The Silver Bullet

Between circuit designs, I keep seeing stories about the government trying to do things to improve unemployment, healthcare, and real estate.

All of these issues are primarily issues for people who had no money to begin with. One thing the government could do to improve all of these things is to encourage people to save money. I propose that the government make savings accounts operate similarly to other tax-advantaged accounts such as IRA, Roth IRA, or HSA. The simplest approach would be to exempt savings accounts up to some limit from all taxes. It wouldn’t reduce people’s taxes that much, but it would be something the government could do to promote saving.

Most stories of problems people are having with unemployment, heathcare, or real estate would be mostly solved if the people or families in question had a savings account with $25,000 in it set aside to deal with trouble when it comes up.

This suggestion would do nothing to help the poor. People living at or near the federal poverty line will not be able to set aside $25,000. Poverty is a separate problem not addressed by this program.

It seems to me having a little money is a silver bullet that solves a lot of middle-class problems that the government is trying to address separately. If the entire population except for the poor save $10,000 to $50,000, depending on their estimation of the risks in their lives, the next recession, banking crisis, 10% unemployment will not be a big deal at all. People will be free to focus on their lives, part of which include activities that are productive for the economy.

The potential benefits are huge. We must move toward this and away from programs that try to fix each aspect of economic fluctuations separately.