Bailouts and Back Street
by Johnette Hartnett

Poverty is not a resident of Wall Street or Main Street but “Back Street” where the core democratic principle of equality is seldom realized.  So, it was with a bit of irony that the Museum of American Finance on Wall Street was host last fall to a gathering of community development credit unions and other civic leaders and organizations. The event was an annual recognition of the work non-profits are doing in financial literacy for low-income New Yorkers who reside not on Wall Street or Main Street but Back Street. The lessons heard were clear: 30 to 50 percent of low-income Americans (incomes well below $40,000 a year) with and without disabilities, of all ethnicities, need to connect with mainstream financial networks that offer trusted, accessible, affordable products and services in their own neighborhoods. The underbanked consists of millions of Americans who want what everyone else wants - access to free debt and credit counseling and services and products that address their specific economic, cultural, physical, sensory, or recovering mental health needs with the same dignity and respect afforded others.

The “Back Street Brokers” represent non-profits across the nation - from free tax coalitions to homeless shelters to disability organizations - they assist millions of Americans everyday in getting jobs, education, healthcare and shelter. They are the founding fathers of the social service movement going back to the nineteenth century that modernized the “poor house” philosophy of social policy.  The Back Street Brokers are constantly making deals, writing grants and selling their business case for why it makes good sense for a democracy to provide for those with less. Not because it is the right thing to do, but because it is our inheritance as a democracy and our obligation as a global leader.

At the event, the Back Street Brokers discussed the challenges of providing and developing services with broken budgets, a shrinking volunteer base, a financial marketplace that is focusing on the online user, and a public transportation system that does not cater to Back Street neighborhoods. America’s Back Street Brokers understand bailouts because their organizations pioneered the movement of financial education and asset development for low-income Americans back in the 1990’s, long before Wall Street and Main Street had any interest. Prior to the 1990’s, few considered the possibility that people with low to moderate incomes could save, do financial planning, buy a house, own a business, have a pension, or invest. Even fewer thought about the role of disability in building a better economic life through work and in some cases while receiving public benefits. Although the goals sound lofty and the research is thin, the basic premise is that people who are poor – with or without disabilities - have a right to be part of the financial mainstream and have proven, when given access to services that work, that they can budget, plan, save, and be just as responsible as middle income America in managing their finances. Our research demonstrates that people with incomes below $25,000 with significant disabilities do save and their thriftiness would probably embarrass Americans with much higher incomes.

Clearly the current economic crisis is not new to the residents of Back Street who intimately know financial insecurity. There has been no bailout for them against the growing predatory lending industry estimated at 40 to 70 billion dollars that continues to invade their neighborhoods. No bailout for them in accessing affordable health care and other benefits offered to full-time workers from Wall Street now unemployed looking for work on Main Street. No bailout for them in housing assistance with Section 8 vouchers cut by the hundreds of thousands over the last few years. No bailout for them on rents that require over half their weekly paychecks. No bailout for them when the market was good, and they still paid 200 percent interest or more to borrow fifty dollars until the next pay day.

Plainly, America’s working poor don’t get bailouts or even a fair deal with tax incentives as the tax code favors individuals with income. One study found that if the Earned Income Tax Credit (EITC) (worth $40 billion in 2008) were excluded, 80 percent of the hundreds of billions of dollars in tax incentives would go to Americans with incomes above $70,000 a year. Even with the generosity of the EITC, it is estimated that over 20 percent of eligible Americans miss out on it because they just don’t know it is available. We know that over one million taxpayers with disabilities do not file a return because they may not have an obligation but could be missing out on over a billion dollars in EITC. Food Stamps are worth 17 billion dollars and welfare payments about the same. If you are a mom with a child and are unfortunate to slide into poverty or be born into it today, you have five years out of your life – five years - to receive some welfare assistance; and of course that assistance could be $100 a month or $600 depending on where you live in the country.

Historically, there is little research that describes the needs of the poor, particularly the working poor, with and without disabilities. What we know about the poor is basic demographics: education, age, gender, race, income, home owner or renter, and use of public assistance, and in some cases, their basic habits around managing finances. Pre-Fall 2008 research indicates that assets such as owning a home, car, or pension continue to elude millions of workers, especially those with disabilities. Research collected over the past four years from free tax coalitions nationwide found that, on average, 20 - 30 percent of taxpayers assessing free services are customers with disabilities or family members with disabilities with incomes under $20,000 a year. Welfare reform research told us over ten years ago that remaining caseloads were 40 percent disability. On a visit to a homeless shelter in Florida this month, over 40 percent of its clients were persons with disabilities; these are families and children and veterans with disabilities. One study in New England found that 80 percent of inmates reported disability. We know today that one in five Americans have a disability and over 22 million American families have a member with a disability.  Only 21 percent of taxpayers with disabilities have incomes above $40,000 and 51 percent earn less than $21,000 a year according to research we have done with the IRS.  The unemployment rate for persons with disabilities in January 2009 was 13.2 percent compared to 8.3 percent for a person with no disability.  And these statistics from the Department of Labor do not consider those who are no longer looking for a job. Persons with disabilities are three times as poor as their neighbor without a disability. Americans with disabilities are us – they are our children, our family members, our colleagues, our neighbors, and our friends.

If there is a silver lining in the current economic crisis it is the new spotlight on the age old problem of poverty. My generation used to mumble the platitude that “the poor will always be with us.” Let’s hope today’s generation will decide to eradicate poverty along with its campaigns for eradicating disease and wasteful energy and show my generation that nothing has to last forever, especially poverty.

All of this could be good news for the Back Street Brokers because maybe, just maybe, in this new era of hope and change our universities will partner with the non-profits to develop degreed poverty programs based on the thousands of tested models already being implemented across the nation by the Back Street Brokers. Models exist in every corner of this country and demonstrate how –given the resources, the right partnerships, and strategic leadership –it is possible to lift people out of poverty. Free tax coalitions and asset building groups nationwide know this. The smart ones have hired away the brains from the for-profit sector to lead their work. Instead of funding 300 different financial education programs, the private sector financial institutions, financial planners, credit union associations, community-based non-profits and local public school systems should collaborate to ensure that America’s children and their families have access to information and are learning about budgeting, savings, and investments. This outreach – whether organized through a corps of financial foot soldiers or a national curriculum that is universally designed for each grade level from kindergarten to high school graduation – would be interactive and require parent participation when possible. Certainly for students with disabilities transitioning into the workplace, their families and provider network would benefit from this as well.

Since 2005 a national effort has been underway that has assisted over 151,000 taxpayers with disabilities with free tax preparation, totaling tax refunds of over $135 million.  Over 300 free tax coalitions nationwide, mostly on shoestring budgets and 90 percent volunteer efforts, have served over 3 million taxpayers in 2008. Those leading this work, similar to our distant neighbors on Wall Street, are the Back Street Brokers who want new deals and new public policies that promote asset growth, income security, and a higher quality of life for low-income Americans. They deserve a role in the re-tooling of America’s financial wellness because they are the doctors of the poor. We need them at the center of the current national dialogue because they are the innovators for building a better economic future for generations of Americans to come.

Unlike many Americans, people who are poor and people with disabilities and their families have no tax advantaged vehicle to save for future expenses. One million children with disabilities receive SSI and Medicaid.  Working parents who understand that their children will require expensive medical treatment and/or education and training to be happy, productive adults, are wise to start saving for these investments, in much the same way that many parents of young children start saving for college.  But no tax advantaged account exists for this purpose.  Even when families can afford to establish a trust for a child, existing asset limits (no more than $2,000 in the bank for a single person) could disqualify participation from vital public assistance programs like SSI or Medicaid as adults.  The good news is that there are a number of tax advantaged savings bills in Congress dealing with many of these issues for persons with disabilities.

Unlike the Wall Street Brokers, Back Street Brokers are familiar with rescue plans and for generations have used them to leverage the potential of their clients despite the inordinate challenges of poverty and disability. Who provides free tax preparation and educates families and individuals about the benefits of filing and receiving refundable credits? Who walks individuals through debt and credit counseling? Who assists families with finding a doctor, paying an electric bill or finding a shelter? Who provides the early childhood programs or runs the senior centers? Who makes sure that the youth have big brothers and sisters? Who labors over public policies that continue to forget the needs of those who are poor and have a disability?

The Back Street Brokers understand that the problems of Wall Street will exponentially impact the problems of Back Street. Not because of stock portfolio losses but because of job losses and the ripple effects that follow. Pre-Fall 2008 evidence was already available:  increased unemployment, loss of valued healthcare, growing homelessness, increased bankruptcies, and accelerating state budget shortfalls.

Back Street America lives in everyday economic crisis that has gone unsolved for generations. They are the experts in coping and have demonstrated great resiliency and grace. They are the backbone and the future of our country. Imagine with their expertise, keen knowledge of the problems, and innovative models, what a bailout could mean for the millions of customers they serve daily.

The Back Street Brokers are the architects of change that are pioneering new public economic policy for low-income individuals with and without disabilities. They are the cartographers that are building America’s roadmap out of poverty. They offer the new Administration a tested and tried blueprint for change that would produce a new millennium’s version of the American Dream.

Washington, don’t forget them: they are the bailout masters and should be frequent visitors to 1600 Pennsylvania Avenue.