HOUSE Resolution 67, which Donald Trump signed last week, rolls back a rule that the Labor Department finalised late last year, which would have made it easier for cities and counties to run retirement savings plans for citizens who couldn’t get them through work. It is an odd choice for Republicans to kill plans that would encourage private, voluntary, tax-deferred saving, which they tend to approve of. But a trade group for investment funds opposes the city-run retirement plans. The Democrats on Capitol Hill, beset with other problems, are not picking a fight.

They should. The resolution itself is nothing more than a kick in the shins for the three cities, all run by Democrats, that had considered setting up plans—New York, Philadelphia and Seattle. But it points to a larger problem, which neither party has confronted. The United States has a retirement crisis, which it is treating like a savings crisis. They are not the same thing.

In traditional macroeconomics, all saving serves the same purpose: investment in the capital stock, or new machines to make stuff. Workers either spend from their paychecks on rent and food, or put money away in bonds, shares or savings accounts. Through the magic of capital markets, their savings both return interest and buy machines and tools—capital stock. In turn, this stock becomes component of the basic model for economic growth. These economic models consider only the aggregate sum of all savings: 100,000 funded pensions are worth the same as a single billion-dollar estate.

Full Content: The Economist

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