Asset Building: Catholic Social Thought and a New Strategy for Helping the Poor Catholic University

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Asset BuildingCatholic Social Thought and a
New Strategy for Helping the PoorCatholic
University of AmericaFebruary 15, 2007

• Ray Boshara
• New America Foundation
• Washington, DC
• 202-986-2700
• boshara_at_newamerica.net
• www.newamerica.net
• www.AssetBuilding.org

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What is Asset Development?

• Public and private strategies to enable
  low-income persons to save and accumulate
  long-term assets a home, post-secondary
  education, investments, land, a small business,
  and a nest-egg for retirement.
• U.S. field has been savings-based and
  account-based like 401(k)s for all and
  savings accounts at birth for all but other
  means to asset accumulation (such as expanding
  Pell Grants) matter, too.
• Historically, includes the Homestead Act, GI
  Bill, and various homeownership programs in the
  20th Century.
• Informed by Amartya Sen assets as the economic
  proxy for Sens notion of capabilties

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Why Assets?

• Michael Sherraden, Assets and the Poor (1991)
• Economically, assets are the key to economic
  security.
• Asset ownership is associated with positive
  social, civic, behavioral and psychological
  effects not necessarily associated with income.
• Lack of income means you dont get by. Lack of
  assets means you dont get ahead.
• Assets have not been part of the solution to
  fighting poverty for adults or children.
• Imagine your or your familys life without assets
  savings, a home, an education, a small
  business, investments, and a nest-egg for
  retirement.

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Why Assets, continued

• With asset lens, 4 distinct public policies
• Asset Development
• Asset Denial
• Asset Discrimination
• Asset Deprivation
• - Public policy bundles asset ownership
  opportunities for some, not for others
• - The key goal is inclusion
• Who Owns America?
• Quintile Income Wealth
• Bottom 40 10 1
• Bottom 60 23 4.5
• Top 20 56 83
• - The U.S. distributes income progressively, but
  assets regressively
• Expand asset ownership because it is

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What Have We Learned?

• The poor can save and build assets.
• Savings and asset accumulations is less of
  function of preferences and more a function of
  access to structured savings mechanisms.
• Asset effects are in fact supported by research,
  are earlier, and are often more powerful than
  predicted.

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Research on Asset EffectsSummarized by
Sherraden, 2005

• Holding assets at 23 is associated with later
  positive outcomes such as better labor market
  experience, marriages, health and political
  interest. (Bynner Paxton, 2001)
• The presence of the asset appears to matter more
  than the monetary value of the asset. (Bynner
  Paxton, 2001)
• The presence of small wealth at critical times
  can have transformative effects on the life
  course. (Shapiro, 2004)
• Parental wealth is positively associated with
  cognitive development, physical health, and
  socio-emotional behavior of children even in
  very poor families. (Williams, 2003)

• Wealth seems to be a better predictor of
  well-being as children grow older, while income
  is a better predictor when they are younger.
  (Williams, 2003)
• Low-income, single mothers assets are positively
  associated with childrens educational
  attainment. (Zahn and Sherraden, 2003)
• Income is associated with educational achievement
  when assets are not in the model. However,
  income becomes non-significant when assets are
  included. (Zahn and Sherraden, 2003)
• Assets lead to positive attitudes and behaviors,
  and positive attitudes and behaviors lead to
  assets may be a glimpse of a virtuous cycle
  wherein household development is a reinforcing
  feedback loop. (Yadama and Sherraden, 1996)

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Where Are We Now?

• 383.8 billion in budget resources for asset
  building activities in 2007, 366.9 billion are
  tax expenditures that primarily benefit families
  earning above the national median income. The
  budget includes 16.9 billion in asset building
  direct expenditures for 2007, down 608 million
  from 2006.
• Multi-billion dollar asset-building policies have
  been introduced in the U.S. Congressbut none
  have passed. More and more Congressional leaders
  and Presidential candidates support this agenda.
• Roughly 500 Individual Development Account and
  hundreds of other asset-building programs
• Asset building policies and projects in Canada,
  UK, Uganda, China, Taiwan, South Korea, Mexico

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U.S. Policy Agenda

• Two track agenda
• Getting defaults right, making saving easy and
  automatic
• Federal and state
• Accumulate and protect
• Account-based and program-based
• Macro trend toward individual asset accounts
  will the poor be included?
• Must make accounts work for the poor.
• When do risks need to be pooled?
• Balanced portfolio of programs and accounts.

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Detailed Policy Agenda

• Universal KIDS Accounts at birth
• Various Auto Save plans auto 401(k)s, Auto
  IRAs, Universal TSP, etc.
• Matched savings for the working poor
• Connecting tax refunds to assets / Split
  Refunds
• Expansion of state-based 529 college savings
  plans
• Improving access to mainstream financial services

• Improving financial education
• Revising asset limits in public assistance
  programs
• Reviving Savings Bonds
• Improving established micro-enterprise,
  post-secondary education, homeownership, and
  retirement security programs
• Improving laws to protect assets and reduce
  consumer debt

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Childrens Savings Accounts

• Existing Policies
• UK Child Trust Fund
• Singapore Baby Bonus Child Development
  Accounts
• Canada Education Savings Program
• Hungary Baby Bonds

• Proposed Policies /
• Current Projects
• Korea Child Development Accounts
• U.S. Various universal CSAs policies proposed
  SEED demonstration proiect
• New Zealand KiwiSaver Plus
• Australia Nest Egg Accounts
• Uganda Child Development Accounts demonstration
  project

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Future Generations

• Any nations economic success, and the security
  it offers for retirees, depends on the economic
  success of its children.
• Budget deficits, aging populations, and
  ballooning entitlements greatly reduce their
  chances for economic success. Presently a
  28,000 per child birth tax, and 8 spent per
  senior on every 1 per child these numbers will
  increase. We need a birth bonus.
• Record inequality economies are growing, but
  not everyone is sharing in that growth.
• Great societies promote equal opportunity for
  each generation. Not equal outcomes, but equal
  opportunities.
• With CSAs, we can help ensure that inequality of
  outcomes in one generation does not become
  inequality of opportunity in the next.

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Assets and Economic Justice for All

• Participation
• We judge any economic system by what it does for
  and to people and by how it permits all to
  participate in it. (p. ix)
• All people have a right to participate in the
  economic life of society..it is through
  employment that most individuals and families
  meet their material needs (p. x)
• Option for the Poor
• All members of society have a special obligation
  to the poor and vulnerable.From Scriptures and
  church teaching, we learn that justice is tested
  by the treatment of the poor. (p. x)
• Structures
• Time for a New American Experiment.which can
  create new structures of economic partnership and
  participation. (p. xii)