Who Builds Obstacles to Real Stimulus?

Tibor R. Machan

Where I work we have a retirement plan. It comes with the job so once you get your employment you are also part of the system.

Turns out that the accounts set up can contain quite a lot of cash. However, even if one is over the age of 65, even 70, the plan does not permit one to make any cash withdrawals if one is still working full time. One is able to take out loans but these, of course, need to be paid back in monthly payments, so they offer little help with one’s expenses in bad times like ours.

Anyway, what is most interesting is that freeing up some of the retirement funds--say about 15 or 20 %--could make it possible for many of those who work at such places to inject substantial funds into the economy by paying off a mortgage, making improvements on one’s home, purchasing an automobile, taking a vacation or whatever. This is just what the current administration in Washington aims to achieve with money printed or borrowed, i.e., with non-productive economic stimulus.

I haven’t got the figures but I bet that the change of such plans at various companies, universities, hospitals and so forth, so that participants could withdraw some funds and use them to make purchases of various kinds, could amount to a pretty penny! Might even help jump start a dormant system!

When one looks into why these plans do not permit any cash withdrawals, at first it appears that the rule is made by the employers and changing them would require some procedures that a single employee is rarely set up to carry through but a group of them might manage. With some tenacity they could. But a little more investigation shows that it is useless to appeal to the employer. It is certain Department of Labor regulations that in fact coerce employers to disallow such withdrawals by working employees.

In particular, Chapter 4 (Payment of Benefits) of the Employee Retirement Income Security Act of 1974 (ERISA) “sets standards for most employer and union sponsored plans in private industry and imposes responsibilities on those running the plan.” Aha. I was almost convinced that my employer experienced a fit of paternalism at some point and set up the retirement plan in a way that no cash withdrawals are possible if one is still working full time. (Never mind now whether such withdrawals might be wise or not--one size does not fit all in these as in many other cases.) But it turns out that my employer’s hands are tied by federal law.

Talk about government regulation that imposes severe restrictions on citizens regarding how they may use their own resources. That, of course, is the idea behind social security--coercing us all to “save” for our old age! Never mind, once again, that different folks could well use different strokes here, as elsewhere.

It is odd that at this time, when Washington is desperate for some genuine, bona fide economic stimulus, real funds that make it possible for citizens to go to market and generate commerce, including, of course, employment, that very same Washington is prohibiting the use of funds for just that purpose. Instead, it promotes using artificial funds, money printed and borrowed, with which to engage in a Keynesian pseudo-stimulus, with its bizarre device of the multiplier, the something from nothing idea that injecting such phony funds into the market will produce multiples of those funds--as if the law of the conservation of mass and energy had been overturned.

It is sometimes useful to check out the obstacles to coping effectively with some of life’s challenges. It may appear that they are placed there by corporations, businesses, and other economic institutions and one might actually be able to have a chance of removing them by persuading the people at these institutions to change their minds. But, no, it is often the federal government--in this case the Department of Labor via ERISA--that renders it impossible to make adjustments that could help citizens to manage their affairs and, also, downturns in the economy.