Wednesday, October 31, 2007

ASPIRE Act Doesn't Inspire Me Much

Having devoted at least a good twenty minutes of my life to painstaking consideration of the ideas behind the ASPIRE Act (linkage below), I feel at least somewhat qualified to ask three cutting-edge questions:

  • How are we gonna pay for this, exactly?

  • Is it even remotely possible for our government to not screw something like this up?

  • Tell me again how throwing $500 or $1000 at newborns promotes financial literacy?

  • Did I mention: How are we paying for this?

"But wait!" you say. "What the heck is the ASPIRE Act, and why are you writing about it instead of boobs?"

I hadn't heard much about ASPIRE, either — the savings Act, not the credit card — at least not until I perused the November issue of Money magazine. In that particular mag (page 32) is an interview with Michael Sherraden, founder of Washington University's Center for Social Development. He's also a Big Gun behind the proposed U.S. adoption of tax-advantaged savings accounts for kids.

Loosely termed "401(k)s for kids," these accounts pack a punch — although I'm not entirely sure who's giving the punch and who's receiving it.

Here's the gist: If the program becomes law, then every child receives a tax-advantaged account at birth — an account oh-so-lovingly stocked with anywhere from $500 to $1k, courtesy of Uncle Sam. The point? Why, to promote saving, of course. (Which, admittedly, this country sucks at.)

There are lots of knobs and switches to play with here, of course. In theory, the account funds are untouchable until the kid reaches 18 years of age, at which time they can be used for higher education. Sometime after that — age 25, let's say — the account funds could go toward home ownership. From the links below:

No withdrawals can be made until the accountholder reaches the age of 18. Between the ages of 18 and 25 the only allowed use of the funds will be for post-secondary education with distributions being made directly to post-secondary education providers. After reaching the age of 25, homeownership and retirement security will be the additional allowed uses.

More details reside at: ASPIRE Act Summary Children's Savings Accounts

You might think that a guy like me — a dude who's all about money and saving and personal finance — would be absolutely gung-ho on something like the ASPIRE Act.

But I'm not.

And here's why: I want to see how exactly it is that Uncle Sam's cutting of $500 checks to babies not long after mom's epidural has worn off ... how exactly does that really promote financial literacy? Because "promoting financial literacy" seems to be a widely-trumpeted reason behind all this.

Whatever. I don't buy it.

We can't be bothered to implement decent personal-finance courses in schools, but handing out restricted-use cash to kids at birth, along with doling out some tax advantages — this is going to win the battle?

Could such accounts turn out to be a useful tool? Sure. In fact, I'd argue that first-person management of actual, in-hand money is infinitely more educational than having someone tell you what to do with something you don't have. But show me where the education is in all this. Show me that first.

But our national savings rate is horrific. Surely ASPIRE would boost that?

I suspect it would ... marginally. It's forced saving, after all. (At the outset, anyway.)

But I'm much less concerned with a country's reported "savings rate" than I am with how that country approaches the idea of savings altogether. In a cultural context, I mean, we Americans pretty much take a wizz on saving. And we do it every chance we get.

I guess that, in the end, I want ASPIRE (or whatever comes of this idea) to be more than just another bureaucratic redistribution of money whose real-world outcome amounts to diddly-squat.

If policymakers can pull that off — and boy, does Cynical Me have his doubts — then I say, Go for it.

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— Posted by Michael @ 9:27 AM


When I first heard Hillary Clinton's $5000 "baby bond" proposal, which seems similar to the ASPIRE concept, all I could think of is how frequently food stamp recipients trade their benefits for a lesser amount of CASH. Someone is probably already dreaming up a way to game the forced savings system, and most recipients of a "free" savings bond or account would gladly trade it for cash equal to a small percentage of the face value of the bond/account. What a crock!


Let me ask this: can I sell my child's right to their Aspire account in some market (legal or illegal)?

Uh-oh.... methinks your suspicions have much merit!


The cynic in me feels the same way, having worked (in my younger days) several years in a position that allowed me to see how the welfare system can be so severely abused.

Where there's a will...


Didn't we used to do this with savings bond? People related the the children actually gave them as presents. This is just more of the same robbing me to give it to someone else.


The ASPIRE act wouldn't solve everything but the manipulation of welfare and food stamps is no different than hedge fund workers avoiding taxes though starting their own foundations and that has a much larger impact on our tax revenues and budget spending. Besides to even get food stamps you must have no less than 1,500 dollars in assets for a family of four 3,000 if that includes a sick or elderly person. Same with welfare if you collect above or buy a car on payment plan you lose your benefits. So I hardly think this is the biggest problem with ASPIRE. The managing of the accounds is certinly a concern but then federal school loans seem to doled out consistently I got mine ok. It would be funded the same way social security certin retirement accounts and everything else is run through national savings managed by the Treasury for the first 18 years national savings would grow incredibly since ASPIRE is for every kid no matter the income the parents, non-profits, and the government nation would all be funnling money into our economy sounds like a good start to me...

Anonymous Anonymous
, at 8:53 AM, April 30, 2008  
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