401(K)s and IRAS to be Nationalized?

The specifics of Obama's plans to"fix" the economy do not get a lot of press time because no one seems to know what the hell they are. Although Obama is extremely eloquent, his speeches appeal to emotion and have little content to be analyzed. The specifics behind his"Hope, Hope, Change, Change" can be best discerned by watching the other leaders of the Democratic Party.

The Carolina Journal reports Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers’ personal retirement accounts — including 401(k)s and IRAs — and convert them to accounts managed by the Social Security Administration. Triggered by the financial crisis the past two months, the hearings reportedly were meant to stem losses incurred by many workers and retirees whose 401(k) and IRA balances have been shrinking rapidly. The testimony of Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, in hearings Oct. 7 drew the most attention and criticism. Testifying for the House Committee on Education and Labor, Ghilarducci proposed that the government eliminate tax breaks for 401(k) and similar retirement accounts, such as IRAs, and confiscate workers’ retirement plan accounts and convert them to universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.

Of course, the nationalization of private retirement funds is being advocated in the name of protecting workers. The argument goes: there is a long-standing trend away from pensions for which employers assume the risk and toward 401(k)-type retirement investments for which individuals assume the risk. Such private retirement accounts are being gutted by the collapsing economy and individuals need protection against risk and further losses. Thus -- just as with banking and (perhaps) mortgages -- the government should intervene to provide a guarantee.

Rep. George Miller, Chairman of the committee called to discuss how the financial upheaval is affecting pensions and private retirement accounts, explained"Unlike Wall Street executives, America's families don't have a golden parachute to fall back on. It's clear that their retirement security may be one of the greatest casualties of this financial crisis."

I do not know if the American public will accept the nationalization (read, confiscation) of their retirement funds. When Argentina moved to nationalize pension funds (an ongoing move), the media correctly identified it as a "grab" and people took to the streets in protest. I think Americans might just roll over, however. Why? For several reasons, including:

---Obama has inspired such devotion that he can do almost anything in the"honeymoon" period of his Presidency; everyone will cry out to critics"give the man a chance"

---People with retirement funds are terrified of their decline and the nationalizated substitutes are being sold as"Guaranteed Retirement Accounts."

---Most people do not have private retirement accounts and, so, the majority of people will raise no objection. Indeed, since those with healthy 401(k)s etc. are seen as the"haves", the"have-nots" may well snicker in a shameful satisfaction.

---Nationalizing pensions and private investment funds would shift burden from employers. GM and Ford would love for the government to take over the pension liabilities that are killing them.

---Americans are naively trusting of government. Argentinians know their government is not"their protector" and they've gone through enough financial crises to understand some of the basics of money/financial policies.

Obama wants to take decisive,"brave" action to establish his control over the economy and his role as savior. God protect us all from"brave" government and saviors, especially when any one party (in this case the Democrats) have a de facto monopoly over the reins of salvation.