US Communism

[Almighty Colin]

WASHINGTON -- Democrats who have led the charge against creating private accounts within Social Security joined Republicans Thursday to introduce legislation that would give individual investment accounts to every American child.

The bill would set up $500 savings accounts for all children born after Dec. 31, 2006, and those whose families live below the median household income level would be eligible for another $500. Any accumulation in the accounts would be tax-exempt and the government would match contributions made to certain children's accounts.

"It's something that could attract broader support for the overall concepts" of President Bush's plan to revamp Social Security, said Sen. Rick Santorum, R-Pa., one of the bill's chief sponsors and third-ranking Senate Republican. "You've got to keep your legislative options open."

Santorum indicated his preference for a multifaceted approach to increasing national retirement savings, likening children's investment accounts and Social Security investment accounts to legs holding up a stool. But he asserted that "if we're trying to build bipartisan consensus ... this should potentially be on the table."

Rep. Patrick Kennedy of Rhode Island, a Democratic sponsor of the bill, touted the accounts as a cheaper way to promote private saving than making changes to Social Security.

"When you consider the Social Security issue, you're talking about $3 trillion," Kennedy said. "This pales in comparison." The House version of the bill would cost $68 billion over 10 years, he said; the Senate version would cost $38 billion over 10 years, according to a Santorum spokeswoman.

The children must pay back the government's initial $500 contribution before they turn 30, but can transfer the money out of its Treasury-managed portfolio into a Roth IRA or Section 529 post-secondary education plan after they turn 18. Children or their parents could add to the accounts up to a maximum yearly contribution, and the government would match half that amount for low-income kids ($1,000 in the House's version, $500 in the Senate's.)

Children's investment accounts are aimed at reversing a dismal trend in national savings. By mid-2003, net national savings had plummeted to 0.7 percent of the gross domestic product, according to Morgan Stanley chief economist Stephen Roach. Between 1980 and 1994, the Federal Reserve Bank of San Francisco said, the average gross savings rate was 8 percent; between 2000 and 2002, it was 1 percent.

Both Republican and Democratic sponsors of the children's accounts bill pitched it as a vehicle for promoting personal ownership -- a major theme of the Bush administration -- and "the power that can bring to your life," as Santorum said. But the majority party tied the program move openly to the ongoing Social Security debate.

"I'm not so naïve that I didn't see how someone might talk about it" as a common ground on private accounts, said Sen. Jon Corzine, D-N.J. "I think this is independent of Social Security."

Administration of the children's investment accounts would be modeled after the Thrift Savings Plan for federal workers, which the White House has also adopted as a framework for its Social Security changes. Privatization of the investment would be optional, as in the Social Security proposal being crafted by Bush and congressional Republicans.