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The Price of Hope: A Few Thousand Dollars

By Bob Friedman on 10/28/2016 @ 11:00 AM

Tags: ALC 2016, From the Founder

Last month, I was humbled to give the closing remarks at the 2016 Assets Learning Conference. This blog post contains the prepared version of those remarks. I would be honored to hear your feedback and your ideas for how we can fulfill the American Promise. Please share your thoughts by Tweeting me at @CFEDBob.

First and last, I want to thank ALL of you for making this Conference, and this growing Movement. The core team – Kristin, Leigh, Jocelyn, Adnan, Melissa, Sean, Sarah, Karianna. My 80 colleagues at CFED, who pulled off this feat, and are as kind as they are smart, dedicated and good dancers; my 19 fellow Board members, all giants in their own right, who give their best; our Sponsors and Exhibitors, without whom none of this would be possible; 350 presenters, who made possible 70+ brilliant breakouts; 500 Hill advocates, who completed nearly 200 visits. And most all, all of you. Please stand—our partners and colleagues, our friends and family, our teachers and students, who everyday open the doors to the Opportunity Economy we seek. Sometimes I think we owe you a warning: this work can be habit forming. Those who enter rarely leave and instead, go on to lead.

I—we—believe in the promise of America contained in the Declaration of Independence: “We hold these truths to be self-evident, that all [people] are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the Pursuit of Happiness.” I admit I amended “man” to “people,” but then, so has our history. The original version of the promise read, “Life, Liberty and Property,” which I used to think was an inferior version, but increasingly, I see the truth in it.

Until the last few months I thought—wrongly—that we had made great progress on Life and Liberty, and I could afford to focus on economic liberty and the basic economic endowment that could afford the Pursuit of Happiness. Tulsa and Charlotte, Minneapolis, Ferguson, Baltimore, Orlando and so many other cities have changed that.

Bryan Stevenson calls mass incarceration and the perversion of our criminal justice system the fourth stage of slavery in this country. But then he notes the hope: “The opposite of poverty is justice.”

As we rededicate ourselves to all forms of justice, let us recognize our particular calling: economic justice. I had the opportunity earlier this week to tour the National Museum of African-American History. At its base is the display of our original sin, the greatest cruelty and injustice of our history. But it rises to the greatest expressions of the human soul as one climbs—music and sport, politics, art and culture. In one corner, Booker T. Washington speaks: “At the bottom of education, at the bottom of politics, at the bottom of religion itself, there must be for our race…economic independence.” He might have added health and mental health, debt, stress and home, and so much more. As demonstrated in this conference.

I think liquid asset poverty is a form of economic slavery. Because property and wealth are inputs as well as outputs. The price of economic independence in this country is at least a few thousand dollars—the price of stability, the price of confidence, the price of hope—the price of a downpayment on the American Dream.

If so, asset tax policy—our two-thirds of a trillion annual upside-down investment in family economic independence in wealth inequality—is the continuing shackle of economic slavery. But it can become the key to the Opportunity Economy, where everyone, EVERYONE—people of color, women, people with disabilities (Ed Roberts called disability the equal opportunity disadvantage), immigrants, ex-offenders, the young, the old, even white men—has an economic place to stand, an opportunity to grow this economy, and to support themselves and their families in so doing. Instead of rewarding the rich, missing the middle and penalizing the poor, let us turn this annual investment averaging $2,000 for every man, woman and child every year into an investment in the promise of all people, so that the common genius may come out and flourish. In this universal infrastructure where, in Fred Goldberg’s memorable description, “everyone has a number and everyone counts,” will we have the political acceptability, ability and cash flow to target investments, give every child a more equal start and begin to close the racial wealth divide.

Now is our time. If economic exclusion is the fact of our time, economic inclusion is its promise. It is high time, in Langston Hughes terms, to “Let America be America again…the America that never was, yet still must be.” This is our work.

It is an ambitious calling—some might say an impossible calling—to turn the assets tax code right side up, to create universal targeted Child Savings Accounts, to close the Racial Wealth Divide. But the time is right…and ripe. The simple truth is that everyone will gain from opening the doors to the economy in this way to the talents, aspirations and sweat of every American—to the potential contributions of millions of new entrepreneurs, homeowners, savers, students, citizens. This is the way—it is the only way, I think—to begin to close the gaping racial wealth divide, in Lincoln’s terms—“to lift artificial weights from all shoulders, clear the paths of laudable pursuit for all … to give everyone an equal start and a fair chance in the race of life.” In this way, we can fulfill the promise of America, which is truly, the promise of Americans…of all of us.

I know your lives are full, but if we are to take history in hand and bend its arc towards justice, it will require all of us to devote some time to explaining to our colleagues and friends, parents and children, the Promise at stake, and the time to continue this nation’s fight for an economy of the people, by the people, for the people.

And so I want to end where I began—thanking all of you, and all of your colleagues back home all over this country, who are the heart of this movement and the hope for realizing the American Promise. This is the room where it happens. Thank you.

"You Know It Has Soul": Reflections on the Launch of Oakland Promise

By Carl Rist and Bob Friedman on 02/08/2016 @ 03:00 PM

Tags: Children’s Savings Accounts, Events, From the Founder

EDITOR’S NOTE: Director of Children’s Savings Carl Rist and Founder Bob Friedman were in Oakland on January 28 for the official launch of the Oakland Promise initiative. Oakland Promise marks perhaps the most comprehensive children’s savings initiative in the country, and we’re excited to watch it grow!

It was with great pleasure that we were able to take part in the launch of the Oakland Promise, described as a cradle-to-career effort to ensure that every child in Oakland graduates from high school with the expectations, resources and skills needed to complete college and be successful in the career of her or his choice. The launch event was one of the most inspiring we have ever attended: it gathered more than 500 people committed to the idea every community deserves to have a future better than their past.

In so many ways, Oakland Promise raises the bar for municipal-level children’s savings initiatives. Here are three ways we think Oakland Promise stands out among a growing crowd of municipal children’s savings initiatives:

  1. Soul. At the post-launch reception, Michael Sorrell, President of Paul Quinn College, described why he participated in the launch, even though Paul Quinn is located nearly 2,000 miles away in Dallas. “If you know anything about Oakland, you know it has soul,” said Dr. Sorrell. That soul was certainly on display at the launch. An incredible array of community partners was in attendance to lend their support, including Mayor Libby Schaaf, school superintendent Antwan Wilson, every member of the school board and every member of the city council member. Add endorsements by 100+ public officials, including Lieutenant Governor Gavin Newsom (who introduced California Promise legislation the same day); 100+ community partners; more than 70 private donors, led by Mark Bennioff (CEO of Salesforce, who upped his $5.4 million grant in support of the two-generation Brilliant Babies initiative); 22 colleges and universities, led by University of California System President Janet Napolitano; and a range of others.
  2. Hope. Oakland Promise doesn’t just provide hope for the community; indeed, it provides hope for a range of other communities as a model for boosting college success that draws on two proven strategies. First, as its name suggests, the Oakland Promise draws on the best of the so-called “Promise” models—starting with Kalamazoo—that commit to covering the cost of postsecondary education for all who graduate from local high schools. Second, Oakland Promise adds a full dose of the best of asset-building and children’s savings—the kind of “hope in concrete form” that Michael Sherraden first wrote about and that research shows makes such a difference in college access and success. In Oakland, this means following the well-known Kindergarten to College model that was cultivated across the Bay in San Francisco.
  3. Leadership. Hope and soul would be for naught were it not for good, old-fashioned leadership, and that’s where Oakland’s new mayor, Libby Schaaf, comes in. Mayor Schaaf has made Oakland Promise her number-one priority because of the importance of education to the future of her city. Leveraging resources from the philanthropic community, Mayor Schaaf hired David Silver (formerly the Executive Director of College Track) as her new Director of Education. Under Mayor Shaaf’s leadership, David assembled an all-star team of experts, including Amanda Feinstein (most recently a leading funder of children’s savings programs with the Walter and Elise Haas Fund) and Vinh Trinh. Together, this team has already raised $25 million in commitments. Never before have we seen this level of support at the launch of a CSA effort.

So what does Oakland Promise mean for other communities? With the right mix of soul, hope and leadership, Oakland stands as a beacon of what is possible to all communities; its lessons and inspiration is rife. But as participants noted, even Oakland has a long way to go. For Oakland to deliver on its promise, it will require hundreds of millions of dollars in funding beyond the existing commitments, as well as lifetimes of devotion. Luckily, the seeds have already been planted in Oakland.

Of course, the fact is that the promise Oakland is making to its young people is a promise America should be making to its youth, regardless of where they live. This is a much more significant undertaking. It would require, for starters, a reallocation of our national investment in asset building. In other words, the $600 billion in upside-down federal tax expenditures would need to be turned right-side up so that universal, progressive savings programs can benefit those who need them the most. With these reforms in place, the promise Oakland is making can be a promise America can make to all its young people.

When we launched the Campaign for Every Kid’s Future in 2015, we set an ambitious goal of 1.4 children with savings accounts by 2020. Oakland proves that with the right leadership and a whole lot of soul, our goal is within reach.

Want to expand access to Children's Savings Accounts for even more students? Join the Campaign for Every Kid's Future!

FROM THE ARCHIVE: Wealth Inequality: Its Causes and Cures

By Bob Friedman on 09/21/2015 @ 05:00 PM

Tags: From the Founder, Racial Wealth Divide

This post first appeared in March 2013.

The video, Wealth Inequality in America, went viral last Tuesday, scoring more than two million hits in less than a week.

Why the interest? A compelling video to be sure, albeit with data that has been around for awhile. It is the wealth gap that is truly stunning; the gaping chasm in wealth between virtually all Americans and the very richest one percent who control more than a third of all wealth. The wealthiest quintile of Americans owns more than 85% of all wealth. Perhaps the greater surprise is at the other end of the spectrum, with the poorest 80% of Americans (270 million people) owning less than seven percent of the nation’s wealth.

The trends are even more sobering (if that were possible): in the last 30 years, the wealthiest five percent of Americans amassed almost three-fourths of all gains, while the bottom 60% of the American people actually lost share (-5.4%).

Last week, Thomas Shapiro and his associates released a study of the causes of the tripling of the black-white racial wealth gap from $85,000 to $236,500 over 25 years. The prime determinants of the increase: duration of homeownership, household income and unemployment over the period.

Why is wealth inequality—and asset poverty—so great, and what should and can be done about it?

It is easier to assert that income inequality is at least somewhat earned—a reflection of work and merit. After all, salaries are reflected here, a clear tie to hours worked, and, arguably, to productivity as well. Earnings disparities due to wealth inequality are harder to justify, let alone explain. Does anyone think that the average billionaire contributes 400 times more to the common good than the average teacher, fire fighter or police officer?

One reason wealth inequality has grown to such an extent is because we fail to tax wealth gains, and we actually penalize low wealth people from pursuing exactly the paths they must to acquire a minimum of wealth: stability and hope.

Last year—like many years before last year—we awarded half a trillion dollars in tax breaks to homeowners, retirement savers and successful investors. Virtually all of these rewarded the richest 40-20-5-1%. At the same time, we denied the 60%--a majority of Americans—any incentive on their savings. In fact, for the poorest Americans, we went the other way, penalizing them for saving for their education, businesses, homes and futures.

There are many policies that have been suggested by New America Foundation, the Brandeis Institute on Assets and Social Policy iasp.brandeis.edu, the Center for Social Development csd.wstl.edu, the Initiative on Financial Security of the Assets Institute aspeninstitute.org, CFED cfed.org and others. But, since such a large part of current subsidies for wealth inequality pulse through the tax system, and since tax reform still appears on the political horizon, we must not miss the opportunity of tax reform to reduce and rationalize savings and asset-building tax incentives. Most crucial: provide a savings incentive to the poorest 60% of taxpayers who, as has been proven by well-documented demonstrations and history, will save, start businesses, buy and keep homes, go to college, create their futures and ours. This can be done for a fraction of the half-trillion dollars we spend annually with questionable effectiveness to incent saving and asset building by the wealthiest 20% of Americans.

We should encourage saving and asset-building—entrepreneurship, education, homeownership, employment—for many reasons, not just because it is fair and productive, but because it is the key to economic growth that we so need. We know that having even a few hundred dollars in savings makes kids 6-7 times more likely to aspire to and attend college, enables individuals to start their own businesses, allows the ill-housed to enter the ripening homeownership market. Research by John Haltiwanger and his colleagues at the National Bureau of Economic Research has established that almost all job growth in the past 30 years has come from new and young businesses—overwhelmingly businesses less than one year old. But investment in new businesses mostly comes from individual savings and savings of friends, families and associates; savings that have been largely wiped out over the last several years. This decimation of savings is a likely reason why job creation by new businesses has fallen from a high of 3.6 million annually before 2008 to a low of 2.2 million in the years since.

If we want to seed the next economy, lets open its doors to all, enabling them to build the skills, businesses and jobs of our future.

Read This If You’re Having a Bad Day

By Bob Friedman on 06/04/2015 @ 12:00 PM

Tags: From the Founder, News

As seen in the June 2015 edition of CFED's newsletter...

EDITOR'S NOTE: Last week, CFED hosted a fundraiser in San Francisco to honor the vision of Founder Bob Friedman, our Chair Emeritus. During this event, we also launched the Family Economic Opportunity Fund, a $2,000,000 campaign to raise the capital CFED needs to design, pilot and scale innovative programs and policies that significantly reduce wealth inequality in the US and ensure that all U.S. families can achieve financial success. The Family Economic Opportunity Fund was seeded by a generous donation from Morgan Stanley and has already attracted over $700,000 in gifts from companies and individuals who attended our fundraiser in San Francisco. In preparation for this event, we asked Bob to write a letter to his granddaughter, Olivia—his pride and joy. In that letter, he shared his vision of the world he wants Olivia to inherit. This vision has been the driving force behind CFED since Bob founded it in 1979. The letter was just too sweet not to share!

Dear Olivia,

My colleagues (many of whom you’ve met) at CFED, the organization I started and work with, asked me to write this letter explaining to you what we do and why we do it. We have a hard time explaining that to most people. I think they wanted me to try to explain it to you so I would explain it clearly, but I think they might underestimate how smart you are.

Olivia, only one of the things I love about you is the way you seek out the stranger in the room—the one everyone knows least—and make her or him part of the group. We at CFED want to make every person in this country part of the group, able to support themselves and their families, and do what they want to do to make the world better.

You will almost certainly go to college and develop the skills to do what you want—Princess Scientist—and make enough money to raise kids of your own and help others. If you want to start a business, you will have the savings to do that. If you want to buy a house, you will have the downpayment you need to do that.

We talk a lot about what is most important—being smart and kind—the value of practice and learning and working hard. (I’m really glad that we now agree being pretty is NOT the most important.) A lot of times you will hear that if you are smart and kind and work hard that everything will work out okay.

But sometimes it doesn’t. And while a lot of the reasons are bad luck, there are a lot of bad rules that make bad luck last longer and hurt more than it should.

At CFED, we work to change the bad rules to good rules so that bad luck doesn’t last. And the good news is, the good rules help not just the people with the bad luck, but everybody.

For example, La Terra Cole, one of the first people we helped save for college. La Terra grew up in foster homes, apart from her birth parents—I do not know why they could not take care of her, but I think part of it was not being able to earn enough money to support her. Only three of 100 foster kids like La Terra get to go to college, even through college is the surest path to a good job. That is when we met. We did what most parents who can do for their own kids: we gave La Terra $1 to match every dollar she saved from the part-time jobs she worked after school. When she saved $100, we gave her another $100 she could use to pay for college. Actually, she worked so hard, she saved more than $1,000; she went on to college and then law school. She is now working and saving money to finish law school and start her business, which will help other kids in foster care follow their dreams, stay out of debt, go to college.

We work because we think every kid like La Terra—every kid and every adult in the United States—deserves a chance to go to college, start a business, buy a house, work, and save and support a family. One of the things I have learned--as I think you have learned from meeting people—is how amazing most people are if you just give them a chance. We think if everybody does better, if everyone can contribute their work and ideas of how to live better, then more—everybody—will.

There are many reasons why so many kids and adults don’t have the chances your mom has created for you. Some reasons lie in the past--the bad rules that allowed slavery and kept people with different skin color from getting the homes or jobs they deserved. And there are still bad rules today. When you are eight, we will cover the tax system in greater detail, but for today here is what you need to know: Every year, every person in our country has to pay the government some part of the money they make so that the government can do the things it needs to do to keep you safe. With that money, the government builds roads and pays teachers, makes parks and helps people that can’t help themselves. There are a lot of rules that go into how much you pay the government and right now, the rules help people who have the most, save the most. We think that it would be a better idea to have the rules help the people who need it the most save the most. That way, they can help themselves instead of having to ask for help from the government, and everybody can enjoy what they can contribute when given the chance.

Olivia, may you always brighten the world as you have this past six, almost seven years. You inspire me to do all I can to deliver a better world for you and all your generation.

With love and pride,

Bop Bop

What Does Success Look Like?

By Bob Friedman on 11/05/2014 @ 10:00 AM

Tags: From the Founder

As CFED embarks on the journey of developing our next strategic plan, we’re not just looking to the next three years. Instead, we seek think both short-term and long-term, and thus to determine our strategic direction for the next 10 years. As we do, the threshold question seems to be, “What does success look like?” This question is critical not just for us, but for the movement we seek to be a part of and to help nurture. Indeed, having an overarching and inclusive goal is essential if we are to inspire and unify the diverse and important elements of this field, to insure that there is need and room for everyone, to encourage collaboration, direct competition away from each other and toward the barriers we seek to take down.

It is not so easy to define success in a meaningful and helpful way. Our first temptation is to define success in terms of macro change in the outcome trends which define and limit economic opportunity and mobility: reducing the 44.5% of Americans (and super majorities of African-Americans, Latinos, Native Americans and other groups cast to the sidelines of the mainstream economy, like people with disabilities, foster kids, the old, the young) experiencing liquid asset poverty. Or, we could reverse the metric and emphasize the positive—the percentage of Americans with sufficient assets and opportunity to maintain an economically secure lifestyle. In an ultimate way, these are the right measures—the ultimate test of whether all our efforts have made a difference. But these statistics will not change quickly, as millions of people will have to change their economic status for these numbers to change. This can only be the result of significant policy and market changes (changes in community practice and innovation will not likely register). So, focusing on such outcomes will mask progress in the forces, policies, market changes, community practice energy and innovation which will lead to those macro-outcome changes.

I would suggest that instead, we focus on the number—not the percentage—of people (currently low-income and asset-poor people, especially people of color and other traditionally and disproportionately economically disenfranchised communities) possessing a few thousand (or, for kids, a few hundred) dollars of liquid wealth—“hope in concrete form.” Let us measure, for example, the thousands or tens of thousands of kids covered by children’s savings programs each year, wherein they are provided fifty to a few hundred dollars in incentives and savings, or the thousands of adults provided Individual Development Accounts or similar asset accounts.

Yes, I do focus on money. I realize there are a lot of non-monetary measures of financial empowerment and inclusion. I realize also that one of the consistent findings of recent years is that even very small incentives make a difference. At the same time, our fundamental finding, articulated by Michael Sherraden 25 years ago, is that assets—and particularly liquid assets—matter. They matter economically, psychologically, socially and politically. Here, even small amounts matter, and money is countable, tangible and pregnant with possibility.

As an intermediary variable, I would also suggest we measure the breadth, strength and vitality of the asset-building field/movement—the number of organizations and people involved, the financial support base for those organizations, the number of significant innovations and so on. As I gazed out upon the 1,231 participants at the 2014 Assets Learning Conference, I could not help but pick up the electricity in the room—the energy, optimism and effectiveness of each participant, each of whom is an agent of change. To meet any member of that audience was to come face-to-face with accomplishment and potential. Each participant too represented 10-100 colleagues back home. New constituencies—civil rights organizations, the women’s movement, education reformers, housing advocates, business advocates, funders, researchers—are increasingly seeing a common agenda which embraces economic justice and opportunity, and knows that wealth is at the center. I cannot help but believe that as long as this field is filled with the diversity of energy, vision, commitment and talent so palpable in that room, the movement will continue to grow, and with it, the number of Americans with a minimum of investable assets underwriting entrepreneurship, education, homeownership, economic expansion and growth.

Let us have faith in each other, and measure the number of people and organizations working toward the outcomes we seek. In doing so, let’s use Gloria Steinem’s inclusive movement principles as our watchword:

“How do we move forward? It’s not rocket science. We need to worry less about doing what is most important, and more about doing whatever we can. Those of us who are used to power need to learn to listen as much as we talk, and those with less power need to learn to talk as much as we listen. The truth is that we can’t know which act in the present will make the most difference in the fu- ture, but we can behave as if everything we do matters. …Nothing is too small—or too big—to change con- sciousness.

All together, we are changing from a society whose or- ganizing principle is the pyramid or hierarchy to one whose image is the circle. Humans are linked, not ranked. Humans and the environment are linked, not ranked.

And remember, the end doesn’t justify the means; the means are the ends. If we want dancing and laughter and friendship and kindness in the future, we must have dancing and laughter and friendship and kindness along the way. That is the small and the big of it.

At my age, in this still hierarchical time, people often ask me if I’m “passing the torch.” I explain that I’m keep- ing my torch, thank you very much—and I’m using it to light the torches of others. Because only if each of us has a torch will there be enough light.”

- Gloria Steinem, “Our Revolution Has Just Begun,” Ms. Magazine, Winter/Spring 2014. p. 31. From her National Press Club Address on the eve of receiving the Presidential Medal of Freedom, the highest civilian honor conferred by the US.

Gloria Steinem to Keynote Assets Learning Conference, Platforms for Prosperity

By Bob Friedman on 08/28/2014 @ 05:00 PM

Tags: ALC 2014, From the Founder

Gloria Steinem—feminist leader, author and activist—will keynote CFED’s Assets Learning Conference, Platforms for Prosperity, in the Closing Plenary, addressing the parallels between the assets movement’s radical assertion that the poor can save, start businesses, go to college, buy and keep homes, and be full stakeholders in our economy, and another once-unthinkable idea: that women and men should have equal rights and opportunities. Gloria will remind us of our collective power to push for a more just society where all people are financially secure and have the tools and opportunities to fundamentally improve their economic position.

There are few leaders who have done as much to build liberation movements for all people—the half of our population that are women and girls, and more broadly all people whose opportunities are constrained, whose talents and promise are ignored, undervalued, wasted. She has been pivotal in building the modern women’s movement, but has been just as active in the movements for economic and social justice, civil rights, human rights, disability rights, citizenship rights and more. Gloria is synonymous with movements. Who better to talk about the role and how to build the assets movement?

“A feminist is anyone who recognizes the equality and full humanity of women and men."

– Gloria Steinem

Gloria has guided and inspired us at CFED throughout our history. Too few people realize that the self-employment/microenterprise field in the United States was an outgrowth of the women’s movement. At a time when the labor market offered women few living-wage job opportunities, the U.S. microenterprise field emerged to recognize and assist low-income women in creating jobs and incomes for themselves. Through her Ms. Foundation and Magazine pulpit in the 1980’s, Gloria helped recognize, shape and propel what is now known as the U.S. microenterprise field.

A staunch supporter of asset building and CFED, Gloria was the emcee of CFED’s 30th Anniversary Gala, adding grace, humor, insight, inspiration and inclusiveness to the celebration. Her role as the keynote of our Closing Plenary is fitting at CFED’s 35th anniversary, as we embark on a new path to expand the assets movement, because she will encourage us to think big and be bold and make new and larger connections. As she often says, “dreaming is a form of planning.”

Gloria Steinem

On November 20, 2013, President Obama presented the Presidential Medal of Freedom—the highest civilian honor in the US—to Gloria. I do not know whether that was a bigger honor for Gloria…or for freedom. In remarks to the National Press Club the night before, she both demonstrated why she so deserved the honor, and mapped the path ahead in her own profoundly inclusive, visionary, grounded and brave approach:

“How do we move forward? It’s not rocket science. We need to worry less about doing what is most important, and more about doing whatever we can. Those of us who are used to power need to learn to listen as much as we talk, and those with less power need to learn to talk as much as we listen. The truth is that we can’t know which act in the present will make the most difference in the future, but we can behave as if everything we do matters."

“Humans are linked, not ranked. Humans and the environment are linked, not ranked.”

“[R]emember, the end doesn’t justify the means; the means are the ends. If we want dancing and laughter and friendship and kindness in the future, we must have dancing and laughter and friendship and kindness along the way…”

“At my age, in this still hierarchical time, people often ask me if I’m ‘passing the torch.’ I explain that I’m keeping my torch, thank you very much – and I’m using it to light the torches of others. Because only if each of us has a torch will there be enough light.”

We hope that if you are able to join us for the Assets Learning Conference, you can stay for the Friday afternoon plenary to experience first-hand the ways in which Gloria can ignite an entire field full of advocates.

Photo Credit: Jenny Warburg

Growing the Field: Future Directions

By Bob Friedman on 06/12/2014 @ 04:45 PM

Tags: Children's Savings Accounts, Events, From the Founder

CFED Founder Bob Friedman at the 2014 Children's Savings Conference

Over the past 25 years, the Child Savings Account movement has grown from an idea to a global phenomenon, and, in the US, from no systems including low- and middle-income children to having proven tools and tens of thousands of accounts in a handful of large-scale, universal, progressive local and state systems. The vitality of social entrepreneurs across the country who have led the development of the field for two and a half decades is only exceeded by the energy and potential of new converts. It is reasonable to expect at least another 25 years of accelerating growth, especially if we play our cards right. As the past, present and future of the CSA field paraded in front of the 300 participants at the 2014 Children’s Savings Conference, From Aspirations to Achievement, several principles rose to guide future growth:

  1. Embrace, respect and nurture both experienced and new social entrepreneurs seeking to develop/expand the field. There is room and need for everyone. Though the growth of the field has perhaps exceeded the growth in funding, only infighting and competition can blunt the growth of the field. As Gloria Steinem directed in her National Press Club speech on the eve of receiving the Presidential Medal of Freedom, “People often ask me if I’m ‘passing the torch.’ I explain that I’m keeping my torch, thank you very much, and I’m using it to light the torches of others…because only if each of us has a torch will there be enough light.”
  2. There is no one right path forward. “Those of us who are used to power need to learn to listen as much as we talk, and those with less power need to learn to talk as much as we listen. The truth is that we can’t know which act in the present will make the most difference in the future, but we can behave as if everything we do matters.” This movement has grown because of different change strategies—research strategies, policy advocacy strategies, practice and demonstration strategies, financial institution strategies, etc. We are probably better off supporting the widest variety of strategies—public, nonprofit, philanthropic, market, family, federal, state, local, practice, research, policy, communications and organizing, 529 and other financial institution strategies. It’s okay—even useful—to disagree; that is a measure of our vitality.
  3. It’s okay to learn. As Frank DeGiovanni summarized, the cup of CSA knowledge is both half empty and half full. We should go forward confident of the rigorous and varied research base on which we stand, and mindful that there are key questions—savings vs. assets, the best ways to increase savings rates—going forward that are worth answering without undue anguish. John Keats urged negative capability: “the capacity to be in doubt and uncertainties without any irritable striving after truth and reason.”
  4. Faith in the future; patience. The growth of the CSA field, like most social systems, does not follow predictable annual cycles. Five years ago, the seeds sown in the SEED Initiative—the first large national test of CSAs—seemed to have yielded proof of concept, but few lasting systems (besides SEED OK which modeled a statewide, automatic progressive 529 system). Four short years later, we have large-scale universal progressive state and local systems with tens of thousands of accounts, federal interest, and the likelihood of many more local and state systems.
  5. Piggyback on other systems—529, income maintenance, social service, education, tax systems. Tax reform aimed at sharing savings and asset-building incentives to the asset-poor majority of low- and middle-income kids with savings structures and matches could finance such an inclusive foundation for economic progress for a fraction of its current cost.
  6. Keep learning. It is okay to disagree and try your own way forward, but it is only responsible to learn from what has gone before and people who have been working these trenches for a long time.

Related Reading

A Giant Bows Out

By Bob Friedman on 05/14/2014 @ 06:30 PM

Tags: From the Founder

Jack Litzenberg

Jack A. Litzenberg, who worked at the Charles Stewart Mott Foundation for more than 30 years, leading the development of antipoverty, microenterprise and sectoral employment programs there, died Tuesday, May 6, 2014, at the age of 67. CFED, economic opportunity and so many of us in these fields have lost a special friend and guide. The very least we owe Jack—and the world of opportunity he did so much to help create—is to appreciate his legacy and ensure that younger folks who may not have had a chance to know him but in whose hands his legacy rests, know what he taught and how he led.

I first resisted meeting Jack. In 1983, with funding from the German Marshall Fund of the United States, I was putting together a study tour to Britain and France to study new approaches to job creation and entrepreneurship. I called Geri Larkin, then a Program Officer at the Mott Foundation, to invite her. She declined and recommended Jack. I said I really needed a woman. She said, “would it help that he’s disabled?” I assented, having no idea the gift she was giving me or the field. I did learn never to let disability mask ability.

Perhaps the most vivid image I have of Jack to this day was after our visits to early self-employment initiatives born in the wake of plant closings, in Glasgow, Scotland. We gathered in the late afternoon—40-60 strong, including our travelling pack of 12 and 30-50 leaders of local employment initiatives from throughout Scotland and England—arranged in a large circle in a cathedral-like room with the sun’s afternoon rays filtering through the air. Suddenly, Jack leapt to the center of the room, five clocks that he had bought from the formerly unemployed entrepreneurs he had visited, excited, transformed. He commanded, transported everybody in that room. To this day I don’t know whether the glow I remember emanated from reflected afternoon light, or his soul. I do remember his delighted refrain: “You should have seen the people.” Before that, Jack didn’t know of microenterprise. That afternoon, we gained our greatest champion.

Jack returned from that trip to become the lead funder for microenterprise development in the US. He funded pioneering women’s self-employment programs like WEDCo, WSEP, WISE, even while he nurtured and taught their leaders. He funded seed capital funds, and then a long-running assessment of them led by Gary Prince and Joyce Klein. He wanted to be effective, and to that end, always insisted on learning from what we did. He launched the Self-Employment Learning Project with Peggy Clark and Lisa Mensah, then at Ford, and would fund its successor, FIELD at the Aspen Institute, which continues to this day. In 1991, when the microenterprise field he seeded had grown to more than a hundred programs all over the country, he became an organizer, funder and founding board member of the Association for Enterprise Opportunity, AEO. For this work, Jack was recognized by the Council on Foundations with the Robert Scrivner Award for Creative Grantmaking.

Always searching for other pathways to opportunity, Jack discovered and nurtured Cooperative Home Health Care and its entrepreneurial leader, Rick Surpin, early in the 1990s, and proceeded to fund the development of sectoral employment initiatives, with Steve Dawson, PHI and others.

I realize as I cite these few grants and initiatives, how many hundreds more he conferred, each perfectly sized, each tailored to the human entrepreneur behind the innovation, each better designed to unleash the talents and aspirations of the disadvantaged people they were targeted to help, due to his craft and vision. No one could size a grant like Jack; he knew when to give $5,000, or $25,000, or $100,000. No one knew better how to build a field, brick by brick. No one was a better mentor or friend to aspiring social entrepreneurs than he. When I learned he had passed, I, of course, felt a huge new void in the universe. But then the calls poured in from the amazing people he had touched and nurtured and led; people like Bill Bynum, Peggy Clark, Lisa Mensah, Joyce Klein, Elaine Edgcomb, Kathy Keeley, Connie Evans, Steve Dawson, Rick Surpin, Benita Melton, Carol Rugg and so many others. And then, I realized that he had so enriched this world and this life, that I could only be grateful for all he had given, and for all of the giants he created.

Words fail, but I offer a few poems to Jack that I wrote over the course of our lives together: the first, Jack, written as he underwent spinal surgery in 1993 to straighten his back so that his heart would not collapse (an ironic notion). His chief concern was whether he would be able to play golf after the surgery; the doctor promised that if he could before, he would also be able to play after, but he lied. The second, If Jack Weren’t Jack, was on the occasion of his 50th birthday in 1997. The final two, Jack’s Hands and King Jack, were written when the microenterprise and sectoral employment fields got together to honor Jack a couple years ago at the AEO Conference.

It is hard to know which of Jack’s gifts were the most dear, but I cannot leave this note without mentioning his sense of humor—like his heart and his vision—generous, heartfelt, genuine. His whole body joined in his laughter. He worked for and saw a better world, but he could also laugh at our failures and foibles…and his own. In fact, he took joy in laughing at himself.

Who Are the Job Creators?

By Bob Friedman on 05/13/2014 @ 06:00 PM

Tags: From the Founder

“It is high time we stop feeding the birds by feeding the cows and start feeding the birds directly.”

  • Senator Daniel Patrick Moynihan

“But, mom, all people are born short.”

  • Anne Kiehl Friedman, age 4, responding to her mom’s comment after she complained of being born second, “Anne, complaining about being born second is like complaining about being born short."

Policymakers’ and pundits’ answers to that crucial question vary from year to year, most often miss the mark and frequently lead to misguided policy (bearing an unmistakable resemblance to original ideological orientation).

Republican leaders like Mitt Romney, John Boehner, Paul Ryan and others have suggested that it is the wealthy—the 1%—who are the true job creators, since their capital fuels business formation and job growth.

Thirty-five years ago, David Birch shook the development world and captured the attention of policymakers with his 1981 article, “Who Creates Jobs,” and its central contention that small firms were responsible for the lion’s share of new jobs. Numerous studies since have validated the contributions of small businesses to job creation.

The most important—though still underappreciated—recent study of this issue is “Who Creates Jobs?” by John Haltiwanger and his associates at the National Bureau of Economic Research. Their work clarifies that it is not the size of the business that matters for job creation but the age: new and young businesses create the majority of jobs.

Using the largest longitudinal business database, compiled by the Census Bureau, researchers found that over the 30-year period from 1976-2005, virtually all net new jobs were created by new and young firms. In fact, after controlling for age, small firms were no more fertile than large firms. Even though 40% of new firms don’t see their fifth birthday, the surviving 60% have grown enough to make up for the jobs lost by failed young businesses. For most of this period, new firms under one year old contributed almost ALL net job creation.

There is evidence, too, that the decline in job creation from as many as 3.6 million per year in 2008 to approximately 2.2 million per year for the last several years is due to a reduction in the number and growth of new and young firms. We know a little more about the characteristics and needs of these young firms:

  • Their owners are not the wealthiest among us. In fact, entrepreneurship is spread across the income spectrum at 7-8% of the population, with half of microbusinesses owned by entrepreneurs with household income below the national median.
  • While there is reason to focus on the minority of firms that are poised for rapid growth (about 3% of new firms, according to Kauffman Foundation research), there is no good reason to ignore the majority of new firms that add jobs in 1s and 2s. If we can learn to count and value the ones and the twos, we find them adding 1-2 million jobs per year. The majority of new firms are microbusinesses and will remain microbusinesses throughout their existence, but despite being small, they are too significant to overlook in the overall dynamic of job creation, innovation, resilience, learning and vibrancy in the macro economy. These firms yield many ancillary benefits at the micro level in terms of entrepreneurial leadership and contagion.

These firms are vulnerable. Often launched on the wings of a dream or the necessity of turning a hobby or skill into a way to earn a little more money, they are backed by little more than meager savings (half of firms are started with under $5,000) and the grit and bravery of the common entrepreneur.

"While there is reason to focus on the minority of firms that are poised for rapid growth (about 3% of new firms, according to Kauffman Foundation research), there is no good reason to ignore the majority of new firms that add jobs in 1s and 2s. If we can learn to count and value the ones and the twos, we find them adding 1-2 million jobs per year. The majority of new firms are microbusinesses and will remain microbusinesses throughout their existence, but despite being small, they are too significant to overlook in the overall dynamic of job creation, innovation, resilience, learning and vibrancy in the macro economy. These firms yield many ancillary benefits at the micro level in terms of entrepreneurial leadership and contagion." (Source: Kauffman Foundation)

CFED’s recent study, In Search of Solid Ground: Understanding the Financial Vulnerabilities of Microbusiness Owners, found that lack of savings impacts microbusinesses of all ages, undermining businesses’ stability, growth potential, ability to withstand emergencies and capacity to make long term investments in the business and the owner’s household. Yet household wealth took a historically large hit during the most recent recession, draining entrepreneurs of critical sources of startup capital, including liquid savings and home equity. In their epic study of racial disparities in business creation rates, Fairlie and Robb note that “differences in asset levels is the largest single factor explaining racial disparities in business creation rates.” No wonder startup rates and growth rates declined.

Other recent work from CFED, “Enhancing Support for Lower-Income Entrepreneurs Through Major Public Systems,” documented the federal policy landscape for microbusinesses, including new entrepreneurs. We found that the majority of policies and programs designed to support small businesses fail to reach the majority of new firms and are instead focused on gazelles, businesses with capital needs of at least $250,000, and “small” businesses with relatively large workforces. There is support for smaller microbusinesses and non-high-growth new entrepreneurs, delivered through several large public systems. In addition to the SBA and small business-serving offices in other Cabinet departments, the tax system, workforce system and postsecondary education system all deliver resources to these entrepreneurs. However, the support is poorly targeted and frequently difficult to access. Our paper identified 12 federal policy reforms that could improve the amount and quality of services delivered to lower-income entrepreneurs through these systems.

We believe there is pent-up entrepreneurial interest, capability and energy across the country just waiting for the savings necessary to risk advancing toward the future. The first step is easy: recognize the role new and young firms play in our economy, and especially in job creation, and design policies that effectively support all types of new entrepreneurs, not just high-growth firms and new employer firms.

Second, because initial financing for the vast majority of new businesses comes from personal savings and savings of friends, family and associates, the right intervention is not to create institutional funders, but to reinforce family savings. While we encourage savings for retirement, postsecondary education and homeownership, we have no designated, tax-advantaged savings accounts for arguably the most economically effective investment – entrepreneurship. We should create such accounts, and provide a tax incentive for them which serves would-be and new entrepreneurs across the income and demographic spectrum.

Another way to encourage start-ups and healthy growth is CFED’s proposal for a New Entrepreneur Tax Credit . The NETC would help make the labyrinthine tax system easier for new entrepreneurs to navigate by providing a tax credit for first-time Schedule C filers (the tax forms used by the self-employed and most microbusinesses) to fully offset the self-employment tax. While employers take out workers’ payroll taxes with each paycheck, microbusiness owners must pay their payroll taxes in lump sums. Furthermore, because they are acting as both employer and employee, microbusiness owners must pay both the employer and employee shares of payroll taxes. Combined, the often unexpectedly responsibility to pay the employer share of the payroll tax combines with the need to pay all at once to create a moment of serious financial vulnerability. A tax credit for new entrepreneurs would reduce their marginal tax rates during the difficult startup period. This, in turn, would help new entrepreneurs avoid tax bill-induced crises, keep more liquidity in their business to support early operations, and provide an ideal moment to educate new entrepreneurs about the amount of taxes they should expect to pay in the future.

With this and other CFED entrepreneurship policy proposals, we could launch millions of entrepreneurs who lack capital, but not vision, talent or energy. Meanwhile, we’d be adding millions of jobs to the U.S. economy.

The Existence of Poverty Doesn’t Signal the Failure of Asset Building: A Response to Callahan

By Bob Friedman on 04/28/2014 @ 08:45 AM

Tags: From the Founder, Recommended Reading

In a recent blog post, David Callahan critiqued the asset-building field by asserting that it was hard to think of "a policy movement that failed so miserably in its overall goal, despite massive foundation funding, intellectual firepower and buzz."

To be sure, Callahan recognizes certain contributions of asset policy and innovation in the course of his article, although such recognitions are buried after his indictment of failure. In fact, he even goes so far as to acknowledge, somewhat in contradiction, that continued asset innovation could accompany greater ideological advocacy for government's role in shaping the economy. Yet this sort of scathing critique, especially of a thoughtful friend, demands answer. To this end, I offer three points.

First, there is no evidence that foundations' investment displaced, diminished or otherwise worked against other inclusive economic development and security strategies. While Ford and other foundations did invest in asset practice, policy and research—generously—so too did they continue longer-term and equally "massive" investments in a range of other strategies, including those David describes.

David deserves credit for his important work during this period on the issues of government's proper role in the economy (even as the economy was demonstrating its inability to function fairly and productively without better laws, regulation and structures), the specter of rising indebtedness led by under-regulated predatory lenders and insufficient public funding of postsecondary education. But the asset-building field supported and complemented these efforts, rather than diminished them, with the enlarged frame of financial security and empowerment, encompassing the Learn-Earn-Save-Invest-Protect spectrum.

Second, the inability of families to climb out of poverty in the last decade should not be laid exclusively at the feet of any particular movement concerned with the economic well-being of low-income families. If the assets movement is to be judged by the measured economic outcomes of the last thirty years in terms of income, wealth, inequality, poverty, wages, protections, un- and underemployment, opportunity and mobility, then all our strategies and efforts should fairly be judged as failing—even failing “abysmally” as David put it.

But, it is not likely that any of our efforts were consequential in producing those outcomes, at least when compared with the impacts of globalization, technology, declining wages, shrinking unions, deregulation, disinvestment and, most importantly, the Great Recession which put our entire economy on the brink of collapse in 2008 and disproportionately devastated low- and moderate-income communities. A fair review of the emergence of the asset-building field (and its contribution to an evolving economic justice movement) during this period would recognize the palpable (and measured) difference made in tens of thousands of people's lives by the availability of IDAs and CSAs and the savings, education, entrepreneurship, homeownership and economic advancement they opened. These have resulted in the spread and measurement of 67 asset-building state policies, the rise of the Cities for Financial Empowerment Coalition, and the emergence of significant federal legislative and administrative policies.

We have not yet afforded every American a reasonable chance to save and build assets, but the path to large-scale, inclusive and progressive savings and asset-building incentives and structures is clear. While asset building has its "technocratic policy" aspects, it calls attention to the gulf, racial and generational, of wealth inequality and its historical and structural causes and supports, including a tax system that squanders half a trillion dollars a year in tax breaks for the wealthiest among us and misses the asset-poor but entrepreneurially rich majority.

Third, while I agree with David that we need to be making larger, values-based arguments about the shape of the marketplace and the larger role of government regulation and investment in the economy, this argument must extend beyond income policy, financial regulation and investment to wealth policy. Going forward, there is an important asset-based storyline that focuses on the under-appreciated entrepreneurial, educational and vocational, homeownership dreams of the asset-poor majority, and the way policy (tax policy in particular) currently rewards the rich, misses the middle and penalizes the poor. An economic growth strategy based on engaging the savings, entrepreneurial, educational, homeownership and retirement security dreams of all, built on the large scale, universal, progressive, automatic, tax-based systems of child and adult accounts is being rolled out in San Francisco, Cleveland, Colorado, Utah, Maine and so many other states and cities.

These asset strategies can and should be a part of the larger spectrum of economic policies Callahan describes. In particular, the annual half-trillion upside-down tax expenditures on productive asset building need to be rethought and redeployed to invest in all people, especially the asset-poor majority, and curbed for the top 20%. Broadly inclusive and progressive Children’s Savings Accounts are likely to be the harbinger of such policies, but clearly not the last. This is not a narrow, technocratic argument, but in line with the new thinking led by Thomas Piketty and others, that we need to deal with capital distribution and accumulation directly.

If we have not yet achieved the large scale transformative asset policy we sought, it is perhaps not because the assets field has failed, but because we have only begun on what is better conceived as a 50-year marathon than a 20-year dash.

EDITOR'S NOTE: This post has been edited slightly because the original version erroneously identified David Callahan as a staff member at Demos. He has not, and his original post has since been removed from the Demos site because it is not reflective of the organization's view of asset building.

We can’t shrink the wealth gap if we don’t reform the tax code

By Bob Friedman on 11/19/2013 @ 02:17 PM

Tags: From the Founder, News, Recommended Reading

EDITOR'S NOTE: This piece originally appeared on The Hill and can be read here

The wealth gap these days is the subject of an acclaimed documentary, viral videos and countless articles and opinion pieces. But even as the concept infiltrates popular culture, have we moved any closer to understanding it?

How did it come to pass that more than four-fifths of the wealth in this country is owned by the richest fifth of households? Or that for every dollar in wealth owned by white households, just 5-7 cents is held by African American and Hispanic families?

The causes of wealth inequality are complex, but one big one is too often ignored – the tax code. In 2012, the United States actually spent more on tax expenditures – deductions, deferrals, exclusions, preferential rates and credits – than we collected in individual income tax receipts. These tax expenditures have gone overwhelmingly to the richest Americans. The annual bounty to the wealthiest quintile is now roughly half a trillion dollars a year.

For three of the largest tax expenditures – preferential rates on capital gains, the home mortgage interest deduction and the property tax deduction – the wealthiest 1 perrcent of households collected nearly a third of the benefits in 2009. Middle and low-income households collected less than 5 percent. People making more than $1 million a year received an average of $96,000 from these tax benefits while those in the poorest quintile got less than $5.

While there is little appetite among federal budget negotiators in Congress to address these enormous inequities in the tax code, without real reform the wealth gap will grow further and our nation will continue on a perilous economic path.

The real issue is not so much that we reward the rich, but that when it comes to savings and asset building incentives in the tax code, we miss the middle and penalize the poor.

This is simply bad policy. Three decades of pilot programs, research and evaluation in real communities across this country has proven that given the opportunity, low income and even very poor people living at half the poverty line will save, start businesses, buy and keep homes, go to college, and create economic futures for themselves and their families.

Savings not only help middle and low income families move up the economic ladder, they also have a significant impact on economic growth. Most new businesses – the source of virtually all jobs created in the last 30 years – are funded out of personal savings and savings of friends, family and associates. And new research shows that low and moderate income kids with as little as $500 or less in college savings are three times more likely to go to college and four times more likely to graduate than those without a savings account.

What should we do if we want to shrink the wealth gap, stimulate widespread economic growth, and reduce or improve the efficacy of tax expenditures?

First, we should provide an effective savings match/incentive at least to the asset-poor majority of Americans, by installing a universal, refundable savers credit. For less than 5% of current asset expenditures, we could offer a $100-$500 savings incentive to every American. This investment would likely pay for itself several times over in terms of savings leveraged and the returns on those investments.

Such proposals have been introduced in Congress before by bipartisan teams, and advanced by such diverse organizations as the AARP, the Center for American Progress and the Heritage Foundation.

If necessary, financing such an investment could be easily covered by savings from existing asset tax expenditures of questionable effectiveness. As Sens. Orin Hatch (R-Utah) and Max Baucus (D-Mont.) recently suggested, we could start from scratch: Eliminate all tax expenditures, at least conceptually, and then add back only those that can be shown to grow the economy, make the tax code fairer or effectively promote important policy objectives. Alternatively, we could simply cap or limit individual tax expenditures such as the home mortgage deduction or groups of tax expenditures.

We need also to remove or raise asset limits from federal and state benefits programs such as welfare and disability benefits, so that the poor are no longer penalized for doing exactly what they should if they want to move up – save, work, go to college, start businesses, buy homes and prepare for retirement.

The genius of the American economy has long rested on our belief in the productive capacity of common Americans. It is high time we refocused our tax code to invest in those struggling to gain a financial toehold in the American Dream. The result is likely to be not only a fairer America but a more productive one that includes millions of additional businesses and jobs, secure homeowners, skilled workers – and justly hopeful kids.

Friedman is the founder, chair of the Board and general counsel for the Corporation for Enterprise Development (CFED). A recognized pioneer in the asset-building and economic development movement, he received the Presidential Award for Excellence in Microenterprise Development from President Bill Clinton in 1999.

Four Lessons Gleaned from the Children & Youth Finance International Summit

By Bob Friedman on 06/03/2013 @ 01:00 PM

Tags: Economic Inclusion, Events, From the Founder, Recommended Reading

One hundred million children in more than 100 countries with financial education and services by 2015.

When Jeroo Billamoria first suggested that goal for Child and Youth Finance International, the global facilitator toward this grand goal, I thought, frankly, it was crazy. Even if you could achieve anywhere close to those numbers, the actual access, education and services received by many might be minimal.

But then, I like round numbers, aspiration and inspiration, especially around a worthy goal. And worthy, this goal is. One-third don’t even have a legal identity in this world, let alone the integrity, respect, freedom and opportunity all people—including all children—deserve. Children and youth, worldwide, are even more likely to be poor than their elders, and they, arguably even more than their parents, will need financial understanding, savings and education to traverse the daunting economic gauntlet of the 21st Century global economy. Even if we accomplished a fraction of Jeroo’s goals, the journey would be worthwhile.

I agreed to join the Board of CYFI (pronounced Sci-Fi, to further endear it to children of all ages). After all, who can say “no” to Jeroo?

No one, it turns out: 400 adult delegates from 102 countries and 100 children and youth from more than 40 countries participated in the second Child and Youth Finance International Summit, May 7-9 in Istanbul, Turkey. The delegates represented powerful international, national, governmental, financial, educational authorities, internationally recognized NGOs as well as leading researchers, practitioners, and children and youth. It was about as diverse a group as one could imagine along all dimensions. But, it was clearly unified by one shared goal and value: to include the world’s next generation(s) with economic citizenship, financial education, financial access and financial services. Clearly, there is a global movement for child and youth financial inclusion. To be sure, the call for 100 million of the world’s children to be reached with financial education and services is fairly undefined and allows the possibility that not all counted will have received meaningful access, inclusion and empowerment. But, just as importantly, CYFI’s goal is articulated in a call for both financial education and financial services, including at least an account. CYFI commissioned a global consortium of leading researchers in the field to consolidate international learning, and concludes that a combination of education and services is necessary and effective, whereas financial education alone seems to have little effect.

Many takeaways from CYFI’s International Summit are worth mentioning here.

Global Learning is Crucial and Timely: While we in the US have much to teach (SF K2C, SEED, etc. draw interest can allow us to glean crucial insight), we have much to learn from developments and innovations on all other continents, including from developing and poor countries where the numbers of savings programs, institutions, and child and youth participants are much more numerous and where the use of technology and especially the mobile phone is far ahead. Among the countries where model initiatives are blossoming from which we can learn: Kenya, Uganda, Ghana and Nigeria in Africa; Philippines, Thailand, India and Sri Lanka in Asia; Brazil, Colombia and Mexico in South America; and Egypt and Turkey in the Middle East and North Africa. For example, the Government Savings Bank of Thailand, established 100 years ago to promote savings, has established 738 school banks with 1,392,000 accounts, 122 mobile service centers, and 54,682 village and community funds.

Scholarship/Resources: CYFI’s Research Committee (led by many of our friends including Margaret Sherraden, Deb Adams, Lew Mandell, Willie Elliott, Fred Ssewamala, Trina Shanks and Mat Despard) produced and released at the Summit two documents well worth anyone working on CSAs reviewing, including Children & Youth as Economic Citizens: Review of Research on Financial Capability, Financial Inclusion, and Financial Education, and its companion report, which reviews and summarizes leading programs across the globe. In addition, CYFI has issued Child and Youth Friendly Banking Product Certificate Guidebook, the National Implementation Guide: Child and Youth Finance Initiatives at the National Level Guidebook and Beyond the Promotional Piggybank: Towards Children as Stakeholders. Among the significant departures included in these documents, I note several. First, the inclusion of social education and a rights perspective in economic citizenship that is the stated goal of CYFI—“that all children and youth realize their full potential as economic citizens.” Second, though financial education is undoubtedly the most practiced element of financial capability, inclusion and empowerment, there is little evidence that financial education alone is effective, and there is too much variation in what is meant by it. Third, a conversely, there is significant evidence that financial education and inclusion together have significant savings, economic, social and financial effects. Fourth, there is a hunger for and need to establish a unifying theory, set of measures, definition of different kinds and doses of financial education, and (among researchers at least) impact evaluation which separates financial education, financial inclusion and the combination. Finally, Lew Mandell and Trina Shanks agreed to produce a paper accumulating what evidence exists justifying the combined effect of education and services together.

The Business Case is Weak (and maybe not the right case to make): I went to a session on Building the Business Case for CYF where there was no case really presented, certainly no cost benefit or ROI from a financial institution perspective. Lew Mandell, chair of the session, turned to me as someone else pointed this out, to invite me to talk about K2C and how the use of batched accounts might lower costs. I do think there are reasons and ways to reduce the cost of financial inclusion to financial institutions (e.g., by universal enrollment, use of mobile and other technology, offloading financial education to the education system, finding more effective and simpler products and distribution systems) and to increase their returns (e.g., longer-term tracking, government deposits, etc.). But, as the session progressed, I began to think that the better frame is societal ROI, since the returns are longer-term and not capturable by a financial institutions or business entities. The potential returns are huge—in skilled workers, entrepreneurs, savings, investment, productive work and more—but the real case for universal financial inclusion is like the case for universal public education—a rightful pursuit by government and society.

The Importance of Child and Youth Voice and Inclusion: During the final session of the Summit, people talked through an address by the head of the UNCTAD. But when José—an eight-year-old from Peru, shorter than the podium—talked, without notes, pausing professionally for the translator to provide an English version, there was not a sound other than his calm strong voice in the room. I cannot do justice to his exact words, but here’s some of what he said:

  • “I don’t want to see any children working the streets."
  • “I don’t want to see any children going hungry for want of food."
  • “All kids should be able to afford books and clothes so that other kids won’t make fun of them."
  • “You should only use savings in the case of emergencies."
  • “We should recycle."
  • “We should learn how to make chocolate and sew."
  • “We kids can and should teach each other.”

The 100 kids who attended had their own sessions and made six recommendations to the adult delegates, including:

  • Financial education should be available to all kids and compulsory.
  • Adults should give their old cell phones to the kids of the world.
  • All kids should have access to bank accounts without expensive fees or minimum deposits.
  • All kids should have access to entrepreneurial training and jobs.
  • Adults should speak to and treat kids as equals and with respect.

Perhaps most important, they noted, all the above should be done ASAP.

The involvement of the kids was important, and their voices were the most powerful we heard.

For CYFI's Summit Summary and Findings, click here.

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Wilma Mankiller's Legacy: Every Day is a Good Day

By Bob Friedman on 04/02/2013 @ 12:15 AM

Tags: From the Founder

CFED Founder Bob Friedman

I remember when I first met Wilma Mankiller, thirty years ago at the first convening on women’s economic development hosted by Jing Lyman and Sarah Gould of CFED at Wingspread. After dinner the first night, one incredible woman after another introduced herself, including Kathy Keeley, who had just founded WEDCO, the first women’s microenterprise program in the country, and Rebecca Adamson, who introduced what would become First Nations Development Institute. But, when Wilma, then Deputy Chief of the Cherokee Nation, stood up, it was like the world stopped, and centered on her quiet, grounded, visionary voice.

Wilma understood and believed in what I now believe is the most crucial insight in economic development—that common people, including low-income and very poor people -- are capable of leading their own development, as entrepreneurs, students, skilled workers, homeowners, savers, investors and crafters of their own futures. The new movie on Wilma’s life and work, The Cherokee Word for Water, elaborates on this basic insight, even as it tells the story of Cherokee volunteers building an 18-mile waterline. Click here for the movie’s trailer, or visit the movie’s website at www.cw4w.com.

I and CFED continued to learn from Wilma throughout our lives. Having her say that individual allotment of communally held native lands was one of the greatest disservices done to native peoples by the federal government, it was with trepidation that I brought her Michael Sherraden’s idea of Individual Development Accounts. She loved the idea—a not-unimportant judgment given that she led the economic development committee of the Ford Board of Directors while Melvin Oliver, Frank DeGiovanni and Lisa Mensah funded the birth and growth of the assets field, and the American Dream Demonstration.

In 2006, Wilma keynoted our Assets Learning Conference in Phoenix, underscoring that what may be most important about matched saving and asset building is not the money, but the sense of empowerment and possibility that accompanies the money.

As I think about Wilma now, I recall so many of her simple summaries of profound truth, including:

“Every day is a good day,” which is the title of her second book, drawn from her interview with Carrie Dann.

“Things have a way of turning out the way they’re supposed to.” To which my wife, Kristina, would respond, “That’s the way you lost a continent.” To which Wilma would respond with, “I did not lose a continent.” In my old age, I recognize the way she meant her statement, and trust much more in the aspects of this life that I scarcely understand. I remember as well how, when I stayed with her during her last weeks, Spring seemed to hold off as she clung to life. The moment she died, the trees sprung into bloom, the birds into song. It was as if her life had spread to the universe, even, as the tradition held, she climbed the Milky Way, eating strawberries as she went.

It is my hope that all CFEDers and all our friends, when you have occasion to be in the Mankiller Room in our Washington, DC, offices, will reflect a moment on the untapped promise of all people, and the wisdom, humor and faith Wilma conferred.

Wealth Inequality: Its Causes and Cures

By Bob Friedman on 03/19/2013 @ 03:15 PM

Tags: From the Founder

CFED Founder Bob Friedman

The video, Wealth Inequality in America, went viral last Tuesday, scoring more than two million hits in less than a week.

Why the interest? A compelling video to be sure, albeit with data that has been around for awhile. It is the wealth gap that is truly stunning; the gaping chasm in wealth between virtually all Americans and the very richest one percent who control more than a third of all wealth. The wealthiest quintile of Americans owns more than 85% of all wealth. Perhaps the greater surprise is at the other end of the spectrum, with the poorest 80% of Americans (270 million people) owning less than seven percent of the nation’s wealth.

The trends are even more sobering (if that were possible): in the last 30 years, the wealthiest five percent of Americans amassed almost three-fourths of all gains, while the bottom 60% of the American people actually lost share (-5.4%).

Last week, Thomas Shapiro and his associates released a study of the causes of the tripling of the black-white racial wealth gap from $85,000 to $236,500 over 25 years. The prime determinants of the increase: duration of homeownership, household income and unemployment over the period.

Why is wealth inequality—and asset poverty—so great, and what should and can be done about it?

It is easier to assert that income inequality is at least somewhat earned—a reflection of work and merit. After all, salaries are reflected here, a clear tie to hours worked, and, arguably, to productivity as well. Earnings disparities due to wealth inequality are harder to justify, let alone explain. Does anyone think that the average billionaire contributes 400 times more to the common good than the average teacher, fire fighter or police officer?

One reason wealth inequality has grown to such an extent is because we fail to tax wealth gains, and we actually penalize low wealth people from pursuing exactly the paths they must to acquire a minimum of wealth: stability and hope.

Last year—like many years before last year—we awarded half a trillion dollars in tax breaks to homeowners, retirement savers and successful investors. Virtually all of these rewarded the richest 40-20-5-1%. At the same time, we denied the 60%--a majority of Americans—any incentive on their savings. In fact, for the poorest Americans, we went the other way, penalizing them for saving for their education, businesses, homes and futures.

There are many policies that have been suggested by New America Foundation newamerica.net, the Brandeis Institute on Assets and Social Policy iasp.brandeis.edu, the Center for Social Development csd.wstl.edu, the Initiative on Financial Security of the Assets Institute aspeninstitute.org, CFED cfed.org and others. But, since such a large part of current subsidies for wealth inequality pulse through the tax system, and since tax reform still appears on the political horizon, we must not miss the opportunity of tax reform to reduce and rationalize savings and asset-building tax incentives. Most crucial: provide a savings incentive to the poorest 60% of taxpayers who, as has been proven by well-documented demonstrations and history, will save, start businesses, buy and keep homes, go to college, create their futures and ours. This can be done for a fraction of the half-trillion dollars we spend annually with questionable effectiveness to incent saving and asset building by the wealthiest 20% of Americans.

We should encourage saving and asset-building—entrepreneurship, education, homeownership, employment—for many reasons, not just because it is fair and productive, but because it is the key to economic growth that we so need. We know that having even a few hundred dollars in savings makes kids 6-7 times more likely to aspire to and attend college, enables individuals to start their own businesses, allows the ill-housed to enter the ripening homeownership market. Research by John Haltiwanger and his colleagues at the National Bureau of Economic Research has established that almost all job growth in the past 30 years has come from new and young businesses—overwhelmingly businesses less than one year old. But investment in new businesses mostly comes from individual savings and savings of friends, families and associates; savings that have been largely wiped out over the last several years. This decimation of savings is a likely reason why job creation by new businesses has fallen from a high of 3.6 million annually before 2008 to a low of 2.2 million in the years since.

If we want to seed the next economy, lets open its doors to all, enabling them to build the skills, businesses and jobs of our future.

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