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The Shoe's On The Other Foot

First Democrats said, "What crisis?" But they lost the battle for public opinion on that front, as the vast majority of Americans (whether they support President Bush's personal accounts plan or not) believe that the Social Security program is in serious danger. Democrats have been successful in marshaling opposition to the President's plans, yet even their own constituencies have demanded to see "their plan."

That's where the situation gets a bit dicier for Democrats, as they've not had to lay any cards on the table to this point. Now reports are circulating that Democratic proposals may be forthcoming.

Rep. Rahm Emanuel, D-Ill., who this year has proposed three pieces of retirement savings legislation, said Monday, "We need to work on strengthening Social Security, but if you look at where the immediate problems are, it's not in Social Security, it's in their ability to save for retirement and the amount they have saved."

His bills would create automatic 401(k) enrollment; allow for direct deposit of a portion of an individual's federal income tax return; and extend a tax credit for investing in 401(k) and Individual Retirement Accounts that is due to expire next year.

Peter Orszag, an economic policy adviser in the Clinton administration who now heads the Retirement Security Project, is recommending Emanuel's proposals to extend the savings tax credit and automatically enroll workers in 401(k)s. Orszag also wants automatic increases in the percentage of income directed toward 401(k)s and the automatic diversification of assets in them as workers near retirement.

If Orszag gets his way it will be state enforced mandatory savings (aka Socialism), which may be an easy sell to those who romanticize failed Western European socialist ideals of the past, but would rightfully look like a giant political pinata for Republicans.

Both parties have figured out it takes a lot less political capital to be "for something" as opposed to being "against everything." If the shoe is changing feet it will be interesting to see how unified Democrats remain when someone like George Soros wants some political agenda payback for his investments. I can see the Soros platform now... legalize and tax drugs to fund Social Security!!!


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Comments (23)

Isn't Social Security state... (Below threshold)

Isn't Social Security state enforced mandatory savings anyway, except with privitization you're guaranteed to get your "investment" back, wheras now if you die you're out of luck?

Doesn't sound a whole lot different from this plan, except with this plan you're required to donate to social security AND your 401K, and different people get control of your money.

I can see the Soro... (Below threshold)
I can see the Soros platform now... legalize and tax drugs to fund Social Security!!!

I know that was tongue-in-cheek, but what would be so bad about that? Violence would decrease, and Social Security would be funded.

i agree with Mark J. legali... (Below threshold)

i agree with Mark J. legalizing drugs and using the money to fund Social Security is not a bad idea IMHO.

it would, as he said, reduce the violence associated with the drug trade and provide a steady revenue stream for S.S. and if some airhead wants to fry his brain and turn his other organs to sludge with this crap, who are we to tell him/her that he/she can't? at worst the gene pool should show a marked improvement.

it would, as he said, re... (Below threshold)

it would, as he said, reduce the violence associated with the drug trade and provide a steady revenue stream for S.S.

Also it would free up some resources now tied up in the drug war that could be used on illegal immigration. Or we could just stick with the Minutemen.

Emmanuel's proposal has be... (Below threshold)
Clive Tolson:

Emmanuel's proposal has been around since back when Bush and the GOP promised to work with the Dems and find a consensus on Social Security - and didn't!

His plan is basically private accounts as an option, alongside Social Security in its current form. Which looks nothing like the Cato Institute implosion of SS, at a cost of $3 Trillion.

I think the liberal I voted... (Below threshold)
Rod Stanton:

I think the liberal I voted for in 04 has been giving us his best Mark Anthony "Friends, Americans, illegals .... I come not to raise taxes but to lower them". I expect him tho raise the tax at least 11% to $100,000 and probably more.
Liberal as Bush is he is still better than JFK. At least we are not arming freedom fighters with spitballs!

401(k)'s managed by whom? I... (Below threshold)

401(k)'s managed by whom? Invested in what?

I agree with Raina --- what's the difference?

The president finally put o... (Below threshold)

The president finally put out a SS plan?

This is supposed to help? ... (Below threshold)

This is supposed to help? Those who can't afford to sock money away into a 401k now will not be any more able to do it through this "plan".

It friggin' kills me that the people coming up with these ideas have their own, separate government plans which is apparently too good for the likes of the rest of us.

I guarantee you this will not be a "suppliment" to SS. It will be a replacement - and all our SS dollars will just become another tax they keep sooner than when we die.

I offer this modest proposal: If the government needs money during a "transition" period with privatized accounts I'll be happy to "loan" it to them at, oh I don't know, say Prime? When they loan us money for education, it's right now at about 2.75%, but can go as high as 8.25%. When they loan us money through FHA, the best we can hope for is 5.5% for 15 years. So why is it that when THEY "borrow" from SS we only get a hair over 1%?

No need to tax drugs direct... (Below threshold)

No need to tax drugs directly. Make 'em legal to possess and use only on Indian [forgive my political incorrectness] Reservations. A natural extension of the Casinos. Just work out a 50-50 split with the Mob/NA first, and make money and save money at the same time. Hell, not only save SS, pay down the national debt in less than five years. Just have a major sobriety/drug sniffer checkpoint at the entrance/exit to each reservation, and then all our resources for drug interdiction can go for other forms of homeland security.

Just a pipe dream...

Clive is correct on this on... (Below threshold)

Clive is correct on this one. This is an old proposal, been around a long-time. The Bush folks at Treasury have entertained it, although I cannot recall whether they have endorsed it. Basically, it would be a default system, where you would automatically be enrolled into your company's 401(k). You could opt out, and, of course, would retain ownership rights to any contributions. This is basically a way to enhance savings rates and save the dumbasses in our country who have the means, but not the smarts to put any money aside for future needs. So, maybe, just maybe, you can call that slightly socialistic. But I would rather have that, then to have to bail these folks out later when they retire with no money.

I'm not a fan of Rahm, but ... (Below threshold)

I'm not a fan of Rahm, but it sounds like none of you actually understand what he was proposing.

The "automatic" enrollment in 401(k)s only means that the default for starting a new job would be that you save a certain amount (haven't seen the details). Right now, the default at most places is that you don't save in the 401(k) unless you take some action to join up.

Considering the low participation rate in 401(k) plans, companies, plan providers and economists have been researching ways to encourage higher participation. Among them is making participation in a 401(k) automatic, meaning no effort has to be made to sign up. A worker would have to take some action to not enroll in that situation, but the participation wouldn't be forced.

Calling this socialism is just ignorant.

Sorry, Chris. Apparently y... (Below threshold)

Sorry, Chris. Apparently you figured it out all by yourself.

As for the comments about folks who can't afford to save, there are companies who have experimented with this proposal. The participation rate for their lowest waged employees rose significantly. They could afford to participate, they just didn't think they could afford it.

FYI, other ideas being mulled around by 401(k) sponsors is getting people to commit before it happens to increasing their contribution rates on an automatic basis timed around pay raises.

To give you an idea of how these two things put together could increase dramatically the savings rate in this country, if workers were defaulted to save say 3% of their pay when they started, most wouldn't miss it and would just go ahead with the default. Assuming they get regular raises, at the first raise, if they get a 4% increase, their 401(k) contribution would increase to 4% (1% of the raise) while they'd pocket the other 3%.

Places where this has been tried, the savings rates have skyrocketed. No word on whether those folks are all going to soup lines to make up the difference...

Andree you must have misrea... (Below threshold)

Andree you must have misread:

"If Orszag gets his way it will be state enforced mandatory savings (aka Socialism)"

There's no reference to Rep. Emanuel in that sentence.

Andree you must have mis... (Below threshold)

Andree you must have misread:

"If Orszag gets his way it will be state enforced mandatory savings (aka Socialism)"

There's no reference to Rep. Emanuel in that sentence.

Nope. I think the problem is that you misread, Kevin. Perhaps you could investigate the difference between the words "automatic" and "mandatory".

Good luck.

Kevin,FYI, if you'... (Below threshold)


FYI, if you'd like to educate yourself on the topic, here's a decent article.

Combining automatic 401(k) elections with SMT principles will actually create a situation where we need government less as we age.

SS should just be scrapped ... (Below threshold)
Rob Hackney:

SS should just be scrapped anyway. Its one of the last dregs of socialism we need to do away with. I get a much better return in the market. Also, look at how well Japan does and it has NO SS.

In other words, folks, Rahm... (Below threshold)

In other words, folks, Rahm had a decent idea. Bush should be smart and steal it.

Yeah, Rob, that's realistic... (Below threshold)

Yeah, Rob, that's realistic. Good idea.

First question, are 401 K c... (Below threshold)

First question, are 401 K contributions fully tax deductible and what are the limits on 401 Contributions. I assuming 401 K works just like RRSPs in Canada.

In Canada RRSP contributions are fully tax deductible, but you are limited to 18 per cent of earned income in a year to a maximum, sitting around $13,000 - $14,000 ??? this year, it goes up every year. It's the most effective tax saving vehicle we have since we pay too much taxes in the first place and we don't have the mortgage interest deduction, so sad, and the Canadian government acknowledged long ago Canada Pension benefits aren't going to cut it for most people.

I could be off base but couldn't one argue providing a minimal pension for people is actually good for the economy and therefore capitalism?

My very conservative businessman father says he doesn't have a problem with welfare because people on welfare pay the rent, buy groceries etc which means all their money goes back into the economy, so long as the welfare payments are enough to live on but low enough to inspire people to get off it. In his own endearing words, he says he accepts that a certain percentage of people in the world are useless and unemployable and why waste money trying to make them employable. [They do that a lot in Canada, lot of make work projects- spend millions of dollars to give 20 people a job for 4 months, just give em the money to stay home and then you could pay thousands of people, instead of 20, says my pappy]. If you don't give people like that any money, they'll turn to crime or anarchy. Okay, there are some flaws in his argument but he shocked me when he said he didn't have a problem with welfare. On the other hand, he says his native Holland has a welfare system that is way too generous, which discourages people from working and he predicts will bankrupt that country unless they start making cuts. We had this discussion a while ago so I don't know if Holland has started to make those kind of changes. That is why they need immigration because who is going to fund all those "Cadillac" social welfare programs?

Cancon,401(k) cont... (Below threshold)


401(k) contributions are deducted from taxable income. Our caps are similar to yours. Mr. Bush pushed for increasing them (they'd stagnated for over a decade before he took office) and they are going up each year as well.

The idea of making enrollment automatic (not mandatory) is simply to overcome the tendency to procrastinate.

Whereas the lazy previously did not participate (who can find the time to check two boxes on a form and sign it?), under an automatic participation regime, the lazy would be enrolled until they could muster the gumption to get themselves unenrolled.

The second part of this is the SMT, which I provided a link to earlier. It gets folks to agree in advance to have their contribution amounts increased a set percent automatically around the time of their pay increases. Where it's been tried, it's increased savings rates dramatically.

401(k)s are an experiment in making most workers owners of real investment vehicles rather than future beggars at the government trough.

Well, it sure looks likely ... (Below threshold)

Well, it sure looks likely that Soros has Senator Leahy in play what with Vermont under Leahy (hehehe) now on the verge of declaring itself a "free drug state" and actually considering departing the union so as to accomplish that. The idea is to make Vermont the drug importing/trading land between the U.S. and almost certainly Mexico and of course Canada. I think most people can see where that'd be heading.

And, to comment upon commen... (Below threshold)

And, to comment upon comments, anyone who thinks that legalizing drugs will result in "less violence" has not considered the experience of the Netherlands.

Legalizing drugs does not reduce much of anything except law and order. Not a good idea.






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