California FarmLink IDA Program

The other day I decided to reach out to a couple of sustainable agriculture organizations in western Massachusetts to encourage them to think about a beginning farmer IDA program.

Living out in the sticks (rural Vermont, that is), I’m particularly intrigued by the idea of matched savings accounts to assist start-up farmers. I’ve written a couple of times on this blog about the Beginning Farmer and Rancher Individual Development Account Program funding in last year’s Farm Bill, which was included as a $5 million per year item, although the actual dough has yet to be included in an appropriations bill, which is required before the Department of Agriculture can launch the program.

I haven’t heard back from either of the people I emailed, so perhaps they don’t find it such an interesting idea. But today I came across an organization called California FarmLink, and they seem to like the idea enough that they went out and started a farmer IDA program back in 2003 before the recent federal Farm Bill program was even a glimmer in some congressman’s eye. Indeed, it sounds like the success of their program (and their advocacy efforts) played a significant role in convincing congress to include the beginning farmer IDA program in the Farm Bill.

Now they’re organizing an advocacy effort around getting the $5 million program into the 2010 appropriations bill. I plan to put in a call to my congressmen, and I urge others to do the same.

Click here to get the details from California FarmLink.

Savings in Crisis

It’s tempting to think about re-naming my blog “Did You Hear What They Said Over at the Ladder?” and just have all my posts be rip-offs of the New America Foundation’s blog on asset-building.

I resist that temptation, mostly because I assume that most anyone interested enough in asset-building to read my blog has probably been a reader of the Ladder for a while. But I can’t resist noting their recent pointer to a CNN opinion piece by New America staffer Alejandra Lopez-Fernandini. It’s a great piece on how we shouldn’t misinterpret the need for fiscal stimulus in a recession and assume that individual households should be discouraged from saving too much (which is a message that many people hear in the media today). Alejandra explains how saving helps vulnerable households reduce risk and increase the probability of their solvency at a time when the last thing we need is more bankruptcies and foreclosures. It also makes funds available for investment by businesses that can put those funds to productive use.

She was able to articulate so well what many of us in the asset-building field have been struggling to explain to ourselves and others during the past half-year of economic crisis.

Time Magazine on Education as Asset-Building

In so many ways, the world is discovering what advocates of asset-building have preached for the past decade: that we need to encourage saving and investment, not consumer debt and personal spending; that financial education and home buyer education are critical to success in making home ownership more accessibile; that a strong economy is built on the foundation of small businesses and human capital, not wall street wizardry.

The latest example comes from no less an authority than Time Magazine in their recent feature, “10 Ideas Changing the World Right Now.” Time’s first world-changing idea: “Jobs are the New Assets.”

The cognition you’ve got up there in your head — your education and training — it’s worth something. We can extract value not just from our homes and our portfolios but from ourselves as well. The mechanism for extracting that value? A job. “The income you earn from working is like the stream of interest income you might get from owning a bond,” says Johns Hopkins University economist Christopher Carroll. “Think of it as a dividend on your human wealth.”

Human capital is worth quite a lot. Gary Becker, the Nobel Prize-winning University of Chicago economist, figures that in a modern industrialized economy, 75% to 80% of a person’s economic output comes from human capital (as opposed to, say, land or machinery). Of course, during the bubble years (first stocks, then housing), the noneconomists among us didn’t exactly think about it that way. “People became mesmerized by how rich they were,” says Becker, “and didn’t realize the crucial asset they had in their earning power.”

I’ll admit, I’ve always been a little uncomfortable with post-secondary education as one of the major “asset goals” for individual development accounts (IDAs). The hard assets (home ownership, small business) are a bit easier for me to wrap my head around.

In just 10 paragraphs, this article in Time makes the most convincing case I’ve heard for why Michael Sherraden and the other architects of asset-building programs were right on the money to include education (human capital) as one of the big 3 asset categories. It’s absolutely worth a read, as are the other nine ideas on the list.