America’s second-largest minority is probably not what you think.

It’s low-income workers. More than one in four working Americans is low-income according to the Census Bureau, even though on average they are working the equivalent of 1¼ full-time jobs.

To help these families, most of our social programs have focused on the income side of the equation, providing benefits to help families meet basic needs. But the history of prosperity clearly shows that what these families need is help overcoming their “asset poverty.” Education, small-business ownership and homeownership are what ultimately lift people out of poverty.

Given that, it’s encouraging that President Barack Obama has been talking up the Savers’ Tax Credit as he previewed his State of Union address. The Savers’ Tax Credit would provide a boost to low-income earners who are already saving and would make it easier for millions of Americans to save for a secure retirement.

This initiative is particularly important now, during the most severe economic downturn in a generation in which low-income earners have been especially hard hit.

But the Savers’ Tax Credit is only the beginning of what should be a very concentrated focus on the financial lives of low-income Americans.

With the landscape for employment shifting permanently away from well-paid manufacturing to other 21st-century industries, low- to moderate-income Americans will have to rely on critical assets such as a post-secondary education and other larger investments to negotiate the economic transition and to position themselves for future economic mobility.

None of that is possible unless there are opportunities for these Americans to save money. Yet, these opportunities are unevenly and sparsely available in the U.S.

The Savers’ Tax Credit is an excellent idea that should be accompanied by financial management training and should be among a range of financial products made available to low-income earners.

Matched savings accounts, for example, should also be among the financial products made available to low-income earners. Matched savings accounts that are specifically tailored to low-income American families would enable them to save, build assets and ultimately thrive in the financial mainstream.

With matching funds drawn from a combination of private and public sources, current versions of matched savings accounts have successfully helped tens of thousands of low-wage workers pursue post-secondary education and small-business growth, and even purchase a first home (with most keeping these homes).

These matched accounts also come with in-depth financial education courses that help savers continue to manage their money long after the matching savings comes to an end.

The concept of matched savings accounts, ideally offered by the private sector, is consistent with other programs that have been some of the greatest generators of wealth for average Americans in the history of our nation. From the G.I. Bill to the creation of the 401(k) and Roth IRA, our nation has been deliberate in choosing tools that help Americans build wealth — and prosperity has followed for those able to enjoy these government-led efforts.

Data show that matched savings accounts are good social and economic investments.

Savers with matched accounts were 35 percent more likely to own a home, nearly twice as likely to attend college and 84 percent more likely to own a business. Even more impressive, for each federal dollar invested in matched accounts, five dollars were pumped back into the national economy in various forms. In an environment where the Obama administration is focused on recouping billions of dollars in bailout funds, it is hard to argue against this kind of ROI.

Financial products like matched savings accounts should have bipartisan appeal. These wealth-building tools propel the efforts of hardworking families aspiring toward prosperity and security.

Our nation should meet them halfway to ensure the integrity of the American Dream.

Ben Mangan is president, CEO and co-founder of EARN, and Camille Busette is vice president of EARN.

This Op-Ed was published in AOL News.

OK, I’ll admit it. I am one of those people the president was talking about. If you have read any of my writings, you know that I am anchored by my optimism. But in the dark, rainy days of January in soggy San Francisco, I have been feeling crestfallen after so much hope in what an Obama presidency could mean to this country, uncertain that any real change was possible.

But last night’s State of the Union address moved me — back towards a place of hope. The president’s emotional, smart address positioned him to move from great orator to a visionary, populist reformer — reflected through making good on the policies he put forward. If you support Obama, the afterglow of a masterful speech, which drew legislators from both sides of the aisle repeatedly to their feet, makes it hard to imagine just how challenging it will be to give life to the many policies he proposed.

President Obama thinks we should have the government we deserve. Let’s earn something worthwhile.

One of his most compelling statements should tip us off to just how hard this will be. The president declared:

“…I refuse to pass this problem on to another generation of Americans…” He was speaking on one particular issue, but clearly feels this way about the ocean of economic and social ills that plague our nation. The president has said recently that one good term in office is better than two safe terms in which he failed to solve the greatest problems we face as a nation. This speech made that claim even more credible for me.

And this insistence to do the right thing is at the heart of the problem for Obama. You see, not everyone feels the same way. In fact, there are some who would say Washington is mostly filled with people who’d cut their granny’s prescription drug benefits to either secure their next election, or make partner at their lobbying firm.

But there are people in Washington who feel as Obama feels. And good people who vote in states around the nation, who agree with the president when he said:

“Generations of Americans were unafraid to do what was hard.To do what was needed even when success was uncertain. To do what it took to keep the dream of this nation alive for their children and their grandchildren…”

The president repeatedly hit upon the theme of Americans getting the government we deserve. To deserve the kind of change the president described — change that will ensure the integrity of the American Dream and America’s most important values — we, as a people must do our part and hold our elected officials accountable. For Democrats, this means ensuring that our representatives don’t turn and “run for the hills,” as the president quipped. For Republicans, it means demanding that legislators engage in good faith negotiations to find the middle ground on key proposals like health care, debt reduction and tax cuts.

Please, Mr. President, stick to your guns and gird for the fight you face to make good on your word. Embody the strength and resiliency you cited among the Americans surviving these very hard times. There are millions of Americans — as decent and strong as you described — ready to support you.

CFED, a DC based think-tank with roots in the Bay Area has published their bi-annual Scorecard for Assets and Opportunity. With unemployment running over 12% in the Golden State, it’s hard to look beyond the traditional measures of prosperity. But as I have written about in past entries, we have to consider assets - like owning homes, college degrees, small businesses, and increasingly, health insurance - to fully understand how economically secure we are as individuals and as a state.

CFED (a long-time partner to my nonprofit EARN)has a team of researchers who methodically pull apart and grade the policies in every state. This analysis provides an invaluable view on how state policies create or restrain the creation of assets - and by extension - economic opportunity.

How did California do? A big fat C.

What do you think our grade should be? How do you believe state policies on business ownership, homeownership, health insurance and education impact your own personal prosperity? Cast your vote in the poll below.


As always, I will report back on the results.

Given the many current conversations about the plight of the California Dream, it shouldn’t be a surprise that we didn’t fare well. Personally, I’m surprised that the grade was this high. Have a look at the complete scorecard for California.
The scorecard also has a breakdown of different policy areas - and in some of these, California scored well according to CFED’s measures. In other areas, like homeownership policy? An unsurprising F.

As I ponder what this C means, there are several phrases that come to mind - cruddy policy, and constant crisis are a few. But being the optimist I am, I’m trying to focus on constructive criticism. Sometimes bad news is the first step toward something good. Here’s hoping I’m not cuckoo.

It would be a huge impediment to upward mobility among working class people if we, as a nation, downgraded the importance of homeownership. Before I go any further, let me make a few things clear. I’m not one of those people who hate renting. I have lived in rental housing for virtually my entire life, and it has suited me just fine. I didn’t own a home until 5 years ago. I have nothing against renting, and believe it is the right choice for anyone who makes that choice. It’s also the right choice for anyone who can’t really afford to buy a home.

Affordable rental options must remain an important part of creating prosperity for low and moderate income workers. But I believe that homeownership is an especially powerful sparkpoint for Americans. Particularly for moderate income workers who do homeownership right - with fixed rate, long term financing, and a realistic plan to pay the full cost of ownership.

Achieving the dream of homeownership is the kind of life-changing experience that galvanizes people of modest means to continue driving toward successes that had previously seemed impossible - like graduating from college, or beginning to save for retirement for the first time ever. In the case of homeownership, there are also strong corollary benefits - it can lead to greater civic participation, and it seeds economic success for the children who live in homes owned by their parents.

Have you noticed the growing chorus around the nation, questioning whether homeownership should still be the cornerstone of the American Dream? It would be tragic if the institution of homeownership were the baby thrown out with the particularly fetid bathwater brewed by the mortgage mess.

Should renting really be the new American dream?

How the engine of homeownership ought to be built, and ought to run is one of our most important national conversations. I don’t propose to have the answers to these questions here. I’m just making a case to keep ownership as one of our cornerstones for prosperity. I certainly agree that we need to align the carrots and sticks of policy and market power properly, so we don’t drive people to make poor choices when it comes to buying homes.

But let’s not move all the carrots toward renting. For millions of Americans who have moved into the middle class, homeownership was the catalyst in a formula for creating multi-generational prosperity for families. Success begets success. And the success of homeownership led millions of these folks to make choices they would not have had they not owned homes.

When done properly (and it can be done well. EARN, and groups like us, have astonishingly low foreclosure rates among our clients - far smaller than the national average) homeownership helps grow aspiration. It can make other dreams come into focus for folks who buy homes - especially people experiencing upward mobility for the first time.

What do you think? Do you believe in this formula I’m arguing for, or do you think this is just alchemy? Make your voice heard by voting in the poll below. As usual, I promise to blog on the results!

Postsecondary education is one of the most effective vehicles to help low-income earners escape poverty and promote upward mobility. However, a gap continues to exist between the promise of higher education and the rate at which low-income individuals pursue college education. Only one-third of families in the bottom income quintile enroll in college and of those only a portion actually graduate.

A recent report by the Economic Mobility Project finds that many low-income students miss out on college simply because they do not have good information about how financial aid can significantly reduce the cost of tuition. The report, Promoting Economic Mobility by Increasing Post Secondary Education, identifies the factors that are essential to boosting college enrollment and graduation rates of low-income students. Additionally, it lays out a plan to help enhance economic mobility particularly for those students.

In California, tools are being developed to help more low-income students’ access higher education by bringing together two worlds - postsecondary education and nonprofit organizations that offer Individual Development Accounts (IDAs). This project is led by the University of Southern California School of Education which aims to help educational leaders identify ways to collaborate with nonprofit agencies to increase the usage of education IDAs.

You can download the recently published report here: IDA-PAYS: Examining the Potential of Education IDAs

IDA practioners and financial aid administrators may also be interested in: IDAs and Financial Aid: Understanding the Puzzle and Sharing Best Practices.

Also, if you are a higher education or IDA leader interested in offering IDAs or improving your current education IDA program, download: New Strategies in Delivering Education IDAs: Rethinking Program Design.

I was staring through the little TV screen on the elevator up to my office yesterday. Some of the words finally came into focus and gob smacked me. According to Deutsche Bank, half the homeowners in the US will owe more than their homes are worth by 2011.

If you don’t believe me, have a look here. Let’s put this into context. I did the math and we’re talking about 100 million Americans who will be underwater on their mortgages. Based on some projections from environmentalists, many of these folks may also be literally underwater shortly after their household balance sheets go into the toilet.

This is the kind of news that lends itself to some very creative interpretation. Some people read these kinds of numbers and immediately begin preparing to band together and live like Kevin Costner in Waterworld.

Can you see my mortgage?

I am more interested in what this will do to the way Americans re-evaluate their relationship with money. The report from Deutsche Bank states that a quarter of Americans already owe more on their homes than they are worth. I am certain that this is one of the reasons the savings rate in the US has skyrocketed from near 0% to about 6% in less than 6 months.

There is no disputing the national shift toward thrift. It is very hip, though I wonder if it’s just another trend. What’s our tipping point for a lasting cultural shift in how we save and spend? Many of my colleagues who work on helping people save believe we’ve already tipped. These folks have expressed their belief that the Great Recession has indelibly formed a new attitude about consumption. But I disagree. We Americans should never underestimate our attachment to stuff. In this country, unfortunately, we are still what we buy.

But I think our tipping point could arrive if half the nation’s mortgages sink underwater. It may come as a shock to some readers, but Americans used to be great savers - just as good as the Japanese and the Germans (but never as good as the Chinese, who have a 20%+ savings rate). We had double digit savings rates for years after the Great Depression. But savings gradually petered out as we invented new ways to get cars, homes, appliances and just about anything else. In particular, I think being able to shake money out of your home like a piggy bank sent the savings rate below zero.

What do you think our tipping point will be? What will it take to make us a nation that saves - not just in an emergency, but across time? I’d love to see your comments on this below.

For all our sakes, here’s hoping Deutsche Bank is wrong about 2011. In addition to the obvious and deep economic ramifications, it would be really unfortunate if Waterworld were given a second life.

The country is watching as California law makers attempt to balance the state’s staggering 26 billion dollar budget deficit. Just as the unemployment rate rose to a record 11.5% in May 2009, Governor Arnold Schwarzenegger revealed an aggressive plan to solve the budget deficit by reducing state spending for virtually all departments receiving state funding: Education, state workers, Health and Human Services, State Parks, Local Governments, and Corrections. From the perspective of supporting low-income families who have been especially hard hit during this recession, the most alarming aspect of this budget crisis is the severe cuts in funding for the department of Health and Human Services, which is the state department that administers safety net programs.

Two plans emerged to close the budget deficit, one proposed by the governor and the other approved by the Democratic-Controlled Conference Committee. This is a snapshot of the two proposals as it relates to safety net programs.

As part of a larger plan to reduce state spending, the governor proposed to eliminate funding for core programs like CalWORKs and Healthy Families, while the Democratic-Controlled Conference Committee tried to retain these programs by reducing benefits and limiting certain components to the most needy. CalWORKs is the states welfare-to-work program, which helps move low-income families out of poverty by helping unemployed parents find work, underwriting child care, and providing cash assistance as they move toward self-sufficiency. Healthy Families is a program that provides affordable health insurance to very low income children. Millions of low-income Californians who are already struggling to make ends meet in this tumultuous economy now face added uncertainty about their future as vital safety net programs shrink or are eliminated.

During economic downturns safety net programs play an essential role in helping stabilize low-income households and preventing moderate-income households from spiraling downward. When low-income households receive job assistance, affordable health insurance, or child care, they are better positioned to begin saving and moving out of poverty. If households living at or near the federal poverty line lose benefits that supplement their income, they are left to make difficult trade-offs among basic necessities like food in lieu of health insurance. California’s growing ranks of low-income households face a turbulent future as they deplete their savings, fall into greater debt, bankruptcy, and perhaps even face homelessness to get by in this high cost state. This is harmful to the well being of children and their prospects for economic mobility.

Before the current recession, poverty rates were already high in California. The Working Poor Families Project reports that 32% of children in the state were raised in low-income working household in 2006; meaning, nearly one third of children in California come from households that earned less than $41,228 a year for a family of four. The number of children and families in poverty is probably much higher now given the mounting foreclosure and unemployment rates in the state. Recognizing the vital role safety net programs play in stabilizing families during economic downturns, the federal government enacted the American Recovery and Reinvestment Act in March 2009. This landmark bill sends billions of dollars to states to protect safety net and asset-building programs. By cutting funding for safety net programs, our state leaders are not only walking away from billions of federally matched dollars but they are also allowing millions of families to slide deeper into poverty.

California should not radically rewrite its social contract at a time when families face more economic uncertainty and require more help than ever. Our state leaders should, instead, consider solutions that involve increasing revenue to bridge this budget shortfall. According to Peter Orszag, Director of the Office of Management and Budget, and Nobel Laureate Joseph Stiglitz, “… tax increases on higher-income families are the least damaging mechanism for closing state fiscal deficits in the short run.” New Jersey’s recently approved budget has enacted this advice by temporarily raising personal income tax on wealthy families, earning more than $400,000 a year. Additionally, they are increasing taxes on cigarettes and alcohol. A growing number of prominent individuals and groups like the Center on Budget and Policy Priorities, Economic Analysis and Research Network, Nobel Laureate Paul Krugman, and 200 Economists from various parts of the country are urging state leaders to protect safety net programs and raise taxes to bridge budget deficits if necessary.

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.

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.