[Congressional Record Volume 150, Number 103 (Thursday, July 22, 2004)]
[Senate]
[Pages S8735-S8736]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SANTORUM (for himself and Mr. Corzine):
  S. 2751. A bill to encourage savings, promote financial literacy, and 
expand

[[Page S8736]]

opportunities for young adults by establishing KIDS Accounts; to the 
Committee on Finance.
  Mr. SANTORUM. Mr. President, today, I am introducing ``The America 
Saving for Personal Investment, Retirement, and Education (ASPIRE) Act 
of 2004'' along with Senator Corzine. A bipartisan group of members is 
introducing companion legislation in the House of Representatives. The 
bill creates a Kids Investment and Development Savings (KIDS) Account 
for every child at birth and creates a new opportunity for the children 
of low-income Americans to build assets and wealth.
  This country has seen a growing number of Americans investing in the 
stock market and has witnessed an historic boom in homeownership, which 
has increased to a record high 68 percent. However, this growth in 
assets has not reached every American. While many middle- and upper-
income families have increased their assets in the past decade, many 
low-income families have not had the same financial success. A recent 
study conducted by the Federal Reserve found that the median net worth 
of families in the bottom 20 percent of the nation's income level was a 
mere $7,900 an amount that is far too low to ensure a comfortable 
economic future for their family. This challenge needs to be addressed 
to ensure that lower income families have a significant opportunity to 
accrue wealth and expand opportunities for their families.
  Under this legislation, KIDS Accounts would be created after a child 
is born and a Social Security number issued. A one-time $500 deposit 
would automatically be placed into a KIDS account. Children from 
households below the national median income would receive an additional 
deposit of $500 at birth and would be eligible to receive dollar-for-
dollar matching funds up to $500 per year for voluntary contributions 
to the account, which cannot exceed $1,000 per year. All funds grow 
tax-free. Access to the account prior to age 18 would not be permitted, 
but kids--in conjunction with their parents--would participate in 
investment decisions and watch their money grow. When the young person 
turns 18, he or she can use the accrued money for asset building 
purposes such as education, homeownership, and retirement planning. 
Accrued funds could also be rolled over into Roth IRA accounts to 
expand investment options.
  I would like to highlight what I view as the two major benefits of 
this legislation. The first, and most apparent, is that this bill will 
help give younger individuals, especially low-income Americans, a sound 
financial start to begin their adult life. For example, a typical low-
income family making modest but steady contributions can create a KIDS 
Account worth over $20,000 in 18 years. Second, and perhaps more 
important, is that KIDS Accounts creates opportunities for all 
Americans to become more financially literate. The account holders and 
their guardians will choose from a list of possible investment funds 
and will be able to watch their investment grow over time. All 
Americans will have the opportunity to see first hand that a smart 
investment now can grow over time into considerable wealth.
  I believe that this bill could be a significant step forward in the 
effort to expand asset opportunities to all Americans and encourage my 
colleagues to support this bipartisan effort.
  Mr. CORZINE. Mr. President, I am pleased to join with Senator 
Santorum in introducing the ASPIRE Act of 2004, which would expand 
opportunities for young adults, encourage savings, and promote 
financial literacy, by establishing investment accounts, known as KIDS 
Accounts, for every child in America.
  ASPIRE is based largely on a similar initiative in the United Kingdom 
developed by Prime Minister Tony Blair. Yet despite its British roots, 
the proposal is based on the most basic of American values. By giving 
every young person resources with which to get a start in life, ASPIRE 
will help realize the American ideal of equal opportunity. And by 
making every young person an investor, the proposal would encourage 
self reliance, promote savings, and give every family a personal stake 
in America's economy.
  Under ASPIRE, an investment account would be established for every 
American child upon receiving a Social Security number. Each account 
would be funded initially with $500. Those with incomes less than the 
national median would receive an additional contribution of up to $500, 
and would receive a one-for-one government match for their first $500 
of private contributions each year. Up to $1000 of after-tax private 
contributions would be allowed annually from any source.
  Funds would accumulate tax-free and could not be withdrawn for 
purposes other than higher education until the child reaches the age of 
18. At that point, funds could be withdrawn either for higher education 
or for the purchase of a home. Funds left unspent would be saved for 
retirement under rules similar to those that apply to Roth IRAs. Once 
the account holder reaches the age of 30, the initial $500 government 
contribution would have to be repaid, though exceptions could be made 
to avoid undue hardship.
  Accounts initially would be held by a government entity that would be 
based on the successful Thrift Savings Plan, or TSP, which now manages 
retirement accounts for Federal employees with relatively low 
administrative costs. As with the TSP, investors would have a range of 
investment options, such as a government securities fund, a fixed 
income investment fund, and a common stock fund. However, once an 
account holder reaches the age of 18, funds could be rolled over to a 
KIDS Account held at a private institution.
  It is difficult to understate the potential impact of giving every 
American child a fun investment account of their own. For the first 
time, every child will have a meaningful incentive to learn the basics 
of investing, because they will have real resources to invest. For the 
first time, even families with modest incomes will have a significant 
incentive to save, to earn the government match. And, perhaps most 
fundamentally, for the first time, every American child will grow up 
knowing that when they reach adulthood, they will have the ability to 
invest in themselves and in their own education. In short, every child 
will have hope for a real future.

  Considering its potentially significant social and individual 
benefits, the ASPIRE Act requires an investment that is relatively 
modest. It has been estimated that, when it becomes effective, the 
bill's cost would represent only about one tenth of one percent of the 
Federal budget. Yet the proposal differs from other proposals for new 
spending or tax cuts because, for the first 18 years, it would not 
reduce overall national savings at all. In that period, virtually every 
dollar of outlays would be saved, and would be available to expand 
long-term economic growth. In fact, the proposal would lead to an 
increase in national savings because of its incentives for families to 
save more. This would help create the economic growth we need to handle 
the added burdens associated with the impending retirement of the baby 
boomers.
  Senator Santorum and I have been working on this legislation for many 
months, along with sponsors of identical legislation in the House, 
Congressmen Harold Ford, Patrick Kennedy, Thomas Petri and Phil 
English. In that process, we have been assisted by a broad range of 
experts and other interested parties, for which I am very grateful. 
However, I want to especially thank Ray Boshara and Reid Cramer of the 
New America Foundation, who have been extraordinarily helpful in the 
development of the legislation, and who have taken the lead in efforts 
to promote this and other asset building initiatives.
  I recognize that given the lateness of the session, it is unlikely 
that this legislation will see action in the 108th Congress. However, 
Senator Santorum and I are hopeful that those with an interest in the 
proposal will review the language of the bill and give us feedback in 
the coming months. We are open to suggestions for improvements and 
expect to introduce a revised version of the legislation in the next 
Congress.
  The ASPIRE Act is a big new idea based on simple, old time American 
values. It already enjoys strong bipartisan support from conservatives 
and progressives, alike, in both houses of Congress. I look forward to 
working with colleagues on both sides of the aisle to secure its prompt 
enactment.
                                 ______