Amongst the expected ideologically partisan propaganda trotted out by President Obama during his recent state of the union address was a rather interesting proposal: MyRA. It reveals something we knew and something we didn’t know. We knew the President is so hopelessly ignorant of basic economics that he can’t possibly understand why people are insufficiently saving for retirement. What we didn’t know, however, is how perilously close we are to a federal government implosion (this is actually good news!).
In his address he says, “Let’s do more to help Americans save for retirement. Today, most workers don’t have a pension.” So, his proposal is to create what is essentially a new kind of retirement account (cleverly dubbed “MyRA”) as though a lack of IRA options currently presents a barrier to retirement savings. Please. Saving (for anything) necessitates a deferment of present gratification. That is a hard sell since basic human instinct is to “live for today” (just ask a child to wait to open their presents). As adults we understand that the future is uncertain and therefore saving is prudent, but we never completely shed our preference for present goods versus future goods. So with the deck already stacked against us, is it any wonder that an incentive-distorting program such as Social Security would decrease rather than increase rates of saving? Under the (false) assumption that we are “guaranteed” Social Security for retirement the natural instinct then is to save less. Even if one is still inclined to save in spite of Social Security promises, the ability to do so is made that much more difficult by virtue of Social Security & Medicare’s 8% confiscation of gross income. This of course ignores all the other federal, state and local taxes we pay on top of that. To put it bluntly Mr. President, there just isn’t that much left to save thanks to government interference.
Even setting aside the adulteration of normal incentives, as a retirement option the MyRA is a terrible choice. Given the multiple flavors of privately managed, tax-favored IRA plans already in existence, why exactly do we need a government managed plan? What benefit(s) does this government plan offer the consumer? None. Conversely though it offers one key benefit to the government: instantaneous use of the “invested” funds (please note mechanistic parallel to a Ponzi scheme). The retirement investment market is measured in trillions of dollars and the government would like nothing more than to divert some of that their way. But even beyond the ideological choice of not lending money to a bankrupt regime this investment fails. It is not a real investment. You are simply loaning money to the government. They do not create anything of value from it; they simply consume it (rather inefficiently). On top of that they only promise a paltry 2% return (that doesn’t even keep up with inflation). In order for you to get your money back the government has to pick the pockets of everyone else through taxation and/or inflation. The MyRA program amounts to nothing more than a voluntary (for now) extension of Social Security. Social Security funds are exchanged for treasury notes and immediately spent. MyRA funds too will be exchanged for treasury notes and immediately spent. A MyRA owner and Social Security recipients are left with but a handful of paper treasury notes whose only value is derived from the fact that the US government has the military might to extract those resources out of its citizens in a demographically collapsing Ponzi scheme.
This desperate act is good news though. This penultimate plea to the public to lend them money is the death rattle of a dying, amoral, bankrupt regime. As history has shown, all empires ultimately collapse due to financial, not military, plundering. Death always comes from within, not without.