California Kids Savings Account Act

California is proposing Senate Bill 752, the Kids Savings Account Act. http://tinyurl.com/2zk8bd This bill would provide $500 for each baby born in CA as a savings for retirement, home, or educational training upon reaching age 18.

Sen. Darrell Steinberg and co-author Sen. Bob Dutton, R-Rancho Cucamonga (San Bernardino County), said "If a $50 deposit was made to the account every month until the children reached 18, the account would contain between $17,500 to $21,000 -- depending on the rate of return". http://tinyurl.com/yq6cz9

What if the voluntary additional $50 per month is not deposited? Five hundred dollars with an 8% return over 18 years, and a 3% inflation rate, will amount to only $1174, which the $500 original deposit must be repaid, to the State, leaving a balance of $674 for the account, in today's dollars! With zero inflation the balance would be $1998, minus the $500 original deposit for a balance of $1498 at age 18. The illusion presented by the bill authors is a child would have $17,000 to $21,000 at age 18! Who could resist such an offer?

This sounds like a great idea, but so did Social Security when it was created. Social Security today is nothing like what was in the original bill. Senate Bill 752 will be the same. It will morph into a huge government run program that has beneficiaries other than the intended. Soon the government will decide to use force and make parents and grandparents contribute monthly to their kid's account.

The State never sleeps. It stays awake 24 hours each day trying to find another way of managing our lives. State legislatures dream of ways to eliminate suffering and become the next Jesus Christ, Mahatma Gandhi, Henry David Thoreau, or Martin Luther King. All of those men practiced non violence, against the State. Were they legislators today they would likely use the force and violence of the State to impose their wishes on others, much like Senators Steinberg and Dutton are trying to do.

The bill simply authorizes the State Treasurer to set up and run the accounts. Who gets to manage the money, what fees, when, where, and how will be determined by bureaucrats. What happens 20 years from now when the State has 2000 applicants per day of 18 year olds wanting their money?

On the other hand this will help the birthrate. Churches, business, realtors, builders, colleges, and government all need new customers. In some countries in Europe the birthrate is so low the State is offering incentives for women to have babies. Human beings are not an endangered species.

If the government mandates money be set aside for a product or service, that product or service will only go up in cost. Those who benefit most from the Kids Savings Account are the ones lobbying for the bill. These would be colleges and vocational schools.

I wrote http://f4u.blogspot.com/2006_10_01_f4u_archive.html advocating a similar national program for retirement to replace social security. The funding for my suggestion would come from privatizing federal assets; mineral rights (offshore and on land), roads, parks, forests, and grazing rights. Each citizen would own shares in these corporations. After all, the assets belong to the citizens, not the government. The dividends from these assets could be used for retirement accounts. California has mineral rights to 3 miles offshore. They could use the dividends from this and other state assets to fund these accounts. Of course that would take money from other state programs.

The authors of the Kids Savings Account refer to the value of asset building. They call this a new homestead act. I believe in asset building and I have written before about the need for a second homestead act that would allow all residents of government housing to take private ownership. The public housing would become a private asset, a tax base, and relieve the government of liability. As the Kids Act says, housing equity is the fastest way most people build assets. My proposal would take property from the government and give it to citizens. The Kids Act will take money from private citizens and give to the State to create assets for others. This is what the Homestead Act of 1862 did, take land from the Indians and gave it to others. The 1862 Homestead Act prohibited non citizens from homesteading. This prohibited all Indians from homesteading their own land! Most African Americans were still slaves and could not homestead. Since a large portion of public housing is occupied by African Americans, my proposal for a homestead act would benefit African Americans.

During my working career there could be serious consequences if I was wrong. Policy makers and leaders cannot afford to be wrong, though they often are. Neither party will admit their policies were wrong. They never hesitate though to say the other party's policies were wrong. Here there are no serious consequences to being wrong with my pontifications. The worst that may happen is you will say my brain is not capable of cognitive reasoning.

Bilbo Baggins