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(In)security and Safety Nets

Bina PatelCascade Commentary

Summary

Public benefit programs to support families in crisis have become distorted into entitlements, and yet government has little, if any, obligation to pay out future benefits. Policy ideas like individual asset accounts offer common ground for policymakers to collaborate on revamping outdated programs, while concretely enhancing the financial security of individuals.

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The safety net system created in the 1930s to mitigate the effects of the Great Depression is in need of serious examination and reform. Over time, public benefit programs to support families during short periods of crisis unfortunately have become distorted into entitlements—the presumption that government-provided benefits are a personal right. Moreover, the underlying assumption of most Americans is that these benefits are indeed secure and part of government’s obligations to citizens. Reformation of the safety net system is beyond political ideology. The discussion of safety nets in our culture tells us more about what we hope for our future and to what we aspire as individuals and as a society.

Among the most compelling reasons to seriously consider reforming the safety net system comes from sentiments among the American public. Americans’ feelings of insecurity regarding national-level issues are rising, although Americans feel more secure about their own personal future success. A recent article, “What the Public Really Wants on Jobs and the Economy” by Ruy Teixeira, presents an extremely interesting set of data. For example, in a 2006 Pew Research Center survey, 62% of those polled feel there is less job security than 20 years ago. While 69% of Americans feel they have or will achieve the American Dream, 59% feel pessimistic about the overall economy, retirement, health care and jobs.

“Asset building aims at increasing wealth accumulation among low- and middle-income families in order to move them towards long-term self-sufficiency.”

Teixeira continues by noting the following implications: “Given that the public views the overall economy as performing poorly and promoting economic insecurity, it should come as no surprise that the public favors policies that would mitigate that insecurity. And, given that Americans remain optimistic about their own and their families’ futures and determined to get ahead, it should also come as no surprise that they favor policies that promote economic opportunity and individual mobility.”

It is clear that broader ranges of policies supporting individual security are necessary. This idea is central to the asset building movement. Asset building aims at increasing wealth accumulation among low- and middle-income families in order to move them towards long-term self-sufficiency.

Personally held asset accounts have long been supported by the asset building field through its most widely used program, Individual Development Accounts (IDAs). IDAs are savings accounts that are matched by public and foundation funds. IDAs are usually used for home ownership, education or business start-up. The escalating need for individuals to have their own safety nets is met well by asset accounts. A systemsbased approach to individual asset ownership can address escalating security needs and provide wealth that increases economic equity, as well. Assets provide an individual with access to the market, and therefore more opportunity for economic mobility.

“Policy ideas like
individual asset accounts offer common ground for policymakers to collaborate on revamping outdated entitlement programs, while concretely enhancing the financial security of individuals.”

Already dedicated funding streams like unemployment insurance or the social security pool, for example, warrant review across political lines. They are feasible dollars that can be shared among the general population in part, but also that can be directed into individual asset accounts. Unemployment insurance is a tax paid fully by employers for each employee. If workers never collect unemployment, they lose this benefit. One proposal is to adopt the Chilean model that divides this tax both into a general fund and into individual accounts. This sort of policy is one relevant way to address what Americans are feeling about (in)security and the role of government.

Currently, government has little, if any, obligation to pay out future benefits, particularly for social security. Utilizing individual asset accounts reframes this relationship. Citizens vulnerable to a government system (into which they have already paid), unable to meet its obligations, can have confidence that their retirement, unemployment support or other assets accounts are safe and sound and that they will be accessible when needed.

Government is well poised to create policies that offer more opportunities to families. Policy ideas like individual asset accounts offer common ground for policymakers to collaborate on revamping outdated entitlement programs, while concretely enhancing the financial security of individuals. Policymakers can better respond to the paradox of personal optimism versus national pessimism by examining policies to support personal success for more families.

Bina Patel is Director of the Oregon Asset Policy Initiative at Cascade Policy Institute, a think tank based in Portland, Oregon. To read other publications of the Oregon Asset Policy Initiative, visit www.cascadepolicy.org.

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