In his latest economic perspective column, Tax Notes economic consultant Gene Steuerle continues his look at the administration's USA Account proposal. The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. These new saving proposals would help to fill a gap that is not being addressed by either the social security system or the private pension system.
Social security has a base of protection for low-income individuals, but almost no saving.
Conceptually it's easier first to consider USA accounts in abstraction from the political debates of the day. The U.S. retirement system basically rests on two pillars. For the most part, taxes are collected each year and paid out to recipients immediately. Soon, in fact, these systems are scheduled to go into a permanent deficit status, where benefit payments are in excess of taxes paid. The bottom line is that most government programs for the elderly are transfers from younger to older generations and involve little or no saving.