Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, November 27, 1993 TAG: 9311270114
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
SOURCE: Newsday
DATELINE: LENGTH: Medium
Just ask the Connecticut schoolgirl whose college dreams inspired her to save $4,900 from a part-time job - but forced her family to repay $10,000 in public aid. Or the Milwaukee welfare mother who built a $3,000 savings account with her sewing - only to be charged with fraud and ordered to turn over her savings.
These two were hit by federal rules that say that any family with $1,000 or more in savings is no longer entitled to public support. With that kind of money, the system says, they can pay their own way.
But there's a growing feeling among experts that this restriction on savings is in fact the culprit behind welfare's cycle of poverty, and that until poor families are allowed to accumulate some wealth they will never escape to economic independence. "You can no more spend your way out of poverty than you can borrow your way out of debt," said Sen. Bill Bradley, D-N.J., who is among the advocates for a change.
These advocates, sociologists and legislators among them, are calling for a new, special kind of savings account for America's poor: Individual Development Accounts, or IDAs.
Advocates see these accounts as similar to the popular Individual Retirement Accounts, or IRAs, which provide tax breaks for people who save toward their retirement. With IDAs, Americans at or near the poverty level could save for specific goals that could help them get ahead, such as college or job training, buying a house or starting a business. And the government would supplement those savings; advocates have proposed matches ranging from $1 for every $10 in savings up to the reverse, a $10-to-$1 match.
Bradley sponsored what is the only national IDA program in existence, a tiny segment of his larger $1 billion support programs for blighted cities. But he and Rep. Tony Hall, D-Ohio, are now asking Congress to approve a bigger pilot program across the country. President Clinton has endorsed the accounts, and advocates hope they will be part of his welfare-reform plan, expected soon after the new year.
In the meantime, a sprinkling of states, including Iowa, are experimenting with IDAs of their own.
Opposition to IDAs is both practical and philosophical. The practical complaint is that these accounts would cost governments - hence, taxpayers - money at a time when governments already can't balance their budgets.
Michael Sherraden, a sociology professor at Washington University in St. Louis, is one of the strongest supporters of IDAs. He argues that what's good for the rich is also good for the poor. "The way anyone gets ahead is to save and invest in the big life goals," Sherraden said.
He argues that U.S. social policy helps everyone except the poor save money.
by CNB