Introduction

For the most part, public policies designed to fight poverty in the United States are structured to focus solely on income. There is no argument that income is important. Income creates the necessary cash flow to provide food, housing, health care, and other urgent needs. Yet, in 1998, 25.5% of all American households had insufficient net worth to sustain living at the federal poverty level for three months if their income were to be disrupted. That means that nearly one quarter of American households—even those with current income streams—could plummet into economic disaster in times of job loss, divorce, long-term illness, economic downturns, or other factors that commonly disrupt income. As a point of reference, less than 13% of households were identified as living below the federal poverty level that same year.

Arguably the most influential measure in the history of American domestic policy has been the federal poverty level—which is based solely on income. Economist James Tobin once said in response to the official government statement of poverty, “No politician will be able to ... ignore the repeated solemn acknowledgement of our society’s obligation to its poorer members.” Now we are calling for a similar response to the long neglected importance of assets as a measure of poverty.

Assets matter. Assets mean economic security. Assets mean mobility. Assets mean opportunity.

The United States has a strong record of promoting the accumulation of assets among its citizenry. The Homestead Act and the G.I. Bill are two prominent historical—and very successful—examples of asset-building programs, but current 401(k) tax incentives, home mortgage interest deductions, and other incentives provided by the government today are equally powerful. Most of these incentives, however, are provided through the tax code and targeted toward middle- and upper-income households. Thus, the benefits provided by them are completely out of the reach of impoverished families. Worse, given asset limits established in many income-maintenance programs, low-income families can actually be penalized or sanctioned for working to save to make long-term investments that could make lasting changes in their economic outlook.