Using 401(k) Plans for Fiscal Stimulus
Venture capitalist-blogger John Ellis offers up an original fiscal stimulus plan:
Well, it's not mine, actually. It's the brainchild of one Leonard Yablon, my neighbor and friend and the former CFO of Forbes. And it goes like this:
1. Allow individual 401K withdrawals of $12,000 for the next 100 days.
2. Individual withdrawals up to $12,000 will be tax free.
3. The result should be an immediate infusion of $120-$180 billion into the economy.
4. Which should stabilize the markets. There are other plans out there. But the Yablon Plan seems the easiest to get done fast.
Tags: economy | recession | 401(k) | economic stimulus
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I don't think that will work very well...
Interesting. Here are my problems with that:
1. I'm rich (well relatively -- I have at least some savings). I'll take the opportunity to take money out of my 401k tax-free, and put it into a taxable savings account. I'll do the same with my wives. That gives me $24K of tax-free money! I won't spend any of it, I'll plan on using it in the future for early retirement.
2. Poor people don't have 401k plans. The people who will spend the money won't have access to it.
3. Let's say 50M people each take $12,000 out of their respective 401ks. That giant whooshing sound is $600 billion of capitalization being removed from the stock market. All at once. Obviously that's a simplification, but you get the idea. Remind me how that *stabilizes* the market?
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