Forced Loans
Every year, the government forced nearly every working American to give it an interest-free loan. Each person pays his taxes (via legally required withholding) as much as 16 months early, with not a cent of interest from the government for this loan of funds. Several states have been toying of late (and California actually implemented) schemes in which the required withholding rates are jacked far above any conceivable level of tax liability. These are desperate financing approaches from entities who are no longer able to borrow (or afford the interest of) money at arms length, and so much use the coercive power of the government to force its citizens to fork over interest free loans.
Apparently, the Obama administration is looking at such a scheme, but on steriods:
The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.
Whatever their stated justification (I am sure it is somehow for the children), I think Dale Franks gets at the actual motivation:
There literally isn't enough money in the world to float the T-notes the Treasury must issue in order to prop up our unsustainable spending path. There are, however, about $3.6 trillion in funds just sitting in 401(k) accounts. If the government can urge"“or force"“you to convert your 401(k) into T-note funded annuities, the Treasury can continue to issue those notes to float the government's deficit. Essentially, you'll be converting your retirement funds into an IOU from the government"¦just like your social security account has already done.
This will allow the Treasury to keep borrowing money"“from your retirement"“in order to keep issuing more debt that they may or may not be able to pay back to you
Mesa Econoguy:
This is exactly what I was on about a year ago. These assclowns want complete control of the financial system – more than they already have – because they conduct their finances in a far superior quality and manner than individuals.
The next step is outright seizure of your retirement funds. Which you might get back at some future date, assuming you reach the new mandatory retirement age of 85.
Heads on pikes.
January 18, 2010, 3:48 pmDr. T:
"The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams..."
We already have state lotteries. This would be another tax on the stupid or the gullible. They probably won't get enough voluntary conversions, so a subsequent bill probably will require that all retirement plans have at least 25% treasuries. All hail sociofascism!
January 18, 2010, 4:37 pmElamBend:
I first heard this suggested about a year ago and considered it a bit out there. By this point, its reappearance has both shocked, and NOT shocked me.
January 18, 2010, 5:20 pmMesa Econoguy:
The Massachusetts special election to fill Dead Kennedy’s seat tomorrow has become very close, and is immediately a referendum on Obamacare, and more generally a referendum on the Democratic socialist agenda.
If Brown wins, and if Democrats press forward with the above forced loan/asset seizure, it’ll be political suicide, and both houses will be in play in November. Even floating this idea is dangerous. The public mood is much more pissed off than these clueless fools acknowledge (because they’re incredibly obtuse), and it’ll only get worse the more they put crap like this out there.
January 18, 2010, 5:24 pmIronman:
The new proposal is similar to one being floated by several Democratic members of Congress before the 2008 election. The best way to describe it is as a really risky retirement scheme.
January 18, 2010, 6:17 pmKTWO:
I suspect this will be promoted as a way to stabilize the economy and get rid of those nasty shocks when stocks fall or new frauds are uncovered.
In fact they will be doing you a favor. Maybe they should charge you interest for protecting your money.
It may be possible to do this even w/o Congress. The IRS has a lot of power to decide what is tax sheltered and what is not. And who knows how many Czars can, or think they can, send orders to fund administrators re how they may handle any 401K and similar moneys they hold.
The lawyers and courts will thrash that out.
Politically the Congress may balk. But once Nebraska and Louisiana are exempted along with union workers and government workers the votes will be found.
January 18, 2010, 7:20 pmBearster:
Something like 45% of the federal budget comes from borrowing (as opposed to tax revenues). Stated another way, the deficit is 45% of the budget. And it looks like the Fed monetized something on the order of 30% of the borrowing.
It is not remotely possible that the debt can be repaid (much less the unfunded liabilities of social security + medicare).
The bond market is going to go over a cliff. The only question is when.
If I had significant money in a 401k/IRA I would watch this issue like a hawk, and the moment it looks likely that they will pass a law, I would take all the money out. Pay whatever penalty necessary to get the rest of your money, because putting money into Treasury bonds at this point is pure suicide.
January 18, 2010, 11:24 pmO Bloody Hell:
This isn't new, BTW -- the Dems've been looking to F*** the people with 401k plans for several years now. Before it was an effort to screw them over in order to pay for Social Security's upcoming shortfall, but now they've need to advance it to hide the massive deficits they're trying to ring up.
January 19, 2010, 12:03 amO Bloody Hell:
> It is not remotely possible that the debt can be repaid (much less the unfunded liabilities of social security + medicare).
Oh, it's easily possible. It would hurt like hell and would require a degree of fiscal responsibility from the Fed which is somewhat less likely than winning six different Powerball lotteries six weeks in a row.
But your assessment is otherwise fairly accurate. When they f*** the people with 401ks the world economy is going to tank like never before.
The thing to realize, among other things, is that that money isn't just sitting under someone's mattress somewhere, it's some person or company's working capital. The interest getting paid to the 401k is the price for "renting the capital asset".
When you close those 401ks, what happens to the credit market? Right. That horrific sucking sound you'll be hearing will make the recent credit debacle sound like a fart in a teacup.
There is no question about it -- the left's leadership is involved in implementing a Cloward-Piven Strategy to destroy the USA. I only hope that, in the violence that will inevitably follow, people go for their heads first, and get them.
If you're under 50, buy guns and ammo. The chances of your not needing them is vanishingly close to zero.
January 19, 2010, 12:18 ampoliticaljules:
How do you know this is not an effort to generate tax monies by causing panic over people removing money from 401ks? Alinsky rule of a percieved threat being greater than the threat itself?
You lose big if you take money out quickly like that. Weather this storm and do not overreact. The only one that hurts is YOU!
I have a feeling they are bluffing.
January 19, 2010, 1:23 amroger the shrubber:
what's interesting to me is how the democrats have used their 60 votes and big ol' house majority. the healthcare scam was expected; as was bailing out the banks while calling them bad names but still taking their 25%+ cut of the slush fund to buy votes with. instantly turning the "justice" department into a 3rd-world banana republic judiciary used to reward friends and punish enemies, yeah, we saw that coming, too. even this latest "grab their 401K's" deal was not unexpected if you follow the news: when la puta maxima kirchner tried it in argentina, you just *knew* the dems got excited and said, "take their *savings*!! yeah!!"
but the one BIG thing each and every democrat hates - the thing they secretly masturbate over, "getting the guns"....they aren't even making a move. yeah yeah, i know, they've tried a few minor stealth gun-control uppgraydd bills, but you can make a case that they weren't serious about it. but the people MUST be controlled, you can bet they're serious about *that*. and still...no gun talk. none.
it's quiet. *too* quiet, if you know what i mean.
January 19, 2010, 1:52 amTerry Noel:
Every time I think the government can get no sillier, someone (thanks, Dale) shows me I have been naive. My questions now is, "At what point do citizens simply stop complying with such insane laws?" Let me be clear that I do not advocate that at present, but for the first time in my life, I am starting to work out a rationale for civil disobedience with regard to taxation.
January 19, 2010, 5:28 amperlhaqr:
OBH said: If you’re under 50, buy guns and ammo. The chances of your not needing them is vanishingly close to zero.
I'd like to recommend food that can be eaten cold, and a can-opener as well. If you live in a desert like Coyote and I do, a store of water is a good bet as well.
----
The thing that's so utterly beyond the pale to me in the CA "raising the state income tax withholding rates to get an interest free loan" debacle is the fact that last year, they had to pay state income tax refunds with IOUs. Why would anyone assume that they'd be able to pay back the extra withholding this year?
January 19, 2010, 7:32 amSBA Business Loans:
Whether its been discussed before or not, its crazy. Spending other peoples money is so easy.
January 19, 2010, 3:30 pmMesa Econoguy:
Scott Brown just won. Juan Williams just said the Democrats are “doubling down†and will attempt to pass the bill before Brown is seated.
They will push an outright takeover of the financial system, and punitive measures against financial institutions.
If they do this, they will start a civil war.
January 19, 2010, 7:31 pmMethinks:
I think bearster has the right idea.
This will be very politically unpopular. You'll have enough time to take your money out - the 10% penalty will be nothing compared to how you will get thrashed if you allow your retirement to be controlled by the government.
Use what's left after taxes and penalties to diversify away from the dollar. If the government needs to pull an Argentina on retirement accounts, things aren't exactly looking up for the U.S.
January 20, 2010, 8:42 amJames H:
We are all Enron now.
January 20, 2010, 9:30 amrxc:
I know this is a thread highjacking, but it is related to another discussion just below, so I thought I would let you know how the French(those dastardly Europeans!) handle this. Every June every person subject to French income tax fills in a form that tells the government what his income was during the previous year. Also on the form is other info about family status, energy conservation expenses, etc. You send this form to the govt, and in September they send you a statement telling you how much you owe on the declared income. You get to pay this amount the NEXT YEAR, in several installments, which may be adjusted to account for their estimates of how much they think you should pay, accounting for changes from year to year (I am still a bit fuzzy about how this works).
So, the hated French actually require people to pay the tax 2 years AFTER they earn the income! It is interesting that they do not know about "witholding" over here.
Actually, I don't pay any French income tax, although I declare all my income, because all my income is US-source, and the IRS insists on the right to tax me WHEREVER IN THE UNIVERSE I live, and there is a US-French tax treaty to prevent double taxation.
FYI
January 20, 2010, 4:10 pmroger the shrubber:
heck, i'm still waiting for them to end mandatory withholding, as this was to be merely a "temporary" measure, like they promised us when they began doing it.
back in world war 2.
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