Paul L. Caron

Wednesday, January 5, 2011

Europe Confiscates Private Pension Accounts to Close Budget Deficits

Christian Science Monitor, European Nations Begin Seizing Private Pensions:

Hungary, Poland, and three other nations take over citizens' pension money to make up government budget shortfalls.

Tax | Permalink

TrackBack URL for this entry:

Listed below are links to weblogs that reference Europe Confiscates Private Pension Accounts to Close Budget Deficits:


It ain't going to happen here.

Unlike some of these Socialized European countries, Roth and Traditional IRAs in the United States are wholly held by all sorts of private banks and financial institutions, NOT directly by the State. Seizing these funds from a myriad of private holders wouldn't be trivial to accomplish.

Meanwhile, the US gov't is too big and leaky to just spring something like this as a surprise. Even serious debate on this would cause massive bank runs as all IRA and 401k holders ran screaming to the exits.

Lets face it, if American politicians are too craven to cut social security benefits, then how are they going to grow the spine necessary to forcibly steal cash from private retirement accounts?

That sort of seizure of private retirement funds would literally amount to armed robbery of every American working a "regular" job. That number of working Americans, not incidentally, probably includes the vast majority of Federal employees who would be tasked to enforce this hypothetical seizure.

Given that the American population is literally the most armed in the world, there is a real likelihood that this sort of outright theft would set off an armed rebellion. I certainly wouldn't want to be a politician with a vote like that on my record!

Now, that said, there are still ways for the Federal gov't to raise money short of doing this. We don't yet have a European style VAT (consumption) tax, and that would be MUCH easier to implement politically here than outright theft of funds from private individuals.

Its also certainly possible that future tax treatment of retirement funds will be less favorable than it is now. I could definitely see the Federal gov't ending all new donations to Roth IRAs. In fact, I think that's probably inevitable. But current Roth balances would likely be grandfathered in, if for no other reason than that the politicians voting for these changes are probably ROTH IRA holders themselves!

Posted by: looking closely | Jan 24, 2011 9:20:39 PM

Contracts between gummints and their unionized workers are sancrosanct and inviolate. We must uphold the rule of law. Contracts between debt holders and car companies? Not only not worth the paper they're printed on, but downright unAmerican! We need shared sacrifice.

Posted by: FUBAR | Jan 24, 2011 2:44:35 PM

Woody is a true poet.

Posted by: Jr Deputy Accountant | Jan 5, 2011 1:23:03 PM

Oh, that would never happen here. Well, not as long as Social Security and Medicare are solvent, and why wouldn't they be with all the money that's been paid in by workers? It's not like the government is runninig a Ponzi Scheme or that Social Security is run like a mob-controlled union pension fund in which the funds are stripped for other projects. No sir, that would never happen here.

Posted by: Woody | Jan 5, 2011 8:45:06 AM

I often argue with people on whether the gov't will renege on Roth benefits (I say they may curtail and grandfather, or may enact consumption taxes that will hurt dollars in all retirement accounts but won't rescind the tax free growth).

Every now and again some one will come in and say that the Gov't won't just renege on the Roths, but seize them. It was usually hot air, linked to argentina which privitized then nationalized portions of its social security system. This article gives them more credence. A scary thought.

Posted by: Dave | Jan 5, 2011 8:02:28 AM