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The rise of America’s debt culture has fueled impressive levels of consumption but proven to be unsustainable. Combined with poor oversight of risky credit products, including mortgages and credit cards, it played a role in the advent of the Great Recession. A group of scholars have been convened by the Institute for American Values to consider the question of what comes next. What’s the upside to welcoming the return of a culture of thrift?

In their new report, they remind us that “thrift is the ethic of wise use. The root of thrift is thrive.” There are some values at play here, such as industry, frugality, and stewardship, which may generate collective benefits if adopted widely. As the authors of the report write:

Indeed, for much of our history, thrift has provided a way forward for aspiring Americans of every rank and description. It has pointed the way to saving and security… It has urged us all to conserve, repurpose, save, act as good stewards of small amounts and sums, and protect our natural environment… For generations, thrift was a core value in creating a wiser citizenry and a more broadly shared prosperity.

In making the case for thrift, the report lays out 20 propositions that paint the picture of what a new thrift culture can do for our families, our neighborhoods, our economy, and our planet. Here they are below in brief, but check out the book for a fuller discussion and be sure to glance at the long and diverse list of signatories (of which I am but one).

Below is guest post written by a friend of the Asset Building Program, Mark Rukavina. Mark runs The Access Project and is one of the country's leding experts on medical debt and its debilitating impacts. 

If you think it is implausible that co-payments for doctor or hospital visits could increase your mortgage interest rate, think again.  Medical bills, even those that have been paid in full, can and do ruin credit and increase the cost of loans.   

The reasons for this vary.   Healthcare costs, for some, are simply unaffordable and bills go unpaid.  Others are confused by their bills and allow them to go past the due date or be sent to a collection agency.  Studies have found that American patients often do not understand claims well enough to know why they owe the bill or if it is correct.  An American Medical Association study found that one of every five claims is inaccurately processed by health insurers. 

In 2010, thirty million Americans were contacted by collection agencies for unpaid medical bills.  Research published in the Federal Reserve Bulletin found that more than half of all collection accounts on credit reports are medical in nature. 

Total healthcare spending in America amounted to $2.6 trillion in 2010.  Of this total, $300 billion was paid out of pocket, for example through deductibles and co-payment fees.   Between 2009 and 2010, the growth in out-of-pocket spending accelerated as more people switched to higher deductible plans or increased co-payments in exchange for lower premium costs.  

As out-of-pocket healthcare costs increase, people are left wondering whether they or their insurer is supposed to pay the bill.   Understandably, providers want payment in exchange for their services.  When they do not receive prompt payments, they initiate action similar to other businesses and send the bills to collection.

It is a common misconception that medical debt cannot hurt your credit score.  Collection agencies typically report medical bills to the credit bureaus and view all collection accounts as delinquent.  They do so without regard for why the bills were sent to collection. With medical collections, many people pay off the balance promptly upon hearing from a collection agency.  They are frequently surprised to find that these accounts stay on their credit report and lower their score.

US News and World Report and their Debate Club feature asked if the recess appointment of Richard Cordray to head up the new Consumer Financial Protection Bureau was constitution. Here’s my take:

The CFPB is the law of the land. The agency was created last year when the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed by Congress and signed by the President. This is how laws are made. It says so in the Constitution. A minority of Senators can’t decide on their own to nullify the law. And tellingly, few are raising the objection the Richard Corday is unqualified for the post. In fact, he has received glowing and bipartisan support, especially from those he worked when he served as Attorney General for Ohio.

Moreover, the CFPB has important work to do. The proliferation of abusive and unregulated financial practices played a notorious role in creating the financial crisis and bringing on The Great Recession. The new agency has been told by Congress to be the cop on the financial services beat and look out for the interests of consumers. This means making sure all types of consumers have access to financial products and services that are fair, transparent, and competitive. Specifically, the agency has been tasked with ensuring that consumer are protected from abusive and deceptive financial practices and are able to get information that is understandable and timely. There should no longer be a safe haven for firms hiding large fees deep within disclosure forms written in unintelligible legalese.

Today, the New America Foundation and the Center for Social Development at Washington University in St. Louis (CSD) released the first of a four-part series of reports "Creating a Financial Stake in College" that outline the vital role that children's savings play in achieving college success.

The New America Foundation's Asset Building Program today commended President Obama’s recess appointment of Consumer Financial Protection Bureau (CFPB), former Ohio Attorney General and current CFPB Director of Enforcement, Richard Cordray. Reid Cramer, director of the Asset Building Program, issued the following statement:

I missed this on my way out of town, but I wanted to steer people to this article by Joe Nocera of the New York Times.

He writes about the workings of an ideologically-driven campaign to lay the entire financial crisis at the feet of Fannie Mae and Freddie Mac, the government-sponsored entities charged with boosting mortgage lending. Yes, mistakes and miscalculations were made by these GSEs and we certainly should be asking what we can do differently, but in my opinion Nocera’s diagnosis is spot on. The subprime mortgage market had already exploded before Fannie and Freddie began purchasing these loans in earnest. In fact, they were actually late to the game. Once on the field, they began buying up these loans not to promote low- and moderate –income homeownership but to chase market share. They exacerbated the problem but hardly caused it. They should have stayed on the sidelines.

It was the drive for market share—and not the requirement to meet affordable housing mandates—that moved Fannie and Freddie into the already exploding subprime market. Nocera paints the picture of a textbook operation to muddy the waters of understanding, with staring roles played by the Wall Street Journal editorial page and the American Enterprise Institute. He calls it “The Big Lie” and it depends on an echo chamber to advance the thesis that government rather than actors in the financial sector are to blame for the advent of the financial crisis and its aftermath.

What to do about Fannie and Freddie remains an open question. The Obama administration has sketched out a set of potential options but (for some reason) doesn’t believe they can advance a reasonable, bipartisan discussion on the Hill. That’s too bad because there are important issues to address, such as how to help aspiring families become responsible homeowners in the future get out from under the debilitating debt of mortgages that exceed the value of thier homes. I wholeheartedly agree with Nocera’s conclusion:

Three years after the financial crisis, the country would be well served by a real debate about the role of government in housing. Should the government be helping low- and moderate-income Americans own their own homes? If so, is there an acceptable level of risk? If not, how do we recast the American dream?

To have that debate, though, we need a clear understanding of what role the government’s affordable-housing goals did — and did not — play in the crisis. And that is impossible as long as the Big Lie holds sway.

There are many ways to measure inequality. You can compare those at the very top and to those in the middle or the very bottom. You can look at the overall distribution of resources among the total population. Or you can look at the degrees of concentration among segments of the population. Each of these measures tells you something different. But it’s more consequential in what you choose to measure.

Jason Deparle writes in the New York Times of new data that shows how income inequality declined during the recession. He sprinkles in some quotes from a professor of entrepreurship, Steven Kaplan, implying inequality is a thing of the past and we shouldn’t be worrying about it anyway since economic growth is the problem. Likely, there are some debates over the data Deparle is citing. Is it best to use Social Security data or tax returns? Should we include earnings with wages? 

Regardless, I don’t find it hard to believe incomes at the very, very top have come down off their pre-recession highs (although I would still like to see more data). But this does not mean inequality is lessening or a problem of the past. We need to look at both income and wealth. Just because it is harder to shine a light on wealth but doesn’t mean we should not look for its impact.

As I wrote previously, inequality in America is still ascendant but the dynamics have changed. The bursting of the housing and stock market bubbles momentarily stemmed the wealth inequality tide. Yet by 2010, stock market losses were largely recouped. This wasn’t the case for housing equity, which is the largest item on the family balance sheet.

The divergence between housing values and security prices will be the main driver of wealth inequality for the foreseeable future.

Without major changes to the housing market and policy efforts designed to help families de-leverage, such as large-scale loan modifications and principle reduction, wealth holding for the majority of American households will remain depressed. Wealth at the very top will be determined by a combination of executive pay, tax rates, and returns to capital. Interestingly, it seems like the recession has ended for those at the very top but continues for the majority.

It’s a busy time of year. Perhaps you didn’t hear President Obama’s December 6^thspeech in Osawatomie, Kansas. It’s worth a closer look—both for its specific language and general themes. The speech was a billed as a thematic statement of Obama’s vision for the economy and if that’s the case, we can expect to hear more in the coming campaign about inequality, mobility, opportunity, and even fairness. Given the state of the economy, we should expect these issues to attract attention, but still the speech sounded like a departure for a president who has often shied away from taking a populist stance. 

I’ll be honest and say that Osawatomie had not previously been on my radar. But the choice of using this heartland town as the site for a major economic address was not accidental. In 1910, Teddy Roosevelt delivered what’s been called his “New Nationalism” speech, a milestone for the progressive era, where he called upon government to regulate capitalism and elevate the public interests above those of money and property. The press reports piqued my interest and I tracked down TR’s address. Reading it, I was surprised by how contemporary it felt.

TR used his address to rail against the rising power of corporations and moneyed interests that “too often control and corrupt the men and methods of government for their own profit. We must drive the special interests out of politics.” The very triumph of America was at stake, which at that time held the hopes of anyone believing in the desirability of democratic and popular government. Property was to be respected and protected but not given undue influence – and certainly not “the right of suffrage.” (We should send this speech to the current Roberts Court.) TR believed that the unleveled playing field was tipping the scales of justice and the promise of America could only be realized with “practical equality of opportunity for all citizens.”

“…when we achieve it, will have two great results. First, every man will have a fair chance to make of himself all that in him lies; to reach the highest point to which his capacities, unassisted by special privilege of his own and unhampered by the special privilege of others, can carry him, and to get for himself and his family substantially what he has earned. Second, equality of opportunity means that the commonwealth will get from every citizen the highest service of which he is capable. No man who carries the burden of the special privileges of another can give to the commonwealth that service to which it is fairly entitled.

I stand for the square deal. But when I say that I am for the square deal, I mean not merely that I stand for fair play under the present rules of the games, but that I stand for having those rules changed so as to work for a more substantial equality of opportunity and of reward for equally good service.”

Pardon the dated gender language and my bolding of the passage, but for me all it would take to make this passage ring true today is a few new pronouns. Now, let’s see how President Obama picks up on these ideas in his speech delivered over a hundred years later. 

In this podcast, Reid Cramer, director of the Asset Building Program at New America, describes the new dynamics of inequality that emerged in the wake of the Great Recession and have given rise to the Occupy Wall Street movement. Without dramatic changes to the housing market and policy efforts designed to get families out from under the overhang of debt, significant wealth inequality will persist for years to come. This is particularly apparent when recognizing the staggering growth of the racial wealth gap.

The Occupy Wall Street protests that have popped up across the country may lack a uniform set of demands, but they undoubtedly possess a singular and powerful critique. High finance has been allowed to assume a disproportional role in our society and, as a result, we see widespread and debilitating inequality. The protesters have found creative ways to publicize a number of contributing factors, including skyrocketing CEO pay and corporate consolidation, flat wages for average Americans, and diminishing employment opportunities. While the financial sector’s share of GDP rose to 40%, with a set of practices that plunged the global economy into a deep recession, the prospects of the top 1% have materially diverged from those in the bottom 99%.

Perhaps the most visible indication of receding opportunity is the growing disparity in incomes. The story of income inequality has been playing out for decades and it features wage stagnation despite growing productivity, with almost all the income gains captured at the very top. New analysis from the nonpartisan Congressional Budget Office confirms that the top 1% saw their average real after-tax income grow by 275% between 1979 and 2007, over six times the gains of everybody else. Economist Paul Krugman calls this the Great Divergence, which corresponds to a 20-year period when more than 80% of the total increase in income went to the top 1%, despite productivity gains of around 20%. The recession has likely narrowed this gap a bit as incomes for the top 1% have come down from their highs. Yet this is just part of the tale.

The surge and persistence of inequality in the aftermath of the Great Recession is most apparent when we shine the spotlight on wealth rather than income. As with income, the gains in wealth which occurred during the aughts (the 2000s) largely flowed upward. Those in the top ten% saw their assets rise 24% between 2001 and 2007, far outpacing gains of everybody else. In 2007, the richest 1% of households owned 34.6% of the nation’s wealth; by 2009—after the recession took hold—this rose further to 35.6%. This degree of concentration has occurred at the expense of those in the middle. Economist Sylvia Allegretto estimates that top 1% of households by wealth had net worth 225 times greater than the median household in 2009. This is the highest ratio of wealth inequality on record and an increase of 24% since 2007.

The skewed distribution of wealth is perhaps more consequential that that of income. This is because one’s prospects for future growth and mobility are not just determined by what someone earns but importantly by how many resources they have at their disposal. Assets can be tapped to help families weather unexpected events, such as when incomes decline through job loss or a health problem, but they can also be strategically deployed to make investments that can pay off down the line. Without access to these resources, families will have a harder time navigating through economic uncertainty or seizing the opportunities offered by our economy.

The Great Recession has only further skewed the distribution of wealth. When the housing bubble burst and the stock market tumbled, the distribution of the nation’s wealth became more equal. But these losses have been short-lived since security prices have rebounded and wealth holdings at the very top have been largely recouped. This wasn’t the case for most families, where home equity was the largest item on the family balance sheet. Home values will remain low for the foreseeable future as foreclosures continue to spread. Many families will find it difficult to rebuild their portfolios.

The current divergence between housing values and security prices will be one of the mains drivers separating the lower, middle, and upper-middle from those at the very top. Without dramatic changes to the housing market and policy efforts designed to get families out from under the overhang of housing debt, such as large-scale loan modifications and principle reduction, significant wealth inequality will persist for years to come.

I’m not really equipped to interpret the communiques released by the Vatican. But it seems there was a pronouncement this week that has the Pope weighing in on financial reform.  Specifically, the Pontifical Council for Justice and Peace supports the idea of a Financial Transaction Tax (FTT) as a means to better promote social justice and solidarity.This undoubtedly has the Pope’s blessing, so to speak, and is significant in its recognition that social justice is a priority, revenue has to come from some place, and high finance should increase its contributions to the public coffers worldwide.

A small tax on financial trading could raise significant revenue to fund for many cash strapped governments. It is an idea that has been discussed in the US context, but for some reasons Wall Street and the big banks have not come around. But perhaps it is indicative of a growing sea change that the idea is gaining prominent and diverse supporters. Not only has it been spotted on Occupy Wall Street protest signs but German Chancellor Angela Merkel and former British prime minister Gordon Brown have also endorsed the idea. And this weekend, Bill Gates is on his way to the G20 summit to argue that it is one way that governments can generate new resources to support international development efforts.

There’s certainly an upside to having this policy implemented internationally, because if it’s implemented everywhere no one will be disadvantaged. While Gates may see this policy as a means to fund specific initiatives (see his Washington Post op-ed), what makes this idea attractive to me is not the earmark for specific activities but the new revenue that could be generated relatively painlessly. In the context of rising inequality and a widening racial wealth gap, calling it the “Robin Hood” tax does not hurt either; its redistributive potential is an added bonus.

POLITICO recently asked the punditariat if Elizabeth Warren was too "elitist" to be a U.S. Senator from Massachusetts. How's that for a charming question? Here's my response:

Elizabeth Warren is a one-issue candidate. Usually, these campaigns don’t have staying power in high-profile elections. Except Warren’s issue just happens to impact almost every single American family. She has become a crusader to root out sources of economic insecurity within our financial sector. In the context of the Great Recession, she can connect her crusade to the classic bread-and-butter concerns of families across the state of Massachusetts.

Before she became a household name (at least to Jon Stewart viewers and POLITICO readers), she wrote an excellent book, The Two Income Trap, that described how middle-class families were increasingly at risk by their reliance on accessing credit and having multiple income streams. Even before the recession began shedding jobs, Warren was sounding the alarm about irresponsible lending practices which were becoming endemic in the credit card and mortgage industries. She saw how emerging business models were stripping assets away from hard-working families rather than provide appropriate financial services. In response, Warren was an early proponent of creating a consumer financial protection agency that would police the marketplace to protect consumers rather than the banks. She displayed her effective communication skills by giving this idea a tagline: If it's good enough for microwaves, it's good enough for mortgages. She has been an important part of the debate since.