One thing I have a difficult time with my undergraduate economics students is the presumption that state actors are interested in improving outcomes. It’s a lesson that Thomas Sowell – who considered himself a Marxist even after studying under Milton Freidman – learned only by trying to improve outcomes while working for the federal government.
Sowell found improving outcomes meant there would be less need for a program. Less need meant less demand for state programs and jobs. Fewer jobs meant less salary potential.
In other words, it’s simply in the sane, economic interest of many state programs to not improve outcomes!
In my last article for Forbes, I covered the OregonSaves pilot initiative to force all employers who do not offer a retirement plan to enroll employees into a state-managed Roth IRA consisting of an S&P 500 Index Fund, a Money Market Fund, and Target Date Retirement Index Funds from State Street Global Advisors (SSGA).
For a 1% annual fee, investors will not be given the advice they could receive for the same fee with the help of an advisor – including if they should invest at all or address other financial priorities – but, will have what amounts to an index portfolio that costs 9-12x more than ones they can set-up online.
While personal finance experts have largely been quiet about the harm, I was able to find one comment on social media that it will be interesting to study the results over time.
The experts will just wait and see what should be obvious is the making of a massive retirement plan pile up.
These new self-driving retirement accounts will be forced upon people the state claims have ‘no access’ to a workplace plan, giving keys to people who don’t have a license and hoping all turns out well.
The investor who selects the money market fund will have seen no or low returns over the last year. The S&P 500 investor could see a drop of 50% or…