Automatic IRA

[sprinter]

Another gimmick forcing you to buy the governments debt allowing for a 'redistribution of wealth'. After the government collapses under its mountain of debt, what will you be left with?

 

 

http://www.wnd.com/2012/11/now-obama-wants-your-401k/

 

 

Since 2010, the U.S. Treasury Department and the Department of Labor have been holding combined hearings on various plans designed to introduce government-mandated retirement plans and investment options, including government annuities invested primarily in U.S. Treasury debt, into the private retirement savings market.

“This hearing was set up to explore why Americans are not saving as much for their retirement as they could,” explained National Seniors Council National Director Robert Crone, describing a recent Treasury-Labor hearing held in the Labor Department’s main auditorium.

“However it is clear that his is just the first step toward a government takeover. It feels like the beginning of the debate over health care and we all know how that ended up.”

‘Automatic IRA’

With the issuance of the White House 256-page Budget Proposal for Fiscal Year 2013, the Obama administration endorsed “Automatic IRAs,” a plan introduced into Congress in 2010 by Sens. John Kerry, D-Mass, and Jeff Bingaman, D-N.M., in which private companies would be automatically enrolled into government-mandated IRAs, forcing those businesses to contribute on behalf of their employees a “default amount” equal to 3 percent of an employees pay, unless an employee specifically opts out of the plan.

[Mark B. Morrow]

The automatic IRA idea has been around for a couple of years. It doesn't look to be going anywhere fast. It may not be a bad idea (even though some on the Right support it and some on the Left oppose it). AARP is in favor of the principle.

 

The provision does provide an opt out option, so no one is forcing you to contribute.

 

http://www.motherjones.com/mojo/2010/01/sotu-obamas-automatic-ira-plan-could-make-bushs-wildest-dreams-come-true

 

On the surface, it sounds like a sensible plan. AARP is supporting it, and says it could help some 50 million of the 75 million Americans whose employers offer no retirement plan. It was developed through a rapprochement between the right and what passes for the left: The idea emanates from a group called the Retirement Security Project (RSP), led by David John of the Heritage Foundation, who hammered out a joint scheme with William Gale of the Brookings Institution. It’s supported by the White House, and expected to breeze through Congress.-- Mother Jones January 27, 2010

[grbeck]

All I can say is that the number of people who have next-to-nothing saved for retirement is downright scary. And I'm not talking about 20- and 30-somethings, either.

 

This is one attempt to address this.

Edited November 26, 2012 by grbeck

[sprinter]

They will force you to buy government IOU's through treasury notes. Doesn’t that sound similar to another government program (Ponzi scheme) that started in the mid 1930’s? That program too only has a bunch of IOU’s since all the extra money collected goes to the general fund. Now your government wants even a bigger bite of your earned money and you guys think that is ok since they have proven to be trustworthy?

[Mark B. Morrow]

They will force you to buy government IOU's through treasury notes. Doesn’t that sound similar to another government program (Ponzi scheme) that started in the mid 1930’s? That program too only has a bunch of IOU’s since all the extra money collected goes to the general fund. Now your government wants even a bigger bite of your earned money and you guys think that is ok since they have proven to be trustworthy?

 

Exactly how many times in our history have treasury notes defaulted?

[Marginal Economist]

A bit off topic - Savings rates don't appear to be tied to tax benefits - LINK

[RangerM]

Exactly how many times in our history have treasury notes defaulted?

More than once.

 

On April 26, 1979.

 

The Day the United States Defaulted on Treasury Bills (here is the same story on the NPR website)

Since the day of Alexander Hamilton, the United States has never defaulted on the federal debt.

 

That’s what we budget-watchers always say. It’s a great talking point. One that helps bolster the argument that default should not be an option in Washington’s ongoing debt limit slowdown.

 

There’s just one teensy problem: it isn’t true. As Jason Zweig of the Wall Street Journal recently noted, the United States defaulted on some Treasury bills in 1979. And it paid a steep price for stiffing bondholders.

 

Terry Zivney and Richard Marcus describe the default in The Financial Review (sorry, I can’t find an ungated version):

 

Investors in T-bills maturing April 26, 1979 were told that the U.S. Treasury could not make its payments on maturing securities to individual investors. The Treasury was also late in redeeming T-bills which become due on May 3 and May 10, 1979. The Treasury blamed this delay on an unprecedented volume of participation by small investors, on failure of Congress to act in a timely fashion on the debt ceiling legislation in April, and on an unanticipated failure of word processing equipment used to prepare check schedules.

 

The United States thus defaulted because Treasury’s back office was on the fritz.

 

This default was, of course, temporary. Treasury did pay these T-bills after a short delay. But it balked at paying additional interest to cover the period of delay. According to Zivney and Marcus, it required both legal arm twisting and new legislation before Treasury made all investors whole for that additional interest.

 

Some may quibble about whether this constitutes default. After all, the United States did eventually make its payments. And the disruption applied to only a sliver of its debt – certain T-bills owned by individual investors.

 

But I think it’s unambiguous. A debt default occurs anytime a creditor fails to make a timely interest or principal payment. By that standard, the United States did default. It was small. It was unintentional. But it was indeed a default.

 

Also, on June 5, 1933

 

 

As the bailouts in the current bust inexorably mount, financed in rapidly increasing U.S. government debt, one might wonder whether a default on Treasury debt is imaginable. In the course of history, did the U.S. ever default on its debt?

 

Well, yes: The United States quite clearly and overtly defaulted on its debt as an expediency in 1933, the first year of Franklin Roosevelt's presidency. This was an intentional repudiation of its obligations, supported by a resolution of Congress and later upheld by the Supreme Court.

 

Granted, the circumstances were somewhat different in those days, since government finance still had a real tie to gold. In particular, U.S. bonds, including those issued to finance the American participation in the First World War, provided the holders of the bonds with an unambiguous promise that the U.S. government would give them the option to be repaid in gold coin.

Nobody doubted the clarity of this "gold clause" provision or the intent of both the debtor, the U.S. Treasury, and the creditors, the bond buyers, that the bondholders be protected against the depreciation of paper currency by the government.

 

Unfortunately for the bondholders, when President Roosevelt and the Congress decided that it was a good idea to depreciate the currency in the economic crisis of the time, they also decided not to honor their unambiguous obligation to pay in gold. On June 5, 1933, Congress passed a "Joint Resolution to Assure Uniform Value to the Coins and Currencies of the United States," of which two key points were as follows:

 

• "Provisions of obligations which purport to give the obligee a right to require payment in gold obstruct the power of the Congress."

 

• "Every provision contained in or made with respect to any obligation which purports to give the obligee a right to require payment is gold is declared to be against public policy."

 

"Purport"? "Against public policy"? Interesting rhetoric. In plain terms, the Congress was repudiating the government's obligations. So the bondholders got only depreciated paper money. The resulting lawsuits ended up in the Supreme Court, which upheld the ability of the government to refuse to pay in gold by a vote of 5-4.

 

Trading present-value dollars for future (ie. DE-valued) dollars has similar effects as a tax. Not good, and not something that should be coerced.

Edited November 28, 2012 by RangerM

[sprinter]

How many times has this county been over 10 trillion dollars in debt? Other countries are not buying any more of our debt and the Federal Reserve has stepped in to finance our insatiable appetite of spending money. As soon as the dollar loses world reserve currency status, which a few other countries are working toward, the bottom will fall out. Sure they can pay off those treasury notes and will with worthless paper aka Weimar Republic.

Can you imagine the chaos the people will create, worthless money trying to buy what little food that can be found. People will be rioting, stealing and killing each other just trying to survive. The police will be overwhelmed in short order so don’t count on them for assistance. But ask yourself this, just why are several agencies of the federal government (including the weather service) buying hundreds of millions of rounds of hollow point ammunition? Are they expecting something?

[sprinter]