Uncle Sam Kills Savings Bonds

Earlier this year, West Virginia made national news headlines for leading the nation in the percentage of residents being vaccinated against the coronavirus.

Now that the low-hanging fruit has been picked, the hard work comes. Namely, getting a large enough percentage vaccinated to promote herd immunity. And, protect society from the kind of resurgence that has decimated India in recent weeks.

To encourage those from ages 16 to 35 to get their shots, Gov. Jim Justice proposed a novel plan in late April: present $100 savings bonds to those who participated in the vaccination effort.

Unfortunately, he quickly had to backtrack on the idea, admitting it hadn’t been fully vetted. The problem stemmed from the federal government’s bureaucratic nightmare that moved all savings bond purchases from paper to electronic at the end of 2011.

The only exception: you can buy paper bonds when using a tax refund to purchase them.

Savings Incentive

I give our governor high marks for his proposal. Especially the idea to give young people the incentive to set aside some savings instead of heading for the nearest movie theater, clothing shop, or fast food outlet to burn up their bonus.

Had Uncle Sam not taken the ill-advised step to convert savings bonds into an exercise in futility, it could have worked. It might have increased the number of people investing money in savings bond and strengthened our economy.

But no. Because someone in Washington, D.C. decided they were going to save money by moving away from all paper—regardless of the long-term benefits that paper offers—savings bonds have become a thing of the past. At least in our household.

New Savings Bonds = Bureaucratic Nightmare

In the past, we weren’t buying them for ourselves. We purchased $50 bonds regularly for our great-grandchildren’s birthdays, a bargain at $25.

We knew since they couldn’t redeem them for a while, the youngsters would have some money later. That would be better than spending it immediately like we did whenever we received monetary gifts as kids.

We didn’t know about the government’s disastrous decision until we stopped by our bank to buy a bond and learned we would have to do that online.

When we checked further, the insanity of the plan astonished us. Not only would we have to obtain our great-grandchildren’s Social Security numbers to buy the kids a bond, but we would also have to obtain their parents’ numbers as well.

Then, hope that while wandering through the electronic jungle, we didn’t misplace passwords or other key information that would prevent the great-grandkids from being able to redeem the bonds at some time in the future.

You can understand why, when confronting the morass of logistical steps required to do what used to take a couple minutes at the bank, we punted.

We just give them cash with an encouragement to save some of it. Not nearly as good as a bond in the good old days.

A Foolish Move

Supposedly this move saved the government millions of dollars. But I question how much it saved when it simultaneously discouraged a host of people from buying savings bonds. That’s called the law of unintended consequences.

If one can still buy paper bonds with a tax refund, there may be hope. Maybe someone in our nation’s capital will recognize the blunder the Treasury Department made when it created a Byzantine process for buying savings bonds.

In the meantime, I expect fewer young adults in our state to save money when it is so tempting to spend it. The nation will be poorer because of it.