Ownership & Assets

The Asset Building News Week is a weekly Friday feature on the 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 jobs, income inequality, housing, the unbanked, retirement security, personal finance, and economic mobility. Stay tuned for next week, which will likely be dominated by the release of the President's FY 2013 budget proposal on Monday, which tends to send Washington, DC into a budget-centric tizzy.

Editor’s Note: Contributors to this post will be part of a panel on the topic taking place on Thursday, February 9th in Washington, D.C. Sign up for the event here. This post is part of the Global Innovation Showcase created by the New America Foundation and the Global Public Square.

Update (2/9): Check out our data page for more information about the event and data points on economic mobility, inequality, and poverty.

This Friday, the Asset Building Program is hosting an event to discuss the concept of economic mobility and to more thoroughly investigate how economic mobility is defined and the true extent of the problem. Scott Winship, a Fellow in Economic Studies at Brookings, will identify some of the key challenges of defining economic mobility, which stem from a lack of an agreed upon definition of mobility, highly complex data or a lack of data altogether, and political agendas that are not conducive to productive conversations about mobility. Heather McGhee, Director of Demos' Washington office, and Shawn Fremstad, attorney and Senior Research Associate at the Center for Economic and Policy Research will provide comments on Winship's ideas and outline appropriate policy responses.

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).

Newt Gingrich doesn't shy away from taking dramatic policy positions. But he doesn't always stick with them. For instance, he no longer supports limiting carbon emissions through a system of cap and trade permits. Nor is his proposal to execute anyone convicted of bringing two ounces of pot into the U.S. being featured in his presidential run (The Drug Importer Death Penalty Act of 1996). His support of other big ideas, such as privatizing Social Security, is more enduring and particularly deserving of scrutiny.

When the topic of Social Security comes up, Gingrich has proposed the U.S. follow the Chilean model of pension reform. By allowing workers to divert payroll taxes into personal savings accounts, he argues that workers would receive much higher benefits than what they would get under the current system and if there's a market downturn, the government can step in. At a recent debate, Newt said that "Chile has promised that if you don't have as much savings as you would get from Social Security, the government would make up the difference. In 30 years time, they've paid zero dollars." Is it really that easy? At first glance, this type of transition in the U.S. would change our underfunded Social Security system into an unfunded one, creating a huge liability for future generations. But we decided to take a closer look at the Chilean experience to see how the process of reform has unfolded down there.

The Asset Building News Week is a weekly Friday feature on the 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 CFED's release of its Assets & Opportunity Scorecard, financial education, jobs, asset limits, lower-income consumers, the mortgage mess, and rhetoric about poverty, inequality, and mobility.

Congresswoman Rosa DeLauro of Connecticut held a press conference today to discuss the important role that SNAP (Supplemental Nutritiona Assistance Program, or food stamps) plays in forming an economic safety net. Elise Gould from the Economic Policy Institute, Donna Cooper of the Center for American Progress, David Beckmann of Bread for the World, and Tara Marks of Just Harvest contributed their expertise on the economic, political, and social dimensions of SNAP.

Conditional clauses are very important. Mitt Romney's statement yesterday that he's "not worried about the very poor" is based on the supposition that "there's a safety net there," an "ample" safety net at that. This is similar to my saying that I'm not worried about whether my husband will starve to death when I leave town because he knows how to order a pizza.

The front page of today's American Banker (subscription required) shows their headline writers having some fun (perhaps too many CFPB related articles has them looking to keep things fresh?) There are three articles highlighted in today's daily briefing:

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.