Greased by lobbying and campaign cash, tax breaks for retirement savings are one thing Congress agrees on. But they also blow out the deficit and add to income inequality.
Five months before Congress faced a near-catastrophic standoff over the debt ceiling, with Republicans demanding restrictions to food and Medicaid programs to rein in spending, a bill that raised the cost of private retirement savings accounts to $282 billion per year was quietly signed into law.
In this era of deeply divided politics, the 2022 bill known as Secure 2.0 was hailed as a bipartisan success — a victory for average Americans. It had sailed through the House by a whopping 414-5 vote. It followed four other major bills passed between 1996 and 2019 that dramatically expanded taxpayer savings – all equally lauded as bipartisan victories.
But that rare issue that brought a divided Washington together also increased wealth disparities and the federal deficit. And the victory was most strongly applauded by the burgeoning financial services industry, for whom tax-advantaged retirement savings has transformed a $7 trillion retirement market in 1995 to a $38.4 trillion behemoth in 2023.
Yes, that’s a factor…for some reason employers think that paying more for new talent is better than paying the same amount for people that already have institutional knowledge.
But anywhere you go is going to be giving the same raises year over year.
Which really makes me wonder why salaries haven’t spiraled out of control or how this ever became an issue. You’d think the “new employee” rate would grow faster than the “current employee” rate. If the “current employee” rate climbs by 2% each year, and the “new employee” rate increases by 4%, it wouldn’t take long for a very wide gap to appear.
But that doesn’t happen. Somehow we manage to be perpetually able to find a new job with a higher salary every few years.
I think the “quitting for a raise” is overblown. Whats happening is quitting for a promotion, and that leads to another problem of title inflation and disparity between employers.
I could search for my title at my current employer and find jobs I’m nowhere near qualified for, paying about the same. And I could search for my original title and find jobs paying 1/2 as much as what I was hired at a few years ago. Shit makes no sense.