Buttressing Economic Policy with Assets

“I work to live.”

So goes the beginning of a quote by a mid-20s woman who was interviewed for a recent Washington Post piece on bankruptcy.

The front-page, above-the-fold-article described the growing number of working Americans seeking relief from unmanageable debt by filing for bankruptcy. As my eyes traveled across the page, my head nodded in agreement with the author’s points. Elizabeth Warren describes the economic tightrope that middle class households walk not as a recent, post-credit crisis phenomena, but as a reflection of the economic risk and instability of this generation (see her 2006 Harvard Magazine piece). Personal bankruptcies filings are on the rise, despite the recent change requiring debtors to meet more stringent criteria in order to file. And then, the ever-important point that bankruptcy wreaks havoc on one’s credit (in case any cynical readers viewed chapters 7 or 13 as an easy “out” for those struggling financially).

With all this in mind, the following day I attended an Economic Policy Institute event, “Rising Economic Insecurity.” The panelists were eye-opening, eloquent, and easy-to-understand (especially for the non-economists in the room). Moderator Louis Uchitelle opened the discussion observing that instability in family income and job security are norms, not exceptions today, and affecting a wider swath of the population. Even households earning well over $100,000 have “no reliable refuge from these downdrafts.” This happens not only to the detriment of family economic well-being, but to the detriment of workers’ self-esteem and mental health. Our country’s most valuable resource, human capital, is being massively undermined by income volatility.

Next, Jacob Hacker and Elizabeth Jacobs introduced findings from their paper and Peter Gosselin shared insights from his new book and recent research. Some highlights: The US is a distinctly riskier place for workers, from the low-wage to the well-paid. Over the last three decades, income volatility has increased for almost all education groups. The cost of broad economic growth was “greater risk for steep financial falls”. And workers are assuming a greater share of financial risk that was previously borne by government and employers (think moving from defined benefit to defined contribution retirement plans, and changes to the homeowners insurance coverage). The evidence abounded. Then, discussant Brink Lindsey critiqued the panelists research methodologies, suggested the panelists exaggerated the true economic picture, and proceeded to engage in a “seemly” back-and forth with the panelists.

Though the discussant and panelists finally converged on the premise that we are in a “new, insecure world,” I left sobered by the dismal prospect of achieving the same convergence on a public policy agenda to address the changing economic conditions.

Why, with qualitative and quantitative evidence to show that American workers of all income and education levels are working harder than ever but are no better off, does policy development stagnate?

I believe asset-building policies are a partial antidote to rising income insecurity and inequality.

For lower and moderate income workers in particular, acquiring assets and the financial skills to effectively manage those assets is a viable strategy to mitigate economic risk. Asset-building policy promotes the accumulation, equitable distribution, protection and inter-generational transfer of personal wealth. And the paradigm-field-outlook-what have you, has broad political appeal. An ownership society, in which individuals are rewarded for their hard work and protected from greater macro-economic trends, requires thoughtful, inclusive asset development policy.