Georgians teeter on personal financial cliffs

Moderated by Rick Badie

Georgia has endured tough economic times and continues to struggle in the post-recession recovery. A recent report by a nonpartisan think tank offers some perspective on the deep damage incurred to the financial health of our state. I highlight the report’s findings, while two policy analysts outline solutions for greater prosperity.

Georgians: Broke and living paycheck to paycheck

By Rick Badie

Many Georgians are practically broke, living paycheck to paycheck.

Too few of us save for our children’s college education, much less retirement.

And God forbid an emergency slaps us, given that we’re already teetering on a personal financial cliff, just getting by. Many Georgians are one emergency away from financial ruin. So says the Corporation for Enterprise Development, a Washington-based, nonpartisan think tank that focuses on household finances and solutions for low- to moderate-income earners.

The organization recently released the 2013 version of its Assets & Opportunity Scorecard, a ranking of the financial security of 50 states and the District of Columbia. Using dozens of “outcome measures,” the report ranks states in five categories: financial assets and income; housing and home ownership; health care; education; and business development.

Georgia’s overall rank was 50. The Peach State earned Ds in three areas: businesses and jobs, housing and home ownership, and health care. The state fared better in education, netting a C. However, for the second consecutive year, we ranked dead last in assessments that measure the financial security of residents.

Translation: We got an F.

Some highlights of the financial grade:

* 56 percent of residents have practically no savings to cover emergencies or save for the future.

* Less than 50 percent of the workforce saves for retirement.

* 55.8 percent of households are liquid-asset poor, which means they lack the means to cover basic living expenses for three months without income.

* 29.3 percent of Georgia households are asset poor, which means they lack the net worth to subsist at the federal poverty level for three months without income.

* 26 percent of households that earn between $55,000 and $90,000 are liquid-asset poor.

* 35 percent of households in Georgia that earn between $51,061 and $82,992 annually have less than three months of savings.

* 65.2 percent of consumers having sub-prime credit.

* Average credit card debt is $10,077.

No doubt, many of us are just scraping by.

For a fuller picture, read the complete report at http://assetsandopportunity.org/scorecard/.

A path to prosperity: Allow more to save

By Jennifer Brooks

The recession’s lingering effects have taken an enormous toll on Georgia families. A report released last month by my organization, the Corporation for Enterprise Development, revealed more than half — 56 percent — of the state’s residents are living on the edge of financial collapse. They have little savings to fall back on in the event of a job loss, health crisis or other emergency.

What many may find surprising is that this group includes a significant number of families who would consider themselves middle class: 35 percent of households in Georgia earning between $51,061 and $82,992 per year have less than three months of savings.

Living on the edge of financial collapse is unsustainable for Georgia families and is not a path to long-term prosperity for the state. There is, however, much that can be done to write a different ending to the story of financial vulnerability that continues to play out in too many communities.

It is clear that not all Georgia residents start out on an equal footing. Having an inheritance or family support can help people weather bumps in the road and allow them to take advantage of opportunities, such as going to college, buying a home and saving for retirement. Fortunately, public policies can level the playing field for families who aren’t as lucky. The policies Georgia adopt can give families the tools to boost income, reduce debt and save for short- and long-term goals. For example, Georgia should:

Adopt a refundable state Earned Income Tax Credit that allows all working families, even those without tax liability, to benefit. Tax credits help working families boost their income, making it possible to save for emergencies or future needs.

Eliminate policies that penalize families who receive public benefits if they save for the future. Georgia’s cash welfare program limits eligibility to those with less than $1,000 in assets, essentially guaranteeing they will not be able to build a personal safety net of savings and become self-sufficient.

Encourage savings by investing in Individual Development Account programs, which match the deposits dollar-for-dollar of low- and moderate-income families who are saving to buy a home, start a business or go to college.

Expand health insurance coverage to more low-income people. Georgia’s decision not to participate in the Affordable Care Act’s Medicaid expansion misses the opportunity to ensure poor adults can get treatment when they are sick. Access to timely medical treatment protects against lost wages and prevents chronic or long-term illnesses that can send a person into debt and ultimately increase costs to the state.

Policymakers should remember their decisions will either set Georgia families up to succeed and put the state’s economy on a path toward greater prosperity, or will sentence more than half of Georgia’s residents to ongoing financial insecurity and little prospect of contributing to the state’s long-term growth. The choice should be an easy one.

Jennifer Brooks is director of state and local policy for the Corporation for Enterprise Development.

Big government can’t solve U.S. problems

By Benita Dodd

One certainty about any state “ranking of opportunity and assets” is that solutions will resemble the blind men and the elephant: a matter of perspective. Proponents of big government suggest government-run solutions and “government” funding. Advocates of limited government propose that individual initiative, ingenuity and philanthropy lead to prosperity.

No resolution has come from government throwing money at a problem. In fact, federal and state spending on means-tested welfare programs in 2011 totaled more than $1 trillion, or more than $61,100 for every family living in poverty. Yet the percentage of Americans living in poverty remains high.

The path out of poverty is not in government programs but in quality education, jobs and families. As crucial as education is to upward mobility, too many children are trapped in substandard schools based on ZIP codes. Those in poor schools and classes, or in schools that don’t meet their needs, should have alternatives: school choice, including scholarships elsewhere, and digital learning. Instead, those who drop through the education system’s cracks end up with limited skills in low-paying jobs, sometimes taking up crime and further burdening society and their families.

While it sounded noble for President Barack Obama to propose in his State of the Union speech that the minimum wage be raised to $9 an hour by 2015, such laws work against job seekers. Nobody wants their fellow Americans to live in poverty, but that is not resolved by mandating the price of labor. That move prices workers out of the job market and encourages businesses to reduce labor instead of expanding, adding workers and creating economic opportunity. For workers with limited skills, it’s tougher to find jobs.

On top of that, onerous government regulations add to the cost of doing business and must be implemented by seizing more money from this nation’s hardworking taxpayers. Among them are professional licensing requirements that increase the number of licensing boards but have no relation to health or safety concerns. These regulations become hurdles to such entry-level jobs as taxi drivers, hair salon employees and landscapers.

The lack of savings is another impediment in climbing the economic ladder. By eliminating the state income tax, Georgia would remove a significant tax on savings for all families, a pro-growth policy that would create more job opportunities. Programs that encourage auto ownership and provide flexibility that public transportation cannot offer also enhances opportunities for well-paying jobs.

Finally, too many low-income families use the emergency room for health care. Many are unable to take time off from their jobs. Calling for Medicaid expansion is no help if these families can’t access an after-hours clinic or a primary-care doctor because of low Medicaid reimbursement rates. It’s smarter to convert Medicaid into premium assistance, allowing families to buy their own private insurance or contribute toward an employer’s health insurance policy.

This nation was built on principles of equal opportunity, not equal outcomes. Government should never be the answer. Georgia must facilitate personal responsibility and a helping hand, not a handout.

Benita Dodd is vice president of the Georgia Public Policy Foundation, an independent think tank.