Rep. Cartwright Introduces Bill to Promote Savings Bond Purchases

Earlier today, Rep. Matt Cartwright (D-PA-17) and a bipartisan group of co-sponsors introduced a bill that would require the Treasury Department to continue their current policy of allowing taxpayers to purchase paper savings bonds for the next five years…unless Treasury can come up with a universally accessible alternative. The Save Access to a Valuable Investment Needed to Generate Savings (SAVINGS) Act (great title, fwiw) is a simple, but important proposal. Why?
 
Savings bonds are a big part of American history. The earliest bonds issued by the U.S. were sold to finance the Revolutionary War. War Bonds were near ubiquitous during World War II, and there was even talk of reviving the concept during the past decade. Military history aside, savings bonds are a part of the fabric of American financial life and have been for many years.
 
However, the past decade has not been kind to savings bonds, as Congress and the Treasury Department stopped marketing the bonds, and then eliminated paper bond sales--first ending a payroll deduction purchase plan and then ending over-the-counter sales at financial institutions. Lots of people got a rude awakening the last couple of years when they walked into their local bank or credit union, asked to buy a bond and were told that they were no longer for sale. Now, the main way to purchase a bond is to go online to www.treasurydirect.gov, open an account and then purchase electronic bonds. There are annoying problems with this system, it’s hard to gift bonds, the interface is so-so, and so on, but there are significant equity issues as well. Treasurydirect.gov assumes that customers have internet access and requires bank accounts to open an account. There are tens of millions of Americans that are excluded from regularly purchasing savings bonds through this new system. The policy of our government should be focused on promoting savings and lowering barriers to responsible financial behavior, not locking vulnerable households out of simple, secure and culturally significant methods of saving.
 
However, there remains one universally accessible way of purchasing savings bonds, buying them on the tax form. The IRS made this change a few years back in response to urging from the asset building field and deserves credit for offering an opportunity for families to build savings and financial security at tax time. However, they’ve never confirmed that this opportunity would be available for any significant length of time. We know now that Treasury will offer the savings bond purchase option at tax time in 2014, but there’s no certainty beyond that which makes it difficult to build awareness and support of the purchase option.
 
That’s where Mr. Cartwright’s bill comes into play, extending the tax time savings bond purchase option for five years creates a barrier-free opportunity for Americans to access savings bonds, a financial product they know and trust. The five year extension also allows time to build awareness of the opportunity.
 
The SAVINGS Act does allow Treasury to walk away from the tax time savings bond purchase program IF Treasury finally comes up with a substitute for the over-the-counter purchases that is a universally accessible alternative. Imagine a stored value card, like the pre-paid debit and gift cards that are for sale everywhere you go these days. That kind of product innovation is sorely need to close the gap that Treasury created when they ended over-the-counter sales.
 
We’ve advocated for these kind of changes for a number of years now as part of the Savings Bond Working Group (see this letter we sent to Treasury Secretary Jack Lew in April 2013). Personal savings remain at extremely low levels in America. Three in ten Americans don’t have a basic savings account. More than 40 percent of Americans live in asset poverty. Promoting savings and increased financial security for ordinary Americans should be a major focus of government policy at this time. Rep. Cartwright’s bill is one step toward realizing that goal, thanks and congratulations are due to him for recognizing this need and working to make sure that safe, secure savings opportunities are available to all Americans.