Building Wealth

P1010044Baltimore The community organizing class at the University of Maryland School of Social Work had gone chapter by chapter through Citizen Wealth, so their questions were specific and pointed as they seized on themes that meant something to  them or tried to put their arms around issues that often slip all of our grasp.  The hardest questions involved the very real problems raised in Chapter 9 focusing on maximum eligible participation and whether we really have a program in the US to build citizen wealth not just in raising and distributing income but actually creating assets and long term income security.

The reasons the students questions were so hard is because we really have no satisfactory answers in current public policy.  The largest federal supports continue to go towards home ownership through mortgage interest deductions on federal income taxes without any specific targeting for especially poor families.  Furthermore the current tightened credit markets and the fight to prevent foreclosures have dampened the boosterism around home ownership as a real asset building strategy for the poor.  As the students pressed the issue, it was obvious to me how vacuous the answers are that are provided by current policy and programs.  A student from Cameroon also kept reminding me about my skepticism in the book about using debt to reduce poverty, so among my careful readers I had to be very accountable.

We need to directly confront the ideological and political objections to direct income transfers that are standing in the way of programs that would create actual family savings with incentives to increase and build protected accounts to marshal and expand financial security and create additional inducements that modify and direct behavior in such ways that expand assets.  Simply put:  we need to give money, encourage savings, and create accounts that can be used for the emergencies that devastate   citizen wealth as well as the education, investment, further savings, and homeownership that can be leveraged to create citizen wealth and intergenerational wealth with permanent impacts for the family and the community.

Unfortunately all of the existing programs that move in this direction for the poor are small and precious and really only amounting to small change in the total expenditures designed to dent poverty.  All of this is more pilot than program.  We talk savings, but we are unwilling to create the hedge for the poor that a real bank account and savings book would do for people.

Professor Steve Soifer was engaged by the question and sent me several emails late into the night reminding me of the power of compound interest based on incremental payments over decades in adding up to real assets over time.  Somehow we have to give people the leg up to either save incrementally or allow the government to create accounts for families or children to create real wealth.  Let’s spend some time doing the “organizing math” to figure out what it would take to create citizen wealth this  way.

Thanks to the Community Organizing class at UMSSW for doing the hard work with me!

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