PhillyDeals: Bogle has a message for Senate Finance Committee

John Bogle, founder of Vanguard Group, the $3 trillion-asset, Malvern-based leader of the mutual fund industry, is due in Washington on Tuesday to lecture the Senate Finance Committee on what ought to be done to prevent retired Americans from ending up in their kids' closets and garages or public shelters, now that most big companies no longer offer guaranteed pensions.

Some of Bogle's suggestions:

Save Social Security by delaying retirement until age 69; boost benefits based on inflation, not wage increases; impose the Social Security tax to higher wages; and limit payouts to rich retirees.

Force employers and unions to make "disruptive and painful" additional payments to the nation's surviving (and mostly underfunded) traditional pension plans, if they want to keep them.

Make it harder for IRA and 401(k) savers, who mostly "lack the knowledge and understanding of the principles of sound investing," to cash out or borrow their savings, or to transfer their accounts to "Wall Street's salesmen," once they are invested.

Bogle predicts his testimony will provoke "enormous resistance from lobbyists for mutual fund managers and industry associations," and mentions by name the Investment Companies' Institute - the mutual fund industry group - whose chief economist, Brian Reid, is scheduled to testify right after Bogle.

Bogle adds that the mutual fund industry would do better to structure itself like Vanguard, with its index funds and low fees.

Vanguard's structure has lately come under fire from an unexpected source: its own former associate counsel, David Danon, who filed a whistle-blower lawsuit that became public in July that alleges the company has used its unusual structure to "illegally" avoid federal income taxes.

Vanguard denies any wrongdoing and is contesting the suit.

A hearing on a New York state lawsuit Danon filed against Vanguard was postponed from Friday to an as-yet-unscheduled date, by agreement of both sides.

Danon has a new lawyer: He's now represented by Stephen Sorenson, a Delaware County native and partner at California-based Thomas, Alexander & Forrester, which represents plaintiffs in cases against financial corporations. "We like going to trial," Sorenson told me.

Rich Americans are getting richer, others aren't, and that's making it tougher for states to fund their budgets, writes Gabriel J. Petek, San Francisco-based primary credit analyst for Standard & Poor's Rating Services.

Republican-run states like Texas and Florida, which tend to rely more on sales taxes, have seen revenues stagnate in recent years. Poor and middle-income people can't afford to buy more stuff; rich people are investing their extra cash, often out of state.

Meanwhile, Democratic-run states like California and New York, which rely more on income taxes, have been able to collect a higher proportion of rich people's rising incomes. But income-tax returns plunged with the stock market after 2008, a warning that soaking the rich is harder in rough economic times, when states need money most.