Big Brother: How the Obama Budget Helps Ordinary Savers (at Some Risk) The newly released White House budget addresses the savings needs of ordinary Americans in a big-brother kind of way. But it does little to address our nation’s overall financial illiteracy. In 244 pages, the Obama budget makes not a single mention of “financial education” or “financial literacy.” The budget does offer measures to beef up math education and help students finish college, both of which are linked to smarter personal money management. Still, when it comes to things like mortgages and retirement saving, this president favors the hand of big brother over initiatives that would help people help themselves. To be fair, the president has embraced financial education at a certain level. We have a formal national strategy for financial literacy and a couple high-level commissions coordinating private and public sector financial education efforts. These groups have done a great job developing helpful consumer websites like moneyasyougrow.org and mymoney.gov. But this work is nowhere near as high profile as that of the watchdog Consumer Financial Protection Bureau, which lords over financial institutions. The Obama budget would help ordinary Americans save by making tax-favored retirement accounts more widely available and automatic. Roughly half of American workers have no workplace retirement plan; only one in 10 who are eligible to contribute to an Individual Retirement Account do so. To fill this gap, the budget would automatically enroll workers without employer-based plans in IRAs through payroll deductions. These workers would be free to opt out. But most in such plans do not. Some would be eligible for a saver’s tax credit, further boosting what they are able to put away. Small employers would be eligible for tax credits to defray any administrative costs. The budget helps clarify the extent to which the White House sees tax-favored accounts as a tool for middle and lower income groups. As reported here, the budget would cap the amount anyone can save in tax-advantaged accounts at around $3 million. “Under current rules, some wealthy individuals are able to accumulate many millions of dollars in these accounts, substantially
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