With the election almost upon us and most polls showing Barack Obama with a substantial lead, many people are wondering what the future might look like with the Democratic party in control of the White house and both houses of Congress.
Speculation and fearmongering abound. Obama's Marxist background and openly socialist rhetoric have raised fears despite the moderate positions and conciliatory statements which have characterized his campaign. Talk of redistributing wealth and proposals for raising taxes on corporations, small businesses and individuals are a cause for concern. How will Obama pay for all of his promises and massive expansion of social welfare programs without huge tax increases? Based on the extraordinary level of hate-filled rhetoric coming from leftist partisans it's hard not to believe that they will be out for political revenge once they come to power.
It's unlikely that every dire scenario and gloomy prediction will come true, but recent events may be giving us a sign of what is to come. There is no question that Obama will need money for further bailouts, to pay for new programs like socialized medicine and just to meet already existing obligations and ballooning debt from entitlement programs. There is an absolute limit to how much he can raise from taxes, even if he taxes the middle class at unprecedented levels.
Yet there is one source of substantial wealth which could be tapped into, the nation's investment in pensions and private retirement plans. Pension funds, 401k plans and personal IRA accounts have a total value of trillions of dollars. If the government were to seize those assets and then replace them with low-yield, low-risk government bonds of equivalent value, it would give the government a huge cash infusion, and offer a more stable alternative to private citizens than controlling their own retirement investments. It would essentially be a second plan similar to social security. It might cause devastation in the stock market and retirement savings would probably grow more slowly than inflation, but President Obama would be able to pay his massive bills.
We can already see the model of this plan being implemented in Argentina, where socialist President Cristina Fernandez de Kirchner is preparing to seize private pension plans with a value of about $30 billion to keep her government operating and make credit available as Argentina faces the same kind of banking and credit crisis which is afflicting many other nations worldwide. In response to this plan Argentina's stock market fell 13%, further contributing to the worldwide financial crisis.
Congressional Democrats are already discussing similar proposals. Listening to the advice of economist Teresa Ghilarducci of New York's New School, Representative George Miller, chairman of the House Education and Labor Committee and Representative Jim McDermot who chairs the House Ways and Means Committee's Subcommittee on Income Security and Family Support, are seriously considering eliminating tax breaks for 401k accounts and redirecting future 401k funds into a system of government-run retirement accounts to which all workers would be required to contribute. Individuals would no longer control those investments, but would instead be required to invest in government bonds with a yield of only 3%.
The details have not all been worked out, and while it would not amount to outright seizure of assets, it would take away the tax benefits which encouraged people to invest in 401k plans in the first place; taking away future earnings and replacing them with a new social security style plan with a yield lower than the rate of inflation. Our current 401k plans would become regular stock accounts and 5% of our future earnings would go into government held treasury bill accounts. The 3% interest on those accounts would be added to our Social Security payments, while the government would keep the principal in the account for its own use. Paying 5% a year for a 3% return in the future really isn't a very attractive deal.
This $80 billion in bonus revenue and the gradual future infusions of cash into the government coffers from this plan will only provide a fraction of the additional revenue the Obama administration will need. Once they start down the road of taking private investment benefits away, why should they stop? Who could stop them if they control both houses of Congress and the presidency? The demand for money will far exceed what they can raise from taxes, and there's an awful lot of money sitting in private pension plans, IRAs and other retirement accounts. Why not take it all and pay the owners in government promises?
Of course, all of these different retirement accounts are the result of agreements between workers and their employers or citizens and their government. They are essentially contracts, and the sanctity of contracts is the most fundamental cornerstone of the law. When you put your money into a 401k, you did so on the basis of promises made to you by the government about how that money would be treated in the future. Without those promises you might have kept the money and used it for something entirely different. You scrimped and saved and denied yourself the benefits of that money you earned, and, if Obama and the Democrats have their way, you may not get the benefits they promised. Or, if they follow the Argentine model, you may lose all control over that money, trading it for a few hundred dollars added onto your social security check at a rate set at the whim of government bureaucrats.
There is a marked tendency among those who have been too long in government and especially those who subscribe to the share-the-wealth philosophy of socialism, to believe that all money essentially belongs to government and that it is only in the hands of private citizens because government chooses to let them keep it, at least temporarily. For them, the needs of government are greater than the rights of the citizens; once they reach the limit of what they can feed into the giant maw of the state from taxation, they will start to look for back-door taxes, and pensions and retirement accounts will be hard to resist.
This attitude is fundamentally wrong. It is a critical violation of the right to own property and enjoy the fruits of your labor, which is part of natural law; fought for in the revolution, explicitly recognized in the Bill of Rights. The money in your 401k, or any other retirement plan, is not the government's money. It is not your employer's money. It does not belong to the collective population. It doesn't belong to the "less fortunate." It is your money and belongs to no one else. When government tries to take it in violation of the terms they previously agreed to, they are no longer a legitimate government. On that day they will have become tyrants.