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House Democrats contemplate abolishing 401(k) tax breaks


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http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20081012/REG/310139971

 

"Under Ms. Ghilarducci's plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5% of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would pay 3% a year, adjusted for inflation.

 

The current system of providing tax breaks on 401(k) contributions and earnings would be eliminated.

 

"I want to stop the federal subsidy of 401(k)s," Ms. Ghilarducci said in an interview. "401(k)s can continue to exist, but they won't have the benefit of the subsidy of the tax break."

 

Under the current 401(k) system, investors are charged relatively high retail fees, Ms. Ghilarducci said. "I want to spend our nation's dollar for retirement security better. Everybody would now be covered" if the plan were adopted, Ms. Ghilarducci said. "

 

Ok, this just boggles me. The government has destroyed social security and now they want to make 401K mandatory, but they control the money? Am I the only one that this bothers?

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http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20081012/REG/310139971

 

"Under Ms. Ghilarducci's plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5% of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would pay 3% a year, adjusted for inflation.

 

The current system of providing tax breaks on 401(k) contributions and earnings would be eliminated.

 

"I want to stop the federal subsidy of 401(k)s," Ms. Ghilarducci said in an interview. "401(k)s can continue to exist, but they won't have the benefit of the subsidy of the tax break."

 

Under the current 401(k) system, investors are charged relatively high retail fees, Ms. Ghilarducci said. "I want to spend our nation's dollar for retirement security better. Everybody would now be covered" if the plan were adopted, Ms. Ghilarducci said. "

 

Ok, this just boggles me. The government has destroyed social security and now they want to make 401K mandatory, but they control the money? Am I the only one that this bothers?

 

I think they would end up just taking it all at the end. I don't trust it at all. I believe in ARgentina they just took the money to pay national debt.

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Dh and I discussed this last night. Dh said we will, after much prayer, make a decision about moving our 401k money if there is democrat control. Socialism, gotta love it.

 

You wont have a choice though under the Dems plan!

 

"Under Ms. Ghilarducci's plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5% of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would pay 3% a year, adjusted for inflation."

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You wont have a choice though under the Dems plan!

 

Yes. I was just reading it and see what you mean. Dh just doesn't trust the democrats, period, and believes that once they get their hands in that basket, they won't stop until they have it all. He was thinking maybe we can save what is there right now. This type of thing just sends me.

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NOT TAXING the 401k money IS NOT A SUBSIDY!!!!!!!!!!!

 

(Sorry for the yelling. Can't help it.)

 

Exactly, Mama Lynx. Apparently the person quoted in the article can't tell the difference between a tax subsidy and a tax deferment. Yet ANOTHER reason not to give the government any MORE of our money.

 

This is a terrible, terrible idea.

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Quiver, thanks for pointing this out....unfortunately I believe that our society has been inching more towards a "want to be taken care of" society than an independent, make your own way in this country society. I still think the latter is the majority but those who control the majority of our information society are pundits for the former.

 

It's kind of like the prodigal son..we have one son who is hard working and stays with the farm and is loyal...the other son squanders his skills and returns humbled and seeking forgiveness...however, the prodigal son in this country has been told..."no, you're entitled to as big a house as your other brother, we'll give you the loan, we'll even pay for it when you're errant ways show that you can't afford it...heck, you deserve a retirement just like your brother has created for himself through sacrifice and diligence..we need to spread the wealth and give ALL folks the right to a nice home, stable retirement, don't worry about working for it, just let us help you create it...after all we're your 'father' and we can help you." The problem is that our government (democrats especially) are trying to create a system where they rule as the father over both sons...I don't want a father ruling me, I want a father that is there in emergencies ONLY, not having any decisions on my life as I choose to live it...if I'm irresponsible and still want benefits, there should be consequences....they're removing all consequences and creating an environment where the responsible son has no incentive to be so....I just can't stand this way of thinking.

 

Tara

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It's kind of like the prodigal son..we have one son who is hard working and stays with the farm and is loyal...the other son squanders his skills and returns humbled and seeking forgiveness...however, the prodigal son in this country has been told..."no, you're entitled to as big a house as your other brother, we'll give you the loan, we'll even pay for it when you're errant ways show that you can't afford it...heck, you deserve a retirement just like your brother has created for himself through sacrifice and diligence..we need to spread the wealth and give ALL folks the right to a nice home, stable retirement, don't worry about working for it, just let us help you create it...after all we're your 'father' and we can help you." The problem is that our government (democrats especially) are trying to create a system where they rule as the father over both sons...I don't want a father ruling me, I want a father that is there in emergencies ONLY, not having any decisions on my life as I choose to live it...if I'm irresponsible and still want benefits, there should be consequences....they're removing all consequences and creating an environment where the responsible son has no incentive to be so....I just can't stand this way of thinking.

 

Tara

 

EXACTLY!! What you said is exactly why that bail-out ticked me off so badly!! The consequences for bad decisions by the liberals were not able to play out fully. Had we backed off and let those consequences come forth, then the truth of those bad decisions would be seen clearly. The govt. is like one of those pitiful moms who mean well but wind up enabling their child their whole life and not holding them accountable for anything!

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EXACTLY!! What you said is exactly why that bail-out ticked me off so badly!! The consequences for bad decisions by the liberals were not able to play out fully. Had we backed off and let those consequences come forth, then the truth of those bad decisions would be seen clearly. The govt. is like one of those pitiful moms who mean well but wind up enabling their child their whole life and not holding them accountable for anything!

 

Whoa, now, Tex. :001_smile: I was as anti-bailout as any gal, but make no mistake: There's PLENTY of blame to go around for the financial mess we find ourselves in. Alan Greenspan said it himself when he was on the hot seat the other day: Even he dropped the ball and misunderstood the system. Conservatives and liberals made this mess together; there was plenty of greed and willful ignorance on both sides. Grrrr! Makes me madder than a wet hen--as I'm sure it does any 30-year, fixed-rate mortgage holder or small investor.

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Whoa, now, Tex. :001_smile: I was as anti-bailout as any gal, but make no mistake: There's PLENTY of blame to go around for the financial mess we find ourselves in. Alan Greenspan said it himself when he was on the hot seat the other day: Even he dropped the ball and misunderstood the system. Conservatives and liberals made this mess together; there was plenty of greed and willful ignorance on both sides. Grrrr! Makes me madder than a wet hen--as I'm sure it does any 30-year, fixed-rate mortgage holder or small investor.

 

Very well said!!!! Liberals didn't do it all by themselves. They had help. And a lot of it!

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"I want to stop the federal subsidy of 401(k)s," Ms. Ghilarducci said in an interview. "401(k)s can continue to exist, but they won't have the benefit of the subsidy of the tax break."

 

Ok, this just boggles me. The government has destroyed social security and now they want to make 401K mandatory, but they control the money? Am I the only one that this bothers?

 

NOT TAXING the 401k money IS NOT A SUBSIDY!!!!!!!!!!!

 

(Sorry for the yelling. Can't help it.)

 

Of course it's not a TAX SUBSIDY. Just how stupid does Ms. Ghilarducci think the American people are?

 

Mandatory contributions to "our" savings accounts. What a crock.

Edited by Jackie in AR
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I would just like to point out that Teresa Ghilarducci is a professor of economic-policy analysis at The New School for Social Research in New York, and not a member congress. She was testifying before a hearing fo the House Ways and Means Committee’s Subcommittee on Income Security and Family Support. This is part of a much broader investigation of regulatory failures. Hearing testimony does not policy or legislation make.

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I would just like to point out that Teresa Ghilarducci is a professor of economic-policy analysis at The New School for Social Research in New York, and not a member congress. She was testifying before a hearing fo the House Ways and Means Committee’s Subcommittee on Income Security and Family Support. This is part of a much broader investigation of regulatory failures. Hearing testimony does not policy or legislation make.

 

Yeah. I get that.

 

Here are a couple of paragraphs from the article:

 

House Education and Labor Committee Chairman George Miller, D-Calif., and Rep. Jim McDermott, D-Wash., chairman of the House Ways and Means Committee's Subcommittee on Income Security and Family Support, are looking at redirecting those tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute.

 

A plan by Teresa Ghilarducci, professor of economic-policy analysis at The New School for Social Research in New York, contains elements that are being considered. She testified last week before Mr. Miller's Education and Labor Committee on her proposal.

 

And a couple more:

 

Under Ms. Ghilarducci's plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5% of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would pay 3% a year, adjusted for inflation.

 

The current system of providing tax breaks on 401(k) contributions and earnings would be eliminated.

 

So, in this case, it sounds as though Ms. Ghilarducci's ideas are being considered for legislation.

 

And one more quote:

 

"I want to spend our nation's dollar for retirement security better. Everybody would now be covered" if the plan were adopted, Ms. Ghilarducci said.

 

Memo to Ms. Ghilarducci: My retirement account isn't our nation's. It is mine.

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EXACTLY!! What you said is exactly why that bail-out ticked me off so badly!! The consequences for bad decisions by the liberals were not able to play out fully. Had we backed off and let those consequences come forth, then the truth of those bad decisions would be seen clearly. The govt. is like one of those pitiful moms who mean well but wind up enabling their child their whole life and not holding them accountable for anything!

 

There were bad decisions made by conservatives and liberals. It takes a lot of chutzpah for either side to lay all the blame on the other side.

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Whoa, now, Tex. :001_smile: I was as anti-bailout as any gal, but make no mistake: There's PLENTY of blame to go around for the financial mess we find ourselves in. Alan Greenspan said it himself when he was on the hot seat the other day: Even he dropped the ball and misunderstood the system. Conservatives and liberals made this mess together; there was plenty of greed and willful ignorance on both sides. Grrrr! Makes me madder than a wet hen--as I'm sure it does any 30-year, fixed-rate mortgage holder or small investor.

 

:iagree:

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It's irrational, I know, but...for some reason the name The New School for Social Research just scare the PANTS off me. :001_huh:

 

I'm all for encouraging folks to save more. That's a TERRIFIC goal. But I have a real problem with this proposal.

 

Really? The New School is a very well-respected institution, and I know several conservatives who've come out of there with a great education. Don't let the name freak you out!

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Really? The New School is a very well-respected institution, and I know several conservatives who've come out of there with a great education. Don't let the name freak you out!

 

You see, Melissa? I KNEW that I was being irrational. :001_smile: They need to work on that name, though: It has a very...Orwellian ring to it, YWKIM?

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It's irrational, I know, but...for some reason the name The New School for Social Research just scare the PANTS off me. :001_huh:

 

I'm all for encouraging folks to save more. That's a TERRIFIC goal. But I have a real problem with this proposal.

 

I'm at the website and, speaking as a conservative, the name seems to be the least scary thing about it. And I thought my university was a hotbed of liberalism. ;)

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Going to a rabidly conservative school is no better... when you're not rabidly conservative... thankfully my professors were more open-minded about my positions than my knee-jerk classmates :D Being smart and outspoken, and at the top of your class (when you're a freshman in a class full of juniors and seniors) doesn't make for many superb dating opportunities. Thankfully, the Naval Academy wasn't too far away... of course No one wanted to ask me out until I was dating a midshipman, then they got mad because, in their words, "I thought I was too good for them." But, you know, they were probably right :lol:

 

My husband and I haven't talked about our 401(k), but you'd better believe we'll be paying attention to everything that happens in the Congress for the next couple of years.

 

(Sorry for the personal note -- it's been a long week, and I just get depressed thinking about the plans people have for my hard-earned money, that I apparently have too much of... now, if I could just figure out where that was in my budget:tongue_smilie:)

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You know, angry tears stung my eyes as I read that article.:mad: That is just so, so wrong!

 

I wonder what would happen if it went into legislation and passed? Would we still be contributing to social security through taxes and have our mandatory 401K contributions stolen by the SSA as well?

 

And, I wonder how they would determine who got what during retirement? Would everyone be leveled out and get the same amount? Or would those who put in more get more at retirement? Since I'm becoming a pessimist, I figure it would be the former.

 

Sigh...

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I would just like to point out that Teresa Ghilarducci is a professor of economic-policy analysis at The New School for Social Research in New York, and not a member congress. She was testifying before a hearing fo the House Ways and Means Committee’s Subcommittee on Income Security and Family Support. This is part of a much broader investigation of regulatory failures. Hearing testimony does not policy or legislation make.

 

Well, then why are people saying this is what the Democrats want to do? Is the subcommittee solely Democratic? No Republicans heard this testimony and considered these ideas? Has there been a proposal based on these ideas?

 

I'm confused.

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Well, then why are people saying this is what the Democrats want to do? Is the subcommittee solely Democratic? No Republicans heard this testimony and considered these ideas? Has there been a proposal based on these ideas?

 

I'm confused.

 

On Tuesday, a Democrat, Rep. George Miller (D Calif.) proposed eliminating the tax savings for 401k.

 

“We’ve invested $80 billion into subsidizing this activity,” he said, referring to tax breaks allowed for 401(k) contributions and savings.

 

(Side digression. RANT! WRONG! WRONG! WRONG! No, you have not invested any money into subsidizing this activity! It's not a subsidy! You've invested nothing! AAAAAARRRRRGGGGGGGGGHHHHHHH!!!!!!!!!!!)

 

Ahem.

 

I have Googled my little heart out for you. All I can find are references that "House Democrats" invited Teresa what's-her-name to speak, and the only quotes I can find are by Miller and McDermott, another Dem.

 

I am more than happy to keep looking, to identify any Republicans who were at the meeting, because I'd like to run them out of office as fast as possible :)

 

My sourch for the above quote

 

But at any rate, Pam, what do you think of the ideas that were floated around at this meeting?

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On Tuesday, a Democrat, Rep. George Miller (D Calif.) proposed eliminating the tax savings for 401k.

 

 

 

(Side digression. RANT! WRONG! WRONG! WRONG! No, you have not invested any money into subsidizing this activity! It's not a subsidy! You've invested nothing! AAAAAARRRRRGGGGGGGGGHHHHHHH!!!!!!!!!!!)

 

Ahem.

 

I have Googled my little heart out for you. All I can find are references that "House Democrats" invited Teresa what's-her-name to speak, and the only quotes I can find are by Miller and McDermott, another Dem.

 

I am more than happy to keep looking, to identify any Republicans who were at the meeting, because I'd like to run them out of office as fast as possible :)

 

My sourch for the above quote

 

 

Thanks. You really don't need to keep looking, but I appreciate what you've already done. I was just curious in general if this was part of a larger Dem plan or if it was simply someone testifying her opinion at a subcommittee meeting.

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Well, then why are people saying this is what the Democrats want to do? Is the subcommittee solely Democratic? No Republicans heard this testimony and considered these ideas? Has there been a proposal based on these ideas?

 

I'm confused.

 

I think it's because if the polls are correct we will have a filibuster proof Congress with a Democrat in the White House and it won't matter a bit what Republicans want.

Melissa

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Thanks. You really don't need to keep looking, but I appreciate what you've already done. I was just curious in general if this was part of a larger Dem plan or if it was simply someone testifying her opinion at a subcommittee meeting.

 

According the article that Jean posted:

 

"This [plan] certainly is intriguing," said Mike DeCesare, press secretary for Mr. McDermott.

"That is part of the discussion," he said.

While Mr. Miller stopped short of calling for Ms. Ghilarducci's plan at the hearing last week, he was clearly against continuing tax breaks as they currently exist.

 

Now, I wouldn't presume that his press secretary speaks for Rep. Miller--at least, I personally hope not, in this case.

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(Side digression. RANT! WRONG! WRONG! WRONG! No, you have not invested any money into subsidizing this activity! It's not a subsidy! You've invested nothing! AAAAAARRRRRGGGGGGGGGHHHHHHH!!!!!!!!!!!)

 

Ahem.

 

So, the taxes on these monies are simply *deferred* until they are withdrawn, correct?

 

 

 

But at any rate, Pam, what do you think of the ideas that were floated around at this meeting?

 

I'll have to read more. It terrifies me that we're in such a situation where these proposals are being made in the first place. It terrifies me when a proposal is entertained that would make the federal government the owner of people's houses via buying bad mortgages.

 

Anyway, I'm still reading. :001_huh:

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Here ya go!

 

Subcommitte Members

 

The majority of them are Democrats, but there are Republicans too, and you can see the list. Only Democrats have been quoted in the news stories, as being in favor of the ideas. So it will be very interesting to see what the Republican members have to say.

 

Me, I don't care who it is. Republican or Democrat, they're wrong, IMO, and I want anyone who is considering these ideas to be fired.

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So, the taxes on these monies are simply *deferred* until they are withdrawn, correct?

 

 

Correct. And that's NOT a subsidy. That's a deferment of taxes. Big difference.

 

And as far as turning this whole mandated saving project over to the Social Security Administration goes...Wha-?! Is she NUTS? Has anyone looked at the state of Social Security lately?! And someone thinks that we should start up a whole NEW program under the SSA and pump mandated worker retirement savings into it and away from 401Ks? Because that's going to be a more successful use of the "nation's dollar"? That's...let me see, how do I put this kindly...wishful thinking.

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Here ya go!

 

Subcommitte Members

 

The majority of them are Democrats, but there are Republicans too, and you can see the list. Only Democrats have been quoted in the news stories, as being in favor of the ideas. So it will be very interesting to see what the Republican members have to say.

 

Me, I don't care who it is. Republican or Democrat, they're wrong, IMO, and I want anyone who is considering these ideas to be fired.

 

Thanks, Ms. Stephanie. On the one hand, I completely agree with you. On the other hand, I do want my elected representatives to *consider* ideas. I want them to eventually throw out the crazy-assed ones, but I have (maybe naive) visions of all ideas being welcomed to the table for debate and consideration, with the strongest, most worthy ideas prevailing.

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NOT TAXING the 401k money IS NOT A SUBSIDY!!!!!!!!!!!

 

(Sorry for the yelling. Can't help it.)

 

Yell away, Mama Lynx, maybe someone will hear you.

 

There are many idiotic notions being thrown around lately. It is scary, because it's hard to tell sometimes whether the person speaking really is this uninformed about economics and taxes or whether it's some kind of politically motivated (dishonest) spin.

 

Look at the bailout. Despite what's been mentioned above, at the height of the crisis, the Democratic leadership in Congress was very aggressively shoving off the whole responsibility on Bush and Republicans. They really are hoping that we weren't paying attention or won't research their involvement and leadership in the 90s and beyond that was key to the current mess. There is definitely blame to go around, but the Democrats in Congress had a major role.

 

And now they want to take over our retirement accounts?? The audacity is alarming.

 

Wondering if more folks will be burying their money in tin cans in the back yard again....

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Maybe. I'm hopeful.though, that stupidity won't rule the day however this election turns out.

 

You are much more of an optimist than I. I think we're in for a long, hard, stupid ride, no matter who wins.

 

But hey! Now it's time to shove the little dears into their costumes so that we can go get us a pre-Halloween sugar rush :D

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Thanks, Ms. Stephanie. On the one hand, I completely agree with you. On the other hand, I do want my elected representatives to *consider* ideas. I want them to eventually throw out the crazy-assed ones, but I have (maybe naive) visions of all ideas being welcomed to the table for debate and consideration, with the strongest, most worthy ideas prevailing.

 

Bless your heart, Pam. I'm with you: I want everyone to have a seat at the table. But what we need are people like YOU prevailing at the table, dear, and not the folks who say, "Yo! That's such a great idea that it deserves its own governmental agency: the Crazy-Ass Administration!"

 

Get out and vote these crazy asses out of office, y'all.

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Right. The taxes are deferred until the money is withdrawn. We put the money in out of our pre-tax salary, deferring the taxes. That encourages people to save. It's a good system. I don't see why we should break it, to fix what the government's done wrong.

 

You're right. It's been a very successful savings plan for many Americans. When my folks owned a small business they had great participation in this. It made my parents very happy to see this because it's in an area of the country that's not rich, and they could see it helping their employees years from now.

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You are much more of an optimist than I. I think we're in for a long, hard, stupid ride, no matter who wins.

 

But hey! Now it's time to shove the little dears into their costumes so that we can go get us a pre-Halloween sugar rush :D

 

My little one has been wearing her princess costume (last year's 50 cent costume dress from the thrift store and the tiara that used to belong to her big sister) since she woke up this morning. She's merely awaiting the signal to get her shoes on for trunk or treat.

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My little one has been wearing her princess costume (last year's 50 cent costume dress from the thrift store and the tiara that used to belong to her big sister) since she woke up this morning. She's merely awaiting the signal to get her shoes on for trunk or treat.

 

Cute! What's trunk or treat?

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Thanks. You really don't need to keep looking, but I appreciate what you've already done. I was just curious in general if this was part of a larger Dem plan or if it was simply someone testifying her opinion at a subcommittee meeting.

 

It's okay. I've been meaning to look into this subcommittee anyway, and you just prompted me to do it now. You're right to call attention to the way it's being reported, as well - EVERY news source I've found reports it as "House Democrats ..." Why?

 

There's just so much fear about the government and money right now. It is easy to fear that a hearing like this underlies a bigger plan. ATM, it doesn't seem like it would be that big of a jump, what with Barney Frank making statements like we can recover some of this money we've lost now by taxing more later (eh? Um ... you don't *recover* losses by taking completely unconnected money from other people.)

 

Fed up with all of them.

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http://www.sharedprosperity.org/bp204.html I thought it might be interesting to read the actual proposal as opposed to the cliffs notes version that is likely a distortion in some way. I read it through and am uncertain this would be the cure all it purports to be. However, there is far more reason to consider the idea when you consider the reasons behind it...Google GM at WSJ and it is clear that something should be done.

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Cute! What's trunk or treat?

 

It's a thing going on at the church we're attending. We bring our car and open the trunk -- decorated if we want, and kids go car to car and get candy.

 

Sort of a safer trick or treat, I guess. I've never done this before, so I don't know much about it except that now we don't have to go out on Halloween night.

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http://www.sharedprosperity.org/bp204.html I thought it might be interesting to read the actual proposal as opposed to the cliffs notes version that is likely a distortion in some way. I read it through and am uncertain this would be the cure all it purports to be. However, there is far more reason to consider the idea when you consider the reasons behind it...Google GM at WSJ and it is clear that something should be done.

 

Thank you! More to read...

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