This week I’ll be posting a four part submission from The Other Shoe. Much appreciation to TOS for the research and analysis of this piece.
***
Author’s Comment: I’ve written this essay as a serious piece and to issue a dire warning as to what has happened, and what may happen to private retirement plans under a progressive administration.
It’s written in a style similar to that of a “Policy Analysis” and is a bit of a slog, so I have broken it down into four parts. I also present a commentary summary at the beginning of each part as a “travel guide.”
———-
Part I. – Road Map: A History Lesson (Commentary Summary)
Bill Clinton tried to take control over the entire private retirement sector of our economy. He wanted to use private retirement assets for government programs.
He and his administration introduced the concept of “Economically target investments”(ETIs) as a way to funnel the private retirement funds into these government programs. (They constructed a new road and wanted to divert traffic onto their new road. I’ll call this the “ETI Expressway.”) They even issued their own statement, an official DOL “Bulletin”, stating that everything was okay. (They erected an “Enter” sign, but what con man wouldn’t say that his pitch was okay?)
They later tried to legislatively to place him, the President, effectively in charge of making all investment decisions for all private retirement funds. (Clinton wanted everyone to pile into his clown car with him as the driver.)
They failed miserably on both counts.
Obama also wants to use private retirement assets for government programs, but he lowered his expectations to a smaller segment – IRAs and small business plans. (As you read through the essay, this aspect will emerge.)
In one attempt, legislation was proposed that would have empowered the government to simply seize the retirement assets of certain small businesses! (This could be characterized as attempted “highway robbery” plain and simple.)
This failed too.
———-
Additional Comment: As you read through each section, there are movie quotes as a lead-in. I thought that I would be a little mischievous, and add a some entertainment, as the quotes convey a bit of a snark relevant to the section. Try to identify the movie and the character who spoke the line. No cheating now, Internet searching is off limits. Hint: The first and the last quote (in Part IV) go together and encompass the entire essay.
———-
Part I. – Road Map: A History Lesson
Trigger warning: “This may hurt a little.”
In a series of subtle and obscure actions taken this past year, the Obama administration has tightened the federal government’s grip on IRAs and the 401(k) accounts of small businesses. They have also re-opened the door for “social investing” of those funds in government programs. These actions were brought about through the administrative/regulatory process, and some might compare them to the Executive Orders Obama gave on other controversial issues. Taken together, these changes portend a major policy shift with regard to private retirement plans, with a disproportionate and direct impact on small businesses.
“What’s past is prologue.”
The Left have long sought to seize control over the assets held in private retirement accounts and to use them as they deem appropriate. There have been many efforts over the years, but perhaps most notable was during Bill Clinton’s administration.
One such proposal came from Robert B. Reich, Clinton’s Secretary of Labor, in which he proposed to raid private pension funds for use in risky public programs, which he referred to as “Economically targeted investments” (ETIs). These ETIs would have been “invested” to provide economic stimulation and include such items as job creation, provide affordable housing and improvements to the infrastructure. Clinton’s 1992 campaign pledge was to create a $20 billion “Rebuild America Fund” and he needed the funds from private retirement accounts to fulfill that pledge.
This 1995 Policy Analysis from the Cato Institute, aptly titled “Whose Pension Is It Anyway? Economically Targeted Investments and the Pension Funds”, provides a thorough, insightful . . . and colorful . . . analysis of the subject and of the events surrounding the issue. It should be required reading for those who have a fiduciary responsibility to invest private retirement funds.
A second attempt at control over private retirement accounts was presented as proposed legislation entitled “Pension ProSave System”. This legislation contained provisions that would have created the “Pension Portability Clearinghouse.” The “Clearinghouse” was to be established within the executive branch with the appointment of the Board of Directors made by the President. Part of the duties and responsibilities of the “Clearinghouse” was to place allocation limits on investments. Contained within the Bill were specific permissible funds, which included, of course, a government investment securities fund.
Essentially, that legislation would have empowered the President to make all investment decisions with regard to all private retirement accounts, with the ability to divert those funds into government securities.
Thankfully neither of these came to pass … yet …
“Aim small, miss small.”
Whereas the proposals under the Clinton administration were efforts to seize control over the entire industry, which were met with fierce opposition, the Obama administration has narrowed this focus to individual retirement accounts and small business plans where opposition would be less organized and less powerful. This could be called the “Obama strategy”. Incidentally, this strategy was employed in the drafting of the provisions and effective dates under Obamacare.
There have been a few proposals put forth to divert private retirement funds into the hands of the government. One such program is myRA.
The most egregious attempt at control and of diverting private retirement funds, however, was the proposed legislation entitled “USA Retirement Funds Act”. The Bill would have actually empowered the government to outright seize the retirement accounts of small businesses (no more than 50 employees), based upon the mere “belief” that the plan “… is about to engage in conduct that is a violation …” (that’s a direct quote from the Bill.)
The sheer audacity and utter contempt displayed by the targeting of small businesses with the confiscation of their retirement assets in this manner, and the consideration by the Obama administration was beyond staggering. It could have brought about an American version of “dekulakization” and with it, perhaps, a second American revolution / civil war. It did, however, clearly reveal the administration’s position with regard to small businesses and their retirement accounts.
Thankfully this did not come to pass either … yet …
