Paul J. Castelli – 4/27/08

This page was last updated on April 27, 2008.

Who is living in the past?; Paul J. Castelli; Beaver County Times; April 27, 2008.

Below is a detailed critique of the subject letter.

“On Wednesday, letter writer Nick Drobac wrote about John McCain living in the past. Judging from the assertions made in the letter, the writer has revised much of the past.

“If we have lost more jobs than we have gained, how can a 5 percent unemployment rate be explained when the population of the United States has grown by more than 100 million people since 1965?

“If the standard of living has declined, how is it that even the poorest families have automobiles, DVD players, large-screen televisions, computers, cable television, etc.?

“He complained about health insurance and pensions. Blame Lyndon Johnson for the inception of Medicare and Medicaid, when the government found it prudent to seize control of a sizeable portion of our GDP and creating the health-care crisis we face today.

“Blame the Democratic Congress for the creation of the 401k plan in 1978, allowing companies to move from pensions to employee-funded retirement plans.”

[RWC] Mr. Castelli was doing OK until this paragraph.

Whether they are defined contribution plans, like 401(k)s, or defined benefit plans, like pensions, they are “employee-funded retirement plans.”

In any case, Mr. Castelli appears to agree with Mr. Drobac that there’s something inferior about 401(k) plans relative to pension plans. Nothing could be further from the truth. While it’s fair to blame Democrats for things like Socialist Security, Medicaid, Medicare, et cetera, the section 401(k) modification of the income tax code (as well as the previously implemented IRA) was actually a good thing.

A pension is a promise by an employer to an employee that he will pay some amount of income to the employee upon retirement. Unfortunately, too many people find that a promise is not a guarantee. Note that Socialist Security benefits are also a promise, not a guarantee.

401(k) plans are completely different. In a basic plan, only the employee contributes to his 401(k). In the two plans in which I participated, the employer also contributed. In any case, the entire contents of the 401(k) immediately belong to the employee, even the employer contributions. Therefore, regardless of what happens to the employer, including bankruptcy, takeover, et cetera, the employer can’t take back your 401(k) assets. Looking at it in adage terms, the 401(k) is the “bird in hand” while the pension is the “two in the bush.” I’ll take the “bird in hand” every time.

“Decreases in federal taxes have never increased the national debt. Three times the marginal tax rates have been lowered, causing three of the longest peacetime periods of economic growth in our history.

“John Kennedy, Ronald Reagan and George W. Bush all knew what anyone with economic sense will tell you: money spent in the private sector is spent better than by the government.

“The U.S. Treasury collected higher than expected revenues in 2007, largely due to the tax cuts of 2001 and 2003. In 1937, Franklin Roosevelt couldn’t understand why the Treasury was collecting less than expected in taxes when he raised the marginal tax rates on the wealthy to 79 percent. Go figure.

“In closing, the Republicans did not reduce national security spending. Reducing the rate of a spending increase in any government program is not cutting funding, no matter what fuzzy math you are trying to use.”

[RWC] Mr. Castelli implies congressional Republicans slowed the rate of growth of national security spending. Unfortunately, Mr. Castelli didn’t provide any data/sources to check. That said, I have a hard time believing Republicans wanted to spend less on national security than Bill Clinton.