- The Washington Times - Sunday, September 6, 2009

President Obama on Saturday announced an effort to encourage increased retirement savings by American workers, hoping to counter the losses suffered during the economic crisis of the last year.

“This recession has not only led to the loss of jobs, but also the loss of savings,” Mr. Obama said in his weekly video and radio address, noting that Americans have lost about $2 trillion from their retirement accounts because of the economic downturn.

The president, one day after the Labor Department announced unemployment reached 9.7 percent, said “the economy is turning around” but that the U.S. cannot, after its recovery, “go back to an economy based on inflated profits and maxed-out credit cards.”

He said he was proposing “several common-sense changes that will help families put away money for the future.”

The administration plans to make it easier for small businesses to automatically enroll employees into 401(k) programs, a feature that has been shown to benefit younger workers in particular, according to studies by Fidelity Investments. That means instead of making 401(k) plans a benefit that a worker must opt into, small businesses can enroll employees into accounts at the date of hiring unless the worker opts out.

The Internal Revenue Service will change tax forms to allow refunds to be automatically deposited into retirement accounts, and the administration also said it will change rules that forbid most workers from putting pay for unused sick and vacation days into their retirement.

Mr. Obama said the government also will simplify the written rules that govern how workers changing jobs can manage their retirement accounts and 401(k) plans.

But Grant Aldonas, a former undersecretary of commerce in the Bush administration, said that “under the circumstances, there is little to save.”

“Workers are currently caught in a vise between stagnating wages and rising costs for education, health care and energy,” he said. “The incentives Obama has outlined here are unlikely to persuade a consumer to forego groceries and buying the kids new shoes for the coming school year in favor of saving a dollar.”

Sherle R. Schwenninger, director of the economic growth program at the New America Foundation, said that while it is good to make it easier for people to save money, the president’s proposals would have a small impact on the national personal savings rate.

Americans, he said, are already saving more than they did in the past because of the recession.

“People are being forced to save,” Mr. Schwenninger said.

Both Mr. Aldonas and Mr. Schwenninger said that Mr. Obama’s proposals will have a negligible effect, at best, on closing the trade deficit.

“With China, for example, we would have to go some considerable distance to match their savings rate,” Mr. Aldonas said. “These sorts of marginal increases in tax preferences won’t do that. In other words, relative to the Chinese, we are still tilted heavily toward consumption, which means that they are likely to continue exporting to us and we are likely to continue importing from them.”

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