Mr. President, Let's Share the Wealth -- a response

Mr. President, Let's Share the Wealth

In his column, David Brooks offers a plan to start kids off in the right direction: giving them the ability to save money early on in life in the hopes that later on they will be financially secure. He also claims that his plan would save Social Security at the same time -- not that it really needs to be saved, in the sense that the Administration is telling the public.

His idea, which he admits isn't really his, is that each child born would be given $1000 at birth and a further $500 every year for the next five years from the federal government. The money would be untouchable until retirement and "due to the wonders of compound interest" the retiree would have a next egg of $100,000.

This idea has just been implemented in the United Kingdom, although with some variations. At birth, each child is given £250, with the possibility of getting £500 if the child's parents qualify. Each year, friends and relatives can deposit a maximum of £1200 in total into the child's account. The government will also make a subsequent deposit when the child reaches the age of seven. When the child turns 16, he or she will be given management control of the account and when the child turns 18, he or she will be able to withdraw on the account.

This represents a fundemental change in welfare policy for the British. The name for this new theory of welfare is "progressive universalism" and is based on the idea of moving from a system of benefit dispersal to a system based system to person asset-building.

Frankly, I like the idea. In the UK, and I suspect the US, there is a real problem associated with people simply not saving enough money to cover future expenses, either planned or unplanned. Nearly a third of households in the UK don't have enough savings to live on for a month if a job loss should occur. That means that a family would need to resort to welfare benefits on top of what is called Jobseeker's Allowance (basically, unemployment benefits with a "welfare-to-work" twist). Giving people the chance to save, however that is accomplished, is certain a good idea and will foster good habits in the future.

But good habits are only created when children are taught early on about money and how to save. How that is done, I can't quite say, but certainly the government should be spending a great deal of money developing a scheme to do this. If financial literacy is this poor among adults, the government can't rely on parents to teach their children what they need to know about proper money management.

Because it is universal, everyone with a child gets a piece of the action. This is important. Means tested benefits can be landmines for public opinion. Benefits attached to income and number of dependants have always been a quagmire. People question, "why should poor people be paid for having more kids?" Whether or not the program is effective in keeping families on stable financial footing ends up taking a back seat in the public discourse.

Anyway, those are my thoughts on this issue for now.