Original Cin

I’m struggling to understand the ramifications of this; except that it seems that the Obama administration may be trying for a weird, roundabout tax increase, and through sheer incompetence didn’t hide it very well:

The new federal steps, which do not require congressional action, include:

….

Allowing people to check a box on their federal tax returns asking that any refund be sent as a savings bond. More than 100 million U.S. households receive refund checks each year, and many are promptly cashed and spent.

-”Obama expands workers’ retirement savings options” http://news.yahoo.com/s/ap/20090905/ap_on_go_pr_wh/us_obama_retirement_savings

The incompetence comes in the fact that someone clearly had Nudge (which is in my queue of things to read) in mind when they came up with this, to the extent that the changes also include “allowing” (nudging?) smaller companies to set up opt-out retirement plans. I managed to confirm on Google books that this is an idea directly from Nudge.

The evil, or at least highly questionable part of this comes from the fact that savings bonds are government debt, and there’s been a lot of talk lately about what the federal government is going to do to pay for all of the crazy spending that’s been going on lately. Will the Fed be forced by politics to fire up the printing press, causing the U.S. to inflate away its debt? Will the government simply refuse to pay? Will we see explicit higher taxes? It’s clear this is an attempt to nudge lenders toward lending to the government, and I’m surprised it’s not actually the default.

To review — the government takes some of your money. If it takes more than it’s “supposed to” it keeps the money interest-free until roundabout April or May. If you’re not paying attention to the fact that Uncle Sam is not as trustworthy a borrower as he was in the past, you can allow the government to keep the money, albeit with interest. It’s entirely possible you won’t get it back, or won’t get back the amount you’re expecting, or that the government will tax it again at a new, higher rate.