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Life Health > Life Insurance

Here We Go Again

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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.

Why, however, doesn’t the administration come out fighting for an above-the-line deduction for long term care? Or a proposal that would encourage creation of a tax advantage for an annuity for life?

Why is its response to the uninsured crisis in this country so minimal that all it can think about is putting a cap on plans that cost a lot? Or why, in the face of initiatives in so many states to cover children under the Children’s Health Insurance Program, does the 2008 budget proposal say the administration wants to return to covering children in families with income less than twice the federal poverty level?

(The federal poverty level for a family of 4 is $20,650.)

Under this plan, New York would lose $14.6 million a year for the CHIP program, according to The New York Times. Compared to what is being poured each month into the sinkhole in Iraq, it would be laughable that the administration would want to save such a small sum on the backs of children if it weren’t so sad.

All these bad ideas stem from one really terrible idea: shredding the safety net in our society. And this at a time when it’s needed more than ever.

Steve Piontek



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