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Return on Investment

Getting More From Federal Asset-Building Policies

Increasing attention has been paid in recent years to the critical role that financial assets play in household stability and oportunity. While much effort is going into developing new programs and policies to help more households build nest eggs, relatively little attention is paid to the cost and benefits of policies and programs that already exist.

While the U.S. has no comprehensive asset-building policy, it does have a patchwork of policies that collectively provide financial incentives for asset-building behavior by individuals and families. They subsidize households who buy homes, save for retirement, start small businesses, and pursue certain types of savings and investment strategies. Some of these policies are direct outlays in the federal budget, but the lion’s share of them are through tax expenditures, which receive relatively little scrutiny.

Using narrow definitions of asset-building policies, and counting conservatively, these policies collectively added up to $367 billion in Fiscal Year 2005. This number has increased by 1.9%, after adjusting for inflation, since Fiscal Year 2003, the last year for which data were available.

While the total of these policies has grown only modestly in this time, the distribution of benefits has changed markedly. Analyzing the largest of these policies, this study found that over 45% of the benefits went to households with incomes over $1 million. These households received an average benefit of $169,150. By contrast, the bottom 60% of the population share among them not quite 3% of the benefits of these policies.

Return on Investment?: Getting More from Federal Asset-Building Policies, 2007

Return on Investment precursor:

Hidden in Plain Sight: A Look at the $335 Billion Federal Asset-Building Budget
Summary Version