ASPIRE Act/KIDS Accounts: Latest Publications

The ASPIRE Act of 2009

Asset Building — Wed, 01 Jul 2009 14:01:00 -0400

What does the bill do?
Why is a bill to promote asset building for children necessary?
Who is eligible? Will illegal immigrants or children who become citizens get accounts?
Will children born before the bill takes effect get accounts?
Why do wealthy people get these accounts?
Why do poor people who don't pay taxes get accounts?
Is it unrealistic to expect those with low incomes to save when they already struggle to get by?
How
read more

The ASPIRE Act of 2009 Bill Summary

Asset Building — Wed, 06 May 2009 01:00:00 -0400

Title of the Bill

The America Saving for Personal Investment, Retirement, and Education Act of 2009 ("The ASPIRE Act of 2009")

Purpose of the Bill

To encourage savings, promote financial literacy, and expand opportunities for young adults by establishing a Lifetime Savings Account for every newborn child.

Lifetime Savings Accounts

Promoting the Vision

Asset Building — Fri, 16 Jan 2009 10:26:00 -0500

Introduction/Background

In recent years, the role that savings and assets play in shaping people's lives has increasingly captured the attention of researchers, policy analysts and elected officials. Their interest in savings and building wealth has grown along with an increased awareness of specific policy tools and interventions, such as matched savings accounts available for lower-income workers. The launch of the SEED Initiative in October 2003 was an important marker in this process because it introduced the

Baby Bonds Pay Bipartisan Dividends

Cecille Isidro — Tue, 16 Oct 2007 12:33:00 -0400

At a recent campaign stop with the Congressional Black Caucus, Sen. Hillary Rodham Clinton said, “I like the idea of giving every baby born in America a $5,000 account.”

That was enough to generate a few headlines and some right-wing outrage. The Drudge Report was quick to tweak one of its favorite targets and drive some Internet traffic with a bold banner, “A Bond for Every Bassinet.”

The conservative Washington Times and New York Post blasted the idea within 24 hours, and Republican presidential candidate Rudy Giuliani called it “pandering” and promptly incorporated it into his next fundraising appeal.

But with some pundits denouncing the proposal as some hyperliberal expansion of the welfare state, it’s worth noting that this idea has been simmering for some time in both Democratic and Republican policy circles.

Unfortunately, much of the discussion that followed Clinton’s remark occurred without any context at all beyond the $5,000 figure, which is a real attention getter to be sure.

For starters, the New York senator was not poised to unveil a multibillion-dollar initiative designed to remake the social contract. It hasn’t been included in any of her formal campaign proposals, but it wasn’t an idea just cooked up on the campaign trail, either.

In a July 2006 speech to the Democratic Leadership Council, Clinton proposed giving every newborn child a $500 endowment, calling it a “baby bond” to distinguish it from a similar proposal championed by the very conservative then-Sen. Rick Santorum (R-Pa.).

But this time, Clinton didn’t say $500; she said $5,000. And at that level, the proposal not only is novel but also costs about $18 billion more per year. The unscripted musing of the sure-footed candidate has made more news than the substance of the proposal. That would hardly be a first, but it remains a shame since this is still a good idea, with good politics to boot.

In the past year alone, there have been similar proposals to use children’s accounts to support these purposes, which have been promoted by the likes of Republican Sens. Jeff Sessions (R-Ala.) and Jim DeMint (R-S.C.), as well as Democratic senators such as Charles Schumer (D-N.Y.) and Joe Biden (D-Del.).

Just last week, a bipartisan coalition of lawmakers reintroduced a bill called the America Saving for Personal Investment, Retirement and Education, or ASPIRE, Act, which provides every baby with a $500 endowment, untouchable for 18 years and then restricted to paying for college, putting a down payment on a home or saving for retirement.

These policymakers have crossed the aisle because they recognize that with the country’s growing wealth gap, low personal savings rate and poor financial literacy, we need to find ways to seed more savings and property ownership.

Access to even a modest pool of assets can provide an essential element of economic security, helping people weather income shocks and take advantage of strategic opportunities.

Much of this simply can’t be achieved through social insurance that is geared toward specific risks like unemployment or very low pay, or specific services such as health care. Assets provide the flexibility families need to navigate a volatile economy.

And there are a number of benefits to starting this savings process at birth. Not only do you get to maximize the advantage of compound interest, but these accounts can become a teaching tool to deliver the fundamentals of financial education -- a primary skill for navigating our 21st-century economy.

This is actually the approach that they are using in the United Kingdom, which is already implementing a similar accounts-at-birth proposal with support from both the Labor and Tory parties.

If we engage in a dialogue that goes beyond headlines, the merits of baby bonds could garner support from progressives and social conservatives alike. That’s because, at its core, this policy is about ownership and opportunity, offering a little something for everyone.

Supporters of President Bush’s ownership society should feel right at home providing a means to spread property ownership through the population, which might change how people think, behave and plan for the future -- ultimately promoting self-sufficiency in the process.

Liberals are more likely to focus on how savings accounts can serve as investments in children that can create opportunities down the road to overcome economic disparities.

We’ve already seen the potential of this idea to create some common ground.

When debates on Social Security had broken down along partisan lines in 2004 and 2005, Santorum and then-Sen. Jon Corzine (D-N.J.) were able to momentarily sing each other’s praises as the initial co-sponsors of the ASPIRE Act. Perhaps Clinton, or some other Democratic standard-bearer, will find other strange bedfellows to work with who see creating children’s savings accounts as an investment worth making.

Forget Easy Money

Cecille Isidro — Sun, 07 Oct 2007 07:12:00 -0400

Countrywide Financial, the nation’s largest mortgage lender, has a curious new idea -- or, more precisely, an old one. No longer will it use wads of Chinese cash recycled through Wall Street to make subprime loans to unqualified borrowers. Instead, it will take in deposits from small savers and lend them out to people who might actually repay them -- just like that humble thrift institution president George Bailey did in It’s a Wonderful Life.

Imagine: a bank that promotes thrift! This could be the start of something big. Writing recently in the American Banker, Eugene Ludwig, a former comptroller of the currency, advised financial institutions to stop relying "on the easy money that comes from wholesale funding" and to concentrate instead "on harder-to-get core deposits." How quaint. Remember when banks actually tried to instill the savings habit by going into schools and helping kids set up small passbook accounts? Today, the first experience most younger Americans have with a bank comes during freshman orientation at college, when they come across a table laden with giveaways and credit-card applications.

This return to thrift comes none too soon. Not since the Great Depression have so many Americans lost their homes in one year -- and we’re not even in a recession, at least not yet. But we’re still on course to see 2 million foreclosures in 2007, afflicting one in 62 households. That’s a 67 percent increase from 2006, according to RealtyTrac. The Federal Reserve’s recent decision to cut its benchmark rate by half a point, while widely praised on Wall Street, will do little to stop the slide.

Also not since the Great Depression have Americans saved so little. Even with unemployment at historically low levels, Americans spent more than they earned in both 2005 and 2006 -- and charged the difference. Household debt, not including mortgages, now eats up nearly 15 percent of disposable income -- more than food and gasoline combined. One in seven families is dealing with a debt collector. Children today are more likely to live through their parents’ bankruptcy than their parents’ divorce. Americans’ stunning lack of savings not only brings personal tragedy but also is causing the dollar to plummet against all major currencies, jeopardizing our economic growth and threatening the financial system worldwide.

What’s going on? No doubt, some of us like to shop too much, but it’s also true that the "fixed costs" of middle-class life have soared. Elizabeth Warren, a professor at Harvard Law School, shows that while family incomes have gone up in the past generation, the costs of health care, education, housing, child care and transportation have risen even higher.

Meanwhile, not only does the government itself borrow as though there were no tomorrow, primarily through unfunded health and pension plans, but it promotes what David Blankenhorn of the Institute for American Values calls "anti-thrift" institutions. Today, 41 states plus the District of Columbia and Puerto Rico run lotteries, and 11 states encourage casinos. Government has also allowed for the mainstreaming of other anti-thrift institutions -- some charging annual interest of more than 500 percent -- that once existed, if at all, only in the shadows of society. Payday lenders, rent-to-own stores, auto-title lenders, some franchise tax preparers and chain pawn shops are all now as common across the landscape of middle-class America as Applebee’s.

After the terrorist attacks of 2001, President Bush told us that the patriotic thing to do was to shop. But Osama bin Laden is still out there, gas is more expensive than ever, the credit card is maxed out and our homes are depreciating. There’s a better way: the old-fashioned virtue called thrift.

Historically, thrift didn’t carry its current association of being cheap or stingy. Rather, it meant the wise use of resources. It meant an abhorrence of waste, whether of raw materials, time, energy or money. In short, it meant conservation.

To conserve money, working-class men and women banded together to create "thrift" institutions. Before these institutions were deregulated and taken over by the fast-buck crowd in the 1980s, they provided a staid but reliable vehicle for building a nation of "freeholding" middle-class homeowners and small-scale entrepreneurs. Most Americans understood, until the triumph of the anti-thrift institutions, that their own freedom from wage slavery -- and, indeed, the civic health and wealth of the republic -- depended on the savings habit and the widespread ownership of unencumbered small properties that it makes possible.

Today, by contrast, while many Americans understand the need to conserve energy and natural resources, they have trouble seeing what any of that has to do with credit cards and subprime mortgages. But conserving financial resources is not only still essential to individual liberty; it is also essential to moderating wasteful consumption and saving the environment.

Reviving the American thrift ethos won’t be easy, and it will probably take at least a generation. But we can take some small steps now that would make saving easy, automatic and frequent. Our goal should be to generate new savers as well as new savings -- in sharp contrast to current government policy, which allocates considerably more than $100 billion a year in tax breaks to high-income earners who would save anyway.

First, we should take advantage of one of the most powerful forces in human nature: inertia. Studies in behavioral economics show that when new hires have to opt out of a 401(k) retirement plan, as opposed to having to opt in, savings rates skyrocket. Also, building on the "Opportunity NYC" initiative (which is being privately funded by the Rockefeller Foundation, New York Mayor Michael R. Bloomberg and several other donors), governments, civic-minded corporations and philanthropies could make automatic savings deposits to individuals who engage in socially desirable behavior. Finish high school, volunteer in your community or buy an energy-efficient appliance, and your savings account receives a deposit.

Technology, if fully exploited, can also make the cost of maintaining a bank account far lower, thereby giving financial institutions a greater incentive to serve small savers and giving freedom to the "unbanked" poor from the gouging fees that payday lenders charge to cash checks. Imagine that your debit card is also an interest-paying savings card, to which your employer, the Internal Revenue Service and other entities can make automatic deposits. Some innovative firms are already offering such a product, which combines low cost with convenience and security.

Meanwhile, regulators should encourage more community-focused banks, credit unions and thrift institutions. These can resume their historical role of promoting thrift by helping customers become savers as well as (eventually) homeowners and small-business owners.

Congress should do its part as well. The bipartisan New Savers Act, for example, makes it easier to open bank accounts, buy savings bonds, put money away for college and receive financial education. Another bipartisan measure, the Automatic IRA Act, encourages automatic payroll deposits into IRAs. Other proposals authorize tax credits for low-income savers, as well as remove savings penalties for those on public assistance.

Finally, to usher in this "new thrift" across generations, Congress should establish a lifelong savings account for all children when they are born -- a reality in Britain and elsewhere and an idea that’s rapidly gaining bipartisan momentum in the United States.

If you’re an American born in the 20th century, thrift probably strikes you as a musty, downscale word -- reminiscent of used clothes, aged relatives who wrapped their sofas in plastic or perhaps the grandmother who saved Green Stamps. But it’s worth remembering, as did generations of Americans struggling up from poverty and privation, that thrift is still the essential virtue that makes the American dream possible.