Yesterday, President Obama released his detailed budget for FY 2010.

In addition to healthcare reform, efforts to strengthen the economy and strategies to decrease the national deficit, the President has more than doubled funding for some programs and fully funded new programs that provide economic opportunity to low-and moderate-income Americans.

The budget supports asset-building by allocating:

• $24 million for Assets for Independence, the federal program that funds Individual Development Accounts (IDAs).
• $5 million for the Beginning Farmer and Rancher IDA Program, this is a new program with full funding.
• $25 million for microloans as well as support for technical assistance programs that give entrepreneurs access to counseling and business development expertise.
• $7 million to make Pell Grant funding mandatory and increase as well as index maximum awards.
• $2.5 billion Access and Completion Incentive Fund, a new five-year program to support innovative state efforts to help low-income students succeed and complete their college education.
• $2 million to pilot housing counseling program.

Within the next two years, the budget also proposes to expand the Earned Income Tax Credit, make the American Opportunity Tax Credit for higher education permanent, expand Child Tax Credit, and increase retirement security through auto enrollment.

We are especially pleased to learn that the administration has expressed an interest in working with Congress to revise asset limits for federal means-tested programs. It also takes steps to reverse the system of upside-down wealth subsidies by capping the mortgage interest, property tax and other deductions at 28%.

Advocates can learn more about this tremendous opportunity to promote policies that help low-income families build and maintain wealth by attending a webinar hosted by CFED. Click here to learn more and register.

For more information on the budget, click here.

The gap in income between the wealthiest Americans and all others has grown considerably in recent decades. According to a new report released by the Center on Budget and Policy Priorities, between 1979 and 2006 the income gap between the rich and the poor tripled. A growing body of data suggests greater income concentration at the top than at any time since 1929.



Regressive federal tax polices are partially responsible for this growing inequality. The report cites that legislation enacted under the Bush administration have provided tax payers with about 1.7 trillion in tax cuts through 2008. These large tax reductions have made the distribution of after-tax income more unequal. In fact, high-income households received by far the largest tax cuts—not only in dollar terms but also as a percentage of income—the tax cuts have increased the concentration of after-tax income at the top of the spectrum.

State leaders can begin to address the widening income and wealth gap by:

• Creating state funding for Individual Development Accounts, a successful program that provides incentives for low-income families to save and build wealth.

• Establishing a State Earned Income Tax Credit (EITC) which supplements earnings of low-wage workers by reducing their tax burden.

• Funding microenterprise support programs that can provide entrepreneurs with skills necessary to successfully establish a microenterprise or small business.

• Eliminating asset limits in public benefit programs. States have full discretion to eliminate the asset test that families are required to undergo in order to qualify for public assistance like CalWORKs, Food Stamps, Medical and more.

The widening income gap threatens the promise of the American Dream, the belief that if you work hard and play by the rules then you can move up the economic ladder and live the American Dream of owning a home and enjoying financial security. If the United States is to remain the land of opportunity then policy makers must consider these policy solutions.

To download the report click here: Income Gaps Hit Record Levels In 2006, New Data Show Rich-Poor Gap Tripled Between 1979 and 2006

EARN has joined millions of Americans on one of the newest social networking sites, Twitter! Yes, that’s right EARN is Twittering.

We will “tweet” to inform you about new research, as well as relevant articles and reports. In return, we would like to hear your thoughts; you can ask us questions, give us feedback, and help us bring that conversation to a new audience.

Join the dialogue by going to www.twitter.com, search for EARNResearch, and click on the button that says, “follow”.

If you are unsure what Twitter is all about check out a recent New York Times Article.

I recently had a blinding flash of the obvious. Much of the social sector is ignoring a vast, powerful layer of infrastructure that can help us all achieve our goals of creating prosperity for hard working, low income Americans: the nearly ubiquitous mobile phone. In places like Bangladesh and Kenya, incredibly valuable innovation is helping connect the poor to the financial mainstream by leveraging mobile phones. Grameenphone is a fascinating, bold example of this.

The potential for mobile technology all became crystal clear for me recently - even if it was a blinding flash of the obvious. In January, I took a two week learning sabbatical to Asia, funded through the Irvine Foundation Leadership Award, where I visited a number of nongovernmental organizations in Hanoi and Manila. I visited outstanding groups like the East Meets West Foundation in Vietnam, and the Knowledge Channel Foundation in the Philippines. Perhaps it was being around the visionary leaders of these groups – John Anner at East Meets West, and Rina Lopez-Bautista at the Knowledge Channel – that helped me understand what an opportunity we have.

Asia is light years ahead of the US in the way people there use mobile phones. I experienced this myself, buying a phone. I got a sim card for my phone when I arrived in Manila and it was loaded with features, including options to make payments to other network users.

In a visit with the Philippines Central Bank, I learned that 10% of the Philippines GDP comes from remittances, much of it sent through mobile phone networks.

Some mobile phone analysts believe that all virtually all Americans will have a mobile phone by 2013. The ubiquity of cell phones among Americans represents a highly underutilized infrastructure to leverage for prosperity. EARN will be focusing our collective intelligence on how to “cultivate our own garden”, to make it even easier for our clients to save, and hope others will join us in finding ways to innovate in this exciting area of opportunity.

In a recent New York Times article Robert J. Shiller, professor of Economics and Finance at Yale, puts forth the idea of government sponsored financial advice as part of the government bailouts earmarked for financial institutions. He posits that everyone needs individualized financial advice to help them make sound financial choices and that financial literacy alone is not sufficient to help most people develop and execute financial strategies. He further states that our current economic crisis may have been less severe if we all had access to financial advisers.

There are many voices calling for programs to address this great and pressing need; some are recommending volunteer corps and still others suggest that teachers and social workers should be trained to provide financial “coaching” as part of their duties. While I must admit that as a financial planner my heart patters at the thought of everyone having access to competent and ethical financial planning, these ideas concern me.

Financial planning services as they currently exist are not reaching a large portion of the population and it can be argued that the people who need it most are the least likely to receive the services.

However, a government subsidized plan will not address the primary reason for this discrepancy. Those of us who are working in the asset building field know all too well that services offered and services utilized do not go hand in hand. The ability to turn client need into client demand is not likely to occur within the framework presented by Mr. Shiller or other proponents of similar programs that focus on increasing the supply of providers. Adviser/client relationships are most effective when built on trust and that occurs when the client knows that the adviser is acting as a fiduciary – putting the client above all other interests. Mandated services will give many marginal advisers an opportunity to be paid to provide services to a population ill-equipped to “supervise” the process and the outcomes. This is not something that a self –regulating organization can effectively accomplish. Disagree? Let’s talk about Madoff.

Government sponsored or volunteer financial advice fails to consider the burden that is placed on the client. The old adage “buyer beware” is never more important than when a person is on the brink of changing their financial future through asset building. This is even more relevant when the government or community based organization puts a stamp of approval on a service delivery system that the organization is not actively monitoring. There is a need to provide access to financial advice and products and there are several organizations and collaboratives exploring the options. I suggest proceeding with caution as the desire to offer these services can be compared to our fast food nation…easy to access but not always good for you.

Saundra Davis, MSFP is Executive Director of Sage Financial Solutions – a nonprofit corporation providing financial planning services to low and moderate income clients.

APIC has recently released a new white paper entitled American Dream 2.0: Safe and Sound First-Time Homeownership Strategies for Working Families in California. This paper offers a series of actionable strategies on homeownership policy for California’s business, nonprofit, and government leaders. At the Assets and Homeownership Symposium, APIC and the Federal Reserve Bank of San Francisco convened thought leaders across sectors and industries to engage in a conversation that lead to some of the strategies outlined in this report.

Despite the turmoil in the state’s housing market, we believe there are innovations in the asset-building field for renters, in lending for first-time buyers, and in employer-sponsored benefits, all of which have successful homeownership track records. This year we hope to see California’s leaders seize this moment and take a thoughtful approach to how the state responds to the current crisis. We believe the American Dream 2.0 on homeownership innovations can help further this conversation.

President-elect Barack Obama has announced the creation of a White House Task Force on Working Families. His announcement comes at a crucial time when nearly 23 million families are at risk of falling out of America’s middle class, according to a Demos study. The task force will be a major initiative targeted at raising the living standards of middle-class, working families.

Some of the goals for the task force include:

• Expanding education and lifelong training opportunities
• Restoring labor standards, including workplace safety
• Helping protect middle-class and working-family incomes
• Protecting retirement security

“President-elect Obama and I know that economic health of working families has eroded, and we intend to turn that around” said Vice President-elect Joe Biden, who will be the chairman of this task force. In addition to producing annual reports, we are pleased the task force will function in a transparent fashion where outside groups have the opportunity to chime in.

The oasis looked like a pleasant place to rest the camels, sleep in the shade, and bathe in a flowing brook. How disheartening to realize that it was just an illusion and that the travelers in the caravan had many more miles to go.

Older workers today are feeling like those travelers. With the evaporation of what we might call the Wealth Mirage, many middle-class Americans are realizing that retirement is a lot further off than they had anticipated.
For one thing, retirement accounts have not exactly delivered paradise. A 2008 report by the Urban Institute, How Is the Economic Turmoil Affecting Older Americans?, found that

“the typical household age 50 and older with a retirement account holds a balance of $89,300, not enough to replace one year’s pre-retirement income.”

For another thing, even before stock prices collapsed, our retirement savings were inadequate, but inflated house prices allowed many of us to pretend otherwise. When a house seemed to be worth three times what one had paid for it, one could dream of living off its equity for retirement. Alas, we realize now, the only price that matters is the one you actually receive when you sell. Americans’ feeling of wealth before the current financial meltdown had no more substance than the castles and palm trees in the oasis.

To be sure, many people are working into retirement by choice, thanks to increased life expectancy. But the financial meltdown is accelerating the trend. Compared to 1998, the August 2008 labor force participation rate of people from 65 to 69 years old had increased by 38% for men and 54% for women. And this number may understate the larger trend, since the economy has been shedding jobs since December, 2007, which is likely to particularly impact older job-seekers.

The caravan’s challenge was to keep the camels fed until they reached a real oasis. Similarly, the older workers’ challenge is to remain employable for an extra five or ten years until their assets are truly adequate. This is even more critical for low-income workers, who must work simply to survive without any safety nets. The potential obstacle older workers face can be thought of as a kind of asset poverty. The asset in question is a marketable skill set; the shortage results ultimately from the market’s accelerating demand for new skill sets, as technologies and industries change ever more rapidly. In this time of contracting job prospects, marketable skills are a necessity to beat the competition.

The task facing policy makers today is to develop practical ways of funding and delivering continual lifelong learning. This will allow workers to acquire new skills that allow them to work in meaningful ways into their later years.

New York was the first state to introduce a package of bills to “establish the infrastructure needed to keep older Americans engaged in the workplace and civic life beyond traditional retirement age.” The legislation ranges from supporting training providers, to creating Centers for Lifelong Learning, to certifying and promoting “older worker friendly businesses.”

As California policy leaders address the issues of older workers (and already, one in five Californians is over 60), solutions will be similarly multifarious. Some will involve new ways of delivering learning that are adult-learner friendly. Others will involve developing attractive and equitable ways to share the cost of lifelong learning between individuals, businesses, and government (e.g. Lifelong Learning Accounts). After all, all three parties will benefit: workers will enjoy more years of productive, rewarding employment, business will gain productivity from having more highly skilled workers, and government will be less burdened to the degree that the economy prospers and jobs are more numerous.

Workable partnerships to fund and deliver lifelong learning are essential to addressing the asset poverty of under-trained older Americans. We will all be better off if America’s seasoned travelers are well-equipped and their reward is not a mirage.

Amy Sherman is Vice President of Policy & Strategic Alliances at CAEL, Council for Adult and Experiential Learning.

Our recent era of “self regulated” financial services seems to have a way of converting scams into large - scale businesses. Payday lending, for instance, has emerged through blind spots in state and federal law, and has been a scourge for working people across America. Anecdotally, one hears there are now more payday lenders in the US than there are McDonalds restaurants and Starbucks shops combined.

It looks like another predatory business, birthed through loopholes, is starting to plague struggling Americans: credit consolidation services. With prices rising, jobs more scarce, and credit terms tightening, it is easy to understand the importance of credit consolidators for people seeking a responsible way to right a tilting financial ship. But an illuminating article in the Wall Street Journal about predatory debt-relief (Debt Relief Firms Attract Complaints, Eleanor Laise, 10/14/2008) shed light on the perils that folks face when trying to responsibly manage their debt. According to the article:

“Debt-settlement companies generally advise their clients to make monthly payments into a special account instead of paying creditors. The firm promises to use the accumulated cash to settle debts for pennies on the dollar. They often charge hefty up-front fees, and their tactics can trash customers’ credit scores, boost their tax bills and leave them in greater debt than when they started…Meanwhile, creditors aren’t getting any payment, so interest and late fees accrue, debt rises and clients get a steady stream of calls from creditors and collection agencies. They may even have their wages garnished.” Click here to view the entire article.

Adding injury to injury, many of the firms referenced in the article abuse the tax exempt status of a nonprofit by funneling cash back to a for- profit owner. Instead of acting the way most nonprofits do – helping the community, they make money for parent companies at tax payers’ expense. Aside from being fraud, this kick-back scheme also taints the fine work of real nonprofits that help struggling debtors through services provided with integrity, quality and transparency.

All signs point to even harder financial times ahead. State and federal officials need to ensure that predatory debt consolidators feel the heat of regulation and enforcement. Americans literally cannot afford the alternative.

How would you define the point at which a family is poor in this country? How about in San Francisco? Most people are shocked when they learn how the federal government measures poverty. If you’re unfamiliar with this number you too will be shocked. Especially if you are a Californian.

According to the Feds, a family of three has to be earning under $17,600 per year to be poor. Let’s put this into perspective: The average family income in San Francisco is $94,000 per year, according to HUD, and the average is about $50,000 per year for the entire United States. But there is no allowance to adjust poverty levels locally. In addition to being unfair, this is unreasonable.

The Federal Poverty Rate is an absolute dinosaur of policy tool. It might even be funny if its obsolescence didn’t make it so harmful for tens of millions of poor Americans. Mayors across the nation have long bemoaned this discrepancy – because it has shortchanged cities of cash they’ve needed to serve the huge number of poor people the federal government won’t recognize, due to where the poverty line rests.

But it appears local efforts at redefining a definition of poverty, by Mayors, has created some new momentum at the national level.

A September 1st, 2008 NY Times article describes a meaningful, bi-partisan effort in Congress to redefine the poverty line. According to the article, “Democrats and Republicans alike say [the federal policy level] is hopelessly outdated…This month, Representative Jim McDermott, the Democrat from Washington who is the chairman of the House subcommittee on income security, plans to introduce legislation that would require the government to develop a more modern and accurate method to determine who is poor.” For more click here.

What is now unclear is how the staggering $700 billion price tag on the bailout package might make reasonable legislators think twice before they expand the universe of people who become eligible for federal aid.