ASPIRE in Ignorance
Oct 6th, 2009 by Timothy Pancoast
How would you like to get $500 just for being born? That is what ASPIRE or the “America Saving for Personal Investment, Retirement, and Education” act would do if enacted. It would provide every person born in America with a $500 savings account. Sounds great right? How about when you stack that $500 up next to the estimated $38,834.79 average share of the national debt owed by each citizen?
This looks like another attempt by the US government to buy something from its citizens with their own money. I wonder what it is this time? One thing is clear, they would rather have us pay attention to the “free” $500 that they want to give every newborn and ignore the $38,834.79 that they are going to take away from that baby at some point. The estimated $3.25 billion dollar annual price tag for this program certainly isn’t going to help the burden of debt they are placing on our infants.
Sources:
http://finance.yahoo.com/news/Coming-Soon-500-for-Every-usnews-3217986354.html?x=0&.v=1
Some key passages (emphasis mine):
“How would this program work?
The ASPIRE Act would give each child born in the United States (I wonder how that would impact immigration.) a $500 savings account. Recipients could then use that money once they were older to pay for education, a first home, or retirement. Low-income children would receive additional funding, and all participants could add to their accounts over time.”
“Why not just give the money to low-income people who really need it?
Entitlement programs that benefit everyone, such as Social Security and Medicare, tend to enjoy more widespread support and therefore last longer. Programs aimed exclusively at lower-income groups, such as welfare programs, often attract more controversy and receive less political support.
“The important thing is that everybody gets an account,” says Cramer, and that it’s opened automatically so families don’t need to take much action. It would still be a progressive program, he adds, because as the ASPIRE Act is currently written, poorer families would receive additional funding.”
“How would this program be paid for?
Over the first decade of its life, the program would cost around $37.5 billion, and would start at around $3.25 billion per year. Cramer argues that because the money would be invested through the savings account, it would help spur economic growth. Lawmakers sponsoring the bill have said they would pay for it by making other cuts, but the bill doesn’t specify what those cuts would be.”
It is a much better idea to change the Federal Tax code to encourage individual savings before the income tax kicks in.
The Tax Code should be all about savings, growth and investment and then you get revenue.
Mike Protack
I think it is very telling that in the Yahoo! article they state that existing programs to promote savings favor the rich. They even state that, “Other savings systems, such as 529 accounts for college savings, DEPEND ON PARENTS opening the accounts and making deposits.” Therefore they try to push the idea that other methods to stimulate savings are fruitless. They don’t like the idea of children depending on their parents. They would rather have everyone raised with a “healthy” dependence on the government.
You are correct, using the tax code to stimulate savings would be far more fruitful in the long run and result in a real strengthening of the American people.
Actually, at 8% annual return, the baby would break even in their mid 50′s.
Each American’s share of the national debt is about $38,800. That figure won’t dissapear. It will have to be paid. The 50 year break even point that you are suggesting is unrealistic. From the article, in England where they have attempted a similar program they use a diversified stock portfolio, and the national average annual return is around 5%. That shifts the break even point to somewhere after 87 years. Being that it is an investment in the market there is also the risk of loosing money rather than gaining it.
I am still thinking their $500 (which is really my $500) for my $38,800 = no deal.
By the way, why don’t I just pay $500 in taxes now and let the government draw interest? I don’t have to pay another dime for the debt and they end up with the $38,800 they need to pay off the debt in the long run. Right? You know that logic won’t fly with the government so why should it fly with me.
From the article:
“Has this been tried anywhere before?
Yes–in Great Britain. Since September 2002, children born in the United Kingdom have received a $500 savings account, just as the ASPIRE Act would provide in the United States. Recipients can withdraw the money after the age of 18; unlike in the proposed U.S. version, there are no restrictions on how they can spend the money. About one quarter of the recipients add extra money to the account, and, according to calculations by Cramer, most of the accounts go up in value so they are worth over $600. (The money is invested in a diversified portfolio of stocks, much like college savings, or 529, accounts in the United States.) Since the program’s first enrollees are now only 7 years old, it’s too early to say how they will spend the money once they turn 18.”
“Actually, at 8% annual return, the baby would break even in their mid 50’s”
Assuming no taxes on the accruing interest the baby’s nest egg will be $2,000 by age 18 with an 8% return (basic rule of 72 calculation) Now getting an 8% return is much more problematic. One certainly can’t get this rate of return either thru Treasury Certificates nor thru current Bank Cd’s. The only long term 8% return available is thru the Stock Market. A diversified Mutual Fund that is well run could accomplish this goal but of course there is no guarantee.
What is being demonstrated here is the miracle of compound interest which works every time it is tried. However, there is no guarantee that the recipients of this largesse will continue to invest wisely or that the initial grant will be worth more in 18 years to buy what is needed by the recipient. The authors just appear to want to gloss over the details to justify some sort of give away program.
To demonstrate just how well compounding interest works. If Every man woman and child made a donation of just one penny per year to a fund for eliminating the national debt,
The return in 90 years based on the 8% rate cited above, would be $3,072,000,000 for just the first year. Assuming Population growth, the amount would increase every year.
If one increases the per capita contribution to one dollar instead of one penny per year the debt retirement fund could kick out over $300 billion per year.
In short if one is given enough time and a favorable rate of return then any and all end results look attractive. I want to see more from this proposal. If the money is going to the Federal Government then I would expect to see the same type of Ponzi scheme we have with Social Security. In short the Devil is in the details.
BO and his behind-the-scenes puppetmasters, disciples of Alinsky and Marx, want to make as many citizens as possible comfortable with the idea of relying on the government for virtually everything. All aspects of American life must become politicized. This is how it was done in the Soviet Union, China, Cuba and elsewhere.
We are no longer in merely in the traditional political tug-of-war between parties with, at the end, America’s best interests at heart. We are now in a civil war, albeit a cold one, with the very future of a free and sovereign United States at stake. It is, in essence, a battle between Marxism and Constitutional republicanism. It’s that simple, and the sooner traditionalists understand that, the better their chances of retaining a free and independent nation for their heirs.
“Stop the Commie bastards!”