The Assets Report 2009

Asset ownership plays a central role in the economic security of American families and the broader economy. Assets can be deployed productively, such as to pay for a college education, or tapped to help individuals and families weather unexpected events. Additionally, assets have behavioral effects that can change the manner in which people think about and plan for the future.

The purpose of this paper is to survey the current and potential landscape of opportunities for Americans to acquire assets and move up the economic ladder. We examine recently enacted legislation and President Barack Obama's Fiscal Year 2010 budget proposals. The programs we identify help Americans acquire assets for post-secondary education, homeownership, entrepreneurship, savings and investment, and retirement security. Such programs are supported by direct spending or subsidies provided through the tax code.

Our assessment of the President's budget finds:

• A significant portion of the Federal budget is devoted to supporting asset-building activities, such as promoting post-secondary education, homeownership, entrepreneurship, savings and investment, and retirement security.
• In Fiscal Year 2010, the President's budget proposes a total amount of $421.94 billion in resources to promote asset building. This includes $63.55 billion in direct spending and $362.39 billion in tax subsidies.
•  The Federal government will allocate $154.09 billion in resources to subsidize homeownership and $125.92 billion for retirement security, far more than what is spent on helping Americans acquire any other assets. $69.65 billion will be devoted to post-secondary education, $294 million for entrepreneurship, and $71.96 billion to savings and investment activities.
• The total tax subsidies for asset building in Fiscal Year 2010 are worth $362.39 billion, which overwhelming accrue to middle- and upper-income Americans.
• Tax refunds, which are returned to many households after they file their taxes, represent a significant asset for many families. The combined value of the Earned Income Tax Credit and the Child Tax Credit is $100.125 billion, $67 billion of which are delivered as tax refunds.

The most notable feature of our current policy paradigm as it pertains to asset building is how many Americans it excludes. Through targeted tax breaks, affluent families are given many options to save and acquire assets, while those with fewer resources are offered less attractive ways to build wealth. This approach misses the potential of assets to help chart a path out of poverty. Although these basic inequities have been a longstanding feature of American asset-building policy, legislation enacted in the wake of the economic downturn and the President's new policy proposals for Fiscal Year 2010 promise to alter the current paradigm in significant ways.

First, the new administration's budget includes a number of proposals specifically designed to advance savings and asset-building activities targeted to low- and moderate income families. Three specific proposals are worth emphasizing, including AutoIRAs that offer access to savings plans by workers whose employers do not currently offer them, the expansion and enhancement of the Saver's Credit to make it more valuable to lower-income workers, and the commitment to reconsider asset limits for public assistance eligibility so they encourage, rather than discourage, saving. Additionally, the Administration has devoted $75 billion of Troubled Asset Relief Program money to helping distressed homeowners stay in their homes under the "Making Home Affordable" program.

Second, President Obama's budget contemplates a number of reforms that involve the increased use of refundable tax credits. Without refundability, benefits are restricted to taxpayers with tax liability to be offset. With a refundable tax credit, the policy is able to deliver resources to taxpayers with low or no tax liability-the people who would benefit most.

Finally, the rhetorical framing the White House is using to talk about economic policy has shifted. In his April 14, 2009 speech on the economy at Georgetown University, President Obama spoke of the need to move our country from an era of "borrow-and-spend" to one of "save-and-invest." Since the American Recovery and Reinvestment Act, this new rhetorical framing has been accompanied by the introduction of proposals that clearly prioritize investments which will drive long-term term growth. However, making this transition will require a stronger focus on expanding domestic savings at the household level and in the national economy.

If the Obama Administration is to ensure the nation's prosperity and help individuals achieve the American Dream, additional policies that enable a greater degree of savings by families at the bottom of the economic ladder will be required. As Congress completes its work of designing and passing a budget and the Obama Administration continues to develop additional proposals, we invite them to consult another of our publications, The Assets Agenda, for ideas on how to implement a more inclusive set of savings and asset-building policies to benefit all Americans.

For the full text of the Assets Report 2009, please see the PDF attached below.