[Congressional Record Volume 146, Number 127 (Thursday, October 12, 2000)]
[Senate]
[Pages S10420-S10421]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERREY (for himself, Mr. Santorum, Mr. Moynihan, Mr. 
        Grassley, and Mr. Breaux):
  S. 3200. A bill to amend the Social Security Act to provide each 
American child with a KidSave Account, and for other purposes: to the 
Committee on Finance.


                            kidsave accounts

  Mr. KERREY. Mr. President, many of the things we do in the Senate 
involve making investments in America's future. Investments in research 
through the National Science Foundation or investments in 
infrastructure development through the Department of Transportation 
reap great rewards for the citizens of tomorrow.
  Today, I am pleased to be joined by Senators Santorum, Moynihan, 
Grassley, and Breaux in introducing a piece of legislation that 
represents a remarkable new investment in the financial security of 
future generations of Americans.
  This proposal, called KidSave, aims to give every American a stake in 
the growth of the American economy, to help all Americans accumulate 
wealth and assets, and to teach all Americans firsthand the value of 
savings and compounding interest. Not only will this legislation 
promote savings and investments across all income levels, but it will 
also help to close the growing wealth gap.
  One of the discoveries I have made in researching this idea is that 
the most important variable in compounding interest rates is time. The 
earlier you start, the more wealth you build.
  One of the poster children for understanding the value of compounding 
interest is Osceola McCarty. Osceola was a Hattiesburg, Mississippi, 
washerwoman, who after more than seven decades of low-wage work donated 
$150,000 to the University of Southern Mississippi--wealth she had 
built by saving a little bit of money over a long period of time.
  Wealth has also empowered the Federal employees I talk to in the 
halls of the Senate, who are excited about their ability to participate 
in their government Thrift Savings Plan, TSP, and who talk more 
knowledgeably than me about index funds and the difference between a 
stock and bond. These employees, and other workers across the country 
who are able to participate in employer-sponsored pension plans and 
IRAs, feel more confident about their own futures and their own 
retirement security. They are confident that they won't face poverty in 
their final years.
  Our KidSave proposal will gave that same sense of confidence and 
pride in one's future to all future generations of Americans.
  How does KidSave work? The KidSave program would use part of the 
surplus to provide each newborn child with a $2,000 KidSave retirement 
savings loan to jumpstart his or her retirement savings. Each KidSave 
loan will be deposited into a qualified KidSave account. The KidSave 
program will be administered by the Thrift Savings Plan, TSP, Board. 
Future KidSave loans will be adjusted for inflation, CPI, beginning in 
2008.
  Parents and grandparents will be able to add $500 per year to each 
KidSave account for each child under the age of 19.
  A KidSave loan recipient--with no additional account contributions--
can expect to generate future retirement savings of $250,000 by the age 
of 67 (assuming an 8 percent rate of return). Furthermore, since 
KidSave accounts are personal property, they can be willed on to an 
heir as part of an estate.

[[Page S10421]]

  How will these KidSave loans be financed? Our legislation uses Social 
Security surpluses to finance the loans in the early years of the 
program. But, as older KidSavers begin to repay their KidSave loans, 
the program will virtually become self-funded, as the loan repayment 
revenues are used to fund the KidSave loans of a new generation.
  Since the $2,000 KidSave loan is--just that--a loan, KidSavers are 
expected to pay back the loan amount at the CPI inflated rate starting 
at age 30. The KidSave loan repayment mechanism is designed in such a 
way to allow future KidSavers to pay back 20 percent of the loan each 
year for five years, beginning at the age of 30. In the rare event that 
an individual's KidSave account may perform poorly, no individual will 
have to pay more than 20 percent of his total account value back in any 
given year.
  Building upon existing investment structures in the Federal 
government, KidSave accounts will be managed and administered through 
the Federal employees' Thrift Savings Plan (TSP). Investment options 
will be determined by the TSP Board. KidSave account holders and 
guardians will have the same flexibility in changing their investment 
distributions as current TSP participants.
  As I noted earlier in my remarks, one goal of this proposal is to 
close the growing wealth gap. Despite all of the glowing media reports 
about the booming American economy, most of the economic gains of the 
last decade have gone to families who have owned financial assets. Ed 
Wolff, the wealth data guru, has reported that the wealthiest 10 
percent of households enjoyed 85 percent of the stock market gains 
between 1989 and 1998. Since 1989, the share of wealth held by the top 
1 percent of households grew from 37 percent to 39 percent, while the 
net worth of the bottom 40 percent of households dropped from .9 
percent to .2 percent.
  An editorial by the Progressive Policy Institute has called this 
proposal a democratization of the ownership of financial assets''. I 
think they've hit the nail on the head. This proposal will create 
universal access to the tools of wealth creation and asset 
accumulation. It will make future workers less dependent on the Federal 
government for their retirement income security.
  This proposal is also aimed at improving the personal savings rate in 
the United States. In fact, unlike other spending programs, KidSave 
loans will not only generate wealth, but also improve national and 
personal savings rates.
  It has been widely reported that the personal savings rate has been 
in a long and steady decline in the U.S.--according to the Bureau of 
Economic Analysis, it has dropped from 11 percent in 1981 to 2 percent 
in 1999. Many workers are spending beyond their means, accumulating 
more and more consumer debt, while others simply can't afford to save 
because of high payroll tax rates and low wages. Many of these same 
workers are relying on Social Security to be their sole or primary 
source of income at retirement.
  But the co-sponsors of this bill recognize that a Social Security 
retirement check isn't enough to live on. The average Social Security 
check in Nebraska is $766 a month. Nationwide, eighteen percent of 
beneficiaries have no other source of income. Another 12 percent rely 
on Social Security for more than 90 percent of their income, and nearly 
two-thirds overall derive more than half their income from that small 
check. For many of them, it's not enough. Our proposal is based on the 
idea that retirees need both income and wealth.
  And Mr. President, that opportunity to hold assets and create wealth 
is an opportunity we can open today to every baby born in America. 
Guaranteed. I urge my colleagues to support this legislation.
                                 ______