It’s bad enough that the poor decisions of Democrats and Republicans over the years have virtually guaranteed that those of us too young to remember the Carter years will never see a penny of the billions of dollars we have paid into the Social Security system. It’s also bad enough that we have a political system in which the two major parties are petrified of pursuing true reforms to this system, after President Bush’s second term push for reform was declared dead on arrival in 2005, mainly for its suggestion that we start to think about privatizing elements of the program for younger workers.
Those people who are savvy enough in personal finance have already figured out that they cannot rely on Social Security (in its current form, at least) as a retirement benefit and have started to plan accordingly. However, many people–especially the poor–lack the monetary means or financial education to figure out how to invest for retirement on their own. To them, a group that numbers in the tens of millions, retirement is a far-distant and lofty goal, seemingly well out of reach when trying to figure out how to pay for groceries, a bus pass or the electric bill.
With all the good intentions (we hope) of any liberal do-gooder, President Obama has proposed a solution to the problem of how the poor should plan for retirement. In his most recent State of the Union address, there was no bold proposal for Social Security reform or laundry list of job-creating ideas that would spur the economy and lead to economic growth and the creation of millions of good paying jobs. It’s awfully hard to save for retirement if you’re not working, which is a basic personal finance lesson that seems to be lost on the man who historians and journalists proclaimed to be the smartest man ever elected President of the United States.
No, President Obama has instead shunned the bold solution for yet another cleverly-acronymed government program that is an excellent garnish to the New Deal “alphabet soup” of programs enacted in the 1930s. Rest assured, working class stiffs, “myRA” is here to make sure you get that condo in Boca and all the river cruises down the Mississippi you could possibly ever dream of. All of this on… a 1.5% return per year.
President Obama’s solution to help the working class poor all the way up to any household earning less than $191,000 per year to save for retirement is, according to CNN Money, a government administered IRA style account which invests solely in government-backed savings bonds. It seems harmless, innocuous, and maybe even the sort of “common sense” idea that Republicans could get behind. Like most other programs of this administration, the devil lies in the details. It’s promised return rate barely keeps up with inflation, actually causing investors to lose money relative to the value of the dollar when they put it in the account.
The myRA program provides a low investment threshold, taking only $25 to open an account, and protects people who probably shouldn’t be speculating in the market in the first place against the variations of the stock market by placing all of their money in the Government Securities Investment Fund. For this security, investors are rewarded with a measly 1.5% return (2012) and an average yearly return since inception of 5.54% (1987-2012). As a point of reference, the average return of the S&P 500 from 1987-2011 was 10.5%. Using the “Rule of 72,” which simplifies the compounding of interest and helps figure out how many years it would take to double your money simply by dividing your return by 72, it’s clear to see that myRA participants will have to trudge a long road to get to Boca.
myRa represents another false promise made to the poor. No one will ever find retirement security investing solely in government savings bonds. Maybe, perhaps, the president intends this program to be simply a part of the retirement plan for the average Joe the Plumber. Beyond that concession, it is still important to look beyond the simple characterizations of this program and to dig deep, past the skin and flesh of feel-good politics to get to the marrow of deceit that inhabits the core of Barack Obama’s presidency.
Buried under the glad-handed promises of President Obama is a striking condescension that this program holds for the poor and working classes. This obviously runs contrary to the prevailing media convention that the Democrat Party is the party of the “little man,” but like so many other promises made by proponents of big government and the bureaucratic plans they peddle, the myRA program lures its targets in with a false sense of security. “Give us your money,” says myRA, “for you’re not smart enough to invest on your own. You can’t really afford to risk it with those evil corporatists and one-percenters on Wall Street, either. Trust us, we’re the government.”
Instead of creating yet another avenue for government to control capital in our economy, why didn’t the president use the bully pulpit of this office to encourage the creation of lower investment threshold funds in the private market? Why not give working class people the shot at investing in mutual funds through their IRAs that could provide a healthy 6 or 7% return on their investment? Why not trust the workers to decide how to invest on their own? The conservative writer in me can answer this series of questions with any number of tried-and-true partisan, pre-canned responses.
However, there is a looming and somewhat sinister answer to the question that the emerging libertarian in me is begging to provide.
A small detail of the myRA program requires investors to participate in their company’s direct deposit program. I cannot help but wonder if myRA is just another method for an already overbearing and intrusive government to collect our private data, and have a means by which to provide this data to whichever office at the IRS is in charge of enforcing the penalty provisions of the Affordable Care Act. While the ACA currently states that the IRS cannot issue a Notice of Lien against your wages, is anyone willing to take the chance that by the stroke of a pen the president won’t extra-constitutionally change that provision?
Here’s the real message: before heading over yet another cliff that the ancient glaciers of American class-warfare politics carved out, shouldn’t us lemmings think twice about another “help the poor, working, and middle classes” program that seems harmless? Let’s not let myRA become yet another well-intentioned government program that doesn’t really help anybody and simply serves as yet another cobblestone on the road to serfdom.
I’d personally rather the president worry about his own pending retirement, which will be here much sooner than mine.
Kyle Sabo | Hunter College | @kps427