CONGRESS ENTERTAINS PROPOSAL TO HAVE PRIVATE RETIREMENT ACCOUNTS PUT UNDER GOVERNMENT CONTROL
By: Daniel David Shaw

Bailout Balloons to Trillions

It started with the $29 billion to bailout Bear Stearns, and with that the snowball started rolling downhill.

It was followed by a $200 billion commitment to mortgage giants, Freddie Mac and Fannie Mae; $85 billion, which has ballooned up to $140 billion, to American International Group (AIG): $700 billion to buy toxic mortgages from banks (a strategy which, with half of the money gone, has now changed to buying equity in banks); $140 billion in tax breaks for banks; $300 billion for Project Hope (the government's attempt at mortgage workouts); the $50 billion guarantee of the nation's money market accounts, and the $2 trillion (that's a T) in Fed loans, which, despite, Treasury Secretary Paulson's assurance of transparency when pitching the plan to Congress, the Federal Reserve refuses to discuss.

At $3.5 trillion you're starting to talk about real money. And when you add the FDIC's guaranteeing of $1.5 trillion of unsecured bank debt, well... you've pushed the total to and eye-watering $5 trillion, some 36% of the US economy.

The multi-trillion dollar elephant in the living room is, "Who is going to pay for this?"

The simple, oh so politically incorrect answer is, We are.

Will the Government Take Over Personal Retirement Accounts?

Increased taxes have already been promised.

But you can only tax a population so much before it simply quits producing. One alternative being considered is the prospect of converting personal retirement accounts into Guaranteed Retirement Accounts (GRAs), managed by that bastion of fiscal propriety, the Social Security Administration.

Forget that Congress regularly purloins funds from the Social Security Trust Fund to cover its own reckless spending, California Democrat, George Miller's House Committee on Education and Labor heard a proposal from Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, to eliminate tax breaks for 401(k) and similar retirement accounts such as IRAs and convert them into Guaranteed Retirement Accounts managed by the Social Security Administration.

401(k) plans permit Americans to put a certain percentage of their pay check into a retirement account. This contribution is not taxed to the employee at the time of the contribution. Moreover, employers make matching contributions, which they deduct as a business expense.

Ghilarducci's Plan

Under Ghilarducci's plan employees would have 5% of their pay mandatorily deducted from their pay and deposited into their GRA. This deduction would be in addition to Social Security and Medicare taxes, which would also have to continue being paid by employers.

But unlike 401(k) contributions that the employer makes to the 401(k) account, the GRA contribution would not be deductible. Moreover, while 401(k) assets are fully transferable to an employee's family at death, only half of the GRA assets could be passed along to heirs. Presumably, Uncle would keep the other half.

Justifying the plan, Ghilarducci noted that, "Humans often lack the foresight, discipline and investment skills required to sustain a saving plan." Apparently she forgot that the Social Security Trust Fund is regularly raided by Congress. That, or perhaps she doesn't consider members of Congress human.

"I'm just rearranging the breaks that are available now for 401(k) s and spreading the wealth," she said, a phrase that has gotten a lot of attention recently, after President Elect Obama told Joe the Plumber that he wanted to "...spread the wealth around."

Argentina Confiscates Private Retirement Accounts

And just in case you think that the idea of a government confiscating personal retirement accounts is out of the range of possibility, we urge you to read the story in the October 22 issue of the Wall Street Journal, which reported that the Argentinean government had seized all private pension and retirement accounts to fund government operations and a ballooning budget deficit.

Did we mention that estimates place the size of the US budget deficit 2009 at a trillion dollars?

The New Administration's Mind Set

Legislation that will mandate the conversion of personal retirement accounts to government managed plans has yet to be introduced. And perhaps it never will. But wait until the bills start coming due for this bailout. This unprecedented, reckless spending binge will unquestionably drive a rapacious Congress to search for assets to pay for their programs like machines from the Matrix.

The President-elect has already made very clear his promise to increase income taxes on higher income earners. And enforcement is likely to become intense.

The idea that it is the government's job is to protect your retirement assets from your own human lack of "foresight, discipline and investment skills" is a concept that will have wide and growing agreement in this administration.

The prospect of Washington getting their hands on your hard-earned assets lay just below the surface of the idea that the financial nanny state will take care of you.

Solution

One can be a spectator and sit back and watch the drama unfold. Or one can act, moving hard earned assets off shore, ideally to Panamanian corporate and foundation structures that are safe, secure, and protected by some of the most investor friendly legislation on the planet.

Why leave your assets on shore, when the "perfect storm" of mind-numbing US budget deficits, promised tax increases and Congressional Hearings on a government takeover of personal retirement accounts is gathering before your eyes?

The writing is on the proverbial wall.

Compare this to the financial environment in Panama where banks are flush with cash, do not touch sub-prime loans, and were there has not been a bank failure in 100 years.

Think about that for a minute: no bank failure in 100 years.

We are talking about world class asset protection and unsurpassed privacy in a constitutional democracy that has no standing army, no central bank and is home to almost 90 international banks.

Panamanian corporations, which can house offshore business activities anonymously, can be set up quickly with bearer shares, and Panamanian foundations, are surprisingly affordable.

Call us to see if a Panamanian corporation or foundation might not be just the tool to help you protect your hard earned assets in the midst of a financial crisis that is rapidly spinning out of control.

We urge you not to wait, to at least investigate these alternatives.

Jefferson

We leave you with two quotes from America's third president, Thomas Jefferson:

"We must not let our rulers load us with perpetual debt. We must make our election between economy and liberty or profusion and servitude.

If we run into such debt, as that we must be taxed in our meat and in our drink, in our necessaries and our comforts, in our labors and our amusements... [we will] have no time to think, no means of calling our miss-managers to account....

And this is the tendency of all human governments. A departure from principle in one instance becomes a precedent for [another]... till the bulk of society is reduced to be mere automatons of misery... And the fore-horse of this frightful team is public debt. Taxation follows that, and in its train wretchedness and oppression."
Letter to Samuel Kercheval, Monticello, July 12, 1816

"The system of banking [is] a blot left in all our Constitutions, which, if not covered, will end in their destruction... I sincerely believe that banking institutions are more dangerous than standing armies; and that the principle of spending money to be paid by posterity... is but swindling futurity on a large scale."
Stated in 1811 when President Jefferson refused to renew the charter for the First Bank of the United States.