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Last week, I attended CFED’s 2012 Assets Learning Conference, a biannual national gathering of practitioners, researchers, and advocates working to promote economic opportunity and fight poverty for low- and moderate-income Americans through savings, investment and ownership. Following the conference, I sat down with Bob Friedman, CFED’s founder, Board Chair and General Counsel, to discuss the state of the asset building field.
David Blatt: You’ve been active in this field a long time. What do you see as the biggest changes in the area of asset-building today compared to 15 or 20 years ago.
Bob Friedman: First of all, it’s so much bigger. We did our first conference 16 years ago, which was an IDA (Individual Development Account) learning conference and there were 150 people. We just finished this conference, where we had 1,200-plus. Today we see so many more programs, people, policies across the field. Even the classes of assets we talk about has expanded. It was always homes, businesses and education. Now it’s citizenship, assistive technology for people with disabilities, emergency savings as well. Also, we now cover a larger spectrum of financial security – learn, earn, save, invest, protect. The innovation is burgeoning.
DB: Where have you seen the most exciting progress in the area of asset-building?
BF: It’s spread among all states. The Assets and Opportunity Scorecard that we issued this past January, there’s a long list of policies there and every year more states are filling those out. I think one of the limitations has been that with the 2008 recession and the decline in state finances, things that cost money have not grown and sometimes have been cut back. But in general, whether it’s policy, practice, research, we have data now about what works and what doesn’t that we could only dream about even a few years ago.
DB: Obviously the Great Recession took a huge toll on the wealth and savings of families, especially of low-income families. What do you see as the lasting impact of the recession on the movement to expand economic opportunity?
BF: It’s taken a huge hit. The current estimate is that people lost $7 trillion in asset value, mostly in housing but not exclusively. People of color were hit especially hard. That’s sobering to all of us. I think there are some very interesting ideas now that Ray Boshara and Jacob Hacker and others are talking about. Maybe there’s a new role for social insurance, new types of insurance for when the markets falls.
The other side of that is that at some point there’s got to be a buy-in opportunity as housing values fall. At some point they’re going to start going up again. I hope that on top of this huge and tragic loss in wealth that we at least take advantage of the possibility to regain some of this and get some new folks into housing and allow them to rise up the economic ladder.
DB: You’ve been especially vocal in focusing attention on the ‘upside-down asset budget’ at the national level. Can you describe what’s wrong with national asset-building policies, and how we reverse the situation?
BF: Sure. Generally we’ve dealt with poverty and unemployment though safety net programs, which not only don’t build wealth but actively penalize low-income and unemployed people from building wealth by imposing asset limits on eligibility. On the other hand, we use the tax system and tax preferences to build the economic ladder. And it’s just mind boggling in its regressivity. We spend half a trillion dollars a year or more through tax incentives – home mortgage deduction, preferential capital gains, and others. As our Upside Down report detailed, more than a third of those benefits, 37 percent, accrue to the richest 1 percent, 55 percent accrue to the top 5 percent, and just 5 percent are spread among the bottom 60 percent. People making over $1 million a year get over $96,000 in annual subsidy; people in the bottom quintile get five bucks. We are rewarding the rich, missing the middle, and penalizing the poor. And it’s cumulative. Over ten years, that’s five trillion dollars. That’s been redistribution towards the wealthiest from the poor.
But it is an opportunity looking ahead because you could reduce this overall budget, you could cut it in half or more and generate two, three trillion dollars in savings. That would go a long way towards closing the budget gap. Then if we could put in place a refundable saver’s tax credit of $500 available to everybody, but particularly targeted for the 60 percent who are currently left out, I really think that could change the face of economic opportunity and growth in this country. If we can renew savings, spread that ‘hope in concrete form’, I think we’ll see a lot of new businesses, new jobs, lots more people going to college and gaining new chances for economic opportunity.
I think the tax reform we’re going to see as part of deficit reduction provides the chance to change the system. Even the Republicans are talking about curbing tax incentives because we’re spending more money on tax incentives now than we’re collecting in income taxes. That can’t continue, we’re gonna have to curb them, and this is the opportunity.
