The core idea is simple. The federal government creates tax-free retirement accounts for lower-income Americans, supplementing private accounts where they already exist, and matching personal contributions to those accounts. The amount of the match would depend on the income of the family and how much they save.
Poor people already have a government funded retirement plan. It's called Social Security.
If poor people are going to be forbidden from withdrawing from the 401(k), then there's no effective difference from Social Security.
If they are allowed to withdraw their funds, which I think is the very basic requirement if we are going to say they "own" the funds, then they will withdraw them right away and spend the money. It's the poor's lack of future time orientation that contributes to their poverty in the first place.
The other factor which contributes to poverty is low IQ, which means the poor people aren't smart enough to make wise investment decisions.
The end result will be a lot of poor people who don't have enough money for retirement because of their bad decisions. It's easy to predict that the liberals of the future will feel sympathy for their poverty and give them free money anyway. Which means that Tyler Cowen's proposal will wind up costing the government more money than the current system.
But I'm sure the already overpaid financial industry loves this proposal. More profits for mutual fund companies and their millionaire employees.