The following general guidelines might be considered for an IDA policy:

• IDAs should complement income-based policy. There should be no attempt to reduce spending for basic needs. But at the same time, there should be strong incentives to save for long-term goals. For example, welfare recipients could, if they choose, save on a subsidized basis for long-term goals, such as education for their children or starting a small business. The working poor could have greater incentives to save a portion of their Earned Income Tax Credit for an asset goal such as home ownership.

 
• Eventually IDAs should be available to everyone. Universal opportunity in asset-based policy would require greater resources than a policy targeted toward the poor. For this reason, some might prefer a targeted policy. However, for reasons of political stability, a universal policy is highly desirable. Also, because asset-based policy would be a system of savings and investment rather than a system of consumption, the net effect of universal policy would be to encourage, with tax subsidies, more savings. This makes sense at the macroeconomic level, above and beyond the effects on households.

 
• IDA deposits should be matched for poor families. On a sliding scale, high income families should bear up to 100 percent of deposited amounts, while impoverished families should receive matches for certain deposits. In no case should a match subsidy comprise 100 percent of the deposit.

 
Some level of savings contribution should always be required of participants. These deposits might come from earned income, Earned Income Tax Credits, or monthly income-based welfare transfers. In other cases, "sweat equity" deposits might be possible.

 Matching Deposit subsidies should come from a variety of sources, including federal and state governments through an IDA Reserve Fund. These subsidies could be matched at the local level, and participation by the nonprofit and private sectors should be actively encouraged.
 

• Deposited funds and earnings on funds should be in whole or in part tax-benefited (tax-exempt or tax-deferred) when used for designated purposes. Tax incentives, such as tax credits for contributed funds, should encourage broad participation and creative local funding of IDAs (for matching deposits and program administration).

 
• Ideally, individuals (or their parents or guardians) should have choices regarding how their IDAs are invested. Ultimately, there might be three basic choices for allocating IDA investments, a "money market" interest-bearing fund, a bond fund, and an indexed common stock fund. Individuals could allocate and, within reasonable limits, move their IDA investments from one fund to another. This set of choices is similar to those offered by most companies or organizations under 401(k) or 403(b) retirement fund provisions.

 
• Because asset-based welfare is a long-term concept, some of the best applications of IDAs would be for young people. Young people should be given specific information about their IDAs from a very early age, encouraged to participate in investment decisions for the accounts, and begin planning for use of the accounts in the years ahead. Ideally, this education regarding the IDA system should take place in schools as an important aspect of individual development -- as important as health education, social studies, or civics. In other words, financial planning would be incorporated into the school curriculum. As a result, education in the handling of financial assets, which now occurs "around the dinner table" in many middle and upper class families (often only sporatically), and generally not in poor families, would be democratized and incorporated into each child's education. The improved economic literacy which would result from this education would benefit the country as a whole.

 
Planning for use of the IDA would also serve as a mechanism for developing an orientation toward the future. Specific planning skills and planning exercises should be built around each young person's IDA. For IDA participants, the planning "exercise" would involve real funds and real plans, and in this regard, it would be salient and meaningful in a way that traditional economics and personal finance courses are not.
 
• If withdrawn for other than designated purposes, all subsidized deposits and the earnings on those deposits should revert to an IDA Reserve Fund. The remaining balance should be subject to a penalty and fully taxable as ordinary income when withdrawn. All penalties for unapproved withdrawals should revert to the IDA Reserve Fund to help finance other IDAs. The penalty for undesignated withdrawals discourage use of funds for purposes unintended by public policy.

 
• An individual could transfer, at any time during his or her lifetime or at death, without penalty, any portion of an IDA to the IDAs of his or her children or grandchildren, or other designated beneficiary. Just as wealthy families pass along assets to their children, the IDA system would enable many non-wealthy parents and grandparents to pass along financial assets and opportunities to their offspring in the form of IDA balances.

 
• This simple and flexible policy idea has the potential to expand into a major domestic policy system. The key is to establish an IDA policy structure that (1) is responsive to the goals of individual participants and local needs, (2) can generate creative initiatives and funding from multiple sources, and (3) can expand gradually as it demonstrates its worth. In the long run, it is possible that an IDA system, or something similar, might involve multiple social and economic purposes, and significantly replace much of what we currently think of as welfare state responsibilities.



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