Obama’s Plan to Snatch Your Savings

In his first term, Obama managed to get his paws on health care, banking, energy, student loans, the auto business, and more.  Now he has his sights set on your 401(k).

The left has had its eye on retirement savings for years, but so far takeover attempts have been rebuffed.  One egregious attempt was the proposal, following the 2010 financial crisis, to “safeguard” retirement savings by requiring that they be rolled over into Treasury bonds.  Had this legislation succeeded, it would have appropriated all or part of the retirement savings of millions of Americans.  The funds would have been used to finance further expansion of government.  In return, savers would have received a promissory note from the federal government similar that issued by the Social Security Trust Fund.

Needless to say, most investors were not keen to convert their savings into Treasury obligations — or, to be more precise, into an unsecured note promising a return approximating that of Treasury bonds.  That is because, as with every other endeavor, government’s management of retirement savings (aka Social Security) has been a disaster.

Those who believe that Social Security has done a good job of investing their savings are greatly mistaken.  Over the past 200 years, the real, inflation-adjusted return of the U.S. stock market has been 7%.  Had one invested $100,000 in the U.S. market in 1802, one’s total return after inflation (or that of oneself and one’s descendants) would have been more than $100 billion.  By comparison, investment in government Treasury bills would have yielded approximately $50 million.  (Figures are extrapolated from John C. Bogle’s Common Sense on Mutual Funds.)