This seems, at first glance, like a terrible, horrible, no good, very bad idea: let people have charge cards on which to borrow against their 401(k) savings. Indeed, after we heard about it on television yesterday afternoon, my ultra-libertarian boyfriend was hopping up and down shouting “there ought to be a law!”
But the article tells me that some very smart, very famous economists, such as the late Franco Modigliani, and the very current Larry Summers, are in favour of it, arguing that allowing people to borrow against their savings will increase their willingness to save in the first place. My instincts cry out against it–I know too many people who are charging their way towards bankruptcy, despite having already tapped their home equity to pay down credit card debt once or twice–but Modigliani and Summers are a lot smarter than I am, and half of the study of economics is learning that your instincts aren’t a very reliable guide to what makes people better off.