Event Summary: Jobs are Not Enough

Reid Cramer, Director of the Asset Building Program, kicked off the event by framing the issues in stark terms: In America today, a job is frequently not enough to support a middle class lifestyle. He pointed out that the path to success for families is becoming increasingly difficult, and must be paved not only by income but by dependable savings and wealth building options.

 

Phil Longman, Senior Research Fellow at the New America Foundation, discussed his recent articles in the Washington Monthly and pointed out that even before the recession, when the nation enjoyed near full employment, the American middle class was suffering from severe economic problems that many people today erroneously attribute to job loss. Problems such as a zero percent savings rate, growing student loan debt, and defaulted mortgage payments will not be solved simply by a decrease in unemployment. Longman cited the importance of usury laws, which protect against predatory lending and promote financial education, and predicted that the newly formed Consumer Financial Protection Bureau (CFPB) would reinstate regulations to protect ordinary Americans from unwittingly falling into dangerous levels of debt. Longman also discussed long-term policy solutions such as child savings accounts, mandatory savings plans from employers, and moving green energy subsidies from corporations to individuals that would also help correct these problems.

 

Mark Schmitt, Senior Fellow at the Roosevelt Institute, provided a historical look at the development of asset building, as well as ideas for its future adoption into public policy. Pointing out that asset building movement began about twenty years ago by analyzing the challenges of poverty from a new angle, Mr. Schmitt highlighted the fact that asset building now provides real savings options to many Americans at different levels of financial security. He emphasized the importance of a system which takes into account the need for emergency savings, and described the many ways in which pilot and demonstration projects have proved the utility of asset building policies, ultimately calling for the political realm to “catch up with the practice” of asset building by instituting scalable policies.

 

Dana Goldstein, Bernard L. Schwartz Fellow at the New America Foundation, discussed the importance of higher education within the larger context of asset building. After discussing President Obama’s initiative to increase the availability and affordability of different forms of higher education, Ms. Goldstein pointed out that the ability to participate in the economic mainstream is directly linked to a good education. However, one of the biggest barriers in achieving this participation is the disconnect between young people’s desire to attend college and their economic reality. By obtaining a savings account early in life and receiving good information about financial aid options, Ms Goldstein cited the research of Professor William Elliott III to argue that kids will be much more likely to connect the idea of college with the reality of attending, and ultimately finishing their degree.

 

The second panel, moderated by Washington Monthly Editor Paul Glastris, explored the political ramifications of the current financial climate and how the concept of asset building offers potential solutions. Mr. Glastris highlighted the implications of the growing generational divide when he said, “It is not possible now to work one’s way through college.” Compared to inflation, college costs have risen steeply, and real wages for college graduates have not followed suit. In this era of economic uncertainty and pessimism, Mr. Glastris asked our two panelists whether asset building has the potential to become a real political issue that people care about.

 

David Leonhardt, Washington Bureau Chief of the New York Times, began by describing a prevalent trend in the American political consciousness: younger people are increasingly moving to the left, while their elders are moving to the right. This was not always the case, says Leonhardt, in the 80s and 90s, when majorities of young and old voted for the winner in every election. This rising progressivism within younger generations is unlikely to go away socially, but Leonhardt believes that there is potential for economic disenchantment and a decreased willingness to pay higher taxes.

 

Heather McGhee, Vice President of Policy and Outreach at Demos, is more optimistic about the future of progressivism in America. Citing a recent poll from Demos, she points out that among young people, understanding of economic challenges has increased since prior generations. The economic, racial, and experiential diversity of this generation is likely to propel its progressivism into middle-age and beyond, says McGhee.

 

This panel also tackled the problem of increasing college costs, decreasing real wages, and in general a decreasing incentive for Americans to invest in higher education. Mr. Leonhardt argued that, while these facts are true, increasing college costs are an exaggerated problem. Debt incurred during college years, he says, is the most valuable investment a person can make. Citing Ms. Goldstein’s work, he pointed out that people experience a psychological barrier by perceiving that college costs are much higher than they actually are, when in reality, “community colleges are on average free, and public state universities are in the ballpark of $10,000 per year.” The serious problem that should be consuming our attention is the fact that many kids go to college, incur serious debt, but leave before graduating.

 

Ms. McGhee said that, while college completion is an important issue, the disparity between college costs and incomes is a problem which deserves a large amount of attention. Restoring state funding for higher education, which has been cut in previous years, is the first step. Five figure student loans, she argues, are still an unduly large burden even though they might have been a good investment. Ultimately, says McGhee, “We have to see education as a public good, not a private cost.”

 

Lastly, the panelists discussed various ideas for increasing retirement savings for Americans across the board. Leonhardt mentioned the use of “nudge policies,” which treat savings accounts as a default and thereby decrease the likelihood that individuals will “opt-out.” Regarding the idea of mandatory savings accounts in which either an employer is obligated to offer an account or an individual is required to deposit savings into an account, both Leonhardt and McGhee agree that the current political climate is unlikely to be receptive to such ideas. Nevertheless, it is clear that other asset building ideas are drawing increasing support across the aisle, a promising indication for the future of economic security for all Americans.

 

Watch footage from the event here and check out the articles from the special issue below and let us know what you think. You can leave comments here, or tweet @AssetsNAF using hashtag #jobsarenotenough

 

"The Asset Agenda: Signature Policy Ideas for Building the Wealth of Ordinary Americans" by Reid Cramer

 

"The Hole in the Bucket" and "How to Save Our Kids from Poverty in Old Age" by Phil Longman

 

“Michael Sheradden’s Compounding Interest” by Mark Schmitt

 

“The ‘Assets Effect’” by Dana Goldstein