Opening Pathways to Economic Independence
Wealth is a necessary input to achieving prosperity, not just a desirable output. Progressive matched accounts, entirely funded by re-rerouting existing tax incentives that favor the wealthy, is the central policy, practice and market innovation that can ensure everyone in America has a bedrock of wealth to make a downpayment on the American Dream.
Matched accounts can support the four main routes to economic independence: savings, education, business and homeownership. My upcoming book, A Few Thousand Dollars: Sparking Prosperity for All, presents the evidence these pathways work, establishes the importance of having a nest egg in each and suggests the way forward.
Let’s start with Savings. Most Americans are one illness or accident away from a predatory lender, putting them on the precipice of a downward economic spiral. Low income people need a savings reserve more than anyone, and we know they will save, not because it’s easy, but because it is the price of stability and hope. Universal Savings Accounts, funded out of what we currently spend to subsidize the savings and investment returns of the wealthiest, would match the first $500 of savings on a sliding scale, providing a new and stable platform and a launching pad for upward mobility.
Education is seen as the great equalizer (although this is often overstated; White high school graduates still earn more than Black college graduates). Generation Accounts build on the growth of 400,000 child college savings accounts established across the country and the larger Baby Bonds and Opportunity Investment Account proposals of Derrick Hamilton, Willie Elliott and others. Generation Accounts can fund the college dreams of all kids and close the racial wealth divide within a generation. They should allow the poorest fifth of the nation, disproportionately kids of color, to accrue $25,000 by age five and $50,000 by age 18—enough to cover college non-tuition costs and build sustainable wealth over generations.
(Illustration by Rohan Eason)
Business creates jobs, but people create businesses. All net new jobs created in the last 30 years were created by new businesses, most often by people not then in business. Matched Business Accounts, funded by spreading out our existing savings and investment incentives to provide essential personal savings, could bring millions of would-be entrepreneurs out of the woodwork, and into the daylight of an enlivened mainstream economy.
Finally, there’s homeownership. Nine out of ten Americans dream of owning their own home, but there is a growing sense that homeownership is no longer realistic. I dissent. A hundred years ago fewer than 10 percent of all Americans owned their own homes. We proceeded to bring homeownership into the purview of the middle class, extending it to two-thirds of families. Certainly, it is the height of cynicism and injustice to close the door to homeownership when three-quarters of Whites, but fewer than half of Black and Latino families have this essential base for wealth and future formation. Home Accounts would reallocate the lopsided, wasteful upside-down housing tax subsidies into a down payment for every adult, renters and homeowners alike.
Now is not the time to give up on prosperity. In every century of our history, this country has made extensive investments in the common genius, giving education, land, business loans, home loans and student loans to millions of low-income Americans. In turn, those Americans built our economy. These policies—universal public education, Homestead Acts, 30-year mortgage and the G.I. Bill—provided some of the most significant, enduring and widely shared increases in economic well-being in our history, even as they missed and disadvantaged people of color, women and others.
Let’s invest in the common genius of all. Think G.I. Bill meets 401(k): Progressive savings matches on the first $1000 of annual savings for everybody. Prosperity Accounts, funded with just half of what we currently spend, could open a new era of prosperity in this country.
A Few Thousand Dollars will be released on October 9, 2018. Pre-order a copy, and let us know what you think of the book on social media using #AFewThousandDollars.