IMHO: The Pit and the Pendulum

Well, of late, the markets have surely seemed desperate—and goodness knows, the response by regulators and lawmakers, certainly to this point, reeks of desperation, IMHO.   We do seem, for the moment anyway, to be in something of a "pit" (and one, I must say, that the politicians seem to be trying to fill with money).

As if things weren't complicated enough, we're also in the waning weeks of what is perhaps the longest election cycle in history—one that, according to the pundits, will sweep the Democrats into a fuller, if not veto-proof, majority in Congress, if not the White House itself.   If those trends hold, the pendulum would have continued its swing back—from the 2000 elections where the Republicans controlled all three, the 2004 elections where they solidified that hold, and the 2006 interim elections where Democrats regained their control of Congress.   Such is the way of American politics.

Still, having spent some part of the last several years worrying about the establishment of a "you're on your own-ership" society (see  IMHO: Legs to Stand On ,  IMHO: Dead "Beat" ), I have been distressed to see a growing voice given to those who would treat the ills of the employer-based leg of the three-legged stool by amputation.

Those voices garnered some unwanted attention this month when the House Education and Labor Committee conducted a round of hearings on "The Impact of the Financial Crisis on Workers' Retirement Security" (see  Congress Considers Market Impact on Retirement Security ).  Unwanted (or at least unanticipated) attention in the form of headlines that read "House Democrats Contemplate Abolishing 401(k) Tax Breaks," "Would Obama, Dems Kill 401(k) Plans?", "Eyeing Your Pension:   Are 401(k)s safe from congressional Democrats?", and blog headlines that were even more provocative ("A 'Spread the Wealth' Plan for your 401k?").   Why, the word got out so fast that Congressman George Miller (D-California), who chaired the hearings in question, felt the need to reassure the media of his good intentions regarding the programs by issuing a background memo ahead of another hearing on Friday (see  Millard Responds to Committee Questions ) with the subject line "Background Memo on Preserving and Strengthening 401(k)s."

What stirred things up was the testimony of Dr. Teresa Ghilarducci, who reiterated her previous advocacy for a "Guaranteed Retirement Account" (funded by a 5% of pay tax on workers and employers and a $600/worker contribution from the federal government) in place of the current tax preferences accorded 401(k)-type plans.   And, apparently in keeping with lawmakers' current inclination to bailout various troubled constituencies, she also suggested allowing workers to "trade their 401(k) and 401(k)-type plan assets" for one of those Guaranteed Accounts—at mid-August prices, no less.