[Congressional Record Volume 151, Number 49 (Thursday, April 21, 2005)]
[Senate]
[Pages S4112-S4113]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SANTORUM (for himself, Mr. Corzine, Mr. Schumer, and Mr. 
        DeMint):
  S. 868. A bill to encourage savings, promote financial literacy, and 
expand 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 2005'' along with Senator Corzine, Senator Schumer and Senator 
DeMint. 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 record high levels. 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 a Roth IRA or 529 post-
secondary education account 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 create 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 firsthand that a smart investment now can 
grow over time into considerable wealth.
  I believe that this bill could be a significant and strategic step 
forward in the effort to expand asset opportunities to all Americans, 
and lower-income Americans in particular. I encourage my colleagues to 
support this bipartisan effort.
  Mr. CORZINE. Mr. President, I am pleased to join with Senators 
Santorum, Schumer, and DeMint in introducing the ASPIRE Act of 2005, 
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, according to Roth IRA 
guidelines, 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 or rolled over to a 529 plan for 
educational expenses. 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 funded 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

[[Page S4113]]

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 are excited to be joined this year by Senators 
Schumer and DeMint as sponsors of ASPIRE, 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.
  Mr. President, 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.
                                 ______