Hate ‘em All!

A few interesting things I read on Tuesday…

Hate them all.  If you want to hate politicians, and I mean ALL politicians, click on this link.  It’s a Washington Post article that has a great speech made on the Senate floor in 2006.  It’s a passionate argument against raising the debt ceiling.  The problem is that it was made by (then) Senator Obama.  And, before all you Republicans rejoice, I encourage you to read the ENTIRE article.  The Democrats voted against raising the debt ceiling and the Republicans voted in favor of it.  They are all horrible…individually and collectively.

Get rid of the debt ceiling.  Chairman Bernanke weighed in on the debt ceiling, saying “it would be a good thing if we didn’t have it.”  Arguing that the increase in borrowing authority simply accommodates the spending that lawmakers have already approved, he said, “this is sort of like a family saying ‘well, we’re spending too much, lets stop paying our credit card bill.’”

It won’t end with the debt ceiling debate.  Former Vice-Chairman of the Fed, Alan Blinder wrote a great op-ed piece in The WSJ.  A few of his points about the debt ceiling:

1. Only in America is there another law that might, and sometimes does, contradict the budget law; a limit on how much the government may borrow.

2. The minority party always has a little political fun before letting the debt limit rise.  (See above)

3. Federal receipts currently cover less than 74% of federal outlays.  So, if we hit the debt ceiling, total outlays will have to be trimmed by 26% immediately.  That’s 6% of GDP.

4. After the debt ceiling, the next concern will be when the federal government’s current continuing resolution expires.  Because Congress has not passed a budget for several years, these resolutions keep the government operating.  They essentially maintain spending at current levels for a time.  The resolution now in force expires on March 27^th.  After that, we can have a government shutdown like 1995-96.

I’m not sure that this 401(k) thing is going to work out for us…Some fascinating numbers from a Washington Post article on 401(k) plans:

1. More than one in four American workers with a 401(k) uses the account to pay current expenses.  One in three people in their 40s does this.

2. In 1980, four out of five private-sector workers were covered by traditional pensions.  Now, just one in five workers has a pension.

3. In 2010, 28% of participants had an outstanding loan against their retirement account.  (While this money plus interest will hopefully be paid back to your account, it shows how stretched people are.)  This is a record.

4. Of workers changing jobs, 42% cashed out their plans rather than rolling them over.  That should work out pretty well…

5. A typical household approaching retirement age has $120K in retirement savings.  This is enough for a $7K annual annuity.

6. Approximately 30% of households earning less than $50K / year had cashed out a retirement plan for non-retirement purposes.  Only 12% of households earning between $100-$150K did this and 8% of those earning more than $150K did it.

Have a great week.

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