The Right Coast
October 25, 2004
401k credit cards
By Tom Smith
I think it's a good idea. There will be people who blow their retirement egg at Vegas, but so what? Larry Summers et al. seem right to me. If you make savings more liquid, people will be more likely to save. It's part of that whole ownership of property thing. I wish the Post would tell us how much the inventor is going to make. It's interesting that he and Modigliani patented the idea.
The whole story of the 401(k) is a beautiful thing. I'll link to it someday if I can find an on-line account. It was invented by some executive compensation expert strictly for the use of top executives. Then it sort of got out of control. The IRS wanted to shut the 'loophole' down, but the constinuency in favor of it grew so fast the IRS was stymied. A huge force for the privatization of capital and retirement was born.
401(k) plans continue to grow. They're powerful engines for savings and economic growth because among other things, they create a gigantic risk pool in the form of all the investors out there who bear some risk of market fluctuation, instead of some intermediary, like the backers of defined benefit plans, having to bear it. A beautiful thing. Now, if we can just privatize social security, we'll grow so rich we'll never have to give a damn what Europe thinks about anything again. Maybe that's why Kerry's against it.