Category: Business

President Donald Trump, in his State of the Union address Tuesday night, suggested a major new retirement benefit for tens of millions of American workers, embracing an economic policy that proponents say could bolster the federal retirement safety net.

Speaking to congressional lawmakers, Trump pledged to extend to private-sector workers the same type of retirement plan already available to federal employees. He also said the government would kick in up to $1,000 per year to their accounts, presumably in matching benefits. Roughly 54 million workers in the private sector have no workplace retirement benefits and do not benefit from stock market gains, according to research cited by the Economic Innovation Group, a Washington-based think tank, as part of what some experts have termed a “retirement crisis” in America.

“Half of all of working Americans still do not have access to a retirement plan with matching contributions from an employer,” Trump said. “To remedy this gross disparity, I’m announcing that next year, my administration will give these often forgotten American workers — great people, the people that built our country — access to the same type of retirement plan offered to every federal worker. We will match your contribution with up to $1,000 each year.”

The announcement was celebrated by Trump supporters as a major new economic policy heading into the 2026 midterm elections, but critics pointed out some problems with Trump’s pledges, and are skeptical it will substantially boost savings for working-class Americans.

The most obvious challenge is that it’s not clear how much Trump can do on his own. Under existing authorities, the administration can create portable retirement accounts — modeled on the Thrift Savings Plan used by federal employees — and make them available to workers who currently lack a workplace plan. But the government cannot compel employers or workers to automatically enroll, nor can it unilaterally appropriate funds to provide a universal $1,000 match to all eligible workers.

Instead, the administration can facilitate take-up of a benefit that already exists. The bipartisan Secure 2.0 bill, signed by President Joe Biden in 2022, created a “Saver’s Match” — a federal contribution of up to $1,000 annually for qualifying workers who put $2,000 in an eligible retirement account. One problem has been that many eligible workers have had nowhere to put their contributions. Trump’s executive action could create additional account infrastructure, but eligibility would still be constrained. Only workers who make less than $25,000 per year, or roughly $41,000 for couples, are eligible.

More impactful would be if Trump’s comments spur congressional action. A White House official suggested that the administration will support bipartisan legislation to automatically enroll eligible workers in federal accounts, provide the $1,000 federal match for low- and moderate-income workers, and make those accounts portable across jobs. One bill is backed by a coalition that spans Charles Schwab, AARP, DoorDash, and Uber.

White House economist Kevin Hassett has backed a similar kind of approach. Of the more than $200 billion in annual income tax expenditures related to retirement savings, less than 1% flows to workers in the bottom income quintile, according to the Economic Innovation Group. This would move some of those benefits down the income distribution.

“Since we’ve had the 401(k) system this has always been the problem: A huge share of the workforce has not been participating and doesn’t have access to these benefits. Closing that gap is a big first step,” said John Lettieri, cofounder of the Economic Innovation Group. “It’s a long-run exercise to get people into the market, engaged in long-term savings and investment behavior with matching benefits. That’s a proven way of building wealth over time, including for low-income savers.”

That said, there are reasons to doubt that even the legislation being debated in Congress would do much to increase retirement security for low-income workers. Low-income Americans often do not have enough to live on already, much less an extra $2,000 per year to put into retirement accounts, said Matt Bruenig, founder of the People’s Policy Project, a left-leaning think tank.

The Survey of Consumer Finances suggests that fewer than 12% of people who earn below $43,000 save for retirement.

“Almost no low-income people have retirement accounts. This is not because they are disallowed from having them,” Bruenig said. “It’s because they can barely pay their bills. Nothing in the president’s plan changes that.”

President Donald Trump’s new tariffs are not legally justified, according to several prominent economists and trade experts, who say there is no sign of the profound international financial problems that such measures were intended to remedy.

Hours after the Supreme Court invalidated the emergency tariffs that he imposed last year, Trump on Friday invoked a 1974 law to announce a new 10% global import tax, later raising it to 15%. The president cited a provision known as Section 122 that authorizes temporary restrictions on imports to deal with “fundamental international payments problems.”

In an official proclamation, the president said the nation’s “balance of payments,” a comprehensive account of Americans’ financial transactions with foreigners, was suffering “a large and serious deficit.” And he listed a number of metrics reflecting a deteriorating U.S. financial posture.

The law does not define “balance-of-payments deficit,” and economists disagree about what should be included in the term. But several critics, including the International Monetary Fund’s former chief economist and a prominent conservative legal commentator, disputed the president’s claim. Trump wrongly conflated an alleged payments deficit with the merchandise trade deficit that he targeted last year with his first set of comprehensive tariffs under the International Emergency Economic Powers Act (IEEPA), they said.

“The U.S. does not have a ‘payments’ problem. It can finance its trade deficits,” Gita Gopinath, the former IMF official, now teaching at Harvard University, wrote on X.

Added Andrew McCarthy, a former federal prosecutor, writing in the conservative National Review: “These new tariffs are even more clearly illegal than Trump’s IEEPA tariffs.”

Opposition to the new import taxes erupted even before they took effect at 12:01 a.m. on Tuesday. The outcry suggested that the president, still smarting from his 6-3 Supreme Court defeat, could face renewed legal jeopardy over the centerpiece of his economic agenda.

“I do anticipate a lawsuit,” said Scott Lincicome, vice president of general economics for the Cato Institute and a former trade lawyer.

U.S. importers would have the right to sue once they paid the tariffs. Liberty Justice Center, the nonprofit public-interest law firm that represented several small businesses in one of the tariff cases decided by the Supreme Court, said Monday that it is “closely monitoring” the president’s latest actions.

“We will ensure that whatever authority the executive branch relies on, it follows the rules Congress actually wrote and the constitutional guardrails that protect our system of separated powers,” said Sara Albrecht, the center’s chairman.

The debate over the Section 122 levies shows that questions of law and economics will continue to dog Trump’s bid to remake the global trading system. This time, there is no question that Congress has delegated to the president the power to levy tariffs — only under what circumstances. At issue are complex definitional questions of international economics and the legislative intent behind the wording of an untested provision in U.S. trade law.

Time may also be a factor. The Section 122 tariffs expire after 150 days unless Congress votes to extend them, which is unlikely.

Judges might be reluctant to “second guess” the president’s judgment on whether a balance-of-payments problem exists, said John Veroneau, a lawyer who served as deputy U.S. trade representative under President George W. Bush.

Still, the administration’s newfound reliance upon Section 122 reverses the legal arguments it made last year. Defending the president’s emergency tariffs, Justice Department attorneys told an appeals court that Section 122 did not apply to Trump’s trade deficit concerns, which were “conceptually distinct from balance-of-payments deficits.”

The White House declined to elaborate on the president’s Feb. 20 proclamation and fact sheet, which blamed a loss of domestic manufacturing for an excessive number of dollars leaving the country. Problems with the nation’s balance of payments can “endanger the ability of the United States to finance its spending, erode investor confidence in the economy, and distress the financial markets,” the proclamation said.

Congress passed the Trade Act of 1974 when the United States was dealing with a distinctly different set of economic issues. In 1971, President Richard M. Nixon abruptly ended the convertibility of dollars into gold, marking the end of the Bretton Woods system of fixed exchange rates.

At the time, foreign central banks were rushing to trade their unwanted dollars for gold, threatening to deplete U.S. financial reserves.

There’s no sign of that sort of crisis today. The dollar has dropped about 10% over the past year, but it remains above its level for most of the decade leading to 2015. There’s certainly no sign of the “imminent and significant depreciation” that Section 122 requires.

But even some Democrats say the administration is reacting to worrisome financial ailments.

Economist Brad Setser, who served in the Treasury Department under President Barack Obama, said the global economy is characterized by dangerous imbalances.

For years, the U.S. has run a deficit in its current account, the broadest measure of the nation’s trade balance, while China has run a mirror-image surplus. To keep running a large trade deficit, the U.S. must attract financing from abroad. So far, it’s been able to do that, which is why many analysts do not share the administration’s urgency.

But the nation’s net international investment position — which balances the value of foreign stocks and bonds owned by Americans against what foreigners own in this country — is also deteriorating. That figure reached negative $26.7 trillion last year, down sharply in recent years.

Some of that decline reflects foreigners’ large purchases of U.S. stocks, which have outperformed other markets, and thus is not a problem, Setser said. But the deterioration in the investment account also stems from the growth in the U.S. external debt, which carries a rising interest burden.

“At this level of the current account [deficit], U.S. external debt will tend to rise. The external position will tend to weaken, which is one definition of a balance-of-payments problem,” he said. “The debt position does worry me.”