The Ladder

A Blog from New America's Asset Building Program

Asset Building News Week, April 9-13

Published:  April 13, 2012
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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 our new Assets Report, welfare reform, food security, veterans, housing, tax time, alternatives to mainstream banking, economic security for the working poor, and student loan debt.

The Assets Report

The big news for us this week was the release of our annual Assets Report. The Assets Report 2012 is our analysis of the President’s Fiscal Year 2013 budget that looks at the different federal allocations to direct spending and tax subsidies that promote asset building. By our calculations, the budget includes about $548 billion in support for asset building, but the vast majority of this comes in the form of tax breaks that overwhelmingly go to higher income households. As Rachel Black points out, “spending billions of dollars to help the wealthy build wealth isn't effective policy or smart spending.” This year, we are particularly excited to release an accompanying infographic that we hope will help readers engage more actively with the report data. Take a look and tell us what you think here. You can also join the conversation on Twitter with the hashtag #AssetsReport.

Welfare Reform

Jason DeParle has a thorough piece at the New York Times that looks at Arizona as a microcosm of the impacts 1996 welfare reform has had on low-income people. He outlines, in devastating detail, the measures families have taken just to scrape by, in the absence of a robust safety net. The legislative transition that accompanied reform was abrupt, he writes: “The old program, Aid to Families with Dependent Children, dates from the New Deal; it gave states unlimited matching funds and offered poor families extensive rights, with few requirements and no time limits. The new program, Temporary Assistance for Needy Families, created time limits and work rules, capped federal spending and allowed states to turn poor families away.” Both Ezra Klein and NPR have good follow-up coverage of the piece, elaborating on what all this means against the backdrop of conversation about different budget proposals.

Food Security

The U.S. Department of Agriculture released a new report looking at the role SNAP (food stamps) has played in reducing poverty over the past decade. The New York Times quotes Stacy Dean from Center on Budget and Policy Priorities, “SNAP plays a crucial, but often underappreciated, role in alleviating poverty.” The study found a particularly strong effect on child poverty: “The program lifted the average poor person’s income up about six percent closer to the [federal poverty] line over the length of the study, making poverty less severe. When the benefits were included in the income of families with children, the result was that children below the threshold moved about 11 percent closer to the line.” NPR reports on the work public schools are doing to make sure children across the U.S. are adequately fed in the form of breakfast, lunch and supper programs. Minnesota Public Radio is seeking stories from people who have received or have children who’ve received free or reduced price lunch. The Washington Post reports that the Manassas, Virginia farmers’ market is participating in a program that allows SNAP recipients to use their EBT cards and receive up to a $10 match when they buy produce at the market.

Veterans

U.S. News reports that “the population of female veterans without permanent shelter has more than doubled in the last half-dozen years and may continue climbing now that the Iraq war has ended, sending women home with the same stresses as their male counterparts — plus some gender-specific ones that make them more susceptible to homelessness.” Meanwhile, NPR reports on the phenomenon of for-profit educational institutions preying on veterans, who have access to federal funding for higher education and are therefore lucrative targets.

Housing

The Treasury Department is faulted in a new report from the special inspector general for the Troubled Asset Relief Program (TARP) for failing to do enough to relieve homeowners. The New York Times explains that the Hardest Hit Fund, described as “a fund to support homeowners in the communities hit hardest by the collapse of the housing bubble,” only disbursed 3% of its budget in the two years since its creation.  The TARP report “cited a lack of planning and leadership by the Treasury Department as the reason so little money has been spent.” Both Forbes and the Los Angeles Times report on the rules the Consumer Financial Protection Bureau is developing for mortgage servicers. Forbes writer Halah Touryalai writes that “the CFPB wants the servicers to be a held to higher standard in order to clean up sloppy record keeping and bad practices,” to avoid what CFPB director Richard Cordray terms “surprises and runarounds.” The LA Times points out that these rules are similar to those that the five major banks named in the foreclosure settlement (which service 55% of all U.S. mortgages) agreed to: “measures to provide clearer information to customers, such as monthly bills that show unpaid principal, fees and charges.”

Despite all this and the fact that foreclosure activity is at a five-year low, RealtyTrac reports that banks will likely “repossess close to 1 million homes this year. Last year, lenders took back 804,000 homes.” In other housing news, a local paper from Fall River, Massachusetts looks at the local Housing Authority’s Family Self-Sufficiency (FSS) program. The FSS coordinators point out some of the barriers families face trying to move out of subsidized housing. (For example, with a 30,000 person waiting list for state child care vouchers, many participants are struggling to find affordable child care that would allow them to work more.) For more about the FSS program, check out our paper from last year, Taking Asset Building and Earnings Incentives to Scale in HUD-Assisted Rental Housing. Lastly, the Assistant Secretary for HUD’s Office of Public and Indian Housing has a piece at the Huffington Post that connects the dots on housing as a crucial building block for good health.

Tax Time

This op-ed from Iowa’s Des Moines Register makes the case for expanding EITC (Earned Income Tax Credit). The piece points out something we identify in our Assets Report: people who aren't homeowners miss out on the home mortgage interest deduction. They point out: “Low-income workers contribute to the economy and the common good in many ways, and they pay property, sales, gasoline and other taxes to support that common good. Doesn’t it make sense that low-income taxpayers should have a chance to achieve greater financial security, build an asset base, and plan for a better future?” The Washington Post and Asset Building Research Fellow David Rothstein write about the demise of the refund anticipation loan this year. RALs have historically posed a financial risk to low-income taxpayers because paying back the loan can ultimately eat up the actual refund. The Wall Street Journal has an article and accompanying video that recognize the tax time moment as a potential savings opportunity, particularly for low and middle-income households. Watch David Wessel explain below:

Bloomberg Businessweek has a great piece up about taxpayer behavior and director of the Taxpayer Advocate Service, Nina Olson. The piece is long, but a fascinating read and full of tidbits about the tax code and the ins and outs of the IRS (100,000 employees! 3.8 million words in the tax code!) Here's a quote from Olson: “Taxpayers bring a whole bundle of life circumstances, history, economic circumstances, baggage, biases.… They bring a whole bundle of things to the table. Your job is to listen to what they’re bringing.”

Banking Alternatives

Students at an elementary school in Auburn, NY are learning about savings accounts by opening real accounts with a local bank that comes to their school to collect deposits. The article describes the incentive system (small prizes) as well as the program’s goal of expanding financial services to kids of all income backgrounds. This 2 minute video from Roberto Daza for The Economist “Banking the Underbanked” highlights the work of a San Jose, California credit union that describes itself as a “hybrid check cashing/credit union concept” that is aiming to meet customers “where they are both physically and in their financial lives.” Bloomberg Businessweek reports that prepaid card use is up 18% in 2011 due to a drop in consumer use of mainstream products. Depending on the card fees, prepaid cards may end up being more costly than some checking accounts, the article notes. Spending on credit and debit cards is up, Visa and Mastercard both report. TIME looks at the Occupy Wall Street Alternative Banking Group proposal for reforming the credit score. The Advocate has a piece describing conversations between the Louisiana state legislature and banks over the new practice of providing state tax returns on debit cards. One state representative said, “I have to tell you I’m finding a lot of resistance back in my district,” adding “I know y’all aren’t doing it for nothing. You’re not doing it as a service for the state.” Concerns range from a worry that people in rural areas won’t be able to access funds, that elderly residents will struggle with the new system, and that people will incur fees (the first withdrawal is free but there are fees for non-Chase ATM withdrawals).

Economic Security for the Working Poor

Reuters reports that the number of people classified as “working poor” rose in 2010, according to Bureau of Labor Statistics data. Cuts to subsidized child care in California, this Huffington Post piece argues, will place an added burden on working poor parents: “child care absorbs as much as one-third of total household income among poor families with small children, according to Census data.” Matt Yglesias argues that anti-poverty spending cuts will have a disproportionate impact on women. Jodie Levin-Epstein of the Center for Law and Social Policy (CLASP) takes a critical look at Brookings data on marriage as a solution to poverty and concludes that a range of factors make marriage a questionable route out of poverty, in part because “one plus one does not always add up to two stable incomes.” Although unemployment has improved somewhat in recent months, there remain 3.66 unemployed people for each new job opening, the Wall Street Journal reports.

Student Loan Debt

This New York Times opinion piece looks at new legislation that will “require colleges and lenders to do a better job of making students aware of their borrowing options and the marked difference between federal and private student loans.” The differences include interest rates, default protection, and deferral policies, but many students aren't aware.  New America’s Education Policy Program has more on their blog about the Know Before You Owe Private Student Loan Act.

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