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What The Media Tell Americans About Free Enterprise

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Friday, April 7, 2000

Volume 8, Number 7

Media Mavens Are Mum on Potential IRA Changes

If you listen to the media, itís a "national calamity" that Americans donít save enough of their income for their retirement years. Last month, a bipartisan group of congressmen proposed boosting the amount individuals can set aside in tax-deductible retirement accounts -- but, in spite of their professed worry about national savings rates, the media have generally failed to report the story.

Journalists recognize the problem: introducing a segment on savings for the NBC Nightly News on June 4, 1998, anchor Tom Brokaw called it "a national calamity in the making: more and more baby boomers headed toward retirement, not enough Social Security dollars to go around and not nearly enough personal retirement savings."

On CBSís Saturday Morning last October 30, reporter Stacey Tisdale warned viewers that "in spite of our booming economy, the average American family has only $1,000 in savings and the savings rate is at its lowest level since the Depression."

Thatís not entirely true -- the officially-calculated "savings rate" doesnít include capital gains from stock investments, which is boosting many familiesí retirement accounts. Writing in The New York Times last May, economist Klaus Friedrich calculated that "if the value of capital gains is included, the rate rises [from 0.8 percent] to 8 percent. By this more realistic accounting, the savings rate has been rising, not falling, over the past three years."

According to a report issued last fall by the Cato Institute, "The Rise of Worker Capitalism," at least 43 percent of American households own stocks or stock mutual funds, so the savings rate of those families is almost certainly understated by the official government figures.

But what about other, presumably less affluent households? Last month, a bipartisan group of congressmen advanced a proposal that would encourage working families to save more of their money for retirement, but practically no one in the media has touched the story.

Democratic Rep. Dennis Moore of Kansas and Republican Rep. Elton Gallegly of California have pushed a bill that would increase the maximum contribution to an Individual Retirement Account (IRA) from the current $2,000 to $5,000. The increase would be phased in over a yet-to-be-determined number of years.

Itís not a plan that would help the rich -- high-income individuals and couples canít deduct their IRA contributions. This proposal would instead boost middle-class retirement coffers by raising the contribution limit for the first time since 1981, when it was set at $2,000. In real terms, inflation has eroded that cap to just $1,072 per year.

Total television news coverage thus far? Zilch. Total newspaper coverage? A Nexis search shows that the Associated Pressís Libby Quaid has written about the story, a Reuters dispatch popped up in Salt Lake Cityís Deseret News, and The Wall Street Journalís Jim VandeHei wrote a story for the March 9 edition of his newspaper.

Thatís not very much coverage for legislation that could potentially affect millions of American families. So, with both politicians and pundits worried about the long-term future of Social Security, why are the media ignoring a proposal that could substantially ease the dependence of working Americans on government pension checks?

One reason may be that, although many Democratic congressmen are backing the bill, Democratic leaders such as House Minority Leader Richard Gephardt are voicing concern that raising the allowable limits could deprive the government of too much money.

"[House Republicans] arenít fooling anyone," Gephardt was quoted as saying by The Wall Street Journalís VandeHei. "They have twisted and contorted the legislative process into nothing more than a marketing scheme designed to make last yearís unpopular tax cut more appealing."

Also on March 9, White House spokesman Joe Lockhart complained that the proposed change in the IRA contribution limits, taken together with other proposed tax reforms, could amount to "a trillion dollars of tax cuts that we canít afford, that will either squeeze Social Security and Medicare, or eviscerate discretionary domestic spending in this country."

It sounds like a battle is brewing inside the Beltway, between those who worry about how much of their own money working families will have for retirement, and those who worry about whether the federal government will have enough money in the future. Itís an important debate to have -- and it would be much more meaningful if the establishment media told Americans that it was already underway.


ó Rich Noyes


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