1. Upside Down: The $400 Billion Federal Asset Budget Corporation for Enterprise Development September 23, 2010 Eugene Steuerle Richard B. Fisher Institute Fellow The Urban Institute To receive Gene’s regular column, “The Government We Deserve,” send an email to: esteuerle@urban.org

2. Two Long-term Goals of Mine (1) To relate asset development policies to principles such as progressivity & efficiency (2) To channel asset research to where the saving takes place and where the subsidies are made Four parts to this presentation: A profile of saving over the lifespan Saving by socio-economic class Private versus public saving How we subsidize saving

3. Profile of Saving Homes and pensions matter most For middle class, pension saving starts early In fact, much saving can come from simply hanging onto pension assets until retirement For many, asset spend-down also starts with more than two decades of life expectancy remaining Mortgage debt pay-down a traditional (but continuing?) major source of saving CDs and checking accounts often learning tools—not major sources of asset accumulation

4. Mean Assets of Middle Third of Wealth Distribution For Various Age Groups in 2001/2004 Source: Urban Institute calculations from the 2001 and 2004 Survey of Consumer Finances

5. Source: Urban Institute calculations from the 1992, 1995, 2001 and 2004 Survey of Consumer Finances and DYNASIM3. Annual Wealth Accrual Per Adult between Early 90s and Early 00s for Typical Households, by Education (2004 Dollars)

6. Within Cohort Change in Household Wealth over Nine Year Period Source: Urban Institute calculations from the 1992, 1995, 2001, and 2004 Survey of Consumer Finances

7. Saving by Socio-Economic Class Lower-income classes save only a tiny fraction of what is saved by middle class Saving by black middle class also very low relative to non- Hispanic white middle class Some variables that stand out Almost no stocks & bonds Lower rate of mortgage pay-down Saving in assets with lower rates of return (& less risk)

8. Ratio of Bottom Wealth Third to Middle Wealth Third for Household Heads Ages 55-64 Bottom 1/3Middle 1/3Ratio Net Home Equity168751104480.15 401Ks and IRAs3853442660.09 Bank Accounts2363201680.12 Net Vehicles5848148500.39 Mutual Funds, Stocks, and Bonds 602107320.06 Other Assets –Debt-8035237… Net Wealth294612357020.12 Source: Urban Institute calculations from the 2001 and 2004 Survey of Consumer Finances

9. Ratio of Black to White Wealth for Household Heads Ages 55-64 in 2001/2004 BlackWhiteRatio Net Home Equity325201332370.24 401Ks and IRAs10662612370.17 Bank Accounts3303242900.14 Net Vehicles6640175280.38 Mutual Funds, Stocks, and Bonds 177178780.01 Other Assets –Debt4271440490.10 Net Wealth575732982190.19 Source: Urban Institute calculations from the 2001 and 2004 Survey of Consumer Finances

10. Annual Wealth Accrual Per Adult between Early 90s and Early 00s for Typical Households by Race (2004 Dollars) Source: Urban Institute calculations from the 1992, 1995, 2001 and 2004 Survey of Consumer Finances and DYNASIM3.

11. Private versus Public Saving Social Security and Medicare “wealth” dominates all private wealth for close to 2/3rds of population

12. Mean Value and Composition of Household Wealth Ages 51-61, by Wealth Decile (in 2004 $1,000 dollars) Source: Urban Institute calculations from the Health and Retirement Study

13. Source: Urban Institute calculations from the 2001 and 2004 SCF and DYNASIM3. Mean Wealth Per Adult for Typical Households Ages 55-64 in 2001/2004

14. Source: Urban Institute calculations from combining the 2001 and 2004 SCF and DYNASIM3. Median Ratio of Social Security Wealth to Total Wealth for Households Ages 55-64 by Income, Education, and Race in 2001/2004

15. How We Subsidize Saving Tax subsidies accrue to higher income classes since: They face higher tax rates They do most of the saving

16. Some Tax Expenditures, 2011-15 ($billion) Homes Mortgage Interest$638 Net imputed rental income$224 Capital gains exclusion$216 Property tax deduction$151 Pensions Employer plans$247 401 (k) plans$361 IRAs$ 79 Keogh plans$ 96

17. Distribution of Subsidies for Mortgage Interest

18. Distribution of Subsidies for Defined Contribution Plans