U.S. economy

If you’re like me, you have no interest in foolishly looking at the dwindling numbers in your retirement plan. Luckily, I’m decades away from retirement and can afford occasional market volatility. My initial concern during this crunch, however, wasn't the fluctuating values in our nest eggs. Instead, my worry was that employers might draw back from automatic enrollment programs, and that new employees might consider opting out of plans more frequently. Not so, according to people smarter than myself. According to a recent Chicago Tribune article, not only has the number of companies automatically enrolling employees in retirement plans doubled, but there shouldn’t be much cause for concern that, despite what looks like prolonged doom and gloom for our economy, companies may find auto-enrollment less attractive.

For behavioral economists (and their many fans), this probably comes as no surprise—default options work. What the article argues and suggests by its title, however, is that automatic enrollment (despite its increasing popularity) is insufficient in creating a robust nest egg at current match rates. Likely true, though the Tribune makes it seem as though auto-enrollment is a static business decision by saying that it “may create a false sense of security and discourage workers from putting more away.” A false sense of security is an issue, of course, but I would argue that a balance of $0.00 in an employer-sponsored plan is far, far riskier.

The real fix lies in automatic escalation—the next generation of automatic enrollment.

Greg Craig, Susan Rice, Barack Obama, Tony Lake, Maj. Gen Scott Gration, Samantha Power/NYT

Scripting America's Priorities:

A Discussion with Authors of the Democratic Party Platform

Click here to Register or Watch 

featured speakers

Susan Rice
Senior Foreign Policy Advisor to Barack Obama
Senior Fellow (on leave), Brookings Institution
Former Asst. Secretary of State

Karen Kornbluh
Principal Author, Democratic Party Platform
Policy Director (on leave), Office of Sen. Barack Obama

comments

Steve Coll
President & CEO
New America Foundation

Maya MacGuineas
President, Committee for a Responsible Federal Budget
Director, Fiscal Policy Program, New America Foundation

moderator

Steve Clemons
Director, American Strategy Program, New America Foundation
Publisher, TheWashingtonNote.com

Central banks in three of the world's largest economies, the U.S., U.K., and the Eurozone, are set to decide this week whether to raise lending rates. All three economies are flirting with recession but central banks fear that lowering rates would stoke inflation. Most analysts expect the three banks will hold rates steady until further signals that inflation is cyclical. Second quarter growth in the U.S. was a sluggish 1.9%, despite the fiscal stimulus package. Meanwhile, June consumer prices rose at the fastest rate in 25 years.

Snapshot asks, in the second half of 2008, will growth or inflation dominate central banks' interest rate policy?

Associated Press -Fed Likely to Hold Rates Steady Amid Crosscurrents
Market Watch - Dollar Flat as Traders Eye Central Banks
Bloomberg - Rolling Recessions Bring Paralysis to Bernanke, King, Trichet

MSN Money Central (07/3) quotes Doug Rediker on fears of declining American competitiveness.
Sydney Morning Herald (07/02) cites Steve Clemons on a neoconservative regrouping in Washington.
Miami Herald (07/01) quotes Steve Clemons on the reasons behind North Korea's terrorism delisting.
Emirates Business (07/01) cites Parag Khanna on the Second World's growing ability to shape world events.
The Australian (06/28) features Peter's Bergen's analysis of the growing divisions within Al Qaeda .

The number of workers filing new claims for unemployment benefits fell by 5,000 last week to 381,000, a smaller decrease than analysts had predicted. The four-week average of new claims, a less volatile measure, rose to 375,250 from 372,000, indicating that the U.S. labor market remains weak and far away from a recovery. Coming after last month's half percent spike in unemployment to 5.5%, these figures add further gloom to the current picture of the U.S economy and will put pressure on the Fed hold its target funds rate at 2% when it meets next week.

Snapshot asks, to what degree will falling consumer spending be exacerbated by labor market weakness?

Wall Street Journal - Jobless Claims Fall in Latest Week
Bloomberg - U.S. Initial Jobless Claims Fell to 381,000 Last Week
Reuters - Treasuries extend losses after jobless claims
Associated Press - Stocks trade mixed after dip in jobless claims

Representing the economically troubled state of Michigan, home to the auto industry, Democratic Sen. Debbie Stabenow just has to look around her to see how sky-high health care costs have eroded the global competitiveness of U.S. industry. Still, she told a New America-sponsored forum on Capitol Hill the other day, it's "nice to be joined by the data in something that I have been talking about for a long time."

Stabenow, the opening speaker at our forum about employer health costs in a global economy, described how the "most expensive and crazy structure in the world"—aka the U.S. health care system—was damaging the economy, hurting industry, threatening the middle class. "We are literally losing jobs," she said, spending more than our competitors on health but having less to show for it. (Click here for the webcast, here for the study, here for our earlier post.)

Throughout the primary season we have heard two things consistently from voters: they are worried about the economy and concerned about affording health care. Today, New America's own Len Nichols and Sarah Axeen analyzed one linkage between these two domestic priorities: the impact of rising health care costs on global competitiveness and U.S. jobs.

April 15, 2008 - US NewsWire Service - A spokesman for the Internal Revenue Service today apologized for the inadvertent release of an unauthorized letter* written to accompany the economic stimulus payments to households across America. The IRS spokesman said that taxpayers should ignore the letter, originally written for review and consideration by the White House. Congressional leaders asked for an investigation into how the letter was released. The document is reproduced below:

Dear U.S. Citizen,

Enclosed is your economic stimulus payment for 2008. The check amount is as follows: $600 for a single person, $1,200 for a married couple, and $300 per child, for families making less than $75,000 ($150,000 for a couple).

Speaking of children, if you have any, you should thank them for loaning you this money. After all, they are the ones who will have to pay it back. If you are blessed with grandchildren, don't forget to thank them too. They'll be paying off the interest.