This week the Treasury Department has announced that it is shutting down the myRA program, the lame and perhaps even insidious retirement savings program begun by the Obama administration in 2014.
Announced during President Obama’s 2014 State of the Union address, myRA accounts were supposed to help low- to middle-income workers save more for retirement. The accounts were tax-free and required only a $25 minimum to open an account.
Sounds great, right? So why did we call it “lame” and “perhaps even insidious”?
It was lame because it really wasn’t at all novel. As we wrote at the time: “The problem with inadequate retirement savings has little to do with a lack of options. Right now, anyone who doesn’t qualify for a 401(k) or 403(b) can open an IRA account, can start with as little as $25, and can invest in safe, guaranteed instruments if that’s what they want. It’s not clear how the president’s proposal would improve on that.”
In fact, existing alternatives to the myRA were superior because they allowed workers to invest in a variety of securities, while the myRA restricted investments to U.S. treasuries. And treasuries are lousy retirement investments.
So, if the myRA didn’t really create an exciting new retirement savings vehicle, why did the Obama administration even bother? That brings us to the “perhaps even insidious” part.
Our antennae are becoming very sensitive to attempts by the federal government to deal with its debt. We don’t believe the federal government is a benign actor, and we don’t believe it always has the best interests of the American people as its central concern. We also suspect that there are forces within the federal government that leer greedily at the over $25 trillion in Americans’ retirement savings.
So we’re skeptical of existing new federal programs that encourage or force Americans to invest in federal debt, and that’s why we saw the myRA as “a way to pawn off new federal debt onto the least sophisticated workers and savers.” We said, “the myRA relies on savers too naïve to open an IRA financing the federal government’s deficit spending.”
With the myRA, Treasury thought it had found a way to finance federal debt without the embarrassment of declining foreign interest in our public debt markets. If China no longer wanted to buy America's debt, Treasury would “nudge” working Americans into buying federal debt disguised as retirement savings.
So, goodbye myRA. But it won’t be the last time the federal government attempts to lure the American people into bailing out Washington’s unrestrained spending.