New America Foundation
By: Reid Cramer
June 3, 2011
Our social policy system is riddled with inequities. I often focus on the disparities between how we incentivize savings and encourage families to build wealth. While those on the upper half of the income ladder are able to access tax incentives as homeowners and when they contribute to a range of designated accounts, families with lower incomes and fewer resources are largely shut out. This critique was the impetus for creating a new type of account that could incentivize savings for those currently excluded, the Individual Development Account (IDA).
IDAs are designed to support savings for the purchase of specific assets, such as buying a home, pursuing post-secondary education, or capitalizing a small business, by matching the deposits of program participants. Over the last 15 years, community groups across the country made IDAs available to their constituents. One of the features of this experience that has been so remarkable is the commitment of IDA proponents to learning from the experience. From the beginning, a thorough research agenda was developed and has produced a growing body of knowledge. In many ways, this is a model for how social policymaking should work. New ideas can be put into action, their impacts assessed, and subsequent approaches can be refined or abandoned. The process is often iterative and takes time, but the nature of social science requires openness to acquiring new information and an ability to place it in context.
A new study by a team of researchers from Center for Social Development at Washington University in St. Louis, University of North Carolina, and the Brookings Institution offers a new learning opportunity. This research focused on evaluating the ten-year impacts of a specific IDA program in Tulsa, Okla. and is notable in that it used a randomized experimental design, so we are able to compare the experience of a group that received the IDA for three years and those that did not.
The release of this paper is an excellent time to take stock of what we have learned from the IDA experience to date and consider the policy implications. To contribute to that process, I've written a paper that provides commentary on the findings of this new research, raises questions about the state of homeownership as a means of achieving economic security, and critiques the existing policy tools for supporting low-income families' climb up the economic ladder. There is undoubtedly more to be said and learned from the IDA experience, but I hope to keep a constructive conversation going. I look forward to hearing your feedback.