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 inequality, retirement, and housing.
Late last week, Monica Potts wrote a response in the Daily Beast to a new report arguing that inequality is slowing economic growth. The contents of the report weren’t particularly groundbreaking, as arguments about the connection between rising inequality and slow economic growth have been made many times before. But what was surprising was the publisher of the report: Standard & Poor’s, the financial services firm. Potts, along with other long-time commentators on inequality such as Paul Krugman, took this move by the firm as a signal that there may be new stakeholders embracing the view that inequality in the U.S. is a problem worth addressing. If enough economically motivated actors – like high-powered financial services firms – start to see the need for action, policy solutions may become closer to being politically feasible.
The authors of an issue brief published by the Center for American Progress this week described inequality as merely one of many economic justice problems that need to be addressed. Rebecca Vallas, Melissa Boteach, and Shawn Fremstad argued that it is “time for a 21st century social contract” that not only addresses rising inequality, but also provides “a robust and responsive system of work and income supports[, which] is essential to protect against what President Franklin D. Roosevelt called the ‘hazards and vicissitudes of life.’”
One consequence of the rise of self-funded retirement plans like the 401(k), and the decline in pooled-risk arrangements like traditional defined-benefit plans, is the amplifying effect this turn of events has had on wealth inequality. Michael Hill argued this week that the transition to our current system of retirement financing has meant that the “wealth gap may last into retirement for Baby Boomers.” As he explained, “With traditional pensions becoming rarer in the private sector, and lower-paid workers less likely to have access to an employer-provided retirement plan, there is a growing gulf in the retirement savings of the wealthy and people with lower incomes.” One reason among many that 401(k) balances may be so unequal among households is that families with less wealth sometimes use retirement assets to finance other important life expenses besides retirement. Tim Grant for the Pittsburgh Post-Gazette reported that “18 percent of parents plan to use their retirement savings for [their children’s] college expenses.”
Yet even before some households can begin to accrue retirement assets, they need access to a retirement plan. The Star Tribune’s Jennifer Bjorhus described a U.S. Treasury program called myRA that may help to achieve greater access. The reason for the local coverage of this program from Minneapolis is that the Treasury Department is engaging in what Bjorhus described as an “outreach” effort on the new program in the area.
“Public housing in New York is at a crossroads,” wrote Mireya Navarro for the New York Times this week. The fate of public housing in the city is in limbo as policymakers debate how to deal with crumbling infrastructure, budget shortfalls, and a quarter of a million households on the waiting list for housing. In D.C., affordable housing is also hard to come by. One recent policy effort by the District government that was at least partially motivated by the desire to make housing more affordable to low-income residents was an increase in the minimum wage. But as Aaron Wiener argued in the Washington City Paper, the minimum wage hike will probably do very little to make D.C. housing affordable. He suggests that an expansion of the EITC would go further towards helping families afford housing in the city.
Two articles this week addressed the plight of the Millennial generation as many of its members struggle to own a home. Dina ElBoghdady for the Washington Post’s Wokblog shed some light on the connection between student loan debt and homeownership. And Michelle Jamrisko and Alexis Leondis for Bloomberg explained one of the underlying reasons for Millennials’ difficulty in becoming first-time homebuyers: a significant increase in the median down payment required for the cheapest homes on the market.
A new program in D.C. called Produce Plus would help low-income residents afford fresh foods at farmer’s markets in the city. Karen Chen explained that, in conjunction with other incentives for low-income residents to shop at farmer’s markets, the program could have a big impact on the diets of many families.
In California, an assemblywoman introduced what Bryce Covert for ThinkProgress called “the first-ever bill to help low-income moms afford diapers.” Families who qualify for the state’s TANF program would be eligible to receive funds for the use of buying diapers.
Our Aleta Sprague and Julianna Lord, an Emerson National Hunger Fellow who spent the summer with the Asset Building Program, coauthored a blog post about a recent bill introduced in the Missouri legislature that would raise the state’s Medicaid asset limit. Sprague and Lord explain that the reason for the change at this particular time to a 46-year-old law relates to the personal experience of a state senator who observed the effects of the arbitrary and counterproductive asset limit first-hand through witnessing the experience of his elderly father. While the authors commend the state legislature for taking action on this bill so far, they emphasize the need for broader, federal solutions such as “establishing a reasonable floor for Medicaid’s remaining asset limits [in various states] and indexing them to inflation.”
New York prosecutors announced criminal charges against certain payday loan companies in the state that the prosecutors allege violated the state’s usury laws. Jessica Silver-Greenberg reported on the story for the New York Times’s DealBook.