Washington’s hubris never ceases to amaze me. For whatever reason, lawmakers always think they’re better decision makers than the typical citizen — despite so much evidence to the contrary.
Take the subject of retirement planning.
As I point out in my just-updated video — The Death of Social Security — politicians have already run our nation’s current retirement system into the ground.
Yet rather than worrying about the mess they’ve made, they are talking about creating MORE government-mandated retirement systems!
One of those is the “Automatic IRA.”
The idea comes from David John of the Heritage Foundation. He unveiled it back in 2006, and it has since been proposed to Congress a number of times:
In the Senate, the latest iteration was introduced by Democratic Senators John Kerry and Jeff Bingaman in September 2011 …
In the House, Democratic Representative Richard Neal (Mass.) most recently proposed it in February 2012 …
And most notably, President Obama endorsed the idea in his budget for fiscal 2013.
The basic gist is that businesses with 10 or more employees would be required to start funding a new form of individual retirement account. While businesses that already have retirement plans would be exempt, it’s estimated the legislation would affect about 40 percent of the U.S. workforce.
Employees would be automatically enrolled, though they could then choose to opt out.
What kind of investment choices would be offered?
That’s not clear yet, though Mr. John — the initial creator — has said:
“There could be an R-Bond account at Treasury for first-time savers, but that money would be rolled into private sector accounts once the individual accounts reached a certain size.”
Translation: The Default Option Might Be U.S. Treasuries!
Just think about it: This idea could amount to automatically taking money from 40 percent of the American workforce and putting it into U.S. debt … at a time when Washington’s deficits are ballooning out of control and other investors are growing less interested in buying our bonds.
Is that a mere coincidence? I don’t think so.
Because, sure, you could opt out. And you might easily change the type of investment in your new Automatic IRA, too.
Yet the very reason lawmakers are pushing for these accounts in the first place is because they say most people don’t take intentional actions. So by that same logic, a whole lot of people would just be herded into investing more of their earnings in spendthrift politicians!
Even if this plan really does start with the best of intentions — encouraging more Americans to start saving more for their retirements — I believe additional tax breaks or other incentives would be a far better way to accomplish the goal.
After all, look what’s happened every other time lawmakers have tried to “help” Americans manage their retirements:
And even with systems that are truly segregated for the good of beneficiaries — like state pensions — there have been plenty of examples of mismanagement and broken promises.
So are Automatic IRAs the worst idea Washington can come up with? Not by a long shot.
But it sure would be better if they worried about the messes they’ve already created rather than new ways to protect everyday citizens from themselves.