President Obama’s Asset-Building Budget for Fiscal Year 2010

This week, the Asset Building program released The Assets Report 2009, a survey of asset-building policies and proposals in President Obama’s Fiscal Year 2010 budget. We identify recently enacted laws with asset-building provisions, proposed programs and changes to the tax code, and requested funding for existing programs that are collectively worth $422 billion.

The $362 billion slated for tax subsidies in the next fiscal year overwhelmingly favors asset accumulation for middle- and upper-income Americans, and dwarfs the $63 billion the Administration plans to spend through discretionary programs. Spending for each of the five asset-building purposes are as follows:

• Post-secondary education: $70 billion;
• Homeownership: $154 billion;
• Entrepreneurship: $294 million;
• Savings and investment: $72 billion;
• Retirement: $126 billion.

Homeownership spending comprises the majority of the President’s asset-building budget, and in fact, $108 billion alone is devoted to the Home Mortgage Interest Tax deduction, by far the government’s most expensive asset-creation effort.

Several notable proposals that benefit low- and moderate-income Americans deserve attention. President Obama proposes AutoIRAs, which would require employers who do not currently offer retirement plans to offer automatic enrollment in IRAs to all their employees. The President also proposes to expand and make permanent the American Opportunity Tax Credit, Making Work Pay Tax Credit, EITC, and Saver’s Credit. Moreover, more of these credits make use of increased refundability, which ensures that they benefit even the lowest-income people who have low tax liability. Lastly, the Adminstration makes a commitment to work with Congress to reconsider asset limits in Federal means-tested programs, which discourage saving by the poor.

Despite these promising proposals, the landscape of asset-building opportunities for low- and moderate-income Americans remains limited. Not only do most tax subsidies go to those who already engage in the asset-building behavior that government wants to encourage, but few subsidies exist for asset building by people with lower incomes. Like middle- and upper income Americans, low- and moderate-income Americans have long-term asset-building needs such as saving for post-secondary education or homeownership. However, they also need to save for the short term to weather unexpected events and access to mainstream financial institutions. Both are prerequisites for long-term asset building, but neither is addressed in the President’s budget.

With a greater emphasis on moving America from an era of "borrow-and-spend" to one of "save-and-invest" we believe the President’s new policy proposals for Fiscal Year 2010 are a good start altering the current policy paradigm for asset building in significant and positive ways. As he continues to consider how to implement a more inclusive set of savings and asset-building policies that benefit all Americans, we invite President Obama to consult The Assets Agenda for our best ideas on shaping the new policy landscape for asset building.