401k and Obama

On October 24, 2008, word got out that key Congressional Democrats had held hearings about the possibility of federalizing Americans’ retirement investments, phasing out the current 401k’s and other 400-series retirement plans.

Note the date, because it makes a difference both politically and economically.

Ten days before the election and right at the stock market’s nadir, the conservative pundits put out the word that the 401k and Obama had come to the brink of breaking-up. According to conservative pundits, Obama and Company planned to end privatized retirement plans, wresting control of Americans’ futures out of their employers’ hands and putting it, maybe, in the government’s hands. The 401k and Obama were on the rocks.

A little perspective on the 401k and Obama

Given that the best hiding place is the most obvious place, two significant facts deserve attention: First, “hearings about the possibility” don’t exactly make it a done deal. And, second, Democrats simply were responding to the heavy price American workers had paid for Wall Street’s woeful deflation. In fact, the Congressional Democrats, noting that 401k’s had, on the average, lost 40% of their value in the stock market’s collapse, wanted to protect average working people from further plunder. Thinking about the 401k and Obama as a certified change-agent, Congressional Democrats welcomed any and all suggestions. The one set of hearings focused on a hybrid plan-employee contributions matched by government funds and invested at the employee’s discretion. The plan numbered among several others up for examination when the proper time and circumstance rolled around.

The “buzz” on the 401k and Obama

In his October 24 article, which spread across the internet like wildfire across Australia and with only slightly fewer casualties, Mark Impomeni wrote, “Congressional Democrats miss the point that under current law, Americans have control over their retirement savings, where and how it is invested, and when and how much they contribute… [Democrats] want control of Americans” retirement to reside in Washington, DC, not on Main Street, all in the name of ‘retirement security’.”

Once it gets written down, a rumor gets elevated to the status of fact, and then it evolves into a threat. Warning that the 401k and Obama could not peacefully co-exist, Impomeni unfortunately missed the fact that Americans’ corporate employers have control of their retirement investments. The corporations establish and administer 401k s, and they determine whether or not they will match employees’ contributions. Historically, many companies often had delivered their matches in the form of company shares; and, sometimes, they delivered nothing at all. In the downturn, 401k matches always has numbered among the first benefits cut. Congressional Democrats believed the 401k and Obama could do better.

401k and Obama in the cold light of day

Yes, workers determine, up to a point, where their 401k funds are invested, but they cannot choose real estate, commodities, or futures. And, yes, American workers determine how much and when they contribute, but they face stiff penalties for going over the limits, and “when” isn’t quite as flexible as Impomeni makes it seem: once an employee authorizes a payroll deduction for a 401k, corporate and IRS regulations stipulate how long he must continue the deduction. The average working guy cannot show up on Tuesday and tell accounting to drop five bucks into his retirement, betting it all on Exxon.

401k’s took a beating when the stock market headed south. Democrats took the initiative to explore ways for protecting Larry Lunchbox from further loss. Of course, from the oblique angle of the very far right, this initiative means the 401k and Obama have taken the first step down the slippery step toward hard-core socialism.

Looking at conservatives’ treatment of the 401k and Obama, objective observers had to wonder: published just ten days before the election, had the conservatives’ rhetoric mightily exaggerated the reality? Was there, maybe, a little more on the agenda than just the 401k and Obama?