While the Federal Reserve System's primary role may be to control our nation's monetary policy, one of the lesser known functions of our central bank is as an economic research center. To keep the public informed of current work in the field, a number of publications are made available covering a wide variety of topics, as well as specialized publications for educators* and students*. If you have never seen the Federal Reserve's offerings, I highly encourage you to take a look*. If you are reading this blog, there is something there for you.
In the winter edition of Bridges, a quarterly publication distributed by the St. Louis branch of the Federal Reserve, Ray Boshara discusses new innovations in savings for America's impoverished. Through exploration of the American Dream Demonstration and Individual Development Accounts, Boshara highlights how many commonly held beliefs about the plight of those in poverty turn out to be quite wrong. People in poverty can save money, given some basic education and appropriate financial tools. Additionally, some findings were quite shocking. Households earning 200% of the poverty line saved about 1% of their income, while families only making 50% of the poverty line saved about 3%. Furthermore, controlling for factors such as age, gender, race, employment status, or welfare receipt showed that savings occurred across the spectra of these categories. In the American Dream Demonstration, "every hour of financial education was correlated with greater saving, but only up to 10 hours."
The results of the American Dream Demonstration are important on many fronts. For the politically minded, it is refreshing to see conservative ideas used for social benefit. Boshara takes a minor swipe at "left-leaning academics" who doubted the viability of the ideas, but it is a swipe the left should gladly take. The mechanisms described by the article promote asset growth among our poorest citizens. This growth in net worth correlates to greater financial stability, greater ability to survive financial distress, and of particular importance, improved outcomes for children raised in poverty. The mechanisms are cost effective and do not require billions in federal funding. The American Dream Demonstration may not solve all the problems of those in poverty, but it's a tremendous step in the right direction.
*I have linked to the St. Louis Federal Reserve publications, as this is the bank in my home region.
This is of course great policy. I must, however, take issue with this: "For the politically minded, it is refreshing to see conservative ideas used for social benefit."
ReplyDeleteJust what, pray tell, is conservative about these ideas? We're basically talking about a publicly funded education program and/or subsidised financial services for the poor. How you square that with a conservative movement bent on the wholesale destruction of said poor I couldn't tell you.
I suppose I can see how certain segments of "the left" (that fictional homogeneous force of evil) would see such a thing as interfering with a throw-more-money-at-it approach to the problem, but the people who can't see this as complementary are probably few and far between. And regardless, an idea's unpalatability to certain lefty academics does not make it conservative. This is a social program for the poor, and the conservatives are neither buying nor selling such things.
Hunter-I assume you read the Bridges article in full? The greatest successes of the program required no public funding.
ReplyDeleteI like this regardless of how you catagorize it politically. As you said on facebook it goes to help generational issues and break the cycle. The larger issue regarding poverty as I see it. If kids in poverty see their parents save even a small amount they are more likely to continue that trend.
ReplyDeleteSure, I read it. The program he's talking about (ADD) was publicly funded, at research scale ($25M/year) rather than social program scale. He mentions having nearly acquired the public billions necessary to roll out these benefits (education and financial tools) to large numbers of the poor. I'm not sure why he then goes on to take credit for an (unfunded) act of Congress passed two years before the establishment of the program which is only sort of tangentially related to it. But that program was not extending education or new financial tools to anyone...the changes only applied to those who were already eligible for a 401k.
ReplyDeleteI would also submit that the "nudge" kind of stuff he's talking about there at the end isn't a particularly conservative idea. It's a great idea, of course, and so is the financial education and delivery of financial tools researched by the ADD. But these are technocratic, sort of New Democrat style things. None of this is being advocated by the conservative movement, at least not in this country.
Also, the author of that bridges article recently co-authored a book. Its title is The Next Progressive Era. He also blogs at the Huffington Post. Not exactly the guy I'd go to looking for conservative ideas...
ReplyDeleteHunter-I appreciate your unabashed support for a political party, but you might want to reconsider what that means. As you state, this is a "technocratic, sort of New Democrat" type of thing. Remember that the New Democrats were a centrist organization that saw their greatest successes signed into law by Bill Clinton. This included welfare reform and deregulation of numerous industries. The sum total of the New Democrats may have been liberal in outlook, but they borrowed from the conservative playbook at will.
ReplyDeleteAs far the specifics of this article and why I say that there are conservative values involved in the design of the ADD, it's pretty straightforward. The ADD is a program designed to encourage private investment to solve poverty issues. This is a supply-side approach to an economic problem, and supply-side economics have dominated the politics of the right for decades.
Furthermore, you might want to rethink your statements about how evidence of public spending on this program prove that it is liberal in design. Do you seriously intend to suggest that government spending is a default attribute of the left? Are we to conclude that all military programs are liberal by design because they receive government funding?
So, to re-iterate, you asked, pray tell, what about the ideas in this program were conservative. The emphasis on private investment and supply-side solutions are hallmarks of traditional conservative thinking. No, the author is not a conservative. That does not preclude him from using traditional conservative means to his ends. While that may not sit well with your particular political bubble, it is simply the truth.