Things That Make You Go Wow!

Every once in a while, a legislative body comes up with what is actually a good idea, something that will benefit someone other than the wealthy 1%.  The California state legislature did just that, and Michael Hiltzig took a look at it in his column earlier in the week.  The state will be putting in place a special program for low income workers to save money for their retirement.  It's no grandiose program, but it hopefully prove to be a useful supplement to Social Security.

In September, the state launched a plan to enable these workers to put aside about 3% of their wages a year for retirement. As enacted by the Legislature and signed by Gov. Jerry Brown, the program's goals would be modest indeed.

The best thing about the plan is that it would allow workers to build up retirement stakes at low cost and low risk; their contributions would be pooled with other enrollees' for the purpose of making investments, which would cut down on fees. Workers would be signed up automatically, though they could opt out at any time. They'd be protected against the loss of their contributions and guaranteed a modest investment gain — say about 3% over inflation. When they retire, their nest eggs would be turned into annuities designed to last to the end of their lives, presumably at a conversion cost lower than they might incur in the commercial annuity market.

There would be no cost to state taxpayers. Employers with five or more workers would be required to offer the plan to their workforce and to allow contributions to be withheld through their payroll systems, as they do for taxes. They'd be free of any other legal or administrative burdens.

It's a great deal. It's also necessary, given the decades-long assault on employer-sponsored defined-benefit pensions, which were once an important pillar of retirement security for average Americans. "This could be a real model for the nation," Karen Friedman, policy director at the Pension Rights Center in Washington, told me.   [Emphasis added]

Unfortunately, there will be a substantial delay in implementing the program:

 But it's going to take at least two more years to get off the ground, which is ridiculous. That's chiefly because the legislation requires that a feasibility study be done first to determine the demand for such a plan and the best way to avoid sticking taxpayers with the costs of an investment guarantee, and a few other details. The kicker is that the feasibility study has to be financed from privately raised funds, and that takes time.   [Emphasis added]

In other words, to get the proposed bill passed and signed off by the governor the sponsors had to include language of delay.  While a feasibility study isn't a bad idea, having to raise hundreds of thousands of dollars from the private sector to get that done shows that even California Democrats can be foolish.

Still, it's an idea that shows thinking outside the box and might inspire other states to take a look at such an option.  At this point we can't count on the DC folks to be looking out for our interests.