Asset Building

 In response to the financial downturn, high schools around the country are adding financial literacy to their curriculum.  Some schools are offering the financial literacy class as an elective.  Others are making it a graduation requirement.  New Jersey is the newest state to join Utah, Missouri and Tennessee in requiring high school-ers to take a financial literacy course.  Some individual school districts, like the Chicago Public Schools, are making the decision without a mandate from the state.

The recent trend to make financial education part of the core curriculum in public schools reminds me of a New America event held last year, "The Effectiveness of Youth Financial Education."  Experts stressed the importance of linking financial education to real-world financial activity, such as a savings account or visits to a bank.  Being able to see how savings grow in a real account engages kids' interest in personal finance and motivates them to learn and retain financial principles. 

Since the inception of the Global Assets Project in 2006, I have advocated that having opportunities to save and accumulate assets earlier in life will lead to a more economically and socially secure future. Now, as I write my last blog post before beginning maternity leave to care for my first child, this assets "perspective" has transformed into much more of "reality." Now more than ever, I am sensitive to the fact that we all need a fair and decent shot at success in life. Yet such success, all over the world, is often hindered by exclusion from a financial identity; from opportunities to save and grow assets, or from the policies and products that the better-off take for granted that allow them to accumulate wealth and pass it along from generation to generation.

In California's tough economic times, even small savings can go a long way for a low-income family. Assemblymembers Jim Beall and Felipe Fuentes are working hard to make sure that CalWORKs families have the opportunity to set aside savings that can help them cushion financial emergencies and become financially self-sufficient.

On Tuesday, the California Senate Human Services Committee passed Assembly Bill 1058 (Beall & Fuentes). The California Workforce Mobility Initiative (AB 1058) repeals the $4,650 vehicle asset limit for recipients and applicants and eliminates the $2,000 cash asset limit for recipients. Also, it allows applicants to have $2,000 in savings adjusted to the California Necessities Index.

If enacted, AB 1058 would help CalWORKs families build the savings necessary to become financially self-sufficient through work. It will also save the state $3 million dollars in administrative staff time, according to the Assembly Appropriations Committee. This money is otherwise spent conducting quarterly tests to verify that the families are indeed asset poor. States that have eliminated the asset test report a savings and no fraud cases.

Imagine a California where every employee has the option to participate in a work based retirement savings plan.

Imagine a California where all workers retire with enough savings to sustain them through old age, so they do not have to depend on the government for assistance.

Well, this may not be too far-fetched of an idea, because California is taking strong steps in this direction.

Yesterday, the California State Senate Public Employment and Retirement Committee passed Assembly Bill 125, the California Employee Savings Program. Authored by Assemblyman De Leon, AB 125 aims to create a voluntary, universal, portable retirement account for California workers who do not have access to a retirement savings plan. Furthermore, AB 125 would enable thousands of small businesses to offer low-cost retirement savings to their employees.

Last week Ford Foundation President, Luis Ubinas, spoke at the opening plenary of the Corporation for Enterprise Development's 2009 Conference on Children and Youth Savings in Brooklyn, New York.  Urbinas discussed how the recent economic crisis and other events have created a unique opportunity to combat intergenerational poverty by increasing access to economic opportunity for the most disadvantaged among us.  In particular, he emphasized the powerful role that children's development accounts can play in accomplishing this important goal.  

Urbinas highlighted the great current disparity in asset holding between the rich and poor in America and how few assets many low- and moderate-income Americans have.  He also noted that despite the fact that the federal government provides several hundred billion dollars in tax incentives each year to promote asset building very little of this goes to low- and moderate income families.  Children's development accounts would be an important  step towards remedying this disparity, by helping all Americans build assets starting at birth.

I know it's hard to keep up with the kids and their lingo these days.  That's why it's refreshing to see some  old school, Webster's approved usage from time to time.  In this case, the Democratic Policy Committee has released their annual report, "The 2009 Fresh 50: Fifty New Policy Ideas for Senate Democrats."  In this case the "fresh" in question means:

"new; not previously known, met with, etc.; novel: to uncover fresh facts; to seek fresh experiences."

 Though, we could also make the argument for definition #17: 

"Slang. a.exciting; appealing; great."

Regardless, the upshot is the same.  The "Fresh 50" is an annual compilation of new policy ideas that might be appealing to Democrats in the United States Senate.  The list is compiled by the DPC staff and disseminated to all US Senate offices and beyond as a helpful resource of promising new ideas for their consideration and potential action. As they say in the report, "These ideas do not represent the positions or agenda of the Democratic Leadership in the Senate. They are the result of a brainstorming exercise meant to develop fresh, new ideas for review and consideration by Senate Democrats." We're thrilled to have three ideas from the Asset Building Program deemed "Fresh" for 2009.

This just in from our friend Peter Morris of the National Congress of American Indians:

While the United States faces one of the most significant housing crises in the nation’s history, many forget that Indian housing has been in crisis for generations. This week, the NCAI Policy Research Center (a think tank at the National Congress of American Indians) and First Nations Development Institute (a national Native nonprofit focused on asset-based development in Indian Country) released a report entitled Exercising Sovereignty and Expanding Economic Opportunity Through Tribal Land Management.

The emerging theme of this week seems to be frameworks.  Today, President Obama called for a new framework for consumer protection and financial regulation. We're ginning up for a good discussion of a new framework as well.  This Friday at 12:15, NYU Dean of Social Sciences Dalton Conley will deliver remarks on a new paper that he's written for the Asset Building Program and the Next Social Contract Initiative.

Dr. Conley's paper, "Savings, Responsibility and Opportunity in America," explores how our understanding of poverty, class, and mobility would be enhanced by expanding our focus from an individual's position in the labor market to include their ability to save and accumulate assets over the life course. This perspective leads to thinking about a new framework for economic mobility and poverty alleviation--one that works across generations and prioritizes policies that help families increase their savings and build assets over the long term.

We often speak of a key part of our role here in the Asset Building Program as being involved in the "Headwaters Strategy."  That is, if I can mix my metaphors, laying the groundwork and sowing the seeds for policy change in the future.  You can do this in a variety of ways, research, policy papers, op-eds are a great example if you can get them accepted.

President Obama and his team seem to be doing their version of the "Headwaters Strategy" as well, particularly on their long-term economic vision.  In his "House on a Rock" speech, President Obama called for America change it's economic foundation.  He said:

"We must lay a new foundation for growth and prosperity -- a foundation that will move us from an era of borrow and spend to one where we save and invest; where we consume less at home and send more exports abroad." (Italics mine)

This isn't the first time that this sort of signal has been sent.  It also seems that we aren't the only ones who've been listening.  David Brooks (one of "The Six Top Republicans Obama Listens To" according to Marc Ambinder), appears to be listening to the President in return.

I enjoyed my walk home today listening to NPR's All Things Considered run a piece explaning the genesis of behavioral economics. You can listen to it here or read the text. 

 It is wonderful to see the economics profession playing a bit of catch up to some of the other social sciences but I like how the rise of this perspective has opened up a large number of policy questions. We now know that "choice architecture" matters (it is explained in the npr peice). People can be nudged along in a direction where they want to go but won't get their on their own. Increasing savings is a case in point. What we  need to learn more about is how to construct the choices to get to the best outcomes. This part is easier said than done.