Universal 401k Accounts
By Greg Mankiw
In today's NY Times, Tyler Cowen discusses proposals for universal 401k accounts, which "would pay poor people to save." nytimes.com My guess is that we will see a lot of discussion of this kind of proposal over the next couple of years.
Here is the question I am left with: Is this proposed policy the best way to redistribute income? That is, if Congress were to allocate a certain amount of additional funds to help the poor, would advocates of these accounts, such as Gene Sperling and Peter Orszag, prefer to spend the money on these saving incentives or on, say, an expansion of the Earned Income Tax Credit?
No doubt, they would say that they would prefer to do both. But that answer just brings us back to the old question of how much income redistribution the government should pursue. The more novel question, raised by these proposals, concerns the form of redistribution. That is, holding the amount of income redistribution constant, what is the optimal way to transfer resources to the poor? |
