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Monday, July 25, 2005

Bi-Partisan Support for Add-On Accounts Appears Possible

Given this post, it would be hard for me to object to these proposals to boost national saving:

Retirement Reservations - Low Savings Rate Worries Congress, By Jonathan Weisman, Washington Post: ... Out of the Social Security stalemate ... a separate, bipartisan push is emerging to address an issue that is arguably more pressing: the nation's abysmal savings rate, which most economists see as a broader threat to retirement security.  A final House Ways and Means Committee bill on Social Security remains far off, but potential provisions aimed at bolstering the nation's anemic savings rate are coming into focus.

Many of those initiatives will have bipartisan appeal. House Democrats plan to unveil their own proposals this week to boost national savings, said Rep. Sander M. Levin (Mich.), the ranking Democrat on the Social Security subcommittee. … A savings package, which could move on its own or be wrapped into a bill next year to overhaul the tax code, could have significant economic consequences. ... National savings helps to keep interest rates low and to finance business investments that maintain economic growth. … The centerpiece policy of a new savings package, crafted by Republican tax lobbyist Richard Grafmeyer, is an enhanced tax credit to spur savings among low- and moderate-income workers.  Grafmeyer's plan -- under serious consideration by the Ways and Means Committee -- would expand that participation greatly. Workers earning $50,000 or less would open a savings plan with their employer, a financial institution or even a tax preparer such as H&R Block. Those institutions would then match the deposits -- 50 cents on the dollar up to a maximum annual contribution of $2,000 -- and would receive a federal tax credit to cover the cost. By checking a box on their tax returns, these workers could direct their earned income tax credits or income tax refunds into the new accounts as well, under a plan under committee consideration, said Rep. Jim McCrery (R-La.), chairman of the House Ways and Means subcommittee on Social Security. … Another likely piece of the larger retirement security package being drafted by House Ways and Means Chairman Bill Thomas (R-Calif.) would help employers make enrollment in 401(k) plans automatic unless workers choose to opt out. … Virtually every one of these measures is mirrored by a similar Democratic proposal, said Rep. Rahm Emanuel (D-Ill.), a Ways and Means Committee member who has been pushing savings provisions for months. If Republicans are willing to break them out of a private accounts package, there is little doubt they would be approved overwhelmingly.  "You could make progress on this in a New York minute," Emanuel said. "We're getting very close here." … Proponents of Social Security overhaul have not lost hope. …

The two sides may agree on add-on accounts to boost saving, but the long-run goals of the two sides are very different and there are politics in the background to be wary of.  Keep an eye on this.

    Posted by on Monday, July 25, 2005 at 10:08 AM in Economics, Politics, Social Security | Permalink  TrackBack (0)  Comments (24)

          

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