Letter to the President and Congressional Leadership in Support of Individual Development Accounts (IDAs) in the Stimulus Package
October 3, 2001
This letter was sent to President George W. Bush, Senators Thomas A. Daschle and Trent Lott, and Representatives Dennis J. Hastert and Richard A. Gephardt
We are writing to express our strong support for including tax credits for Individual Development Accounts (IDAs) as part of a bipartisan economic stimulus package or other appropriate legislation that is enacted prior to the end of this year's congressional session. IDAs are emerging as one of the most promising tools to enable low-income families to save, build assets, and enter the financial mainstream. Your support of IDAs will help millions of American families achieve their piece of the American Dream.
IDAs reward the monthly savings of working-poor families who are trying to buy their first home, pay for post- secondary education, or start a small business. This reward or incentive is provided through the use of matching funds that typically come from a variety of private and public sources. Today, there are more than 10,000 families saving in IDAs with the help of over 400 community organizations, and these accounts have proven to increase work effort, earnings, and confidence among the working poor. However, without the resources provided through a tax credit to financial institutions, there will never be sufficient matching funds available to ensure that IDAs will be a viable option for those families who want to move up the economic ladder.
IDAs represent a new vision for America's working-poor families --- enable them to build assets, not just income; empower them to own, not just owe; view them as savers, producers, and entrepreneurs, not just recipients, borrowers, and trainees. In other words, by providing low-income families with an opportunity to save and acquire assets, public policy is finally inviting low-income working Americans to be full participants in our economy.
As Congress and the Administration begin to formulate economic stimulus and other key legislation, we believe IDAs deserve your consideration and support for the following reasons:
1. IDAs result in higher economic growth and job creation not just for low-income families and their communities, but also for the nation as a whole. According to economic analysis, for every dollar invested in IDAs there is a $5 return to the economy. These returns are in the form of new businesses, higher earnings from additional education, new homes, interest earnings, fewer welfare recipients, and increased tax receipts at all levels of government.
2. IDAs have bipartisan support from both Congress and the Bush Administration. Bipartisan legislation to provide IDA tax credits has been introduced in the House and Senate due to the leadership of Sen. Joe Lieberman (D-CT), Sen. Rick Santorum (R-PA), Rep. Joe Pitts (R-PA), Rep. Charlie Stenholm (D-TX), and Rep. Tony Hall (D-OH).
3. The cost of the IDA proposal can meet any budgetary target or goal dictated by the policy making process. By placing a cap or limit on the number of initial IDA accounts around the country, much like Congress did several years ago for Medical Savings Accounts, the cost of IDA tax credits are highly manageable. In addition, the tax credit for IDAs can be sunsetted after five years to allow Congress, the executive branch, and other interested groups to determine their effectiveness and decide whether they are worthy of continuation and expansion. The Bush Administration in its Fiscal Year 2002 budget proposed $1.7 billion over ten years for IDAs and that amount would be sufficient to begin providing low-income families with a chance to save, invest, and help themselves.
As Federal Reserve Chairman Alan Greenspan recently told Congress, "Unless you save, invest, and increase the total amount of real resources in the 21st Century - I don't care what type of financial systems you devise, I don't care who owns it - all you're doing is shuffling paper; you're not producing real goods." We believe IDAs fulfill the economic reality expressed by Chairman Greenspan and we encourage you to lend your support to IDAs in order to help build a more productive economy now and in the future.
Thank you for your consideration of our views, and if you need any additional information about IDAs, please contact Ray Boshara, Policy Director for the Corporation for Enterprise Development, at 202 408-9788.
Corporation for Enterprise Development
National Conference of State Legislatures
Credit Union National Association
United Way of America
National Black Chamber of Commerce
Institute for Responsible Fatherhood
National Center for Neighborhood Enterprise
The Empowerment Network
First Nations Development Institute
National Congress for Community Economic Development
Consumer Federation of America
National Federation of Community Development Credit Unions
Association for Enterprise Opportunity
Center for Social Development
Enterprise Corporation of the Delta
Economic Security 2000
US Pan Asian American Chamber of Commerce