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Feds Use Retirement Funds To Finance Spending

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The company you work for is running into some financial woes and needs a quick loan, so it dips into your 401(k) and your pension funds and borrows a few million dollars but it promises to you pay you back. Sound shady? That’s exactly what’s going on right now. The Treasury Department has started to take money out of the Civil Service Retirement and Disability Fund because we’re closing in on the national debt limit of $8.2 trillion. While they promise to pay it back, with interest, this strikes me as a serious mistake of funds. Sure, the government won’t go bankrupt and the money will be repaid but on principle it sounds terrible.

This has happened in the past and no one has liked it at all. From the Washington Post,

Colleen M. Kelley , president of the National Treasury Employees Union, said last month that federal employees should not have their pension accounts “used as a rainy day fund. . . . No private-sector employer would ever be allowed to do this.”

What’s the most puzzling is that lawmakers don’t seem to have a problem just raising the debt ceiling every time we hit it, so why bother with the charade and just do it already? We’re not going to address the underlying problem, the huge trade deficit, so we might as well not do one bad thing (borrowing from a retirement fund) in order to pretend we’re not going about business as usual with respect to the soaring debt.

{ 11 comments, please add your thoughts now! }

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11 Responses to “Feds Use Retirement Funds To Finance Spending”

  1. CK says:

    They’ve been practicing this “borrowing” with Social Security receipts for years.

  2. jim says:

    And from what I hear, they’re track record of paying it back is even weaker with SS.

  3. Bald Man says:

    Well, as someone who works in the retirement plan industry, I can tell you that individuals have no problem dipping into their accounts for a rainy day (loans, “hardships,” in-services, etc.) Don’t like the government doing it. Companies can’t (legally) do it. But, if participants are doing it, then how much of a stink do we have a right to make?

  4. CK says:

    I’m not doing it and won’t so I feel free to be rather stinky.

  5. jim says:

    If I want to dip into my retirement then that’s my choice, but you shouldn’t be allowed to dip into my retirement, even if you do plan on paying it back.

  6. Nick says:

    Heh, maybe we’ll start seeing loan requests from the Treasury on Prosper.com soon.

  7. think says:

    They are dipping in because if they didn’t we would have surpassed the debt ceiling and the social security checks and various other debts would cease being paid. Not to mention defaulting on our bonds which would be a catastrophe.

    Why doesn’t congress pass the bill to increase the debt ceiling? The party out of power wants to use it as leverage and are holding it up. Is anyone surprised? This is politics as usual.

  8. Anonymous says:

    The trade deficit is not the reason we have to raise the debt ceiling, nor is it really a problem.

  9. jim says:

    I miswrote, the reason for the huge debts isn’t because of a trade imbalance, it’s because of government spending (duh) but the trade deficit is still a problem. It’s a problem because there is an outflow of money and the US has to borrow more money to finance the trade deficit, which in the future will make loans for the US more expensive. The interest rates on US debt is so low because China keeps gobbling it up so they don’t feel so bad about not re-evaluating their currency. This is a year old article that might be worth a read if you have the time.

  10. Bald Man says:

    jim,
    My point is to say that this is yet another symptom of our national financial mismanagment. As individuals, we stink; as a government, we stink; as corporations, we stink. I know this is a generalisation, but… in general, it holds true.

  11. jim says:

    Bald Man: While that may be true, I’d like the opportunity mismanage my own funds instead of letting someone else mismanage it for me. :)


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