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 housing, retirement, wealth disparities, employment, and government assistance.
It appears from the mounting evidence that the National Mortgage Settlement has so far not settled the national mortgage crisis. The New York Times reported this week that the New York attorney general will bring a lawsuit against two big banks that are allegedly failing to abide by the terms of the settlement. We explained here why the settlement has not been an effective solution for housing disparities, while the recent allegations center on more technical issues with the banks’ compliance, such as providing sufficient notice and documentation of potential foreclosure actions. Meanwhile, Bank of America is also paying off its private securities insurer in another settlement to try to put its history of mortgage abuses and lending discrimination behind it for good. For consumers, though, the effects of the foreclosure crisis are long from over. David Coates argues that the perceived improvement in the housing market “is at best patchy” and will likely be hindered by the “sheer number of foreclosures still in the pipeline.” Shockingly, a new study out this week suggests that homeownership may not be the key to an economic recovery we were looking for, as the evidence shows that high rates of homeownership in a community may actually diminish one’s chances to secure stable employment. One of the study’s findings is that “a doubling of the rate of home-ownership in a U.S. state is followed in the long-run by more than a doubling of the later unemployment rate.” The Washington Post and the New York Times summarize the findings.
An editorial in the Baltimore Sun offered a proposal for greater housing equality that would prohibit landlords from discriminating against potential tenants who receive housing vouchers. Such a measure could reduce concentrated poverty by allowing housing voucher recipients to look farther afield for places to live than just those in those neighborhoods in which landlords currently accept vouchers. While this proposal would afford more options to low-income tenants, the city of Los Angeles will soon be tearing down its most notorious housing project in the name of gentrification, displacing hundreds of very-low-income residents. The views are mixed on whether this is a positive or negative development for the city and for its poorest residents.
Fred Hiatt continued the “retirement cap” debate with a strong defense of the Obama administration’s recent proposal to limit the amount of tax benefits that can be claimed by savers through retirement savings accounts. He was responding to the many criticisms of the proposal that have been published in media outlets such as Forbes and Marketplace. Our defense of the proposal, published this week, is here.
The Asset Building Program’s Aleta Sprague published an Op-Ed outlining the arguments in her recent policy paper on “The California Secure Choice Retirement Savings Program.” Many states have begun to consider similar proposals that would allow all workers to have access to retirement accounts, regardless of whether their employer offers one. Connecticut is one such state, whose legislature this week began to seriously consider a similar plan.
Media attention to the issue of our broken retirement system has grown enormously recently, propelled to a large extent by Frontline’s recent program on the topic. CNN Money warns that high rates of unemployment for workers nearing the end of their working years could be devastating for their Social Security receipts. Because Social Security is based in part on the wages of someone’s highest earning years, a sharp drop in income for someone at what should be her years of highest income could significantly lower the amount provided by Social Security. One proposal to help ameliorate the retirement crisis, offered by New America’s Michael Lind and others, would significantly expand Social Security so that the system wouldn’t be as dependent on the saving behavior of Americans. Matt Miller for the Washington Post praises the idea. Still, in the meantime, Carl Richards for the New York Times urges savers to trudge through “the dull task of decoding 401(k) fees,” because although it’s unpleasant, it’s a necessary part of ensuring that one’s nest egg isn’t unduly eroded away by excessive fees.
Robert Wade, a Professor of Political Economy at the London School of Economics makes the case that the heavy reliance on the Gini coefficient in economic circles to measure wealth inequality may actually underestimate the true size of wealth and income gaps. His reasoning is that the Gini coefficient measures proportional gains in wealth and income, not absolute gains. Therefore, doubling the gains in the lowest income households does not lead to the same gains in absolute wealth as doubling the gains in the highest income households. This is important because accurate measures of wealth are essential to efforts to help the neediest communities. And, according to the Guardian, the poorest wouldn’t be the only ones to gain by helping those communities. “In more unequal societies,” the magazine warns, “even the richest suffer from lower life expectancy, higher rates of infant mortality, and higher rates of depression.”
Business Insider Australia published a series of striking maps that illustrate the level of racial segregation in twenty-two U.S. cities. Taken individually, each map is interesting but rather unremarkable; viewed as a set, though, one begins to perceive the dramatic and consistent pattern of distinct racial segregation in every major U.S. city. The Boston-based advocacy group United for a Fair Economy published a helpful infographic about one of the effects of this pervasive segregation: the racial wealth divide in housing. The Atlantic's Ta-Nehisi Coates has an excellent running series on the ways in which policy created and supported the racial wealth gap.
The New America Foundation’s Education Policy Program identified in a report published this week significant barriers to greater equality of opportunity for low-income families hoping to put their children through college. The Pell Grant is often pointed to as one of the most significant enablers for the college aspirations of low-income families. Yet the report finds that colleges’ decisions to move away from need-based financial aid in favor of merit-based aid have significantly undermined the Pell Grant’s ability to help families afford college. Bloomberg summarizes the findings, particularly emphasizing the fact that merit-based aid “funnels” aid to the richest students, while leaving the poorest without a proportional level of support.
The off-the-books kind of search for employment, in which information about jobs is spread by word of mouth and a desirable job is secured by personal references, is especially harmful to blacks, according to a compelling opinion piece in the New York Times. This kind of favoritism and racial hiring is not illegal, but the system tends to benefit whites more than other races. The struggle to find stable employment may begin to have even higher stakes for the non-native population if a harsh provision is passed in the immigration overhaul bill. If enacted, it would require employment for recent immigrants, and would threaten with deportation those unemployed for more than 60 days. One option for recent immigrants, of course, is self-employment, which the Center for an Urban Future finds is increasingly common among foreign-born populations in certain boroughs of New York City. Finally, the NBC series In Plain Sight, which features stories about poverty in America, explored the devastating emotional and financial effects of high rates of unemployment among recently returned veterans.
Evan Soltas for Bloomberg considered the uncommon position that food stamps may actually be an incredibly effective fiscal stimulus. He reasoned that because the most effective stimulus plans are often government-spending-based, not tax-based, food stamps and TANF could represent a powerful injection of government spending into the economy that actually targets the people who need it the most. “A better safety net for the poor,” he concludes, “turns out to be the best safety net for the whole economy.” In response to Pennsylvania’s recently reinstated asset test for food stamps, an opinion piece in the Philadelphia Inquirer forcefully advocates for eliminating the asset test to allow families that truly need the help to get it. A bill is moving through the Wisconsin legislature that would require SNAP recipients to spend most of their benefits on healthy foods. Its passage and the likelihood that it would withstand federal administrative oversight are uncertain.