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.

Note: This post was originally published on Higher Ed Watch, New America's commentary on the world of higher education, run by the Education Policy Program.

Recently, 529 college savings plans have come under criticism. Like many stakeholders in the economy, 529 plan owners have not been isolated from financial pain, and many critics have used recent market volatility and plan underperformance to call for reform. Others, however, have gone further and called for policymakers to abandon 529s in particular, and savings overall, as a plausible conduit to help families afford college. As New America's recently launched College Savings Initiative is charged with examining and improving 529 plans, we feel that it is important to respond to some of these arguments.

To their credit, many critics of these plans share our general goal -- to increase postsecondary access and affordability for low- and middle-income students. We simply differ over whether or not 529 plans provide a promising tool for helping students attend and complete college who could not otherwise afford to go.

Consider this: A recent Gallup survey from Sallie Mae indicates that, while 62% of parents are saving for college, only 32% of those making less than $35,000 have put any money aside for this purpose. Furthermore, half of those low-income families are saving even less (or in some cases not at all) in light of the recession. This is, quite obviously, cause for concern. But is encouraging savings -- and college savings plans as vehicles to do so -- really the answer? We believe so.

In this week’s Newsweek, Melinda French Gates—co-chair of the Bill and Melinda Gates Foundation—makes the case for access to saving instruments as an oft-overlooked element of global poverty reduction. Citing the microcredit boom as opening doors for the poor, she cautions:

But loans are not enough. Savings accounts could help people in the developing world weather unexpected events, accumulate money to invest in education, increase their productivity and income, and build their financial security.

Today the city of Los Angeles made its second attempt to bring under-banked and unbanked Angelenos to the financial mainstream. Two months after Mayor Villaraigosa launched Bank on LA, City Councilmember Richard Alarcón launched the Banking Development Districts (BDDs) Initiative. Los Angeles has recognized the need for placing affordable financial services at the hands of its people and is taking major steps toward eliminating dependency on fringe financial institutions.

 While 1.5 million households are unbanked state-wide, Los Angeles has the third highest percentage of unbanked households nation-wide. For the Angelenos who do not have a simple checking or savings account, BBDs are a promising way to gain access to the appropriate financial services and products necessary to get connected to savings and asset building. Research shows that a full time worker conducting business with non-traditional financial institutions can pay tens of thousands of dollars in fees in a life time. This is a chunk of money large enough to start a small business, send a child to college, build a retirement or put a down-payment on a house.

In an interview with The Boston Globe, Darryl Collins, co-author of the much anticipated Portfolios of the Poor: How the World’s Poor Live on $2 a Day, made an interesting comment that I found myself nodding along with:

"People who do fieldwork have two views. They either think these households desperately need our help and they are just hopeless without us, or they think they are just geniuses. I think what dawned on me during this study was that you don't lose your personality just because you go down the financial chain. Some people just couldn't keep track of their money and some people did a brilliant job of keeping track of their money. Just like our circle of friends, you have some people who are organized and some people who are not."

I should give you the context, of course. Collins, along with her co-authors (Jonathan Morduch of the Financial Access Initiative; Stuart Rutherford, author of The Poor and their Money; and Orlanda Ruthven) set out to answer the question: How do the financially poor—those who live on $2 a day or less-- manage their money?

The answer that emerged turned out to be a lot more sophisticated and complex than anyone had imagined.

The House just passed the Senate's "tougher" version of Credit Card Legislation.  The House and Senate leadership have fulfilled their promise to get the bill to President Obama's desk by Memorial Day.  There are lots of guides floating around out there which summarize what this means for you. What it means for your season-opening barbeque on Sunday remains to be seen...

The vote on the final bill was 361-64. Not close. However, there was one interesting procedural note.  The House chose to split out the Coburn gun amendment (Section 512 of the Senate bill) for a separate vote.  This allowed Democrats to showcase their opposition to the proposal, but was a move without any actual impact--as Section 512 passed on a vote of 279-147. 

The vote breakdowns are actually pretty interesting in and of themselves.  On the legislation itself, 64 Republicans and one Democrat voted against the bill.  The one Democrat was Rep. Stephanie Herseth Sandlin (D-SD-AL). There's that South Dakota again.  On the Coburn amendment 145 Democrats and two Republicans voted against--Rep. Mike Castle (R-DE-AL) and Rep. Mark Kirk (R-IL-10).  All politics is local, as they say...

For folks who are interested (and truth be told, almost everyone has an interest in this) the Senate just passed their version of the new credit card regulations bill.  The final vote on the Senate bill, widely perceived to be tougher than the House bill, was 90-5.

I'll generally leave the analysis to folks with more expertise on the issue, the NYT is out of the box with a "Consumer's Guide" to the new law and I know some of our folks have lots to say on this topic. However, there are a couple of interesting and noteworthy items here:

First, the Senate bill includes the Coburn amendment on carrying guns in the National Park System.  The House leadership appears to have decided they're going to swallow that even if they don't like it.  They want to get a bill to Obama as quickly as possible and it looks like they don't think they can win a fight on the amendment anyway.

Second, while the Senate bill is seen as being "tougher" and pushing farther than the House bill, the real credit for this measure goes to Congresswoman Carolyn Maloney (D-NY-14) who organized and advocated and twisted arms to get this bill moving over the past several years.  Not to take anything away from Senator Dodd, but it's Maloney who has been the bulldog on this for a long time now.

The third, and final, installment in our "Talking Tax Time" series is here for your enjoyment.  In this episode, our own David Newville sits down with Cathie Mahon, Director of the Office of Financial Empowerment (OFE) in the New York City Mayor's office. 

OFE has created a unique program called "$ave NYC" which is a matched-savings program targeted to low-income tax filers at tax time.  If those tax filers deposit some of their refund into a CD-style account, and keep the money in the account for 12 months, OFE will provide a 50% match on those funds.  "$ave NYC" is a real-life, working version of the Saver's Bonus proposal put forward by the Asset Building team.

In the clip, Cathie and David discuss the genesis of "$ave NYC," it's scalability, and the results from the early runs of the program.  Cathie believes the program shows that low-income tax filers can and will save given the opportunity to do so and discusses some of the motivating factors for the participants.