Over the protest of California’s governor and Senate leader, the Republican-controlled U.S. House of Representatives voted to block the state from moving forward with its novel plan to provide a path toward retirement security for nearly 7 million low-income Californians.
The move was viewed by leaders in California and several other states as an incursion on states' rights by a Republican Congress they accuse of setting its federalist principles aside to scuttle a program that is creating anxiety among Wall Street investment houses.
The House vote took aim at new laws in California and several other states that would require private employers that do not currently offer retirement savings programs to set up accounts for their workers , through which a small share of their earnings would be set aside in an IRA-type account. Private firms would invest the money, much like they do in 529 college savings accounts that many states have established. Workers could choose not to participate, and employers would not have to contribute any money to the accounts.
“Republicans have decided Wall Street's profits are more important than workers’ retirement savings,” House Minority Leader Nancy Pelosi said in a floor speech, where she noted the state plans are enthusiastically endorsed by AARP as an effective tool to help keep seniors out of poverty.
Gov. Jerry Brown wrote a letter to lawmakers in Congress imploring them not to vote against the plans, as did state Senate leader Kevin de Leon, who crusaded for years to pass the 2016 legislation authorizing the new retirement program.
But the House voted Wednesday to rescind an Obama administration regulation that cleared the path for states to start launching their programs later this year.
House Majority Leader Kevin McCarthy said in a letter to de Leon that he was concerned the Obama regulation would not give people who currently do not have access to retirement plans at work enough protections once enrolled in the state programs. He also expressed doubts about the trustworthiness of states to oversee such programs.
“Repealing this regulation is completely in line with our mutual respect for federalism,” McCarthy wrote, “and nothing in Congress’ action will block state innovation.”
But during the floor debate, Democrats said opponents of the programs were not looking out for workers, but Wall Street.
”There’s a reason why some business organizations like the [U.S.] Chamber and other financial groups are worried about this,” said Rep. Earl Blumenauer (D-Oregon). “This is a low-cost, high-impact, transparent program.... I think they’re afraid of the model.”
The resolution next goes to the Senate.