Coming Soon: Universal Savings?
Coming Soon: Universal Savings?
Just got off a briefing with OMB Director Pete Orszag. I asked him what part of the budget he was surprised hadn’t gotten more attention. His answer: universal savings. One of the central planks of the whole nudge crowd of behavioral economists is automatic enrollment in 401k’s. Turns out there’s a huge difference between participation rates in pension plans when people are automatically enrolled and when they have to proactively enroll. But as Orszag pointed out, most low wage workers don’t work at firms that even 401k’s, so automatic enrollment doesn’t help them. As part of the new budget proposal, almost every employer would have to automatically enroll every employee in an IRA. Only very small businesses would be exempt. This seems like a smart idea at first blush. And it’s perfect example of the Obama folks’ policy approach.
Some more thoughts on the budget TK.
UPDATE: Ben Smith has more.
