Is the Bush administration really as bankrupt of ideas as its perennial budget proposals make it seem? Or is it, instead, like a child who feels that if you keep pushing and pushing the same desire long enough then eventually your parents will throw up their hands and give in?
The rub is that not only does the administration keep resurrecting ideas that have been shot down before, but the ideas themselves are just plain, flat-out terrible and misguided.
From the administration’s proposals, one would be hard-pressed to recognize the fact that millions of people who will be retiring in the next decade or so are woefully unprepared for this stage of their life in terms of what they have saved, and thus, what they will have to live on.
The administration’s response? You guessed it, the same old chestnut that has been toted out for several years now: the Lifetime Savings Account. This would allow individuals, no matter what age or income, to contribute $2,000 a year and make penalty-free withdrawals at any time, with no holding period. The contributions would not be tax-deductible, but the earnings would accumulate tax-free, and distributions would also be tax-free.
This idea, which fortunately will not have as many lives as a cat because the administration will only run for 8 years, has rightly been greeted by blasts from all corners of the life insurance business since it made its sorry first appearance.
This time around, in response to the proposal’s being included in the President’s 2008 fiscal year budget, American Council of Life Insurers President Frank Keating said that when “millions of Americans are preparing inadequately for retirement, providing more disincentives to long-term savings represents a misguided policy.”
Similarly, a spokesman for the National Association of Insurance and Financial Advisors asserted: “NAIFA said it last year and the year before that LSAs are a prescription for lifetime spending instead of lifetime savings. There is little or no incentive to save for the long term with LSAs…Annuities and permanent life insurance provide the financial security needed for the older aged and their families and businesses. LSAs do not.”
In another area, we haven’t heard much about private accounts in Social Security lately, most likely because the President was clobbered pretty badly when this lead balloon was first floated and then sank. But you know it’s there lurking.