At Washington Examiner Karl Polzer makes a plea for new federal programs to enable more people to save for their retirements:
America has a retirement savings system, but it is letting down millions of workers and families who aren’t wealthy. This is a very big problem that will affect everyone.
It’s also an opportunity for Congress to include all Americans in the benefits of our market economy.
Despite the existence of IRAs and 401(k) plans to encourage retirement savings, almost half of Americans have no net assets at all, and little or no retirement savings. Many of them have no money to save and no retirement account to put it in. Unfortunately, the tax benefits of the private retirement system are heavily concentrated among top earners. The failure to include lower-income earners is widening the wealth gap.
I can only speak for my own circumstances but for me the greatest impediments to saving more come in the form of state and local tax increases. My state and local taxes are increasing in double digits every year. Chicago has the highest sales tax in the nation and the pushback on attempts to increase it even farther have been enormous. That’s as it should be considering how regressive sales taxes are.
Illinois pays the highest property taxes in the country and at least in my neighborhood property taxes are increasing well into double digits every year. The likely next governor is running on a platform of increasing the state’s income tax.
And, of course, the present low interest rates impose a further tax on savings, the earnings on which are already being taxed at federal and state levels.
I would think that before new programs are considered federal, state, and local governments might consider removing some of the impediments to saving, many of which stem from their actions.
Maybe Mr. Polzer’s plans are simply a stalking horse for eliminating the Social Security system on which so many Americans depend for retirement income. As I’ve written extensively in the past at present interest rates saving for retirement is meaningless for most of us. To eliminate or curtail the Social Security system more will be necessary than just changing incentives.
If we’re going to keep the mixes state capitalist system that élites insist we can’t do without, then we should establish retirement accounts for every single American with personal and public contributions indexed to inflation. When inflation rises your contribution increases, and when inflation falls the government contribution increases.
It’s a counter-cyclical automatic stabilizer that cools expansion and provides relief during a bust. It also gives individuals some long-term security.
A sort of national 401K isn’t a bad idea but it has all of the problems of state public pension systems on steroids.
At the federal level it would just issue currency into accounts, with the proportion issued dependent on domestic economic factors.
It could but it wouldn’t. That strategy is only used for banks.
BTW at current spending levels we are already doing that to the tune of about 5% of GDP per year or, said another way, faster than GDP is increasing. The federal government’s spending more without taxing more would mean that 5% would increase.
How much credit do you think we can extend to ourselves without it having serious repercussions?
As much as we can produce or import. That’s what the variable component is for, to reduce net spending when productivity isn’t keeping up.
That’s my point. We’ve already bagged our limit.
I don’t think that’s true. Our factories are running at 78% capacity. Up to half of our food is wasted. We can produce much more than we are currently choosing to produce.
Ben,
How would these accounts be structured? Would they earn interest? Could they be invested?
Unless it was walled off somehow from the financial markets I think it would just end up being boosting the financial sector in a bad way.
Just generally, I don’t see how the issue of retirement savings can be solved as long as medical costs are a black hole consuming ever-larger pieces of government, business, and individual income.
Just a note. Capacity utilization numbers are usually measured against nameplate capacity, and are bogus.