I am sure that Treasury Secretary Lew and President Obama are serious about raiding retirement plans that are “too big”, and discouraging “the wealthy” from avoiding taxes by saving. (Nevermind that the contributions and any accumulated increases will be taxed eventually anyway when withdrawn.) This latest initiative to discourage large savings means that many “average hard-working Americans” allegedly so beloved by the Citicorp alum and the President will be significantly harmed by these purported guardian angels. Many firms have plans that include significant matching contributions into the employees’ retirement plans. Some or all of that match is required in order for the bosses – a/k/a “the wealthy” a/k/a “the 1%” — to max out their contributions. Many firms match dollar-for-dollar the first 4% of contributions by the employees. So a $40,000 per year employee who puts $1,600 into a retirement plan doubles his or her retirement plan balance overnight.
Once the existing rules are thrown out and all promises are retracted, the bosses will stop contributing for themselves, and the matching contributions to their average hard-working employees will disappear.
Am I wrong?
The sequester is an issue only because the President has consciously refused, throughout his four years in office, to propose any entitlement reforms. Can anyone name a single entitlement reform that President Obama has specifically advocated, in public, and made even a token effort to implement? (Please, don’t count the phantom savings that we will never see from purported healthcare reforms. Even the most ardent apologists concede that the short-term truth is clearly the opposite.)
Since nearly 60% of the budget is off limits, the sequester hits even harder. And the President has compounded the folly by making no effort to direct these cuts at non-essential services, instead preferring that they fall on the most useful ones, thereby wreaking maximum inconvenience on ordinary citizens. Can it really be that the cuts at the TSA need to be at the airport scanning personnel level? We couldn’t make a few cuts at the handbook-writing, convention-planning level?
Can it really be true that the President and Congress cannot find 6 percent savings in all discretionary spending by a Government that expands nearly that much year after year? Or, to be more rational about it, that we cannot find 2.5% savings across the entire budget, or just half of the annual increase?
What we have seen, and is still playing out now, is politics, not responsible public policy. The sad thing about this is that it’s not even good politics. Had the President gone to the American people in late 2009 and, to steal a quote, asked everyone to “eat our peas” — by adopting Simpson-Bowles or something very close to it – the country would have begun a real economic recovery, and he would have been easily re-elected in 2012, with a higher percentage of the popular vote, not to mention avoiding the disastrous 2010 Tea Party takeover of the House.
It’s still not too late.
Let’s put this in terms that even an economics professor can understand:
Why is the recovery so anemic? Why is the employment-labor force ratio hovering around 58 ½ percent, instead of 62 ½ percent as it was until around 2008? In other words, why are we 9 or 10 million jobs behind where we should be if the same proportion of the workforce were employed as was normal until just 5 years ago? Why is it that, despite the Fed giving away money and loans available at the lowest rates in history, companies are not taking risks or expanding jobs here?
Back in late 2008 and early 2009, in an economic hailstorm, when the job creators in the private sector hunkered down awaiting the initiatives of the incoming Obama Administration, they expected tangible steps to jumpstart the private economy. After all, that’s where jobs are created. What did they get? The Administration’s first priority was health care reform that created immense uncertainty that lasts to this day – excepting only the absolute certainty that labor costs would increase. Added to that were new reporting and compliance costs in other areas of endeavor, so that enterprises could “prove” to the government’s satisfaction that they were not violating various laws and regulations. Added to that were measures that gave preferences to our most inefficient industries, whether in the form of wealth transfers from shareholders and investors to the ossified automobile industry, or from all taxpayers to the incredibly inefficient solar and wind industries peopled with Administration cronies. And did we forget the stimulus package trumpeted as “infrastructure” that was no such thing? To top that off, the President dished out some serious demagoguery over the airwaves against “wealthy fatcats” – never mind that milllions of small business owners qualify as “the wealthy” in his lexicon.
Despite incredibly low interest rates, the risk-takers aren’t buying. If you are the CEO of a Fortune 500 concern, are you going to gear up to hire more Americans and suffer more mandates – not just the ones you know about, but the ones you cannot yet imagine? Not likely. The Fortune 500 companies aren’t borrowing, and if they are, they are acting rationally by investing overseas. And they are sitting on wads of cash, much of which they cannot even repatriate to the U.S. in the form of dividends to U.S. shareholders. If you are the owner of a small company, are you going to take risks by expanding? No, your first priority is to cut overhead, not increase it; your second priority is to stay under the 50-employee limit so you don’t run into the Affordable Care Act.
There, does that explain it?
After four years, it’s time — at long last, and having been safely re-elected – for the President to own the consequences of his foolhardiness and (we hope) to chart a new path. Who’ll give odds on that?