Obama moves to encourage saving

President Barack Obama is tackling the sad state of personal saving through presidential orders, a power he can use without depending on Congress to back him up.
“The fact is, even before this recession hit, the savings rate was essentially zero, while borrowing had risen and credit card debt had increased,” Mr. Obama said in his weekly radio address. “Half of America’s work force doesn’t have access to a retirement plan at work. And fewer than 10 percent of those without workplace retirement plans have one of their own.”
What the recession has emphasized is that because so few U.S. families had been saving on a regular basis, many who lost their jobs or saw their wages cut sharply had no nest egg to fall back on.
Hard times showed those with eyes to see that saving for retirement and emergencies is a prudent thing to do: The personal savings rate has zoomed to 5.6 percent of personal in-come from zero or a negative rate over the past two years.
The president’s initiatives will make saving even easier to do for many wage earners and could turn the recession-prompted change in be-havior into a permanent feature of the American economic scene. As reported in Monday’s New York Times, he is taking four steps based on new behavioral re-search:
“... people are more likely to contribute to a retirement savings account, like an employer-sponsored 401(k) plan, if they are enrolled automatically. Under the new initiative, the Labor Department will publish new guidance for small businesses on how to use automatic enrollment for the simplified plans. It will also encourage em-ployers to institute an automatic ‘step up,’ which increases a person’s saving rate each year or with each raise.
“In a second move, Mr. Obama said the Internal Revenue Service would allow people to check a box on their tax returns and receive their tax refunds in the form of United States savings bonds. ...
“In a third change, the government will make it easier for employees to contribute the money for unused vacation time and overtime to their retirement accounts. ...
“ ... White House officials said the new initiatives would go into effect immediately and come on top of two related proposals that Mr. Obama sent to Congress as part of his budget. One would compel all but the smallest employers to offer retirement savings plans, and the other would expand the saver’s tax credit, which matches a family’s savings up to $1,000 a year.”
Is it a good idea to require workers to save? Yep. Particularly when it can be done by matching savings with a federal tax credit. That teaspoon of sugar will help the medicine go down. And that seed planted will pay big dividends for government as welfare costs shrink decades down the road.
One of government’s roles is to look after the happiness of the citizenry. A more secure retirement for a greater number will be a significant step toward that goal.

— Emerson Lynn, jr.