MARY SANCHEZ

Public policy shouldn’t penalize poor people who save

Updated: 2014-02-10T05:19:42Z

By MARY SANCHEZ

The Kansas City Star

Here’s a novel idea: How about basing public policy on research instead of assumptions about wealth and social mobility?

The snowstorm canceled this important conversation last week. Thomas Shapiro of Brandeis University was to appear at the University of Kansas, part of a series of lectures called “Is There an American Dream for You? How Institutional Failure Perpetuates Poverty.”

Shapiro’s talk was to be based on a study of working- and middle-class families in three major cities, beginning in 1998. For Melinda Lewis, one of the many takeaways is how best to help people on government assistance. Lewis is policy director of KU’s Assets and Education Initiative. She points to the possibility of eliminating asset limits in means-tested public assistance and financial aid. For example, households that save more than $2,000 are sometimes cut off from food assistance programs like SNAP and also Medicaid. But the study showed how building even a small financial cushion greatly helps economic stability.

It’s not just the paycheck, the dollars earned, that influences who accumulates wealth and who struggles. Nearly one in three of the families had a health event or a new disability during the study. How they fared through it, whether it debilitated them financially or was something they could weather, varied depending on not just income, but the benefits tied to their jobs. Benefits like pretax flexible spending accounts for child care and medical costs, tuition assistance, health insurance, short-term disability, employer matches for savings plans, paid sick time and flexible work schedules had dramatic effects on how well people could build wealth.

Everyone wants people to become self-sufficient, not be tied to government aid. And the nation would be better served if more people had savings for retirement and were able to pass on accumulated wealth. Assessing how policy can influence, not hinder, those goals is key. Lewis said that too often, public policies prevent poor people from moving out of poverty “in predictable and tragic ways.”

One example is government regulation that doesn’t allow poor people to save without penalizing them, while simultaneously encouraging better-off people to accumulate wealth, with tax incentives for higher education saving, for retirements, capital gains and home ownership, Lewis said.

That’s not only lopsided, it’s the definition of bad public policy.

To reach Mary Sanchez, call 816-234-4752 or send email to msanchez@kcstar.com.

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