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The second year of the Bush Administration’s second term is underway and the prospect of a large breakthrough for asset building policy appears remote at this time. The President’s second Inaugural Address, which highlighted the transformative potential of “ownership” and an “ownership society,” has given way to the political realities of budget deficits, international commitments, and uncertain electoral prospects.

In this difficult political environment, a “dual track” strategy should be pursued: continuing to lay the foundation for larger, more ambitious asset-building policies while aggressively pursuing lower-cost policies that are poised to boost savings and asset accumulation by the poor in the near term — especially ensuring that the IRS’s “split refunds” proposal becomes a reality in 2007, as promised. The other potentially low- to modest-cost idea that could advance this year is promoting financial education for children and youth by creating a KIDS Accounts at birth for all newborns. Congressional attention is likely to focus on financial education following the Administration’s release of a “national strategy” paper in April. The purpose of this annual report is to summarize and take stock of the current state of federal policy through an asset-building lens, especially as it affects the asset base of the poor. Accordingly, this report is divided into three sections. The first is a review of policy developments of the past year related to asset building; the second is an examination of the President’s budget proposals for Fiscal Year 2007 from an assets perspective; and the third is a forecast of the assets policy issues that may be considered in Congress during 2006.

For the complete document, please see the attached PDF version.