 to 21.3% in 1988 and 21.2% in 1989.  That’s a real reduction in the size of government relative to the economy of 10%.

3.  Anti-inflation monetary policy restraining money supply growth compared to demand, to maintain a stronger, more stable dollar value.

4.  Deregulation, which saved consumers an estimated $100 billion per year in lower prices.  Reagan’s first executive order, in fact, eliminated price controls on oil and natural gas.  Production soared, and aided by a strong dollar the price of oil declined by more than 50%.

These economic policies amounted to the most successful economic experiment in world history.  The Reagan recovery started in official records in November 1982, and lasted 92 months without a recession until July 1990, when the tax increases of the 1990 budget deal killed it.  This set a new record for the longest peacetime expansion ever, the previous high in peacetime being 58 months.

During this seven-year recovery, the economy grew by almost one-third, the equivalent of adding the entire economy of West Germany, the third-largest in the world at the time, to the U.S. economy.  In 1984 alone real economic growth boomed by 6.8%, the highest in 50 years.  Nearly 20 million new jobs were created during the recovery, increasing U.S. civilian employment by almost 20%.  Unemployment fell to 5.3% by 1989.

The shocking rise in inflation during the Nixon and Carter years was reversed.  Astoundingly, inflation from 1980 was reduced by more than half by 1982, to 6.2%.  It was cut in half again for 1983, to 3.2%, never to be heard from again until recently.  The contractionary, tight-money policies needed to kill this inflation inexorably created the steep recession of 1981 to 1982, which is why Reagan did not suffer politically catastrophic blame for that recession.

Real per-capita disposable income increased by 18% from 1982 to 1989, meaning the American standard of living increased by almost 20% in just seven years.  The poverty rate declined every year from 1984 to 1989, dropping by one-sixth from its peak.  The stock market more than tripled in value from 1980 to 1990, a larger increase than in any previous decade.

In The End of Prosperity, supply side guru Art Laffer and Wall Street Journal chief financial writer Steve Moore point out that this Reagan recovery grew into a 25-year boom, with just slight interruptions by shallow, short recessions in 1990 and 2001.  They wrote:

We call this period, 1982-2007, the twenty-five year boom–the greatest period of wealth creation in the history of the planet.  In 1980, the net worth–assets minus liabilities–of all U.S. households and business … was $25 trillion in today’s dollars.  By 2007, … net worth was just shy of $57 trillion.  Adjusting for inflation, more wealth was created in America in the twenty-five year boom than in the previous two hundred years.

What is so striking about Obamanomics is how it so doggedly pursues the opposite of every one of these planks of Reaganomics.  Instead of reducing tax rates, President Obama is committed to raising the top tax rates of virtually every major federal tax.  As already enacted into current law, in 2013 the top two income tax rates will rise by nearly 20%, counting as well Obama’s proposed deduction phase-outs.

The capital gains tax rate will soar by nearly 60%, counting the new Obamacare taxes going into effect that year.  The total tax rate on corporate dividends would increase by nearly three times.  The Medicare payroll tax would increase by 62% for the nation’s job creators and investors.  The death tax rate would go back up to 55%.  In his 2012 budget and his recent national budget speech, President Obama proposes still more tax increases.

Instead of coming into office with spending cuts, President Obama’s first act was a nearly $1 trillion stimulus bill.  In his first two years in office he has already increased federal spending by 28%, and his 2012 budget proposes to increase federal spending by another 57% by 2021.

His monetary policy is just the opposite as well.  Instead of restraining the money supply to match money demand for a stable dollar, slaying an historic inflation, we have QE1 and QE2 and a steadily collapsing dollar, arguably creating a historic reflation.

And instead of deregulation we have across-the-board re-regulation, from health care to finance to energy, and elsewhere.  While Reagan used to say that his energy policy was to “unleash the private sector,” Obama’s energy policy can be described as precisely to leash the private sector in service to Obama’s central planning “green energy” dictates.

As a result, while the Reagan recovery averaged 7.1% economic growth over the first seven quarters, the Obama recovery has produced less than half that at 2.8%, with the last quarter at a dismal 1.8%.  After seven quarters of the Reagan recovery, unemployment had fallen 3.3 percentage points from its peak to 7.5%, with only 18% unemployed long-term for 27 weeks or more.  After seven quarters of the Obama recovery, unemployment has fallen only 1.3 percentage points from its peak, with a postwar record 45% long-term unemployed.

Previously the average recession since World War II lasted 10 months, with the longest at 16 months.  Yet today, 40 months after the last recession started, unemployment is still 8.8%, with America suffering the longest period of unemployment that high since the Great Depression.  Based on the historic precedents America should be enjoying the second year of a roaring economic recovery by now, especially since, historically, the worse the downturn, the stronger the recovery.  Yet while in the Reagan recovery the economy soared past the previous GDP peak after six months, in the Obama recovery that didn’t happen for three years.  Last year the Census Bureau reported that the total number of Americans in poverty was the highest in the 51 years that Census has been recording the data.

Moreover, the Reagan recovery was achieved while taming a historic inflation, for a period that continued for more than 25 years.  By contrast, the less-than-half-hearted Obama recovery seems to be recreating inflation, with the latest Producer Price Index data showing double-digit inflation again, and the latest CPI growing already half as much.

These are the reasons why economist John Lott has rightly said, “For the last couple of years, President Obama keeps claiming that the recession was the worst economy since the Great Depression.  But this is not correct.  This is the worst “recovery” since the Great Depression.”

However, the Reagan Recovery took off once the tax rate cuts were fully phased in.  Similarly, the full results of Obamanomics won’t be in until his historic, comprehensive tax rate increases of 2013 become effective.  While the Reagan Recovery kicked off a historic 25-year economic boom, will the opposite policies of Obamanomics, once fully phased in, kick off 25 years of economic stagnation, unless reversed?

Peter Ferrara is director of policy for the Carleson Center for Public Policy and senior fellow for entitlement and budget policy at the Heartland Institute.  He served in the White House Office of Policy Development under President Reagan, and as associate deputy attorney general of the United States under President George H. W. Bush.  He is the author of America’s Ticking Bankruptcy Bomb, forthcoming from HarperCollins.

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http://www.forbes.com/sites/peterferrara/2011/05/05/reaganomics-vs-obamanomics-facts-and-figures/

Red State Revenge - Starve the Beast!!!

 

Election Cycle political donations, as reported by the Center for Responsive Politics:

Shopping

Price Club/Costco donated $225K, 99% went to Democrats

Rite Aid donated $517K, 60% went to Democrats

Magla Products (Stanley tools, Mr. Clean) donated $22K, 100% went to Democrats

Warnaco (undergarments) donated $55K, 73% went to Democrats

Martha Stewart Living Omnimedia donated $153K, 99% went to Democrats

Estee Lauder donated $448K, 95% went to Democrats

Guess, Inc. Donated $145K, 98% went to Democrats

Calvin Klein donated $78K, 100% went to Democrats

Liz Claiborne, Inc. Donated $34K, 97% went to Democrats

Levi Straus donated $26K, 97% went to Democrats

Olan Mills donated $175K, 99% went to Democrats

WalMart donated $467K, 97% went to Republicans

K-Mart donated $524K, 86% went to Republicans

Home Depot donated $298K, 89% went to Republicans

Target donated $226K, 70% went to Republicans

Circuit City Stores donated $261K, 95% went to Republicans

3M Co. Donated $281K, 87% went to Republicans

Hallmark Cards donated $319K, 92% went to Republicans

Amway donated $391K, 100% Republicans

Kohler Co. (plumbing fixtures) donated $283K, 100% Republicans

B.F. Goodrich (tires) donated $215K, 97% went to Republicans

Proctor & Gamble donated $243K, 79% went to Republicans

Spirits

Southern Wine & Spirits donated $213K, 73% went to Democrats

Joseph E. Seagrams & Sons (incl. Beverage Business and considerable media interests) donated $2M+, 67% went to Democrats

Gallo Winery donated $337K, 95% went to Democrats

Coors & Budweiser donated $174K, 92% went to Republicans

Brown-Forman Corp. (Southern Comfort, Jack Daniels, Bushmills, Korbel Wines, Lenox China , Dansk and Gorham Silver) donated $644 K -- 80% went to Republicans

Restaurants

Sonic Corporation donated $83K, 98% went to Democrats

Triarc Companies (Arby's, T.J. Cinnamon's, Pasta Connections) donated $112K, 96% went to Democrats

Pilgrim's Pride Corp. (chicken) donated $366K, 100% went to Republicans

Outback Steakhouse donated $641K, 95% went to Republicans

Tricon Global Restaurants (KFC, Pizza Hut, Taco Bell) donated $133K, 87% went to Republicans

Brinker International (Maggiano's, Brinker Cafe, Chili's, On the Border, Macaroni Grill, Crazymel's, Corner Baker, EatZis) donated $242K, 83% went to Republicans

Waffle House donated $279K, 100% went to Republicans

McDonald's Corp. Donated $197K, 86% went to Republicans

Darden Restaurants (Red Lobster, Olive Garden, Smokey Bones, Bahama Breeze) donated $121K, 89% went to Republicans

Heinz Republicans $64,000 Democrats $21,300! John Kerry's wife's company!!!

Hotels

Hyatt Corporation donated $187K of which 80% went to Democrats

Marriott International $323K, 81% went to Republicans

Holiday Inns donated $38K, 71% went to Republicans

Obamacare: The Road to Repeal Starts in the States

by Michael F. Cannon

States that have refused to implement the Obama health law have already blocked $80 billion of its new deficit spending. If more states follow suit, they can block the other $1.6 trillion and force Congress to repeal the law.

The law relies on states to implement two of its most essential pieces: health-insurance "exchanges" and a vast expansion of Medicaid. Exchanges are government agencies through which the law channels $800 billion to private health-insurance companies.

The Medicaid expansion adds another $900 billion to the federal debt, with private insurers again taking a slice. States are under no obligation to implement either. Responsible state officials will say no to both.

It is a myth that creating an exchange gives states more control over their insurance markets. Yes, the law directs the federal government to create one in states that do not. But every exchange must be approved by federal bureaucrats, empowering them to impose whatever oppressive rules on "state-run" exchanges they would impose through a federal exchange.

In contrast, by refusing to create an exchange states can block the law's debt-financed subsidies to private insurance companies and avoid new taxes on their employers and consumers.

The law imposes a $2,000 per-worker tax on employers, but only in states that create an exchange. (If Virginia creates one, there will be a giant sucking sound as employers flee to Louisiana, Texas, South Carolina and Florida, which have said they will not.) States creating exchanges will have to increase taxes another $10 million to $100 million per year to cover their operating costs.

* * * * *   The Supreme Court further empowered states when it overturned the law's Medicaid mandate. That mandate required states to expand their Medicaid rolls dramatically on pain of losing all federal Medicaid funds, which comprise 12 percent of state revenues. Twenty-six states challenged that mandate as unconstitutionally coercive.

They won. The court held the federal government cannot withhold existing Medicaid grants from states that fail to expand their programs. States may now refuse to expand their programs without fear.

And they should. My Cato Institute colleague Jagadeesh Gokhale estimates this expansion would cost Florida, Kansas, Illinois and Texas roughly $20 billion each in its first 10 years. New Jersey and New York would pay $35 billion and $53 billion, respectively. So you know we're not cooking the books, Gokhale projects California would save money.

But not for long. President Obama is already trying to shift even more Medicaid costs to the states. It's called "predatory federalism": Washington uses a low introductory rate as bait, then once states are hooked it changes the terms. In the end, even California will take it on the chin.

This is money states don't have. Nor can Washington, with its trillion-dollar deficits, afford the $900 billion the Congressional Budget Office estimates this Medicaid expansion would cost the federal government.
In total, state officials can block $1.6 trillion of deficit spending simply by sitting on their hands. According to CBO estimates, the handful of states that have already refused to expand Medicaid are saving taxpayers $80 billion.

* * * * *   Blocking these provisions will expose the full costs of the law, instead of allowing the federal government to shift those costs to taxpayers. The resulting backlash will push members of Congress to switch their votes and support repeal, just as two House Democrats did during the latest repeal vote. A critical mass of states could literally force Congress to repeal the Obama health law.

Opposition to these individual provisions, like opposition to the Obama health law, is bipartisan.

Among the governors refusing to create an exchange is New Hampshire's Democratic Gov. John Lynch, who signed a law forbidding one. Montana's Democratic Gov. Brian Schweitzer is among the dozen or more governors who are balking at the Medicaid expansion. Not that it takes a governor — a solid bloc of state legislators, or even just one committee chairman, is enough.

The Obama health law is weaker, and the path to repeal is clearer, than it has ever been.

This article appeared on Richmond Times-Dispatch on August 5, 2012. 

http://www.cato.org/publications/commentary/obamacare-road-repeal-starts-states

Obamacare Violates the Constitutions Origination Clause; Legal Challenge Moves Forward

Once Obamacare was passed, there was a host of legal challenges filed.  Most of them centered around the insurance mandate and whether or not it was constitutional for the federal government to force citizens to purchase a product.

One of the lawsuits launched against Obamacare involved a businessman named Matt Sissel. The Pacific Legal Foundation took on Sissel’s case. When the US Supreme Court agreed to hear three of the legal challenges, Pacific Legal Foundation decided to put a hold on Sissel’s lawsuit to see what the Supreme Court would rule.

From the reactions and comments of the Supreme Court Justices during the arguments of both sides, many people believed that the high court would overturn the mandate and possibly all of Obamacare. On June 28, 2012 the United States Supreme Court stunned the nation by upholding the entire Obamacare package. Chief Justice John Roberts broke before the four – four tie by ruling that the penalty part of the insurance mandate was a tax.

Once Roberts ruled the penalty for not complying with the insurance mandate was a tax to be enforced by the IRS, most other legal challenges to Obamacare fell by the wayside. However, because Roberts ruled the penalty of tax it opened up a new legal challenge to the constitutionality of Obamacare that Pacific Legal Foundation plan to use on behalf of Matt Sissel.

According to the Article 1, Section 7, of the United States Constitution any legislation to create a tax to be collected by the federal government must originate in the House of Representatives. This is known as the Origination Clause. PLF claims that the original bill that was used to create Obamacare originated in the Senate and not the House, thus making Obamacare illegal. 

Based on this information they are now moving forward with the case in the court system.

Judge Beryl Howell of the US District Court for the District of Columbia recently ruled that PLF’s argument based upon the Origination Clause can proceed forward in the court. PLF Principal Attorney Paul J. Beard commented saying:

“Our commitment is strengthened, and our fight goes on.”

“With Obamacare, the legislative process was backwards— and that makes it unconstitutional. If it’s a tax, as a Supreme Court called it, then it started in the wrong house.”

“When we focus on the Origination Clause, we’re not talking about dry formalities and this isn’t an academic issue. The Founders understood that the power to tax, if misused, involves the power to destroy, as Chief Justice John Marshall put it. Therefore, they viewed the Origination Clause as a safeguard for liberty. They insisted that the power to initiate new taxes should be left with the lawmakers who are most directly accountable to voters— members of the House, who are elected every two years by local districts.”

Matt Sissel says he is in the legal fight for the long haul. As a small business owner in Iowa City, Sissel said:
“I am in this lawsuit to defend liberty and the Constitution. That purpose and that promise continue today. My lawsuit is more important than ever, and we’ll move ahead with it, all the way up the judicial system, if necessary.”

“Quitting is never an option. In the military we learned you don’t stop halfway up the hill. The same goes with our courtroom challenge to Obamacare. I’m grateful to PLF for sharing my determination to move forward.”
This challenge may be the last hope of fighting off Obamacare and the huge negative impact it is having on our nation, economy, and healthcare industry. This battle may be long and expensive but Sissel and the PFL are determined to see it through to the end. We all need to get behind them and support them in any way possible if there is any hope left to stop the ugly beast known as Obamacare from devouring us all.

Read more: http://godfatherpolitics.com/8009/legal-challenge-to-obamacare-moves-forward/#ixzz2ByUiYDQ3

Give a Man a Fish…

By: Bryan Baumgart  

11/2/2012

With the release of the latest jobs report we learn that for every ONE job created under the Obama administration, 75 more people have been added to food stamp rolls. 

In total since January of 2009, a net of 194,000 new jobs have been created while 14.7 million people have joined the food stamp rolls. As The Weekly Standard points out today, “During that time, our nation’s debt has risen $5.63 trillion. Total spending on food stamps is now more than $80 billion annually. Total welfare spending is now approximately $1 trillion, or enough to send every household beneath the federal poverty line an annual check for $60,000.”

Some may not be surprised by this trend; we are after all in the grips of a pretty stagnant economy. The problem however, isn’t the ever increasing number of Americans added to the rolls of food stamps. The problem is that the current administration has put in a much greater effort to increase food stamp rolls than to increase job creation. They have promoted dependence rather than empowerment.

President Obama claims, “We do not pressure any eligible person to accept benefits, nor is our goal to simply increase the number of program participants.” You can imagine how surprised I was then, when I was approached by a friend recently who mentioned that they were currently receiving SNAP themselves. They stated that while applying for college at Education Quest, counselors approached them and suggested they apply for SNAP.  The process was easy enough. They applied, had an interview, and began receiving food stamps immediately. Counselors even coached them on how to be accepted into the program stating, “It helps if you are a full time student working at least 20 hours a week.”

Despite the president’s claims, the focus of the Obama administration remains on increasing enrollment in SNAP. The administration has partnered with Mexico, meeting with Mexican officials over 30 times in an effort to boost participation among immigrants.

The USDA boasts a range of strategies and programs designed to bring more people to SNAP, including taking on “pride.” Awards are provided to local assistance offices for “counteracting” pride and pushing more people to sign up for benefits. A “Common SNAP Myths” sheet details the importance of reaching people who do not think they qualify or have beliefs that conflict with accepting food stamps. A pamphlet currently posted at the USDA website encourages local SNAP offices to throw parties as one way to get potentially eligible seniors to enroll in the program. Despite the high rate of food stamp participation, the USDA has numerous blueprints posted on their website aimed at getting more people to enroll. The USDA even goes so far as to argue that the program is “the most direct stimulus you can get.”

Only 194,000 net jobs have been created under the Obama administration. This pace doesn’t even keep up with the population increase. So few jobs have been created that the employment rate actually decreased due to an increasing number of working age adults have given up even looking for jobs. The real unemployment number (U-6) currently hovers around 14.6 percent.

While on the campaign trail, the president’s slogan has been to, “ask a little more from the wealthy”.  He doesn’t plan to ask though, he plans to take. Allowing the Bush era tax cuts to expire equates to a tax increase on job creators. In the words of Senator Marco Rubio, “I have never met a business owner waiting for the next big tax increase before he will create some jobs.”  Under the president’s current proposals, job creation in the private sector isn’t likely to pick up anytime soon. If these trends continue, we won’t have enough employed Americans to fund SNAP for the needy. If the trends aren’t reversed, America will soon go the way of our European neighbors.