The call for mandatory savings accounts that appeared in the Obama administration's fiscal 2009 budget submitted in February is repeated in the Obama plan for Financial Regulatory Reform submitted in June.
As proposed, it would become mandatory for all employers in business for two years and with 10 or more employees to establish IRA accounts for their workers. While a default payroll deduction of 3 percent is being tossed about by those negotiating the details in Washington, the wording in the Obama reform plan (.pdf) holds out the hope that employees might still end up having the choice to opt out of actually contributing to the IRA account that employers would be forced to open on their behalf:
Under the “Automatic IRA” plan, employers in business for at least two years that have 10 or more employees would be required to offer an automatic IRA option (with opt-out), under which regular payroll-deduction contributions would be made to an IRA. Employers would not have to choose or arrange default investments. Instead, a low-cost, standard type of default investment and a handful of standard, low-cost investment alternatives would be prescribed by statute or regulation.
Time will tell if the bracketed "opt-out" survives the intial legislative process or the certain to follow revisions to any instigating law but, note that, in any case, where the employees' "savings" goes will be "prescibed by statute or regulation." Since transparency is the rage in government circles these days, let's point out what is patently transparent in that clause; The same Goldman Sachs and friends crowd that is running this administration, like the ones preceeding it, are setting up a new payroll tax on wage earners to prop up their financial scams on Wall Street.
Of course, proponents of this plan will argue that this is not a tax, "It is a retirement savings account owned by the worker." (Insert chuckle here) Unfortunately, this is the same argument made by those who pushed for the establishment of the Social Security system, which everyone now admits is just another payroll tax — a payroll tax that common wage earners endure while those making income from investments avail themselves of the myriad of tax loopholes they have provided for themselves.
Oh! But, this time will be different. Rather than going into an off the books government trust fund account, the worker's savings, in an account that really does have their name on it, will be carefully invested into "safe" stocks and bonds by highly regulated firms operating under strict new global financial standards. Hmm. This could be a tough sell to those with new 101K's that used to be 401K's and are now more than a little suspicious that the same people that abused old regulations are going to make things better by creating new regulations for themselves.
And that brings us to what is really going on here. The "Automatic IRA" plan is nothing more than a scheme by the Goldman and friends financial syndicate to create an artificial demand for their dodgy wares. They have run out of willing suckers, so now, by law, they must create unwilling ones.
The bankster syndicate that has been managing (i.e. manipulating) existing IRA's, 401K's and government pension plans has got a massive hole to plug in their confidence game/Ponzi scheme. More more and more people are waking up to what has been going on and are now running for the exits. To offset this drain on the system, the Automatic IRA plan would suck up the "savings" of current wage earners to maintain and inflate the prices of select stocks and bonds. This will allow current pensioners to continue to recieve checks from pension accounts that otherwise would be evaporating from want of fresh money from fresh marks.
Don't let yourself become a money spigot for Wall Street to tap. If its mandatory, it's a tax. Tell your representative that you don't support mandatory IRA accounts. Better yet, tell your employer first and then tell your representative together.
There can be no open free-market in bond and equity markets if players are forced into the game. The government should not be in the business of creating investment demand with mandatory IRA accounts — whether contributions remain voluntary or not.
Sidebar for anti-war types who voted for Obama: In case you missed it, the fiscal 2009 budget submitted by the Obama Administration also includes "placeholder" amounts of an additional $75.5 billion in 2009 and $130 billion in 2010 for our wars in Iraq and Afghanistan. Hope all you want, but the rules of math have not changed — 130 is still a much bigger number than 75.5 and 2010 does come after 2009 on the calendar.