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Building Financial Security in America_ A 2020-2030 Vision by hcj


									               Building Financial Security in America:

                         A 2020-2030 Vision

Presentation Prepared for Asset Funders Network 2012 Meeting
Paving the Road to Financial Security
March 20 th and March 21 st
Houston, TX
                  For Discussion Purposes Only

            A Vision for Funders

§ What did early funders of asset building field see
  that inspired us so deeply?

§ What vision can funders now have for this field?

§ What actions does this now inform?

                For Discussion Purposes Only

         The View from 1990s….
            …Assets Matter…
§   Asset analysis – a radical new frame – severity and persistence of
    the wealth gap as a block to moving people from poverty and
    working class struggle to lives of financial security.
     (Oliver and Shapiro; Sherraden)

§   Sherraden offers not just analysis but also a solution – Individual
    Development Accounts as a wealth building tool that could
    someday lead to major new system of individual accounts –
    beginning as early as birth.

§   When Michael met Bob…
    CFED knows what to do with a smart wealth building tool – rapid
    experimentation with IDA tool – Research and American Dream
    Demonstration – inspires a field of practice and a growing
    movement of “believers” that we have tapped something bigger.

                    For Discussion Purposes Only

                   IDA Inspiration

§   IDAs surpassed expectations

§   IDAs showed how diligent sacrificial saving, with matching money,
    surrounded by supportive institutions, helped people reach long-held

§   Beyond credit counseling (getting to zero); Individual Development
    Accounts offered structure, rewards, and the sweet success of
    achieving a goal that was deeply valued – long-term assets such as a
    home, education, business start, retirement nest egg.

              For Discussion Purposes Only

Why we were inspired …Asset-Building:
       An anti-poverty weapon for a wealthy land

   §    A bit like discovering the right cocktail of medicines. After
        years of working on poverty in the US it was clear that the
        silver bullet of jobs, economic growth, and connecting
        people to both was not moving the needle. Along comes a
        simple tool that fits a mixture of hard work, sacrifice, and
        matching money that seems to promise a way for a firm
        foothold on the ladder to financial security and middle-class

   §    Having the asset – even when modest – changes the
        equation. Not just about schools, jobs, family. Assets are
        the missing ingredient.

                   For Discussion Purposes Only

    Why we were inspired …Asset-Building:
           An anti-poverty weapon for a wealthy land

§   Now the same microfinance client that would have borrowed to run
    a day care saved her money, got her match, and was able to
    finance the building, shelter her family, operate the day care,
    employ three workers, provide care so that other moms and dads
    could work. What’s not to like?

§   “Income feeds your stomach, assets change your head” Giving
    people a way to build assets, when combined with other efforts,
    seemed to be delivering lives of greater success, changing heads,
    allowing people to move forward confront their own behavior
    without shame – this was the epitome of “hand up” not “hand-out”
    social change.

                        For Discussion Purposes Only

           Why we were inspired …
The big vision as it looked in the 1990s
§   If you liked scale, you could now really dream

§   IDAs offered a huge national vision – broad account holding
     § Work without assets was just struggle. Work with assets was progress toward
        middle class

§   IDAs offered a puzzle piece to solve for more than offering opportunity in one
     § Something going on besides just value of account and what asset you
                                                                      that changed
        purchased. Accounts were pointing to generational mobility—work
        not only adults but also children in the household.

§   Asset policy seemed to be natural corollary in the 21 st century to what Social
    Insurance – Social Security and Medicare – was to the 20 th century. Big systems,
    everybody in, everybody contributing, no hand outs, but rather hand ups.

§   IDAs to child savings accounts – in two generations nearly every American would be
              For Discussion Purposes Only

    From Inspiration to Action Plan

§   Inspiration
§   Research and Development
§   Advocacy
§   Government Pilot
§   Advocacy
§   Rose Garden
§   Massive Implementation/Marketing

                     For Discussion Purposes Only

         Inspiration to Action: Reality is
§   Government Pilot (Clinton AFIA – Assets for Independence Act, 2000)
    starts with new $20 million of demonstration funds when funder
    research barely launched.

§   Advocacy – Conservatives love us! (Santorum) Gasp! What
    progressives see as an addition to social insurance wins of 20 th century,
    some conservatives see as the route to end, reduce and/or replace
    policies such as Social Security and Medicare.

§   Bush Administration's ownership society and empowerment language
    shows promise or perils – are they committed to wealth transfer
    through public matching money?

§   Some Practitioners key to IDA demonstration don’t like scale.
    (prefer a high quality homemade cookie to Oreo cookie at scale)
               For Discussion Purposes Only

    Inspiration to Action: Reality is
§   British Government Acts to create Child Trust Funds, but US
    legislation at federal or state level elusive…US rose garden…never
    promised…needs new strategy.

§   Banks and Financial Institutions – organized by Aspen IFS from
    2005-2007 – like the British model of private accounts for every
    child, and new IRAs for all, but major advocacy moment to “Add
    IDAs” or “Add the Kids” to major retirement financial legislation
    Economic Growth and Tax Relief Reconciliation (EGRTRRA) is
    missed in 2001 with EGRA and again with Pension Protection Act
    in 2006.

§   Asset Advocacy feels very top down. Civil Rights to Silver Rights
    feels like its movement elements are missing.

        For Discussion Purposes Only

What big vision can funders now
  have for asset building in

            For Discussion Purposes Only

         Big Vision:
  New Accounts, New Money

n From a Chicken in Every Pot to
n New Pot, New Chicken
n New Accounts, New Money

                     For Discussion Purposes Only

     New Accounts, New Money

n Allow us to connect two wings of the asset building field:

    1. The first wing is the wing that cares about access        to financial
       products –good ones – safe, fair, strong

    2. The second wing is the wing cares about–savings      equity–
    how we reward and grow wealth, and getting a      fair share of the
    tax code for the millions left out. It’s the wing that captures US history
    of rewarding and assisting the middle class (stakeholding, 40 acres and
    a mule, GI bill, mortgage interest tax deduction) and translates this into
    21 st century goal of asset building and closing the wealth gap.

                   For Discussion Purposes Only

        A V ision for New Accounts
§   Asset building that promises new accounts for unbanked,
    underbanked and low-wealth

§   “Access” theme of AFN fits well in the vision for bringing new

§   Financial system that works – just needs to bend to include more
    Americans in the system in a fair way.

§   Bring on the Apps! (e.g.; Hello Wallet, Save Up,
    MANGO, prepaid cards) Accounts have changed. Technology for
    savings is changing the way Americans can do this.

§   Not necessarily the creation of a new account per se, rather new
    accountholders into an account structure which already exists
    and is protected by laws, regulations.
               For Discussion Purposes Only

    A V ision for New Accounts
§   The creation of new Consumer Financial Protection Bureau is
    a huge victory for the Obama Administration’s financial reform
    and for movement on a set of issues around financial access
    that Asset funders and others have been sustaining for decades.

§   This is a ripe funder moment to support innovative institutions
    that can work with the new CFPB to get into the bloodstream of
    a new regulator smart innovations that will make it easier for low
    income people to manage and save their money

§   Post financial downturn and Occupy Wall Street – climate is ripe
    for new code of ethics of practice that is fair to consumers.
    Makes sense to demand accounts that are fair in price, fair to
    understand, built to deliver as advertised – mortgage should get
    you a house not a headache.

                     For Discussion Purposes Only

          A vision for New Accounts:
    The power of accounts as cushions
§   When we speak of having a savings account cushion, we are in
    today’s dollars talking about something close to D2D goal of $2,000
    for an emergency fund for a household.

§   The fight to help lower income Americans establish modest new
    savings accounts allows us to boldly plan for both savings accounts
    that cushion financial disaster and give people the confidence to
    build up the resources that will help navigate financial life.

§   Using savings as a shock absorber, a form of self insurance, is
    crucial because as Jacob Hacker writes, we live in an economy with
    more risk, our safety net is weaker, the incidence of income volatility
    is greater. Families – especially low income families – are
    experiencing great financial insecurity. Savings cushions help
    families stay stronger in the inevitable crises.
      § Pew Research shows that cushions also help people get back
        on the ladder quicker. Not falling back so far or so down.

                     For Discussion Purposes Only

          A Vision for New Accounts:
      Savings is Not Social Insurance
§   Savings account cushions are not a replacement social insurance
    system. Progressive funders need to be clear that with an interest in
    savings cushions, they do not abandon their interest in needing the
    wider social insurance programs or means tested poverty programs.
    These funders do not want to return to the 19 th Century where there
    was only self insurance and none of the broad gains in social
    insurance of the 20 th Century that gave us Social Security, Medicare,
    Unemployment, Disability, and then a broader sets of supports for
    children and families.

             For Discussion Purposes Only

A vision for New Accounts
n Small is beautiful

n Getting people to $2,000 allows cushions for disaster, may
  allow families to recover rung on ladder quickly

n Shift heads, minds, may explain resiliency

n It’s your money. Its expressly for emergencies. You’re not
  penalized for taking it when you need it

                    For Discussion Purposes Only

     A Vision for New Accounts

n Unfortunately, small is small. Only your own money, no market
  upside from investments over long term, no match so no ability to
  do better than your wage, sacrifice and circumstances.

n No savings equity with what happens with tax code rewards to
  upper income savers.

n If we stop at a vision that only includes access, then we’ve made no
  demands on the wider system. Only asked for smoothing of
  people’s own money and progress. It is all self help.

n Should asset advocates in world’s richest country really be done?

                    For Discussion Purposes Only

           A V ision for New Money
n In contrast to new accounts, new money envisions Child Accounts,
  Automatic IRAs, and expanded Saver’s Credit, or Freedom Savings Credit

n Bolder vision to imagine helping more Americans get the reward that
  comes from matching their efforts with tax incentives to grow their wealth.

n It is a vision about savings equity since this tradition is already well
  established in the American tax code.

n It is a vision that would go far beyond access to the financial system by
  insuring that we “dealt in” bottom half of the economy, with average net
  worth of only $28,000.

n Depending on contributions and matches, a Child Account can grow to be
  worth $5,000, or $50,000 and a new Automatic IRA can reach $150,000
  with weekly savings of $13.

                   For Discussion Purposes Only

           A Vision for New Money
n Enacting Federal Asset Policies such as child accounts would cost
  approximately $2 billion annually.

n Enacting matched savings for adults saving in qualified accounts,
  “The Freedom Savings Credit” would cost approximately $3 billion

n Together, these 10 Year Budget items of $50 billion are not small.
  Difficult to hide during a time of budgetary austerity.

                   For Discussion Purposes Only

         A Vision for New Money:
            Essential but Hard
§   Helping Americans generate meaningful nest eggs ($50K -- $150K)
    is a powerful vision

§   New money for asset building of the vast majority of Americans is
    essential and worthy of foundation effort.

§   The heart of the “recovery” theme of AFN is in helping accelerate
    people’s economic security climb – beyondtheir own bootstraps.

§   The case for new money is hard. Hard in Clinton years with a surplus,
    harder still in Obama era with massive deficits.

§   In Clinton years, proposals for Universal Savings Accounts (Rubin,
    Sperling) as a second tier “add on” to Social Security came very
    close to meeting an Asset Building goal of new accounts and new
                       For Discussion Purposes Only

            A Vision for New Money:
               Essential but Hard
§   Bush years, conservative opposition to “new entitlements” made argument
    hard, as well as financial institutions skepticism that with new money would
    come new regulation and far more intrusion into wealth management
    business. (suspicion of fee caps, disclosures, and simple account fever
    contagion into 401(k) world).

§   In Obama era – same financial institution skepticism but deficits dominate. If
    we want money, we will have real opponents—groupswhose current tax
    benefits are threatened.

§   Tax reform is the moment to ask for new money. Finding $5 billion when
    trillions are on the table for debate is plausible

§   Tax reform politically is likely to need some new investments and

§   Asset building policies could become a popular consensus “sweetener”
      For Discussion Purposes Only

What actions does this now

              For Discussion Purposes Only

 Matching our Vision with Action:
          A 2020 plan

n A vision for new accounts AND new money requires a bigger
  battle plan

    § Sustain the gains that have been made in new access and
      new accounts by staying vigilant in the fight for Consumer
      Financial Protections

    § Stay focused on the battle for new money

n Getting new money is a different fight – likely to involve tax reform

n Can we borrow a battle plan from other success stories?

                   For Discussion Purposes Only

      Matching our Vision with Action:
               A 2020 plan

n What does the health care battle teach?

    § Heavy investment in grassroots advocacy

    § Respectable investment in national policy, advocacy, and

                For Discussion Purposes Only

    The Role of Philanthropy in
       Health Care Reform

“Another important lesson was the role that philanthropy played in
building HCAN (Health Care for America Now). The Atlantic
Philanthropies decided to invest in us because we were founded and
backed by labor and community organizations. The foundation
provided HCAN with the kind of substantial funding that allowed us
to carry on a robust field campaign in more than forty states. If
Atlantic, along with The California Endowment, had provided a much
lower level of funding – or decided to favor policy, advocacy and
communications work rather than campaign–style organizing, as is
so often done by foundations – health reform would have failed.” –
Richard Kirsch, 2012

                   For Discussion Purposes Only

       Is the Battle for New Money
n Does money resonate with average Americans in the same way that
  health care does?
   § Health care was argued as a right. Does a fight that tries to
     make savings equity a matter of getting a “fair share” for the
     majority of Americans who are left out work as a campaign?

n Are the health care industry and financial industry comparable in
  their power to thwart reform? Can they be allies?

                     For Discussion Purposes Only

        Matching our Vision with Action:
   What Should Funders be Prepared to Do?

n Foundations should stay committed, stay bold

n Support a dialogue that honestly describes the fight. Seeking new
  money to build assets during a time with massive deficits is not going to
  come without a fight.

n Show a serious willingness to consider supporting grassroots advocacy
  with experienced advocates

n Engage with funders and leaders of similar fights to get tactical
  experience (eg Soros, OSI, Arca)

n Invest in simultaneous “grass tops” policy and communications efforts to
  keep issues alive and support allies in the Administration and Congress

                    For Discussion Purposes Only

        Matching our Vision with Action:
                2020-2030 plan

§   Medium-term vision is a battle

§   Through 2020 , financial access appears easier than savings equity.
    We should celebrate and sustain gains in access and new accounts,
    but stay bold in the battle for savings equity and new money

§   Long-term vision is sound

     § By 2030 , we want new accounts and new money that will
       massively shift asset holding in America. We want a new
       generation, including children and working poor, to be part of a
       savings and investment system that gives them real value.


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