An economics professor at Jacksonville State University and adjunct scholar at the Ludwig von Mises Institute named Chris Westley had some less than flattering things to say about Sessions’ plan to create a government mandated savings plan.

Westley took issue with the plan’s “free” $1,000 deposit to all children born in the U.S.  There are about 4.1 million people born here every year.  For those of you that the government left behind that comes out to $4.1 billion every year.  Even Sessions had to admit that his $1,000 estimate might be a bit high.

The worker’s contribution would be withheld pre-tax, with the mandatory employer match being tax deductible. The mandatory contribution would apply only to the first $100,000 of a worker’s annual wages. Taxes would be withheld from the amounts withdrawn at the account holder’s income tax rate at that time.

Westley said the contribution from the employer is largely a fiction, as employers will pass the cost to employees in the form of lower wages or reduced hiring.

I take issue with the language of calling the compulsory savings a “contribution.”  The dictionary defines contributing as an act of giving, and giving is defined as presenting something “voluntarily,” which is the polar opposite of this plan.

Westley is dead on about the employer contribution really coming from the pockets of employees, which I pointed out about a week ago.

Westley also pointed out something I hadn’t considered.  The PLUS funds might be restricted to stocks of select companies, which will create a two tiered market of government approved, and presumably less risky, companies that see a huge influx of capital from citizens who have no choice but to invest their money and non-approved companies that will be put at a competitive disadvantage by not being able to access the PLUS capital.  The government approved companies would, of course, have to subject themselves to even greater scrutiny than what Sarbanes-Oxley imposes.  Westly suggests that this could lead to government control of capital markets.

Sessions’ plan does have a bright spot of sorts:

Westley said the main advantage of the plan might be one Sessions cannot politically acknowledge: erosion of the Social Security system.

“It seems to be based on the hope that it will so outperform Social Security that it will create political demand to restrict Social Security or abolish it in the future,” Westley said.

The acronym for PLUS is Personal Lifelong Universal Savings, by the way.  Why the hell is every politician throwing the word universal into every policy name these days?  The ironic thing is that every plan they propose is decidedly non-universal since they only pertain to this country.  I think we should call the Sessions accounts Mandated Individual Never-ending Universal Savings, or MINUS accounts.

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This entry was posted by Brian on Wednesday, February 28th, 2007 at 8:28 pm and is filed under Government, Sen. Sessions. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site. Please note the copyright policy.