Crucially, comparing employees in the years just before and the years just after automatic enrollment was introduced, there wasn’t any evidence that those automatically enrolled in the Thrift Savings Plan took on more credit-card debt. What they did do was to take out larger mortgages and larger auto loans. It is possible that they took out larger mortgages and auto loans because they made smaller down payments as a result of having less take-home pay. But given the ease of borrowing from their Thrift Savings Plan account, it seems more likely that they borrowed more because they were able to put down bigger down payments for better houses and cars than they would have been able to swing otherwise.
It's important to get the facts straight about automatic enrollment because there's more at stake than making sure people have enough resources for retirement.
When people save more, the whole economy benefits. A higher saving rate has the potential to reduce the trade deficit without protectionism. If accompanied by appropriate monetary policy, and not canceled out by bigger government budget deficits, a higher saving rate would also make more funds available for research and development. It should raise wages and reduce inequality. Advocates of automatic enrollment have been underplaying their hand by focusing only on the benefits for financial security in retirement.
This article was provided by Bloomberg News.