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Why does Obama want to force us to do business with the banksters in his new pension scheme?

[Welcome, FDL readers!]

Why isn't this plan exactly the same as forcing the unemployed to do business with a bank to collect, and then stealing the ATM fee from them? Bloomberg:

The budget “lays the groundwork for future establishment of a system of automatic workplace pensions, to operate alongside [ultimately replace?] Social Security, that is expected to dramatically increase” retirement and personal savings, Obama’s Office of Management and Budget said in its outline, without giving details on the costs.

The plan would force employers that don’t offer retirement plans to enroll employees in a “direct-deposit IRA account,” with the option for workers themselves to opt out. Currently, 75 million working Americans, or about half the workforce, lacks employer-based retirement plans, according to the administration.

Why are there only two options?

Right now the proposal is:

[ ] Private plan
[ ] Opt out

but why isn't it:

[ ] Social Security
[ ] Private plan
[ ] Opt out

Suppose I accept the implicit argument that Americans don't save enough, and more retirement money is good. Why are they forcing me to give Big Money a second chance at vaporizing my money with an IRA instead of a 401(k)? Seems to me that for many, Social Security would be the better option because it's safer.

And isn't the argument here exactly the same as with health care? Force the private sector to compete with government and the public will get a better deal?

As it is, this just looks like a scam to generate more fees for Big Money to manage my account. But I don't want it managed. I want it safe.

Oh, and make the default "nudge" toward Social Security. I mean, hasn't it had a better track record?

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pie's picture
Submitted by pie on

in the private sector is at an all-time low. There are too many concerns, if are you saying that this would replace Social Security. Wouldn't this mean higher administrative costs and more risk? Wouldn't a minimum benefit have to be guaranteed? What happens the next time the market plummets? What oversight would be in place? How many private companies would be involved?

When Social Security was first established, people did have the option of choosing something else. Someone I knew did that and did quite well for herself, but the *rules* were a lot different then. This can sound great on paper, but then the greedy b*st*rds get their mitts on it with the help of greedier politicians, and the people get screwed.

The guarantees would have to be iron-clad, but I'm still not sure I'd trust them. As it stands right now, of course, Social Security by itself is barely enough, but it's something. With wages not keeping up with cost of living, many people can't afford to also contribute to private plans anyway. Then there are mortgages/rent, food, health care, college funds and other money gobblers.

I fear these guys will make an offer the people couldn't refuse, and it'll be too good to be true.

BDBlue's picture
Submitted by BDBlue on

An IRA is an investment vehicle, usually in mutual funds. So the first lie misnomer is calling this some sort of pensions scheme. It's not. It's pumping more money into markets with no guaranteed return. At least for you and me. The banksters will get their rents, so I guess there's a guaranteed return. Perhaps what they meant is a pensions fund for Wall Street.

Here's what a true government pension plan might look like - an interview with the "most dangerous woman in America" on Democracy Now.*

*It was some finance industry person who dubbed her the most dangerous woman in America - she has a way to supplement Social Security with true pensions, which means no Wall Street, IRAs or 401ks needed.

BDBlue's picture
Submitted by BDBlue on

One of the reasons pensions are in trouble is the investment in equities. Via Yves, I found this interesting discussion of pension problems, which states the problem clearly:

As we've noted in this space many times over the last few years, in the view of financial economists the first part of the model -- that equities provide guaranteed returns over the long term -- is untenable.

BTW, that link appears to go to a blog that focuses on pensions issues. Potentially very useful.

Submitted by jawbone on

type things as solid vehicles for preparing for old age financing. I mean, after what we're going through right now? After seeing what went wrong with the British system of private savings for old age, Chile, Italy -- WTF is wrong with these people?

Unless, of course, their actual intent is to maintain the uberwealthy, to ensure the US becomes like a feudal society with the landed gentry collecting revenue on just about eveything the serfs and slightly higher classes do and need.

The rentier class owns near everything, permits their favored courtiers to have somewhat more than the serfs. Some favored few may even be allowed into the rentier class. Those courtiers know they may not disagree or criticize the master rentiers or they face expulsion from their more comfortable standard of living and also forego any possibility of advancement up the social/economic ladder.

OMG. Once more, the anguished cry arises: More and Better Democrats!

leah's picture
Submitted by leah on

...but the Bloomberg article says the following about the relationship between the new employer pension plan and Social Security:

The budget “lays the groundwork for future establishment of a system of automatic workplace pensions, to operate alongside Social Security, that is expected to dramatically increase” retirement and personal savings, Obama’s Office of Management and Budget said in its outline, without giving details on the costs.

There is nothing in the article to indicate that what is contemplated is meant to replace Social Security.

In essence, such a replacement would be privitizing SS, and Obama has said repeatedly that he does not approve of any sort of privitization scheme for SS. He has said it over and over and over again. I challenge anyone to find one place where Obama has ever indicated that he wants to get rid of Social Security, or that he wants to cut benefits, or he wants to privitize or replace SS. No such statement exists. So what is actually the subject here?

Submitted by lambert on

... "[ultimately replace?] "

So far as I can tell, there aren't a heck a lot of good reasons for setting this program up as it is set up, so one naturally looks for a bad one. And surely setting up a parallel system to an existing one is one bad reason, eh? Especially when Obama's rhetoric is consistently "retirement security".

Anyhow, maybe we could focus on the policy issue here, instead of a bracketed editorial comment? Why on earth are we "nudging" people in the way proposed? That's what other commenters did, so perhaps the "subject here" is reasonably self-evident. Perhaps the title -- "Why does Obama want to force us to do business with the banksters in his new pension scheme?" -- gave them a clue?

NOTE I weary of explaining this, but the issue is putting Social Security in play at all, because when that happens, nature takes its course in the Village. That's what Atrios drew attention to, back in Iowa, and it still goes on. That is why, for example, both Digby and Hamsher, who are hardly alamists, were concerned to beat back Pete Peterson, noted privatizer, at the "entitlements summit" that Obama organized -- an effort that was, apparently, successful. The "Obama never said" argument has never been on point, and is not on point now.

Valhalla's picture
Submitted by Valhalla on

it's still a system designed to institutionalize and facilitate the collection of more rents from us. Anyone whose employer doesn't offer 401ks can set up an IRA of their own now. Plus there are other investment vehicles available to average consumers (my banks always sending me CD offers). So why do we need a new system? Why have a mandate on employers [I thought we hated those!] to offer an opt-out system, versus an opt-in system, if not to pull lots more people into the rental system than there are now. Or, for that matter, than there were even before the meltdown. Until I read the opt-in details, I thought Obama's new plan was just a way to rebrand 401ks, because they are certainly New Coke now. What I didn't realize was that this isn't just a new brand on an old POS, it's another, new POS.

And replacement or no, they will forever serve as the negative answer to the question of why we shouldn't increase Social Security. We don't have to! Ever! Anyone who needs Soc Sec by definition waived their right so a social safety net by failing to pay rent [opt-in] while they still had the opportunity! How much easier to carve out those who don't morally deserve a social safety net when everyone had the same opportunity to hand their money over to the rentiers but some choose not to?

401ks had already served the argument against buffing up Soc Sec, before Middle America saw their retirement washed down the drain. One of the last politically viable opposition statements was because not everyone's employer offered them. Well, now that's taken care of. Whew.