Seen in the New York Times:
Senator Hillary Rodham Clinton of New York unveiled the second biggest domestic policy idea of her Democratic presidential campaign today, proposing to spend $20 billion to $25 billion a year to create 401(k)-style retirement accounts for all Americans and provide federal matching money of up to $1,000 to middle-income people.
Under the plan, the government would give a dollar-to-dollar match for the first $1,000 saved by Americans who earn up to $60,000 annually. For those who earn $60,000 to $100,000, the government would provide a 50 percent match, or $500 for the first $1,000 saved.[...]
My initial reaction to this was that this is an IRA plus a federal match. I’m OK with the idea of incenting folks to save more, but I’d prefer to see it structured via tax credits or deductions, rather than as an explicit, entitlementesque handout, but I do have to admit that it’d be the same.
Supposedly, the funds for the handouts would come from not fully phasing out the estate tax. I’ll give Hillary credit for trying to demonstrate fiscal responsibility with that statement, but I would be remiss if I didn’t point out that Washington has a bit of a problem with spending money it doesn’t have, and such creative accounting ought to be addressed before…or at least in conjunction with…contemplating new social expenditures.
I’m also a little disappointed that this would seem to add to the alphabet soup we have of tax-advantaged specific-purpose savings mechanisms in this country. One of the challenges for lower and middle income folks who want to use such advantaged plans is the whole process of allocating limited savable funds to specific needs.
I’d much rather see a clean-up of the alphabet soup down into one catch-all tax-advantaged savings plan, for use for retirement expenses, income replacement in the event of unemployment or disability, major medical expenses, education, etc. Let folks of modest means work on attempting to save what they can, and spare them the hassle of a financial planning exercise every time benefits enrollment comes around at work.
And perhaps there is some hope for my dream. Quoting from the same NYT article:
Mrs. Clinton said that Americans could also tap into the savings accounts to buy a home or pay for college, and that she was considering allowing workers to access the account “during tough times, like an illness or accident.â€
It’s a start.