Due to protests by trade unions, the government relented: only 20% of the original proposal will be implemented.
In Poland, government wants to transfer one-third of future contributions to individual retirement accounts into the country’s state-run social security system. Unlike Hungary however, the proposed Polish seizure will not touch money its citizens have already accumulated. Yet it will still cost Polish savers $2.3 billion dollars a year.
In Ireland, The National Pensions Reserve Fund was established in 2001 to meet pension costs from 2025 onward, when budget projections revealed social welfare and public service pensions would increase substantially due to an aging population. The payouts from the fund would have continued until 2055 with the rules for drawdowns established by the Minister for Finance, and were seen as the best way to keep the system sustainable.
In March 2009, the rescue of Irish banks from the worldwide financial crisis necessitated a withdrawal of $5.35 billion from the fund. The remaining $2.66 billion was withdrawn in November 2010, when the entire nation required a bailout totaling $113 billion.
France is country number five in which funds earmarked for the future will be used to shore up government finances today. $43.9 billion will be taken from national reserve pension fund (FRR) and used to reduce the deficit accumulated in short-term pensions. Retirement funds earmarked for the years 2020-2040 will be used for the years 2011-2024 instead, and the French government will use the additional saving resources for “other purposes.”
What do such seizures have to do with America? Nothing–so far. Government already has control of our “pubic pension system,” aka Social Security, and a simple act of Congress can alter both the amount and the percentage of its Social Security obligations any time Congress desires to do so. President George W. Bush used up considerable political capital attempting to forestall the looming insolvency of a system which went into the red for the first time this year, a threshold which was not expected to be reached until 2016. Democrats were enormously successful in convincing a majority of Americans that part of that reform, a partial privatization of the system, would be catastrophic.
That success is a testament to the economic illiteracy of many Americans, who essentially believed that leaving the Social Security portion of their retirement accounts in the hands of spendthrift bureaucrats was a better idea than putting that money into private accounts under their own control. But as Europe is currently demonstrating such choices may become irrelevant. No doubt the idea of government seizing private retirement accounts was once considered as unthinkable in Europe as it currently is here. And Americans might be surprised to learn that as recently as October of last year Senate Democrats held hearing to discuss the possibilities of seizing private 401(k) plans. Their rationale? To “fairly” distribute taxpayer-funded pensions to everyone. The motivating factor? Under-funded public service employee pension funds.
A Republican-controlled House of Representatives may have a far bigger budget battle on their hands than they might imagine.
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