You might think that the people who are most directly responsible for getting our nation $19 trillion in debt would be a bit hesitant to tell the rest of America about the importance of savings. But, then, what are politicians for?
Senators Cory Booker, D-NJ, and Jerry Moran, R-KS, recently put forward a bipartisan plan (bipartisan being a euphemism for a bad idea supported by both sides) that purports to help all those Americans living “paycheck to paycheck.” Dubbed the Refund to Rainy Day Savings Act, it would allow Americans who receive a tax refund to set aside 20 percent of it. The federal government would hold it for six months, after which the taxpayer would get it back with interest.
“Our nations faces a savings crisis,” said Booker. “Families living paycheck to paycheck endure the persistent threat of sudden financial disaster.” Moran warned, “Setting aside enough money each payday can be difficult when dollars are already stretched and existing expenses must be paid.”
It’s tempting to suggest to Sens. Booker and Moran that they investigate a revolutionary new product called a savings account and then follow up by studying a mind-blowing concept known as setting aside a small amount of each paycheck in the savings account. But, alas, that wouldn’t enable the good Senators to take credit for helping people who are living paycheck to paycheck.
And, it is a well-known fact that loads of Americans are living paycheck to paycheck. Things have gotten so bad that a British newspaper discovered a man in the U.S. making over $450,000 annually who can barely make ends meet. The evidence is overwhelming: A Bankrate.com survey found that 76 percent of Americans are living paycheck to paycheck. A MagnifyMoney survey found that 56 percent of people in the U.S. are doing so. And a McKinsey & Company poll showed that 40 percent of Americans are living paycheck to paycheck. Hmmm… or maybe that evidence shows that (1) the methods for researching the concept of paycheck to paycheck are not very rigorous, and (2) “paycheck to paycheck” might not be a sound concept so much as that type of catchy rhetoric politicians use to play us for suckers.
For the sake of argument, let’s assume that people living paycheck to paycheck is a big problem. Would the Booker-Moran plan make it any better? More likely, a moral hazard will develop. People will think that since the government is holding money for them and that money is earning interest, they can engage in even greater consumption. It isn’t hard to see that people will think to themselves, “I can spend some more now, put a little more on the credit card, because I have more money coming from Uncle Sam later this year.” The consumption caused by such thinking could easily offset whatever savings are achieved by the Book-Moran plan. If it exceeds the savings, then the problem the legislation was intended to solve will have been made worse, a common outcome of government programs.
Another common outcome of government programs is they often morph into something different and far more dangerous. While the Booker-Moran plan, if enacted, may never amount to much, it could be used to fulfill the political left’s desire for publicly funded retirement. The left increasingly wants to get control over retirement savings by eliminating 401(k)s and IRAs and replacing them with a government-run pensions. If people get used to the government holding part of their tax return to “increase savings,” perhaps they will be open to the government “investing” part of their tax return for retirement. One thing you can be sure of is it won’t be long before the left starts pushing that idea should Booker-Moran became law, and they’ll hope we won’t notice how well government-funded pensions have worked in places like Illinois and Detroit.
Finally, this proposal is another example of why rank-and-file conservatives don’t trust Congressional Republicans. Most folks on the right would understand if Moran, a nominal conservative, made a compromise deal with a lefty like Booker that manages to roll government back and expand liberty. Rather, he puts forward something that will result in government encroaching on our lives a little more. It’s unfortunate that conservatives in Kansas won’t be mounting a primary challenge to Moran this year.
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