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Assets Were a Springboard for Upward Mobility in Yesterday's America

Assets have always been a springboard for achieving the American Dream. Initially, the pivotal asset was land. Millions of immigrants to America, seeking sanctuary from oppression and a higher standard of living, came because land was available. Labor shortages made it easy to get a job at decent wages, while in the Old World, overpopulation and underproduction led to widespread joblessness, beggary, and hunger. America was young and filled with promise and opportunity, while the immigrants' countries of origin were old and undemocratic.

Jefferson's vision of a yeoman democracy is a historical example of asset building. In the Virginia Constitution of 1776, Jefferson set a property qualification for voting of owning twenty-five acres, stating that "every person of full age neither owning nor having owned 50 acres of land shall be entitled to an appropriation of 50 acres” (Boles and Gintis 1998, 361). Jefferson's proposal did not materialize, but other strategies to spur asset ownership were set in place. Examples include the Homestead Act, the GI Bill, the National Defense Education Act, the Morrill Act, and tax deductions and home mortgage secondary markets. Despite a strong belief in individualism and self-reliance, Americans have looked out for the unfortunate and protected assets from loss by creating social security, Medicare, and unemployment insurance.

The Benefits and Costs of Current Federal Assets Policy

For years, lawmakers at the federal level have enacted policies that encourage individuals to accumulate assets. Dozens of programs have helped millions of Americans plan for the future, buy a home, prepare for retirement, send their children to college, and weather unexpected financial storms. Measured conservatively, the federal government provides at least $367 billion to support savings and investments, retirement, homeownership, and small business. A good example is the home mortgage deduction. That's the good news.

Then there is the bad news. Federal assets policy has been an ad hoc enterprise that primarily benefits the affluent with substantial subsidies, principally through the tax code. “The poorest fifth of the population get, on average, $3 from these policies, while the wealthiest 1% enjoy, on average, $57,673. Households with incomes of $1 million or more receive an average benefit of $169,150" (Woo and Buchholz 2006, 7).

Assets holdings have become increasingly skewed toward the rich:

• The rate of asset poverty is about twice the rate of income poverty in the United States.

• The richest tenth of households own 83 percent of assets.

• The richest 1 percent owns 49 percent, while the bottom 80 percent own only 8 percent.

• In 2004, the median net worth of the bottom 25 percent was $13,300, compared to $328,500 for the 25 percent.

• The ratio of median net worth of whites to African Americans is 11 to 1.[1]

This is where new approaches to asset building enter the picture, holding promise as a way to reallocate ineffective and inequitable public subsidies that is productivity enhancing without increasing inequities between the haves, have-nots, and struggling middle class.

  • [1] Ray Boshara, The U.S. Experience with Asset Building Policies and Programs (HRSD Roundtable on Asset-Based Policy Options, Government of Canada. Ottawa, Canada, June 19, 2006). Also consult for more detail CFED's “State Assets Development Report Card 2002." cfed.org/sadrc/, and “Assets and Opportunity Scorecard 2005." cfed.org/focus.m?parentid=2&siteid=504&id=508 (Both accessed 2-5-08.)
 
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