To be realistic, we have to recognize that the growth rate of the federal government has been accelerating and continues to accelerate under the current administration, while at the same time the private sector continues to shrink. So the real question is “How will the government be sustained?”

The logical solution would be for the government to do what we all should do, and that is learn to live within our means. Realistically, the government (ie most politicians) will never support such an approach for multiple reasons, including getting enough votes to secure re-election. Also frustrating this approach is the fact that US debt is becoming less attractive to foreign buyers (Source: Washington Post, April 7, 2010). Therefore, the only alternatives seem to be:

1. Print more money,

2. Generate more revenue by raising taxes, or

3. Discover new ways to access OUR assets.

Just to put the factual background, let’s review what happened in Argentina. In 1902, Argentina was one of the richest countries in the world. At the time, the United States was the only country close to Argentina in terms of being the second most powerful economy in the world. Both countries were behind Great Britain.

In 1916, a new president was elected. The campaign appealed to the middle class and was based on “fundamental change”. The changes that were implemented included: “mandatory pensions, mandatory health care, and support for low-income housing… to stimulate the economy.” These programs resulted in two important changes: (1) the government assumed more control over the economy, and (2) new taxes were assessed to finance the government’s efforts. Not surprisingly, after some time government payments exceeded taxpayer contributions.

Do you think this is starting to sound a lot like US welfare programs, specifically Social Security and Medicare? If you still don’t care, keep reading!

The situation in Argentina only worsened under the Perón administration when the target of all the rhetoric first focused on the “rich” and then broadened to include the “middle class.” Under the administration of Juan Perón, the government experienced rapid expansion, unions grew, and social spending accelerated geometrically. Long after Perón’s departure, the government continued to spend far more than it could, resulting in “hyperinflation” in 1989.

By 1994, the net result of all new income taxes, taxes on the rich, value-added taxes, etc. completely crushed the private sector. In 2002, Argentina was experiencing an economic collapse much like the Great Depression in the United States.

In short, in a period of 100 years, Argentina went from the number two position in the world to a state of extreme poverty in which it could not meet its debt obligations.

Just think what would happen if the United States followed the same path as Argentina. As the Heritage Foundation reported on October 31, 2008, the president of Argentina “announced that she would go ahead with her plan to seize the nation’s private pension funds…seizure of the funds is necessary to protect Argentines.” of the world market crisis. But most observers believe the real motive is to use the $30 billion in seized assets to alleviate the massive debt obligations that your…government has amassed.”

If our government took the same approach, perhaps in a more subtle way, IRAs alone would provide access to around $4 trillion. Just think of how many new government spending programs, new czars, and new agencies that kind of money could support!

I have to say that asset forfeiture is probably beyond the realm of probability in the US. Retirement asset forfeiture probably won’t happen, but it could take away OUR freedom of choice regarding retirement savings, one bite at a time.

Consider the following:

1. The New York Times recently acknowledged that Social Security has already begun “paying out more in benefits than it takes in in payroll taxes, a significant threshold not expected to be crossed until 2016, according to the Congressional Budget Office.” .

2. The US Treasury has begun submitting proposals to provide various incentives to divert money into “government-approved investments.”

3. Based on a study finding that most Americans have saved too little for retirement to supplement their Social Security benefits, there are advocates in the current administration who propose to force workers to save five percent of your income. Maybe not such a bad idea, except it’s also proposed that these savings go directly into a government-run “Guaranteed Retirement Account.” The net result of this proposal would be to leave you less to control through an IRA. Also, you have to ask yourself: What would protect this account from ending up in exactly the same condition as Social Security?

I don’t know about you, but it seems to me that there is a bad wind that is taking us all down the same path as Argentina. Keep your eyes open! Look out for the first step which will likely be naming the US Government Retirement Czar!

As an additional thought, if you can’t relate to the history of Argentina, take a close look at the growth of social programs in the European Union over the last 60 years, and look where they are today!

The timeline for failure seems to be getting shorter: Argentina took 100 years; it only took the EU 60 years. How quickly will the next country fail financially, and more importantly, could it be us?

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