"If Americans are forced to buy government bonds as retirement savings, the nation could be forced into a situation where it will become impossible to reduce or retire the national debt without liquidating the retirement savings of millions of Americans."—ALG President Bill Wilson.
Legislation could force investment in U.S. treasuries to finance debt-strapped government.
September 7th, 2010, Fairfax, VA—A new bill proposed by Senators Jeff Bingaman and John Kerry would force enrollment in "automatic Investment Retirement Accounts", prompting Americans for Limited Government (ALG) President Bill Wilson to urge the Congress to reject it.
"This legislation will force Americans into a government-mandated, 'one size fits all' retirement account," Wilson said, adding that it would "disproportionately impact younger and lower-income workers, who will now have less ability to save for new home purchases or pay off college expenses and debt, all of which occurs earlier in a worker's career."
"This is another attempt by government to tell individuals what they have to do with their own money, stripping them of the right to make their own personal investment and life decisions," Wilson added.
Wilson noted that the "investment 'options' that are offered will be defined arbitrarily by the Department of Labor in regulation."
Those options may include government bonds, writes Jerome Corsi for World Net Daily: "The U.S. Department of Labor released yesterday an agenda for an upcoming joint hearing with the Department of the Treasury scheduled for Sept. 14 and 15 on whether government life-time annuity options funded by U.S. Treasury debt should be required for private retirement accounts, including IRAs [Investment Retirement Accounts] and 401(k) plans."
The Corsi report describes the potential that the "government-mandated workplace retirement account would require by law employers and employees to contribute into a retirement account for every employee and demand that a portion of that contribution go into a federal-government created annuity that would be funded by purchasing Treasury debt."
"Under the law, the Department of Labor could indeed force individuals to buy treasuries, if that's what the bureaucracy wants," Wilson said, pointing to the broad options defined in a newly proposed Section 439 of the Internal Revenue Code:
"(c) INVESTMENT OPTIONS.—
"(1) IN GENERAL.—The Secretary of Labor and the Secretary, in consultation with the Chair
man of the Securities and Exchange Commission, shall, not later than 18 months after the date of the enactment of this section, prescribe regulations which set forth the requirements for each of the classes of investments described in paragraph (2) and procedures for determining which assets meet the requirements for each of such classes.
"(2) INVESTMENT CLASSES.—The regulations under paragraph (1) shall provide that an automatic IRA shall allow the individual on whose behalf the individual retirement plan is established to invest contributions to, and earnings of, the plan only in the following investment options:
"(A) PRINCIPAL PRESERVATION.—A class of assets or fund that is designed to protect the principal of the individual on an ongoing basis, including passbook savings, certificates of deposit, insurance contracts, mutual funds, United States savings bonds (which may be indexed for inflation), or similar classes of assets.
"(B) BLENDED INVESTMENT OPTION.—A broadly diversified class of assets or fund, as specified in such regulations, that is substantially similar to target date, life cycle, balanced or similar funds, as so specified.
"(C) THIRD OPTION.—A broadly diversified class of assets or fund providing a somewhat higher investment in equities than the investment options under subparagraph (B), as specified in such regulations."
"These 'options' are so broadly defined that the Department of Labor can force investment into almost anything, leaving the future solvency of the retirement savings of millions of Americans to the wisdom of faceless government bureaucrats," Wilson said.
Such legislation could create some 60 million potential new IRAs, according Mark Gutrich, president of Denver -based ePlan Services. Wilson said that if accurate, and if the average income investing in the IRA's was $50,000, "if just 1 percent of income for these new IRAs was devoted to government bonds, that would expand government's ability to borrow by $30 billion annually, or by $300 billion over ten years."
Wilson said "that's no small chunk of change." He predicted that after the legislation was enacted, the number of new plans would grow beyond the 60 million, and warned that the investment in treasuries would also grow "should the sovereign debt crisis worsen in the U.S."
"If Americans are forced to buy government bonds as retirement savings, the nation could be forced into a situation where it will become impossible to reduce or retire the national debt without liquidating the retirement savings of millions of Americans. That may be what the government has in mind to protect its bloated budget," Wilson said.
"By increasing the American people's stake in the government debt, the incentive will always be to expand the national debt to finance retirement benefits," Wilson concluded.