The Wall Street executive who is the leading candidate to be Treasury Secretary if Hillary Clinton is elected, is now quietly touting a plan to grab control over the $25 trillion in Americans’ private retirement accounts.
Clinton’s “Trail Blazer” fundraiser Hamilton “Tony” James, currently serves as the president of Blackstone Group. That company is the world’s largest money manager with assets of $4.65 trillion, according to Pension & Invest Research Center, which tracks Wall Street activities.
James is proposing a new retirement savings structure that would completely “scrap the 401(k) system” that allows tens of millions of individuals to control their own retirement assets, in favor of a national “Retirement Savings Plan.” He’s doing this in combination with labor economist Teresa Ghilarducci at the left-wing Economic Policy Institute.
If the plan becomes law, all non-union full and part-time employees would be forced deposit at least 3 percent of their annual salary into a “Guaranteed Retirement Account.” Employers also would be forced to pay into the account. James and Ghilarducci claim creating this new “self-funded pension” would serve to “supplement to Social Security payments.”
The current 401(k) system is “broken,” and can “only be fixed” by an overhaul that includes a federal takeover. Ghilarducci asserted in her book, “When I’m Sixty-Four: The Plot against Pensions and the Plan to Save Them.” She quotes a study by the Employee Benefit Research Institute that claims only 23 percent of workers age 45 and above have saved more than $250,000; and another study from the Center for Retirement Research at Boston College that reports Social Security on average will only replace about 40 percent of Americans’ pre-retirement income.
Both James and Ghilarducci justify their grab of most of Americans’ retirement cash by claiming that the middle class will be “all but decimated” in retirement as a direct result of the current “broken” IRA system. They promise their mandatory participation savings will be guaranteed to “earn” the federal government’s “official inflation rate,” plus 3 percent.
But as Ed Butowsky who publishes the closely watched Chapwood Index comments, there are many ways that the promised financial return can be stealthily diverted back into government and private hands.
For example, the 126-year-old Consumer Price Index (CPI) serves as the government’s “official inflation rate.” It was quietly adjusted in 1983 and again in 1995/96 by government officials to exclude items such as taxes, energy, and food. Butowsky points out that the motivation for the “reconfigurations” was understate the “real” inflation rate in order to reduce the explosive rise in the indexed cost of government spending on Social Security and entitlements.
Butowsky argues that the excluded CPI items are not only necessities, but often comprise most of the daily spending by many middle-income and lower-income families. In contrast, the rich earn more money via investments that grow faster than inflation, so the understated CPI Index has a “profound” gradually and quietly shifts money away from most working Americans.
According to the U.S. government’s official inflation rate, the inflation rate was only 12.2 percent between 2008 and 2012. But the Chapwood Index that is separately calculated each quarter for America’s 50 largest cities, reveals that the “real” cost of living in those urban centers is was more than 10.2 percent in 2012 alone.
Wall Street is wildly enthusiastic over the idea that Clinton, James and other Democrats may be able to flip the entire $25 trillion Americans have invested in their IRAs into a gargantuan federally managed national Retirement Savings Plan. Unsurprisingly, James has stated that a few well-connected firms will be invited to manage Americans’ money whether or not they like those firms.
There’s reason for Wall Street’s confidence in Clinton, whose cozy relationship with Wall Street was outed by WikiLeaks’ exposure of her paid speeches to Goldman Sachs.
The supposed justification for a federal takeover of the “broken” retirement system has the familiar ring — it is the same argument for the federal takeover of the “broken” healthcare system that led to the passage of Obamacare.