Fiscal Policy

'Fix the Debt' Campaign Comes to Idaho

  • By
  • Maya MacGuineas,
  • New America Foundation
August 16, 2012 |

With the election season moving into higher gear and a “fiscal cliff” on the economic horizon, the American public will be hearing more and more about the crushing debt our country faces. As it happens, Idaho is extremely lucky to have two Members of Congress, Senator Mike Crapo and Representative Mike Simpson, who have been spearheading a growing, bipartisan charge to tackle the issue.

Asset Building News Week, July 16 - 20

July 20, 2012
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The Asset Building News Week is a weekly Friday feature on The Ladder, the Asset Building Program blog, designed to help readers keep up with news and developments in the asset building field. This week's topics include college financing, housing policy, consumer protection, and asset limits.

The Inefficiency of the Mortgage Interest Deduction

July 18, 2012
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Matthew O’Brien over at The Atlantic had a piece up yesterday with the bold headline: “Why the Mortgage Interest Deduction is Terrible.” What he means (and does a solid job at explaining in the piece) is that the mortgage interest tax deduction primarily benefits homeowners in the top fifth of income earners. O’Brien writes, “We spend $100 billion every year -- that's the annual cost of the deduction -- subsidizing bigger houses for the upper middle class. This should be among the lowest of low-hanging fruit when it comes to tax reform. It would be nice to end welfare for the well-off.” He notes that the top 1% of earners (those making over half a million dollars a year) receive more benefit from the mortgage interest deduction than the entire bottom 56% of earners combined.

Event Summary: Jobs are Not Enough

July 12, 2012
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The Asset Building Program hosted an event Wednesday, July 11 to release the July/August issue of the Washington Monthly. The issue focuses on the importance and applicability of the asset building agenda in the lives of all Americans. Utilizing the magazine's focus as a frame for the event, our panelists tackled critical themes such as savings as a path to higher education, the importance of life-long savings mechanisms, the role of federal policies in promoting prosperity, and a growing political divide between young and old Americans.

NYC's Health Bucks: Incentive-Based Policies for the Win!

July 9, 2012
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Last week, New York City Mayor Michael Bloomberg announced that he was expanding the city’s “Health Bucks” program, which gives shoppers using SNAP at farmers markets an additional $2.00 for every $5.00 they spend, to all 138 of the city’s markets. Like matched savings accounts and other initiatives that reward productive choices, Health Bucks is a great example of how incentive-based policies and investments can change behavior—and counter longstanding myths about what is and is not possible for low-income families in the meantime.

Death to Tuition Tax Breaks?

July 5, 2012
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This post first appeared on HigherEdJobs as part of their iFocus feature.

By 2018, nearly two-thirds of American jobs will require a postsecondary credential.While our economic success as a nation depends on getting millions more people to and through college, college has never been so expensive. As prices go up and state support dwindles, students are forced to bear a larger share of college costs. Instead of shoring up the resources meant to help low-income students, the federal government is pouring more money into financial aid programs that disproportionately help middle- and upper-income students who would have gone to college anyway. 

The success of low- and moderate-income students often hinges on their ability to receive financial aid, especially grant aid like the Pell Grant. If we don't overhaul our federal financial aid programs to make them sustainable and better targeted toward low- and moderate-income students, we risk never being able to fulfill our nation's labor market needs. And when it comes to finding the resources needed to revamp the federal financial aid program, the lowest hanging fruit, ripe for the picking, are the higher education tax credits and deductions. 

The main problem with higher education tax benefits, like the American Opportunity Tax Credit (AOTC) and the Student Loan Interest Deduction, is that they are not effectively directed toward the students who most need them. According to a recent report by Education Sector, tax filers earning more than $75,000 were two-and-a-half times more likely to receive AOTC benefits than those earning less than $25,000. In addition, millions of tax filers lack the financial literacy required to figure out if they are eligible for one of the higher education tax credits and how to best maximize their benefit. 

In 2009 alone, the federal government spent $14.7 billion on these tax credits that overly benefit upper- and middle-income families. Since higher education is not only a private good, this is both a bad education and economic policy. Federal financial aid programs were developed in part to make a college degree attainable for lower- and moderate-income students since the return on investment to the nation is high. A college education leads to higher earnings resulting in more tax revenues. The magnitude of this effect is astonishing - a four-year-equivalent degree gives the government $471,000 more in income, payroll, property, and sales tax revenue. 

The government could roll back the thresholds of these tax benefits to ensure they are better targeted to low- and middle-income families, but that would do nothing to reduce the complexity that prevents millions of these families - usually the least savvy and most needy - from claiming them. Instead, the government needs to get rid of them - the American Opportunity, Lifetime Learning, and Hope tax credits, plus both the Tuition and Fees, and Student Loan Interest deductions. With the savings, we could better target students who need the most financial aid help by restructuring and rethinking federal aid programs. 

This will be an uphill battle since the tax credits poll well. But in an age of shrinking resources, increasing college costs, and an urgent need to get more students to and through college, we have to put aside popular but poorly-targeted policies in order to help those who wouldn't otherwise attend college, go and succeed.

Preserving Access to Justice: Legal Services and the Safety Net

June 19, 2012
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The Legal Services Corporation (LSC), which provides funding to legal services organizations throughout the country, is an essential feature of the safety net—though rarely described as such. LSC funding is used to provide civil legal services to households at or below 125% of the federal poverty line. Unlike in criminal cases, where the right to counsel is constitutionally guaranteed for indigent defendants, parties to civil cases have no such right under federal law. In other words, depending on where you live, it’s perfectly legal for you to lose your house, all your possessions, and perhaps even custody of your child without ever talking to a lawyer, no matter how little money you make.

LSC-funded services are crucial in helping keep many families afloat. Yet perhaps unsurprisingly, like other social services programs, LSC has faced major budget cuts, and continues to see its funding attacked. Over the past three decades, LSC’s budget has been effectively cut by just around seventy percent. One member of Congress even proposed an amendment to the FY 2013 House Appropriations Bill that would have ended all funding for LSC, citing the organization as “nonessential” and alleging fraud (it failed, but received 122 votes in the House). Like the proposed cuts to SNAP, cutting LSC’s funding—or even failing to increase it—could have truly dire consequences for low-income communities nationwide.

Surveying Household Wealth: Part 2 - Retirement Savings

June 19, 2012
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This blog post is part two in a series analyzing the recently released Survey of Consumer Finances from the Federal Reserve. The SCF is a triennial survey of American families that offers insights into income, wealth, debt, and savings over time. Today’s post explores the data on retirement account ownership.

Saving adequately for retirement helps pave the road to a comfortable and financially secure future. As part one of this series noted, the 2010 Survey of Consumer Finances (SCF) data show that in 2010, Americans prioritized the need for liquidity over saving for retirement for the first time since 2001. While precautionary savings allow families to plan for the short and mid-term, saving for retirement remains a critical long-term savings need. Indeed, despite the drop from first place, SCF data show that retirement ranked a close second in 2010.

Europocalypse Explained

June 15, 2012

Europe's fiscal future is looking bleaker by the day. This weekend, the G-20 will convene in Mexico to determine how to avoid a possible global market meltdown spurred by European bank debt and default. In this podcast, two members of New America's World Economic Roundtable --Jonathan Carmel, the portfolio manager at Carmel Asset Management, and Peter Tchir, the founder of T. F. Market Advisers -- talk about the implications of the impending Spanish bank bailout, the possible consequences of this weekend's Greek election, and how the U.S.

David Corn and Timothy Noah Discuss the Politics of Inequality

May 31, 2012
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On Wednesday, May 30, the Asset Building Program hosted two authors for a conversation about the history, politics and rhetoric of income inequality in the U.S. Reid Cramer, Director of the Asset Building Program, introduced Timothy Noah, Senior Editor at The New Republic and author of The Great Divergence: America's Growing Inequality Crisis and What We Can Do about It, and David Corn, Washington Bureau Chief of Mother Jones and the author of Showdown: The Inside Story of How Obama Fought Back Against Boehner, Cantor, and the Tea Party.

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