POLITICS - The Facts Mame, Nothing But the Facts

More from FactCheck.org, questions posted by readers

"Q: Are congressional Democrats talking about confiscating IRA and 401(k) investment accounts?"

My mother has recently brought up a rumor that Nancy Pelosi and Harry Reid endorse a plan for the government to take people's 401Ks to make up tax dollars. Is this true and where did my mother get the information? (she can't tell me).

A: No. There's no plan to seize these accounts. One House witness at a committee hearing proposed to allow some people to trade their old accounts for a new type that would be less risky.

We've had many queries about this doozy. They all lead back to a Nov. 4 report posted by the Carolina Journal, a publication of the conservative John Locke Foundation of Raleigh, N.C. Its headline proclaimed, "Dems Target Private Retirement Accounts: Democratic leaders in the U.S. House discuss confiscating 401(k)s, IRAs." The report is wrong. There's been no such discussion.

What has been discussed is changing 401(k) and Individual Retirement Accounts in the future by limiting the deductibility of donations, and offering as an alternative a $600 tax credit and a new type of account with an annual return guaranteed by the government. That's a controversial idea to be sure, but it's a far cry from proposing that the government seize retirement assets that investors have already salted away in 401(k)s or IRAs. Nobody we know of is proposing anything like that.

The Carolina Journal report claims that Democrats on the House Education and Labor Committee held hearings Oct. 7 on "proposals to confiscate workers’ personal retirement accounts." The report describes in particular the testimony of Teresa Ghilarducci, a professor at the New School for Social Research in New York City. We've reviewed Ghilarducci's written testimony and a video recording of the entire hearing, both of which are posted on the committee's official Web site and are available to anybody who cares to read or listen. Contrary to the Carolina Journal report, nobody at the hearing talked about confiscating or seizing accounts. We also contacted Ghilarducci independently and asked if she's expressed support for confiscation. She told us in an e-mail message that she hasn't:

Teresa Ghilarducci, Nov. 18: It is utterly ridiculous [to suppose] that I advocate seizing 401k assets.

Ghilarducci was one of six witnesses at the Oct. 7 hearing, convened by chairman George Miller of California, a Democrat, to examine the impact of the financial crisis and stock market meltdown on workers' retirement accounts. Ghilarducci has long proposed limiting tax deductions for money put into 401(k) and similar retirement accounts and setting up a new type of account instead. Ghilarducci touts the idea in a book published earlier this year and in an opinion article published in the New York Times on Sept. 26. A spokesman for Rep. Miller has been quoted as calling her idea "intriguing" and "part of the discussion," but so far nobody in Congress has adopted it in the form of proposed legislation.

What she proposes is strong medicine and has been sharply criticized by conservative commentators including Rush Limbaugh and the editorial page of The Wall Street Journal. She would force all workers to save 5 percent of their annual income in a new type of retirement vehicle, which she calls a Guaranteed Retirement Account. These savings could not be controlled by workers like IRAs and 401(k) assets, but would instead be deposited with the government. Workers could not touch the money until retirement, she says, and even then the savings could not be drawn out any way workers might desire, but would be converted to an annuity – a guaranteed stream of income for life. Ghilarducci argues that these new accounts would avoid stock market risks; the government would guarantee that the savings earn a 3 percent annual return on top of inflation. The government would also pay each worker $600 a year in the form of a tax credit, which would help workers who now earn too little to take advantage of a tax deduction because they owe little or no federal income tax anyway.

At the Oct. 7 hearing, Ghilarducci further proposed that Congress address the recent stock market drop by allowing workers to trade their existing 401(k) or IRA accounts for her proposed Guaranteed Retirement Accounts. (Her words can be heard starting at 33 minutes and 23 seconds into the video of the hearing.)

Ghilarducci, Oct. 7: I propose ... that the Congress allow workers to swap out their 401k assets, perhaps at August levels, for a Guaranteed Retirement Account. Just a one-time swap, trading your 401(k) for a Guaranteed Retirement Account that will be composed of the equivalent of government bonds that pay a 3 percent real return.

Note that she used the word "allow." This proposed swap would be voluntary, the opposite of a seizure or confiscation. And many might find such a trade attractive. Note also that she said "perhaps at August levels," suggesting that Congress might replenish the value of beaten-down stocks in IRAs and 401(k) accounts before making the swap. That would be quite a generous offer; the Dow Jones Industrial Average dropped nearly 17 percent between August 1 and the day of the hearing. Far from proposing to "confiscate" accounts, she proposed to restore their value. Congress has not acted on her suggestions.

Standing By a Falsehood

We contacted the John Locke Foundation to ask about the basis for the "confiscation" claim. We wondered if the Carolina Journal's reporter knew something about the plan that we didn't. Spokesman Jon Ham said: "[W]e, as the saying goes, 'stand by our story.'

"Ham argued that holders of 401(k) accounts and IRAs would feel "coercion" to convert those accounts into Ghilarducci's proposed GRAs. He said: "Even though transferring of a 401(k) to a GRA would be 'voluntary' under Ghilarducci’s proposal, the loss of the 401(k)s tax advantage makes it coercive, with the intent of forcing individuals to transfer their accounts to a GRA. ... Absent the loss of the tax advantage, we would not have described the Ghilarducci plan as 'confiscation.'

"But Ham's argument won't wash. Even if there were coercion to convert an IRA or 401(k) account to a GRA account, it would be a rather serious exaggeration to describe it as "confiscation." The old account owners would still own them, in a new type of account. And anyway, Ham is simply wrong to claim that there would be any coercion.

What Ghilarducci proposes is to pay for her proposed $600 tax credit by taking away the deductibility of money put into an IRA or 401(k) over $5,000 per individual, per year. (IRAs for those under age 50 would actually not be affected, since the current limit for them is $5,000 anyway.) This would certainly reduce the incentive for upper-income workers to put more than $5,000 into such accounts in future years, but it would in no way reduce the tax advantage of keeping money already in those accounts. All interest, dividends and capital gains realized inside those accounts would continue to go untaxed until the account holder withdraws the money. Ghilarducci told us:

Ghilarducci: If people put money into 401(k)s they could keep it there, and taxes would continue to be deferred until withdrawn. It is unthinkable that Congress would take a tax break away for activities already undertaken.So much for "confiscation." We don't endorse or oppose Ghilarducci's ideas. But it's simply a fact that neither she nor anybody we're aware of is proposing a government seizure of retirement accounts.-Brooks Jackson

Correction, Nov. 18: We originally referred incorrectly to the John Locke Institute. The correct name is the John Locke Foundation.

NOTE: This would be a voluntary program.

"Q: Is Obama planning a Gestapo-like "civilian national security force?"

A: This false claim is a badly distorted version of Obama's call for doubling the Peace Corps, creating volunteer networks and increasing the size of the Foreign Service.

This question stems from an interview that Republican Rep. Broun of Georgia gave to The Associated Press Nov. 10. The story carried a headline, "Georgia congressman warns of Obama dictatorship." It said that Broun "fears that President-elect Obama will establish a Gestapo-like security force to impose a Marxist or fascist dictatorship." And it quoted him this way:

Rep. Paul Broun, Nov. 10: It may sound a bit crazy and off base, but the thing is, he's [Obama's] the one who proposed this national security force. ... That's exactly what Hitler did in Nazi Germany and it's exactly what the Soviet Union did.

Similar claims have been circulating in right-leaning blogs and conservative Web sites ever since July, when Obama made a single reference to a "civilian national security force" in a campaign speech in Colorado. Obama's detractors make much of his expansive (and exaggerated) description of such a force as being "just as powerful, just as strong, just as well-funded" as the U.S. military. They also ignore the context.

Obama was not talking about a "security force" with guns or police powers. He was talking specifically about expanding AmeriCorps and the Peace Corps and the USA Freedom Corps, which is the volunteer initiative launched by the Bush administration after the attacks of 9/11, and about increasing the number of trained Foreign Service officers who populate U.S. embassies overseas.

Here is the relevant portion of what Obama actually said, with the sentences quoted selectively by Broun and others in bold.

Obama, July 2, Colorado Springs, CO: [As] president I will expand AmeriCorps to 250,000 slots [from 75,000] and make that increased service a vehicle to meet national goals, like providing health care and education, saving our planet and restoring our standing in the world, so that citizens see their effort connected to a common purpose.

People of all ages, stations and skills will be asked to serve. Because when it comes to the challenges we face, the American people are not the problem – they are the answer. So we are going to send more college graduates to teach and mentor our young people. We'll call on Americans to join an energy corps, to conduct renewable energy and environmental clean-up projects in their neighborhoods all across the country.

We will enlist our veterans to find jobs and support for other vets, and to be there for our military families. And we're going to grow our Foreign Service, open consulates that have been shuttered and double the size of the Peace Corps by 2011 to renew our diplomacy. We cannot continue to rely only on our military in order to achieve the national security objectives that we've set.

We've got to have a civilian national security force that's just as powerful, just as strong, just as well-funded. We need to use technology to connect people to service. We'll expand USA Freedom Corps to create online networks where American can browse opportunities to volunteer. You'll be able to search by category, time commitment and skill sets. You'll be able to rate service opportunities, build service networks, and create your own service pages to track your hours and activities.

This will empower more Americans to craft their own service agenda and make their own change from the bottom up.

Does that sound like a force that could kick down your door in the middle of the night and haul you off to a Gulag or concentration camp? You decide.