Savings

Editor's note: this post appears as an op-ed in today's edition of the San Francisco Chronicle. It is authored by Judy Darnell, Director of Public Policy at United Ways of California, and Aleta Sprague, Policy Analyst at New America Foundation.

After Melissa’s parents kicked her out at age 15, she survived on her own for years. She eventually married and had children, but her husband was abusive. Melissa left him after he broke her 2-year-old’s leg. She needed help to pick herself up. So what stopped her from getting it? Her 8-year-old van.

Pulling yourself up by your bootstraps and a “hard work” ethic are the hallmarks of America’s definition of success. To achieve success and the economic mobility of the American Dream, however, requires not only the ability to generate income, but also the ability to translate such income into assets. While income may measure whether or not a person has enough to get by, assets measure whether or not a person has enough to get ahead.

On Tuesday, the Illinois Senate voted to become the eighth state to eliminate its TANF asset test—and the second state thus far in 2013. This development reflects a longstanding trend initiated by the states to reform their programs’ asset limits to better support families’ long-term financial stability—while saving time and money in the process. Yet in the current Farm Bill debate happening at the federal level, House Republicans are proposing changes that would completely undermine this wave of progress. Let’s take a look at some key lessons from Illinois about why asset limit reform makes so much sense.

As any parent will tell you, mobility is a game-changer. Once junior can crawl, gone are the days of leaving him on his playmat while you step away, however briefly, and expect him to be in the same spot playing with the safe and developmentally appropriate toys you left him with. No, he'd rather be exploring the shoes you left in the corner of room with his mouth or in pursuit of the family cat. What worked before has to be reexamined to be successful once mobility enters the picture. 

What if I told you that very poor people, living in the most expensive city in America in the aftermath of a massive economic collapse, were challenged to save $500 and not touch it for a year with the promise of a 50 percent bonus if they succeeded? Do you think that some of them would be able to do it? A few?

What would you think the impact of that small amount of money would be? Equally small? Would you think that sequestering those resources would make families more likely to go into debt? More likely to skip paying their bills?

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 inequality, retirement, the workforce, and financial services.

Student loan debt has been in the news a lot these days. In the last week, a number of news outlets wrote about mounting student loan debt and the delaying of life events by their borrowers (see ABC News, the Chronicle of Higher Education, CNN Money, the NY Times [here and here], and the Wall Street Journal, to name a few). The article in the NY Times provides a great example of this, "Consider Shane Gill, a 33-year-old high-school teacher in New York City. He does not have a car. He does not own a home. He is not married. And he is no anomaly: like hundreds of thousands of others in his generation, he has put off such major purchases or decisions in part because of his debts."

As part of their effort to reform the tax code, the House Ways and Means Committee created a series of working groups and put out a call for public comment on tax reform ideas.

The uproar from the financial industry over President Obama’s proposed “retirement cap” is preposterous, but unsurprising. In the usual vein, the industry presents the proposed limit as an attack on the hard worker and diligent saver, despite the fact that it comes nowhere close to affecting even the top 1 percent of earners. In fact, it doesn’t touch the top one-tenth of one percent. For every 10,000 IRA account holders, a whole six accounts would be affected by the limit. That number is even lower for 401(k) accounts. As Fred Hiatt for the Washington Post explained, the employee-benefit lobby quickly mobilized to forestall this outrageous “’socialist idea’ of ‘raiding’ retirement accounts.” And it is succeeding.

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 retirement security, racial wealth disparities, housing, and homelessness.