Wednesday, October 10, 2007

Hillary's latest pander, or something else?

WEBSTER CITY, Iowa - Democratic presidential candidate Hillary Rodham Clinton proposed tax cuts of up to $1,000 a year on Tuesday to encourage millions of working-age families to open personal 401(k) retirement accounts. The New York senator said the program would be paid for through higher estate taxes.

At the same time, Clinton said she has given up another idea for a savings incentive — giving every baby born in the United States a $5,000 account to pay for college or a first home.

Instead, she said, her plan for what she called "American Retirement Accounts" will provide "universal access to a generous 401(k) for all Americans."

She outlined a program in which the government would provide a "matching refundable tax credit — dollar for dollar — for the first $1,000 of savings done by every married couple making up to $60,000 a year."

Families with incomes of up to $100,000 would receive a smaller tax break to spur them to contribute to a personal 401(k).

"This means tens of millions of middle-class families will get matching tax cuts of up to $500 and $1,000 to help them build a nest egg for retirement," said a fact sheet distributed by the campaign.

Rush Limbaugh, who I admit has an ego the size of Alaska, credits himself with causing Mrs. Clinton to drop her $5000 per baby plan. He believes that in pointing out that all of the left-wingers objections to privatizing Social Security could be applied to this baby bond scheme that he was backing her into a corner where she would be forced to defend privatization along with her baby bond.

Apparently this was not the case because her new 401(k) plan is much closer to the Social Security privatization (SSP) plans than the baby bond was. The only real difference is that Mrs. Clinton funds her plan with an estate tax while true SSP uses the surplus in the Social Security payroll taxes currently being collected.

This is why I do not believe that Hillary is serious about the 401(k) plan. No matter where the money to fund it comes from the end result would be the utter destruction of the Democrat Party as a player of any significance in American politics. And I believe that Hillary and her economic advisers are smart enough to realize this.

You see what keeps the Democrat Party politically alive is the fact that a substantial number of American people have been rendered dependant on some kind of government payment or subsidiary for a significant part of their livelihood. This is why the first thing of the list for Democrats when they want to show how much they support the military is an increase in veterans benefits. They hope that the more vets depend on that government check the more likely they will be to "adjust" their concept of patriotism to conform to the Democrat vision.

However a plan which would get the average American to start and continue contributing to a real retirement savings plan would subvert everything the Left is hoping to accomplish. If the average American faithfully contributes to an investment based retirement plan from the moment he first enters the workforce (right after high school or college) by the time he is in his late 50's to early 60's he will have more than a million dollars put back for retirement. That means that he will be able to retire early and live comfortably for the rest of his life (this will go double for married couples who can pool their resources).

In fact if they manage their money even halfway well in their golden years they will leave a large chunk of cash to their children, giving the kids even more seed money for their own investment portfolios. George W Bush's vision of the ownership society will be realized with such force as even he could not have imagined.

The effects of this will go far beyond causing people to lose their dependency upon Social Security. As America becomes a nation of affluent investors the a large majority of the public will see their bread being buttered on the side of corporate America, not the government. It will become impossible for Leftists to use their most effective political weapon (after the promotion of dependence upon government handouts) class envy and the demonization of "the rich" (unless they want to try to set the millionaires against the billionaires).

As Americans come to see their personal financial future being in the private sector rather than the public sector support for genuine tax reform such as the flat tax or the fair tax along with the elimination of the capital gains tax and all forms of business taxes will grow to the point where it cannot be resisted.

As I said, these things would destroy the Democrat Party, at least in its present incarnation as the American socialist party.

All of which makes me wonder what Mrs. Bill Clinton is really playing at.