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| Posted: May 23rd, 2013
Today, I spoke at the Urban Institute to call for the expansion of criminal justice reforms aimed at addressing the underlying causes of criminal behavior in light of new data confirming the nexus between drug use and crime. The 2012 Arrestee Drug Abuse Monitoring Annual Report (ADAM II) shows that in five cities/counties, more than half of adult males arrested for crimes ranging from misdemeanors to felonies tested positive for at least one illegal drug. According to ADAM II, positive test results among arrestees ranged from 62 percent in Atlanta to 86 percent in Chicago.
Click to enlarge infographic
In 2004, according to the Bureau of Justice Statistics, 53 percent each of jail and state inmates and 46 percent of Federal inmates suffered from drug use abuse or dependence – and yet only 7 percent of jail inmates, 15 percent of state inmates, and 17 percent of Federal inmates received treatment.
These data show that reform is needed. A month ago, the Obama Administration released the 2013 National Drug Control Strategy (Strategy), the president’s plan for 21st century drug policy reform based on scientific research about the nature of addiction. This plan reflects our understanding of addiction as chronic brain disease—one that can be prevented, treated, and from which people can recover.
The Strategy also supports a “smart on crime” approach to drug enforcement, protecting communities from domestic and international drug-related crime while diverting non-violent drug offenders into treatment instead of prison. As part of this approach, our plan highlights promising criminal justice reform, like drug courts and smart probation programs that reduce incarceration rates, along with community-based policing programs that break the cycle of drug use, crime, and incarceration while focusing limited enforcement resources on more serious offenses.
Far too often, addiction is at the root of what drives crime in our communities. To stop the revolving door of the criminal justice system in America, we must address not only serious criminal activities, but equally important, underlying substance use disorders. The ADAM II report confirms an urgent need to support policy reform outlined in the Obama Administration’s new drug policy strategy, which emphasizes prevention, treatment, and “smart on crime” policies that break the vicious cycle of drug use, crime, and incarceration in America.
To read the full 2012 Arrestee Drug Abuse Monitoring Annual Report (ADAM II) report, click here.
Photo by Simona Combi, Urban Institute
Filed under: Quality of Life |Tags: crime, drug, drug policy, Kerlikowske, MetroTrends, ONDCP, Urban Institute Add a Comment »
| Posted: May 23rd, 2013
Social Security is in trouble and not just because its balance sheets are off-kilter, according to Eugene Steuerle, the Richard B. Fisher Chair at the Urban Institute.
Steuerle told the House Ways and Means Social Security Subcommittee on Thursday that the program is decreasingly able to meet its core objectives. More specifically, he said the program treats many Americans unfairly, deters work and personal savings, and is losing capacity to protect the poor and elderly.
“Every year we wait, we put more of the burden on the young,” said the former deputy assistant secretary of the Treasury for tax analysis. “If we encourage more work, we get more tax revenues than any tax raise [could]. [And] not adjusting the retirement age is like throwing money off the roof and hoping some of the poor get it.”
Since its creation, the system has morphed into one that generates a lot of regressive elements, he said.
For example, Social Security provides about $579,000 in lifetime benefits for an average-wage-earning couple retiring in 2013, and that number is expected to grow to $700,000 by 2030. At the same time, the government is forced to cut programs that benefit their grandchildren in order to tackle the debt and deficits, he said.
The crux of the problem, Steuerle told the subcommittee, is that Social Security has become a middle-age retirement system. That is, a couple retiring at age 62 today is expected to live about 28 more years, compared to a couple that would retire on average at age 68 in 1940 and live another 12 to 13 years.
With many baby boomers retiring, nearly one-third of Americans will soon be on Social Security and collecting almost three decades’ worth of benefits, he added.
Leaving the fiscal implications of this trend aside, Steuerle said, the system discourages middle-age Americans with numerous healthy years left, and a lot of professional experience, from working and contributing to the economy.
On top of that, too often, truly elderly Americans find they don’t have much retirement income left when they really need it, he added. Usually the reason is that they saved for fewer years than they could have, while spending more years enjoying retirement.
Most of all, Steuerle emphasized that Social Security doesn’t treat all citizens equally.
Among the disadvantaged he listed are:
- Working single heads of households,
- Couples with relatively equal levels of earnings,
- Long-term workers,
- Parents who have children in their 20s and 30s,
- Married couples that are close in age.
Subcommittee Chairman Sam Johnson, R-Texas, said he’s in talks with Ranking Democrat Xavier Becerra, D-Calif., to move legislation that can address many of these issues.
Steuerle encouraged the panel to move forward with reforms that could fix these issues and others in the near term. To do so, he said the lawmakers should consider:
- Creating a wage-indexed minimum benefit that would scale up the more years someone works. The idea would be to raise the minimum benefit level from where it is now to support those who need help most while preserving incentives to work longer for those who can.
- Increasing the earliest retirement age, currently 62, by one month per year, for the next 36 years. By doing this, the earliest retirement age would be 65 in 2050.
- Offering partial retirement options, as well as options to exchange money for a higher annual payment, also known as an annuity.
- Dropping references to the term “normal” retirement age. The hope would be to stop telling people when to retire.
“Unfortunately, the Social Security debate has largely proceeded on the basis of being ‘for the box,’ or ‘against the box,’” Steuerle said. “[But] the contents themselves deserve scrutiny.”
Photo by Matthew Johnson, Urban Institute
Filed under: Quality of Life |Tags: congress, problems, retirement, seniors, social security, Urban Institute Add a Comment »
| Posted: May 23rd, 2013
As millions of baby boomers reach retirement age, cities across the country will face unprecedented demand for housing, services, and health care. Urban Institute President Sarah Rosen Wartell sees opportunity for smart growth and investment amid that challenge.
Wartell spoke today at the first annual AtlanticLive Generations Forum hosted by The Atlantic. A series of panels with participants including Secretary of Transportation Ray LaHood and Secretary of Housing and Urban Development Henry Cisneros tackled thorny issues about demographic change and how the millennial and boomer generations alike will deal with housing, transportation, city and neighborhood choice, and other issues.
“The same dynamics for housing demand are at play among baby boomers and millennials,” Wartell said.
As many boomers choose to “age in place,” that is, to retire and continue living in their homes and/or neighborhoods as opposed to in retirement homes, they will demand accessible transportation, services, walkability, and access to health care in their communities. These demands also characterize today’s young, educated, millennial generation.
Will cities and neighborhoods be able to cope with these interrelated demands? There are several key reasons for concern and also several important opportunities.
Areas for concern
- Urban Institute models project that between 2010 and 2030 there will be a 70 percent increase in senior homeowners and a 100 percent increase in senior renters
- As many seniors choose to “age in place” by staying in their homes and communities, their cities and neighborhoods may not be equipped to provide the transportation, services, and health care they increasingly demand.
- Affordable housing is limited, but retirees on fixed incomes and millennials facing an unprecedented wealth gap will increasingly demand affordable housing in walkable urban areas.
Reasons for optimism according to panelists
- Health care will increasingly comprise the largest share of living expenses for seniors, but in-home care and other in-home services can reduce health care costs, and those cost savings can be reinvested in the services that generate them.
- Social Impact Bonds and other public-private partnerships may be well-placed to make the initial investments in the many services that will be needed, increasing economic efficiency and generating profits.
- Technology will allow many seniors to receive health care monitoring and service delivery in their homes, while millennials will use it to interact with and replace many neighborhood amenities.
In the closing session, Cisneros reiterated many of the points made by the panelists, saying that “demographics is destiny.” Changes in age cohorts, racial composition, and economic equality all illuminate what our future needs will be. Smart policy and planning can take advantage of this knowledge.
Further, he said, amid this general demographic sea change, our country’s minority population is booming just as millennials—and especially minority millennials—face growing wealth and income gaps. Boomers need those populations to reach the middle class to buy their homes, invest in their neighborhoods, and grow the economy. All of these issues will increasingly converge on America’s urban neighborhoods, where tomorrow’s demographics must drive today’s policy.
Photo courtesy The Atlantic/Kris Tripplaar
Filed under: Economy, People |Tags: Atlantic, AtlanticGen, boomers, Henry Cisneros, millennials, Sarah Rosen Wartell, Urban Institute Add a Comment »
| Posted: May 22nd, 2013
A fascinating recent article in The New Republic reviewed a body of new science documenting the pernicious physiological effects of loneliness.
Researchers have shown that loneliness—more formally, the want of intimacy—exacerbates a host of ailments, including Alzheimer’s disease, obesity, diabetes, high blood pressure, heart disease, neurodegenerative diseases, and even cancer. The share of Americans who report “not feeling close to people” at any given time is 30 percent and growing, and deemed by some a social health crisis.
Should public policy researchers and practitioners care about something as intangible and inaccessible as loneliness? I’ll give you three reasons why I think we should.
First, some background… Feeling lonely actually sends misleading hormonal signals that physically change the molecular structure of the brain. According to the article, this “wrenches a whole slew” of bodily systems out of whack, causing loneliness to be seen by some as a risk factor for death as great as smoking.
Who tends to be affected by loneliness, according to this research? Women more than men, blacks more than whites, the less-educated, the unemployed, the retired, anyone different. In other words, many of the same people affected by today’s long-term unemployment and wealth disparities, persistent poverty, and isolation. If loneliness exacerbates these ills, it will further diminish people’s ability to engage in economically and socially valuable and productive activities, which in turn could exacerbate loneliness.
Three reasons why loneliness should be a public policy concern:
- Loneliness contributes to a vicious economic cycle in which economically isolated people are further removed from the system, costing productivity and draining resources from social and health systems.
- Too often we quantify how people are struggling by using impersonal numbers like poverty statistics, the unemployment rate, and the labor force participation rate. New research on loneliness reinforces the valuable lesson that suffering has a real, human, emotional face.
- Scientific evidence of how loneliness links mental, physical, and economic well-being reminds us of the interdisciplinary nature of our country’s social problems and validates policy that draws on an inclusive range of research, methods, and approaches.
Loneliness may not be the most acute or immediate public policy concern of our day, but considering the role it and other little-talked-about ailments play in the socioeconomic realm can only make our public policy more thoughtful, robust, and responsive.
Illustration by Daniel Wolfe, Urban Institute
Filed under: People, Quality of Life Add a Comment »
| Posted: May 20th, 2013
There’s been a lot of talk about North Korea in the news cycle of late, but little of it relates to the most prominent humanitarian crises occurring within its borders.
In 2000, all 193 U.N. member states, including North Korea, agreed to meet eight human development goals by 2015, including:
- Eradicating extreme poverty and hunger,
- Achieving universal primary education,
- Promoting gender equality and empowering women,
- Improving maternal health,
- Reducing child mortality rates,
- Combating HIV/AIDS, malaria, and other diseases,
- Ensuring environmental sustainability,
- Developing a global partnership for development.
Since these “Millennium Development Goals” (MDGs) were adopted, some 600 million people worldwide have escaped abject poverty, which is defined as living on less than $1.25 a day.
But as the contrast of North Korea and its neighbor China show us, this progress has been lopsided.
Most of the global reduction in extreme poverty comes from the dramatic growth in China, India, and a few other countries.
On the other hand, in North Korea, with the loss of markets in the Soviet Union and elsewhere in the communist world, per capita income fell by 50 percent, life expectancy has declined by at least five years, and child and maternal mortality has increased. On top of that, one-third of North Korea’s population faces food shortage.
Proving the adage that a picture is worth a thousand words, the famous nighttime satellite image of the Korean peninsula tells the same story.
So while North Korea’s missiles may be a threat to the millions living in South Korea, its own government policies threaten the lives of its 12 million citizens who live in extreme poverty, and the one-third of its children who are stunted by malnourishment.
And, of course, these measures do not account for the burden North Korea’s human rights record imposes on its people. The surest sign of this political and social oppression is perhaps the flagging rates of productivity and innovation.
So as the 2015 date for achieving the MDGs approaches, and as the international community begins considering new goals for improving the human condition, North Korea’s case highlights a broader gap in the current MDG roadmap and a topic that needs to be part of the framework going forward.
While North Korea’s declining living conditions can be visibly and unarguably connected to its politics, there are plenty of other countries where government policies—more so than geography, climate, colonial history, or natural resources—are the main impediment to meeting the MDGs or any new set of targets.
North Korea provides a clear illustration of a vital component missing from the original MDGs: inclusive political institutions are essential to sustained growth.
It is therefore somewhat refreshing that concepts generating buzz in the discussions of post-2015 development goals are an “inclusive future” and “inclusive growth.”
Precise definitions for these concepts are a work in progress, but they generally hone in on the development community’s concerns about growing inequality and the lack of shared benefits resulting from post-2000 development.
It is hard to be against “inclusive growth,” especially in an era of increasing income and wealth inequality. But it is hard to agree on how this can be achieved. In meetings organized by the United Nations and other international institutions, people with various interests and perspectives on how poverty should be eliminated are weighing in.
In their 2012 book “Why Nations Fail,” academics Daron Acemoglu and James Robinson theorize that inclusive economic policies are only sustained in places with inclusive politics.
“Inclusive politics,” as general a concept as it is, is at least more specific than “inclusive growth,” and targets political processes and structures that sustain a polarizing status quo in many places.
This is an advance on the simple-minded ideas that led to past fads in goal-setting, such as “participatory development,” in which excluded groups were invited into discussions of development projects and programs.
These efforts were not wrong, but they never confronted the growth-killing political climates of the countries in question.
Now, as we go about setting new post 2015 targets, we have the opportunity to integrate politics into the thinking and activities of the development/anti-poverty community.
Activists and policymakers serious about making headway would do well to revisit Mancur Olson’s Power and Prosperity, which anticipated the vital nature of politics when it comes to progress.
Olson explained that market-augmenting institutions provided by a capable, but democratically constrained state are the necessary other invisible hand.
I doubt the North Koreans would have agreed to the UN’s 2000 MDG commitment if it had listed “inclusive politics” amongst the goals. But if we’re serious about “inclusive growth,” we should include these goals in the 2015 batch and be clear what we mean, even at the risk of having fewer members of the General Assembly sign up.
Nighttime view of the Korean Peninsula from NASA
Filed under: Economy Add a Comment »
Nancy La Vigne Laura Pacifici
| Posted: May 17th, 2013
For years, lawmakers on Capitol Hill watched as the federal prison system continued to grow. But as the federal government increasingly tightens its belt through furloughs and budget cuts, Congressional leaders are turning their attention to curbing this unsustainable growth.
This issue is increasingly receiving bipartisan support, as policymakers from across the political spectrum join together to take action. The Chairman of the House Appropriations subcommittee responsible for federal prison expenditures, Republican Frank Wolf, has plans to join with the subcommittee’s ranking Democrat, Chaka Fattah, to create a task force to assess and identify ways to reduce prison population and spending growth.
The House Judiciary Committee also recently launched a bipartisan task force—dubbed the Over-Criminalization Task Force of 2013—to review and streamline the nearly 4,500 federal offenses in the criminal code.
As they begin this work, policymakers are confronted with a bloated and ever-expanding system. In fiscal year 2013, for example, the federal Bureau of Prisons (BOP) commanded a 25 percent share of the Department of Justice’s overall budget, representing a 4.2 percent increase from fiscal year 2012. If current rates of growth in the BOP’s budget continue, this agency is projected to consume nearly 30 percent of the DOJ’s budget by 2020.
The growth in the BOP’s portion of the budget is mirrored by dramatic increases in the federal prison population. The BOP population is now nearly 10 times what it was in 1980. In addition to posing substantial costs to taxpayers, the expanding BOP prison population prompts concerns about overcrowded facilities and the disproportionate impact of incarceration on certain subpopulations and communities.
So what can federal policymakers do to stem the tide of mass incarceration, saving scarce resources that could be better used to prevent cuts to essential services, such as federal law enforcement and state and local grants for drug courts, reentry programs, and gang reduction initiatives?
They can start by looking at the two main drivers of the growth in the federal prison population: increasing numbers of prisoners and longer sentence lengths. In particular, the increase in time served by drug offenders—who make up half of the entire BOP population today—was the biggest factor in the growth of the federal prison population between 1998 and 2010.
Reducing the prison population requires policies that both divert nonviolent drug offenders from prison and impose back-end sentence reductions for those already incarcerated. While the BOP plays a key role in implementing some of the back-end changes, its ability to do so on a large scale is limited by, and dependent upon, statutes and budget constraints controlled by Washington lawmakers.
Moreover, making policy changes to curb federal prison growth requires input and support from a wide array of federal criminal justice stakeholders, such as judges, prosecutors, defense attorneys, corrections officials, and victims’ advocates. Buy-in from these key decisionmakers will be essential to the success of attempts to drive down the federal prison population.
Levenworth Federal Prison, Map data ©2013 Google, DigitalGlobe
Filed under: Quality of Life |Tags: Federal, incarcerated, inmates, MetroTrends, politics, population, prison, Urban Institute Add a Comment »
| Posted: May 15th, 2013
If you’ve read the news at all this week, you’ve likely read about the escalating controversy regarding the IRS’ seemingly selective scrutiny of certain organizations, including Tea Party organizations. Without delving into the motivations behind the IRS’ actions, the central question they were attempting to answer is whether the groups were operating in a manner consistent with the rules governing the activity of 501(c)(4) nonprofit organizations, the tax status for which they had applied (and were all ultimately granted, to the best of our knowledge). Given the increased attention on the topic, below is a brief overview of the permissible activities and characteristics of nonprofits that engage in political activities.
This is meant to be a basic overview, and there is a tremendous amount of nuance and detail not included here. If you need more detailed information, please see the references at the end and/or consult a specialist in nonprofit or political law. That said, there are three basic types of organizations that engage with the political system:
501(c)(3) Organizations – Public Charities
There are two types of 501(c)(3) organizations: Public Charities and Private Foundations. This section focuses exclusively on Public Charities, which are allowed to participate in the civic sphere in ways that are in line with their charitable mission.
- Permitted activities: Voter education, voter registration, policy analysis, issue education, and related nonpartisan activities. Allowed to conduct limited lobbying (defined as “insubstantial”) activities. Organizations have the option to choose an official test (501H election) that sets a concrete limit on lobbying expenditures.
- Advantages: Greater fundraising capacity through charity status. Can accept contributions of any size from individuals, corporations, and other nonprofits. Not required to disclose donors to the public, although the information is shared with the IRS on Forms 990.
- Disadvantages: Restrictions on allowable political activities. Cannot directly engage in elections. Cannot be involved in lobbying as a primary organization activity.
- Examples: League of Women Voters, The Urban Institute
501(c)(4) – Social Welfare Organizations; 501(c)(5) – Labor Unions; 501(c)(6) – Business Leagues
While many, if not most, 501(c)(4) organizations do not engage heavily in lobbying or political activity, the ones that do are supposed to exist in order to “promote the social welfare.” 501(c)(5) and 501(c)(6) organizations are membership-based associations capturing labor/agricultural entities and business entities, respectively.
- Permitted activities: Nonpartisan issue and legislative advocacy, lobbying, endorsement of specific legislation.
- Advantages: Not required to disclose donors to the public, although shared with the IRS on Forms 990. Can accept contributions of any size; the Citizens United decision allowed for unlimited corporate contributions. Can engage in nonpartisan election campaign-related activity, but that must not be the primary purpose of organization. Can endorse candidates in communication with members, although not with public.
- Disadvantages: Must be nonpartisan. Cannot publicly (outside of membership) endorse or overtly support or oppose political candidates. No contributions to 501(c)(4) organizations for lobbying or political activity are tax-deductible, by individuals or businesses. In 501(c)(6) organizations, the portion of membership dues used for lobbying and political expenditures cannot be claimed by members as a business expense and deducted from tax liability.
- Examples: AARP (c4), Crossroads GPS (c4), Tea Party Patriots (c4), SEIU (c5), Chamber of Commerce (c6)
527 Organizations – Political Action Committees
Section 527 of the tax code encompasses all forms of organizations engaged directly in electoral politics, including candidate and political party committees. This section focuses on independent Political Action Committees that are predominantly--though not exclusively--organized under Section 527, both “traditional” PACs and the newer SuperPACs that emerged following the 2010 Citizens United decision. There is another notable type of independent spending committee known informally as the “527” that can raise and spend money on elections in unlimited amounts without endorsing specific candidates, but these organizations are now significantly less prevalent and influential than they were around a decade ago.
- Permitted activities: Partisan-oriented activities to influence elections. Explicit support of or opposition to individual candidates.
- Advantages: “Traditional” PACs can engage in direct political activity and endorse candidates. SuperPACs can raise money in unlimited amounts from individuals or corporate/organizational donors.
- Disadvantages: Required to disclose donors to the public through the Federal Election Commission. “Traditional” PACs have $5000 contribution limits. SuperPACs are not allowed to coordinate with candidate committees. Lobbying activities are not necessarily tax-exempt.
- Examples: EMILY’s List (PAC), American Crossroads (SuperPAC)
Each structure serves a specific function within the political sphere, but reviewing applications of all politically oriented organizations to ascertain whether the proposed activities fit into the allowable activities of the organization type they have chosen seems prudent. However, many of the lines between these organizational types are blurry. Of particular relevance to the current controversy, 501(c)(4) social welfare organizations in practice run issue-based attack ads that look a lot like attempts to influence the outcome of an election. With little guidance from Congress, the IRS is left with the unenviable task of sorting out whether organizations engaged in such activities are merely toeing that blurry line or outright crossing it in some objective way.
If you want to learn more, here are some resources:
Illustration from Shutterstock
Filed under: Government |Tags: irs, nonprofit tax status, nonprofits, public charities, taxes, Urban Institute Add a Comment »
Laura Pacifici John Roman
| Posted: May 15th, 2013
Cities are actively searching for ways to reduce blight.
Abandoned properties and vacant lots abound in decaying Rust Belt neighborhoods struggling with manufacturing losses and entrenched segregation. The problem is no less serious in the Sun Belt, where overzealous developers left neighborhoods half-built and overconfident consumers now face waves of foreclosures.
And in every city there are investment property owners playing the moral hazard game—they will only clean up their property when enough others do so that they can profit.
Unfortunately, cities have few effective ways to fight blight. Although cities want to reduce the number and impact of blighted places and have owners of vacant or underutilized properties clean them up, they must tread cautiously. The worst case scenario is that they use too big a hammer, the owner walks away, and the burden is left to the city to develop and maintain these spaces.
But there may be a new tool in the war on blight: a relatively new financial instrument known as the social impact bond (SIB). The idea behind SIBs is that private investors, not the government, bear the risk for large-scale, pricey endeavors designed to build and maintain America’s social service infrastructure.
Social impact bonds are being used to inject private funds into public-sector programs to provide prevention services to vulnerable individuals.
Last year saw the first SIB transaction in the United States when the Bloomberg Foundation and Goldman Sachs invested nearly $10 million in a program aiming to reduce the recidivism rate of young men held at the New York City jail at Rikers Island.
If the program is successful—that is, if the recidivism rate is less than would be the case without these services—New York City will re-pay Goldman its investment plus a profit. If the program fails, Goldman will not be compensated.
SIBs are currently being used to invest in people, not places. But, for cities looking to innovate, SIBs may provide a promising model for funding reclamation of blighted areas that cities inherit or want to develop.
Under this model, private capital would be used to support revitalization projects, and cities would provide investors a cut of the revenue if the developments prove profitable.
Using SIBs this way has some advantages over people-focused prevention programs. Unlike the Rikers SIB, where ‘savings’ from reduced recidivism are unlikely to flow back in the government’s coffers, cities would clearly identify savings in development and maintenance costs, plus reap the reward of increased revenue from more successful uses of now dormant properties.
This is exactly what happened in Nashville when the city joined with private investors to revitalize an industrial wasteland into a mixed-use community known as The Gulch, which is one of the country’s first LEED-certified “green” neighborhoods. According to a report by Smart Growth America and Strategic Economics, The Gulch’s revenue substantially outweighed its development costs.
The Gulch produced over $115,000 per acre in net revenue and generated $3,300 per unit in property taxes, sales taxes, and additional revenue each year, but cost the city only $1,400 per unit in annual maintenance fees for infrastructure upkeep as well as fire and police response services.
So the calculus here is simple. The SIB funds the takeover of problem properties. Then, the city works with commercial developers to design a vision for the space that does more than turn a quick profit, with the SIB investment covering the difference between a socially beneficial project and one focused solely on profit maximization.
The government receives more than twice the revenue that it pays for maintenance, guaranteeing a long-term stream of revenue that is more than enough to pay back the SIB principal plus a profit, and to finance future investments.
Development of blighted areas is both a top priority and a risky financial endeavor for cash-strapped cities. But American cities would benefit immensely by incentivizing the development of these areas through social impact bonds.
Abandoned houses photo from Shutterstock
Filed under: Quality of Life |Tags: blight, Bloomberg Foundation, cities, development, Goldman Sachs, john roman, laura pacifici, nashville, neighborhoods, SIB, Smart Growth America, social impact bonds, Strategic Economics, the gulch Add a Comment »
| Posted: May 15th, 2013
In recent weeks, the growing economic disparities between younger and older Americans, as well as between whites and families of color, received a lot of media coverage. Yesterday, my colleagues Signe-Mary McKernan, Eugene Steuerle, and I told the Treasury Department’s Financial Literacy and Education Commission what we know about these trends and what we think can be done to address them.
The commission is charged with the very important role of educating the public about the complexities of personal finance, and as a part of that, maintaining an informative web site and hotline. We hope the knowledge we shared today can help the commission in its vital mission.
So first things first: how wide are the wealth gaps? Pretty wide.
Let’s start with a broad look across the wealth distribution.
Using data from the Federal Reserve’s Survey of Consumer Finances, we saw that the average American family’s wealth doubled between 1983 and 2010. However we also saw that only the wealthiest households saw anything like that level of growth.
Indeed, while the top 20 percent of wealth holders had an average wealth increase of 120 percent between ’83 and ’10, middle-wealth families only got 13 percent wealthier. On the other end of the distribution, the bottom 20 percent actually saw their relative wealth plummet, from an average debt of $400 in 1983 to an average debt of $17,000 in 2010.
Looking at the data through the prism of race shows a similar gap.
As white people transition from their 30s to their 60s, their average household wealth continually builds. Families of color, on the other hand, don’t have the same increasing trajectory and the disparity gets more pronounced the older people get.
For example, when Americans are in their 30s and 40s, whites have about three-and-a-half times more wealth than African Americans and Hispanics. By the time they reach their early to mid-60s, near the peak of their wealth accumulation, whites have about seven times the wealth of these groups.
The question is why? The answer is that African Americans and Hispanics are less likely to acquire traditional wealth building assets, such as homes and retirement savings.
Getting on a firm path to wealth building can be more difficult for families of color. African American and Hispanic families, for example, are about five times less likely than white families to receive large gifts or inheritances that could be used for major family investments like a down payment on a home or attending college.
The data also show that age is an important factor in wealth accumulation disparities.
Members of the baby boom and silent generations on average acquired a lot more wealth than Americans who were the same age a quarter century ago. For example, the average wealth of today’s Americans aged 56 to 64 is more than twice the amount held by people in the same age range in 1983.
Today’s Americans under 40 haven’t done nearly so well. People in their late-20s to late-30s have 21 percent lower wealth than those in the same age range 25 years ago.
So why do younger Americans have less wealth than prior generations had at their age?
The answers have to do with home equity and student loans.
- Home equity fell by roughly 60 percent between 2007 and 2010 and a lot of younger Americans bought their first home just before the housing crash, when home prices were at their peak, or close to it. So when the housing market crashed, these homebuyers were the hardest hit.
- Ranking only behind mortgage debt, student loans are the second largest source of debt for today’s Americans in their late-20s to late-30s. By way of comparison, student loans were a relatively small component of debt for their counterparts in the 1980s.
And large student loan debts can be especially debilitating by delaying traditional wealth-building behaviors, such as: homeownership, retirement savings, and building a rainy day fund.
So what can be done to help these vulnerable groups?
A great place for the Financial Literacy and Education Commission to focus is on finding innovative ways to prevent young Americans from burying themselves in student loan debts that are likely to prevent them from making wealth-accumulating investments after they finish school.
But teaching financial literacy at younger ages is also critical. The earlier in life a person begins to build wealth, the more time those assets have to compound and become more valuable. So the key is to teach more people to make sound financial decisions earlier in life.
Building a national financial education strategy that permeates throughout our financial and academic institutions can get more people off on the right foot and headed towards a more secure financial future.
Filed under: Economy, Quality of Life |Tags: caroline ratcliffe, changing wealth of americans, eugene steuerle, Homeownership, race, signe-mary mckernan, Urban Institute, wealth 1 Comment »
| Posted: May 14th, 2013
The Annie E. Casey Foundation has just released a very frank and thoughtful summary of lessons learned from its Making Connections Initiative, which focused funding and technical assistance on poor neighborhoods in 10 cities with the goal of improving outcomes for both people and places. One of the things I like best about this piece is that it doesn't sugarcoat the difficulties the initiative encountered or hide the more disappointing results. It acknowledges that Making Connections failed to achieve population-level improvements in family and child well-being, even though sites did succeed in implementing important new programs that improved the lives of individual families and kids.
I played a small part in the Making Connections Initiative, working on the NORC-Urban Institute team that designed, conducted, and analyzed an ambitious longitudinal survey of families living in the target neighborhoods. Casey's decision to invest in this expensive survey effort paid tremendous dividends, not only by providing information to the sites to help shape the work underway, but also by producing new field-building insights about the dynamic interactions between people and places. There's still a lot to learn from this unique data resource.
One of the important insights generated by the Making Connections survey is the critical importance of family mobility. Neighborhoods clearly matter to people's lives and life-chances, but that doesn't mean that "fixing" conditions within a neighborhood—school quality, healthcare for kids, job opportunities, or safety—automatically benefits the people living there. Families move back and forth across neighborhood boundaries; break apart and re-form; send their kids to out-of-boundary schools; and engage with religious, cultural, or family networks that transcend place. Increasingly, we're realizing that anti-poverty and family-strengthening initiatives have to be "place conscious" but not myopically "place based."
The design and implementation of Making Connections varied across sites and morphed considerably over time, introducing a lot of uncertainty and ambiguity into the task of defining its scope and assessing its effectiveness. But this reflected lessons learned from previous rounds of experimentation in the field of comprehensive community change efforts. Now the experience of Making Connections contributes to the body of knowledge from which the next generation of experimentation can draw.
We have to acknowledge that achieving meaningful improvements in the well-being of poor people and poor communities requires intense multi-faceted interventions, tailored to local circumstances and residents' priorities, responsive to change, and sustained over many years. There's no way such efforts can be formally evaluated using conventional methods. But they can hold themselves accountable by setting ambitious population-level outcome goals, being clear about how specific investments or activities are expected to advance these goals, and using data to find out what's working—and not working—to make progress toward them.
This may mean that one of the most important tasks for a place-conscious initiative is to build and support an enduring local capacity for inclusive, evidence-based collaboration around a shared set of goals. Building this kind of human infrastructure takes time (and money) and may not pay off immediately with tangible accomplishments. But if a community's residents, service providers, civic leaders, and public servants were able to work together respectfully over the long term, using data to assess progress and refine cross-sector strategies, we might begin to see the big improvements in peoples' lives that we seek.
Neighborhood photo courtesy of Shutterstock
Filed under: Quality of Life |Tags: Annie. E. Casey, low-income, making connections, MetroTrends, poverty, Urban Institute Add a Comment »