[Joint House and Senate Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


                                                     S. Hrg. 116-46

EXPANDING OPPORTUNITY BY STRENGTHENING FAMILIES, COMMUNITIES, AND CIVIL 
                                SOCIETY

=======================================================================

                                HEARING

                               BEFORE THE

                        JOINT ECONOMIC COMMITTEE
                     CONGRESS OF THE UNITED STATES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 30, 2019

                               __________

          Printed for the use of the Joint Economic Committee


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                        JOINT ECONOMIC COMMITTEE

    [Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]

SENATE                               HOUSE OF REPRESENTATIVES
Mike Lee, Utah, Chairman             Carolyn B. Maloney, New York, Vice 
Tom Cotton, Arkansas                     Chair
Ben Sasse, Nebraska                  Donald S. Beyer, Jr., Virginia
Rob Portman, Ohio                    Denny Heck, Washington
Bill Cassidy, M.D., Louisiana        David Trone, Maryland
Ted Cruz, Texas                      Joyce Beatty, Ohio
Martin Heinrich, New Mexico          Lois Frankel, Florida
Amy Klobuchar, Minnesota             David Schweikert, Arizona
Gary C. Peters, Michigan             Darin LaHood, Illinois
Margaret Wood Hassan, New Hampshire  Kenny Marchant, Texas
                                     Jaime Herrera Beutler, Washington

                Scott Winship, Ph.D., Executive Director
                 Harry Gural, Democratic Staff Director
                           
                           
                           C O N T E N T S

                              ----------                              

                     Opening Statements of Members

Hon. Mike Lee, Chairman, a U.S. Senator from Utah................     1
Hon. Margaret Wood Hassan, a U.S. Senator from New Hampshire.....     3

                               Witnesses

Dr. Nathaniel Hendren, Professor of Economics and Founding Co-
  Director of Opportunity Insights, Harvard University, 
  Cambridge, MA..................................................     4
Dr. Ryan Streeter, Director of Domestic Policy Studies, American 
  Enterprise Institute, Washington, DC...........................     6
Mr. Jose A. Quinonez, Founder and CEO, Mission Asset Fund, San 
  Francisco, CA..................................................     8
Dr. Patrick Sharkey, Professor and Chair of the Sociology 
  Department, New York University, New York, NY..................    10

                       Submissions for the Record

Prepared statement of Hon. Mike Lee, Chairman, a U.S. Senator 
  from Utah......................................................    38
Prepared statement of Hon. Margaret Wood Hassan, a U.S. Senator 
  from New Hampshire.............................................    38
Prepared statement of Dr. Nathaniel Hendren, Professor of 
  Economics and Founding Co-Director of Opportunity Insights, 
  Harvard University, Cambridge, MA..............................    40
Prepared statement of Dr. Ryan Streeter, Director of Domestic 
  Policy Studies, American Enterprise Institute, Washington, DC..    44
Prepared statement of Mr. Jose A. Quinonez, Founder and CEO, 
  Mission Asset Fund, San Francisco, CA..........................    49
Prepared statement of Dr. Patrick Sharkey, Professor and Chair of 
  the Sociology Department, New York University, New York, NY....    52
Response from Dr. Hendren to Question for the Record Submitted by 
  Senator Hassan.................................................    58
Response from Dr. Streeter to Question for the Record Submitted 
  by Senator Hassan..............................................    58
Response from Mr. Quinonez to Question for the Record Submitted 
  by Representative Maloney......................................    59
Response from Mr. Quinonez to Question for the Record Submitted 
  by Senator Hassan..............................................    59

 
   THE POSITIVE ECONOMIC GROWTH EFFECTS OF THE TAX CUTS AND JOBS ACT

                              ----------                              


                        TUESDAY, APRIL 30, 2019

                    United States Congress,
                          Joint Economic Committee,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:30 a.m., in 
Room 216, Hart Senate Office Building, the Honorable Mike Lee, 
Chairman, presiding.
    Representatives present: Marchant, Heck, Herrera Beutler, 
Beatty, Schweikert, Beyer, and Trone.
    Senators present: Lee, Hassan, Peters, and Sasse.
    Staff present: Rachel Brody, Barry Dexter, Sol Espinoza, 
Connie Foster, Natalie George, Harry Gural, Colleen Healy, 
Christina King, Michael Pearson, Hope Sheils, Kyle Treasure, 
Jillian Wheeler, Jim Whitney, Scott Winship, and Randy Woods.

 OPENING STATEMENT OF HON. MIKE LEE, CHAIRMAN, A U.S. SENATOR 
                           FROM UTAH

    Chairman Lee. Good morning and welcome to this hearing of 
the Joint Economic Committee.
    To begin, I would like to welcome back the members of the 
Committee who were part of this body during the previous 
Congress, as well as our new members. And I would like to 
congratulate Representative Maloney on her return as Vice Chair 
during this Congress. I look forward to working with all of 
you.
    The topic of this hearing, Expanding Opportunity, is in 
many ways a quintessentially American topic. As Abraham Lincoln 
put so eloquently: The leading object of our government is, and 
has been, and I hope always will be, to elevate the condition 
of men, to lift artificial weights from all shoulders, to 
afford all an unfettered start and a fair chance in the race of 
life.
    In other words, the purpose of government is to remove 
barriers for opportunity. Often, however, policymakers have a 
limited understanding of what ``opportunity'' is, what that 
word means. We sometimes see opportunity purely in terms of 
economic outcomes--namely, educational or financial success. 
And, moreover, we can view financial capital as the only 
important source of wealth on which opportunity in our society 
depends.
    Economic wealth is no doubt important. No one would dispute 
its importance. And it is right that the Federal Government 
should certainly seek to remove barriers to economic wealth. 
But to see opportunity exclusively in those terms fails 
adequately to capture an individual source of wealth on which 
human beings draw, and one that is in fact key to expanding 
opportunity. And that is, Social Capital.
    Social capital is the wealth produced from our 
associational life, from what we do together as human beings in 
a particular society. It inheres in the web of social 
relationships through which we pursue joint endeavors, and it 
comes from our families, our communities, churches, synagogues, 
rotary clubs, and little leagues, and it is through these 
institutions of civil society that we make a happy and 
productive life with other people. They shape our characters 
and our capacities. They help us address the challenges we face 
in life and provide us with meaning and purpose as we live our 
lives.
    For the past two years, the Social Capital Project on the 
Joint Economic Committee has documented trends in our 
associational life and its distribution across this great 
country. It has studied the evolving nature, quality, and 
importance of our associational life, and the relationship it 
has to different problems our Nation is facing.
    The Joint Economic Committee has recently undertaken the 
work of exploring the connection between opportunity and social 
capital. And it has found that opportunity is largely dependent 
on social capital available to us through the relationships we 
have with our families, neighbors, fellow congregants, and 
coworkers.
    These relationships are crucial both to our economic 
opportunities and our opportunity for producing and sustaining 
a vibrant, healthy, meaningful community life.
    And so the goal of the Joint Economic Committee is now to 
craft policies rooted in social capital, policies that will 
expand opportunity for all Americans by strengthening families, 
communities, and civil society in general.
    This undertaking will of course not be without its 
challenges. After all, social capital is not something we can 
see, or touch, or smell. We cannot even directly measure it. We 
almost do not have the vocabulary or the tools to do it.
    In addition to these difficulties associated with measuring 
it, there are also some real significant difficulties in 
establishing its causal importance. And while policy can 
certainly help promote the bases for a flourishing civil 
society within our culture, we must also inevitably confront 
its limits and determine when, whether, to what extent, and in 
what way the Federal Government has a part to play in this 
project, and the extent to which the Federal Government might 
be inflicting harm on these institutions.
    To bound the types of policies under consideration, and 
based on the past two years of research, the Project has 
identified five broad goals related to opportunity: making it 
more affordable to raise a family; increasing how many children 
are raised by happily married couples; connecting more people 
to work; improving the effectiveness of investments in youth 
and young adults; and rebuilding civil society.
    Our distinguished panelists will help us shed light on 
these issues and these questions today, and I look forward to 
hearing their testimony, and also to seeing the fruits of our 
discussion going forward.
    I now recognize Senator Hassan for her opening remarks.
    [The prepared statement of Chairman Lee appears in the 
Submissions for the Record on page 38.]

OPENING STATEMENT OF HON. MARGARET WOOD HASSAN, A U.S. SENATOR 
                       FROM NEW HAMPSHIRE

    Senator Hassan. Well, thank you Chairman Lee, and thank you 
for holding a hearing in which we can examine innovative ways 
to increase economic opportunity in all of our communities. And 
I want to thank all of the witnesses for being here with us 
today.
    I want to focus today on how we can create opportunity for 
entrepreneurs by increasing their access to social connections 
and personal networks or, in other words, by helping build 
their social capital. Entrepreneurs frequently use their 
personal connections to identify business opportunities, find 
community mentors, and secure the capital that they need to 
launch and grow their startups.
    However, not everyone starts off with connections to the 
business community. And entrepreneurs outside these informal 
networks can find it harder to access vital resources like 
financial counseling and capital investment. This presents 
particular challenges for women entrepreneurs.
    Last year the National Women's Business Council issued a 
report that found that women's personal networks have fewer 
connections with ties to resources like financial capital. This 
is also an acutely important issue for entrepreneurs in rural 
areas of my State. In rural areas, there is often extremely 
limited access to high-quality, affordable broadband internet, 
which is an absolute necessity for any business hoping to 
compete in the modern economy.
    Limited broadband access slows entrepreneurship and 
contributes to the so-called ``brain drain,'' a problem for 
rural areas that I know, Mr. Chairman, you focused on in a 
report on social capital released just last week by this 
Committee.
    Fortunately there are successful initiatives that Congress 
can build on. In New Hampshire, we have many nonprofit 
organizations and business incubators that are leveraging 
community interest and Federal investments to build social 
capital for entrepreneurs from all walks of life.
    New Hampshire's Small Business Development Center provides 
business advertising and mentorship, for example. Our Regional 
Development Corporations provide business-gap financing, and we 
have start-up accelerators that tailor their services in 
innovative ways. So there are many programs already underway in 
the Granite State that can serve as models for our efforts to 
expand opportunity for entrepreneurs, and I expect that there 
are models in lots of other states, as well.
    In my view, having the opportunity to start and grow a 
business should not be all about ``who you know.'' Equality of 
opportunity for entrepreneurs should be predicated on a 
willingness to work hard to transform an innovative idea into a 
reality. The bottom line is that we have to do more to level 
the playing field and help aspiring business owners build 
social capital.
    Our country was founded on the idea that nurturing the 
talent and energy of every person promotes human dignity and 
ignites a vibrant and competitive economy. And government 
certainly has a role in ensuring that we do just that.
    When we bring people in from the margins, our communities, 
our democracy, and our economy all benefit. We thrive and we 
build a stronger future for our children.
    So I look forward to our witnesses' testimony today on how 
we can help all Americans build social capital. Thank you, Mr. 
Chairman.
    [The prepared statement of Senator Hassan appears in the 
Submissions for the Record on page 38.]
    Chairman Lee. Thank you, Senator Hassan.
    I would now like to introduce our distinguished witnesses 
and thank all of you today for being here with us.
    First we have Dr. Nathaniel Hendren, Professor of Economics 
at Harvard University, and Founding Co-Director of Opportunity 
Insights. His work has documented the extent of equality of 
opportunity across a range of domains, from the inability of 
individuals to purchase insurance, to the difficulties faced by 
low-income children seeking upward mobility. And, more 
recently, the disparities in intergenerational mobility 
experienced by children of different races.
    Welcome, Dr. Hendren.
    Next we have Dr. Ryan Streeter, who is the Director of 
Domestic Policy Studies at the American Enterprise Institute, 
where he oversees research in education, American citizenship, 
politics, public opinion, and social and cultural studies.
    Before joining AEI, he was the Executive Director of the 
Center for Politics and Governance at the University of Texas 
at Austin. Thanks for being with us today, Dr. Streeter.
    Next we have Mr. Jose Quinonez, the Founder and CEO of 
Mission Asset Fund, an award-winning nonprofit organization 
that helps financially excluded communities to participate in 
the mainstream U.S. financial system. He has received a number 
of honors and awards for his work, including the 2013 Irvine 
Leadership Award, and was nominated for the San Francisco 
Chronicle's 2019 Visionary of The Year. Welcome, Mr. Quinonez.
    And we have Dr. Patrick Sharkey, Professor and Chair of the 
Department of Sociology at New York University, teaching 
courses in urban policy, criminology, statistics, and violence. 
He is also Scientific Director at the Crime Lab of New York. He 
has authored a number of books, including the award-winning 
``Stuck in Place: Urban Neighborhoods and the End of Progress 
Toward Racial Equality.'' Thank you for being here, Dr. 
Sharkey.
    We are all very grateful that you are here, and we will 
give each of you now an opportunity to present your testimony. 
We will start with you, Dr. Hendren, and move forward in the 
order in which you were introduced.

STATEMENT OF DR. NATHANIEL HENDREN, PROFESSOR OF ECONOMICS AND 
     FOUNDING CO-DIRECTOR OF OPPORTUNITY INSIGHTS, HARVARD 
                   UNIVERSITY, CAMBRIDGE, MA

    Dr. Hendren. Thank you. So I do have some presented slides. 
I do not know if it is possible to show them on the screen. If 
it is, feel free. And if there is a clicker for the slides, I 
would be delighted to use it. If not, I would be happy to just 
roll--alright.
    Alright. So thank you for the opportunity to be here to 
talk with you today. I think, like many of us, I grew up 
inspired by the notion of the American Dream, this idea that 
every child should have an opportunity to climb that income 
ladder. In my research, with a broad set of collaborators, we 
try to measure the extent to which we live up to this ideal.
    Unfortunately, our research shows that this dream is simply 
out of reach for too many children. There are many ways of 
quantifying the American Dream, but one way to measure it is to 
ask what fraction of children grow up to earn more than their 
parents in adulthood.
    Now we find that for children born in 1940, the American 
Dream was nearly a guarantee. Ninety percent of those kids grew 
up to earn more than their parents. But today, only half of 
children grow up to earn more than their parents.
    Now another measure of the American Dream is the likelihood 
that a child born at the bottom of the income distribution 
grows up to reach the top regions of the income distribution--
sort of the ability to go from rags to riches.
    Now if incomes in adulthood were perfectly independent of 
one's background, we would expect that 20 percent of those with 
low-income parents would grow up to reach the top fifth of the 
income distribution in adulthood. But in the U.S., only 7.5 
percent of children whose parents are in the bottom fifth of 
the income distribution grow up to reach the top fifth of the 
income distribution.
    Now perhaps perfect mobility of 20 percent is too high of a 
standard. Another benchmark is to think about comparing across 
countries. Here again, the U.S. lags behind. In the UK, 9 
percent of children grow up to reach the top fifth from low-
income backgrounds; 11.7 percent in Denmark; 13.5 percent from 
Canada; and 15.7 percent in Sweden.
    Now this broad pattern in the U.S. masks the fact that 
there are places in the United States where the American Dream 
is alive and well. Rates of upward mobility vary dramatically 
across the country, and even within cities. In some 
neighborhoods--for example, in Provo, Utah--children from low-
income families grow up to earn $66,000 on average at age 35. 
In contrast, low-income children who grow up in parts of inner 
Baltimore with parents of the same income background, earn on 
average only $16,000 in adulthood.
    Now upward mobility varies even more when we compare across 
neighborhoods within cities. As we have documented in The 
Opportunity Atlas, children who grow up just a few miles apart 
in families with comparable incomes have very different later-
life outcomes.
    For example, children who grow up in some parts of Provo, 
Utah, earn just $30,000 a year on average, less than half of 
their counterparts at $66,000. Or to take another example in 
Midtown Manhattan where poor children growing up on either side 
of Third Avenue earn either $28,000 a year or $45,000 a year on 
average in adulthood.
    And so these striking disparities raise the natural 
question: Why do outcomes differ so dramatically across places 
in the United States? Now our results suggest that the outcomes 
we see today of people in adulthood have their roots in the 
neighborhood environments in which these children grew up.
    Every year a child spends growing up in a neighborhood with 
higher rates of upward mobility increases their income in 
adulthood.
    And so the message is simple. Neighborhoods matter. Where 
we grow up shapes our outcomes in adulthood. If we can improve 
the neighborhood environments for children, especially for 
those who are most disadvantaged among us, we can increase 
upper mobility in the United States. The variation in The 
Opportunity Atlas we believe provides a learning opportunity 
that can inform such efforts where we can attempt to replicate 
the successes of places with high rates of upward mobility.
    Now across the U.S., we do see that places with higher 
rates of upward mobility tend to be places where children are 
growing up in neighborhoods with lower poverty rates, stronger 
measures of school quality, stronger family structures, and 
stronger measures of social capital.
    I do want to be clear today. While we can identify the 
characteristics of neighborhoods that tend to promote high 
rates of upward mobility, current limitations prevent us from 
identifying the best policies for improving upward mobility. 
And to that aim, I look forward to an extensive discussion.
    And I am excited about our ongoing endeavors and 
collaborations on our end with researchers at the Census Bureau 
and Treasury Department to further understand these potential 
pathways to promoting upward mobility. Uncovering the recipe 
for success will not be easy, but thanks to access to 
administrative data and support of government research I do 
believe we can make progress on this important question.
    And more generally, I am delighted to be here today to 
discuss how we might learn from evidence to inform policies 
that might improve upward mobility. And while I know there is a 
lot of disagreement in policies, it is my hope and belief that 
an evidence-based approach to improving upward mobility and 
opportunity for all of our children as its purpose expands 
party lines and allows us to begin to restore the American 
Dream. So thank you for letting me be here today.
    [The prepared statement of Dr. Hendren appears in the 
Submissions for the Record on page 40.]
    Chairman Lee. Thank you.
    Dr. Streeter.

  STATEMENT OF DR. RYAN STREETER, DIRECTOR OF DOMESTIC POLICY 
     STUDIES, AMERICAN ENTERPRISE INSTITUTE, WASHINGTON, DC

    Dr. Streeter. Thank you, Chairman Lee, Senator Hassan, and 
members of the Committee, for asking us to come and testify 
today on the important relationship between social capital and 
opportunity in America.
    Through several decades of research, we know that social 
capital positively affects a wide range of things that we all 
care about and desire, such as good work, happy family lives, a 
good education, safety for our kids, and opportunity for us and 
others. Yet we do not utilize what we have learned about social 
capital very effectively in domestic policymaking anymore.
    And before explaining what I mean by that and talking about 
policy, I would like to share some relevant data points from 
our research at the American Enterprise Institute on social 
capital in America.
    The benefits of social capital are especially interesting 
when we look at how the informal elements of social capital 
such as talking with and getting together with neighbors and 
friends, and formal elements such as volunteering in civic 
groups, relate to one another and other things that we care 
about.
    Consider the following: 46 percent of people who are both 
highly civic and highly social rate the communities where they 
live as ``excellent'' compared to 36 percent of people who are 
highly social but not very civically engaged in their 
communities. People who are highly civic and social are the 
least likely to say they would move away from their community 
if they could. They are more attached to where they live than 
others.
    When you ask people if they get a strong sense of community 
from their neighborhood, highly civic people are more likely to 
say yes, compared with people who are just highly social.
    Social people with lots of friends are very happy, but 
those who are also civically engaged are even happier still. 
People who are civically engaged but not especially social are 
more likely to report never feeling lonely than people who are 
very social but not civically engaged. I could go on. But 
suffice it to say that America's health is greatly enhanced 
city by city by those who embrace their communities out of a 
sense of responsibility.
    To think about the future of social capital in public 
policy, it is worth taking a look at the past. We know so much 
more about the benefits of social capital today, thanks to the 
research of people like Dr. Hendren and others, than we did in 
the mid-1990s, but strangely we incorporate these ideas less 
today when we are designing policy solutions.
    For example, from 1991 to 1996 we saw four major domestic 
policy reforms at the Federal and State levels that all 
presupposed the indispensable value of basic units of civil 
society: family, neighborhood, community, in their very policy 
design. Each understood in its own ways that civic and social 
networks were important elements of policy success.
    The first reform was in school policy which began in 
Milwaukee in 1990 with the first voucher law, and in Minnesota 
in 1991 with the first charter law, and then rippled across the 
country. The premise of the school reform movement was to 
empower parents and families to either form their own schools 
in cooperation with community leaders or have the ultimate 
choice in where their kids went to school. Empowering civically 
minded school reformers was central to the movement's success.
    The second reform concerns public housing, which in city 
after city had become a symbol of failed policy riddled with 
crime, drugs, and persistent poverty. HOPE VI, which Congress 
created in 1992, made the neighborhood rather than a simple 
unit of housing the central focus of public housing assistance.
    Housing projects were torn down and replaced with mixed-
income, sometimes mixed-use, developments that gave families in 
public housing a greater stake in their neighborhood--or at 
least that was the intention.
    The third reform is community policing, which predates the 
1990s, but it was a Federal law in 1994 that effectively made 
it a nationwide practice.
    In the 10 years after the law passed, the share of 
municipal police departments' practicing community policing 
grew from about 20 percent to 68 percent. Today, 80 percent of 
police departments practice community policing, which replaces 
command and control crime response with crime prevention, 
rooted in neighborhood level partnerships.
    Fourth, and perhaps the best known, is welfare reform which 
was created in 1996 amidst quite a bit of public debate. Most 
of the debate then, as now, was focused on the merits of work 
requirements and the time limits on welfare recipients.
    Less debated, but just as important, was the positive 
effect experienced by states that devolved responsibility for 
work outcomes to the municipal level. Where that happened, 
local leaders stepped up and took ownership for helping people 
find work, with generally impressive results.
    If we hope to continue to make progress serving individuals 
and families struggling to fully participate in the American 
economy, we need to focus on the centrality of community 
relationships once again.
    Whatever the merits of our current debates on a range of 
issues from subsidizing wages or making college less expensive, 
or even free, and so on, if we fail to recognize the important 
role that networks play at the local and regional levels in 
people's upward mobility prospects, our national debates about 
these former types of policy will achieve limited impact. Thank 
you.
    [The prepared statement of Dr. Streeter appears in the 
Submissions for the Record on page 44.]
    Chairman Lee. Thank you.
    Mr. Quinonez.

  STATEMENT OF MR. JOSE A. QUINONEZ, FOUNDER AND CEO, MISSION 
                 ASSET FUND, SAN FRANCISCO, CA

    Mr. Quinonez. Thank you, Chairman Lee, Senator Hassan, and 
members of the Joint Economic Committee, for having this 
important hearing. My name is Jose Quinonez. I am an immigrant. 
I came to this country in the dark of night as a 9-year-old. I 
adjusted my status under the Immigration Reform and Control Act 
of 1986. I became a U.S. Citizen and now I am living my 
American Dream of helping low-income people become visible, 
active, and successful in the marketplace.
    As the CEO of the Mission Asset Fund, a nonprofit 
organization based in San Francisco, I have first-hand 
experience at addressing the daunting financial challenges our 
clients face every day. And what I have learned is this: Being 
poor in America is expensive, particularly for people living 
outside of the financial mainstream.
    Nationally, one in seven Latinos are unbanked, meaning they 
do not have checking accounts, or savings accounts. And while 
researchers point to various reasons for why people go without 
accounts, we know banks exclude people based on immigration 
status, or by requiring narrow forms of IDs. Consequently, many 
of our clients are left unbanked and without a choice but to 
rely on alternative providers that charge more to cash checks 
or pay bills.
    The average household--under-served household that earns 
$25,000 annually--pays about 10 percent of that income on fees 
and interest for financial services that those of us with bank 
accounts often get for free.
    Lack of credit is a challenge. Nationally nearly one in 
three Latinos are credit-invisible, meaning they do not have 
credit scores or credit reports. And given the nature of our 
economy, there is little anyone can do without credit. People 
cannot get loans to buy homes, start businesses; they cannot 
rent apartments; in some states they cannot even get jobs 
without employers checking their credit reports. And without 
access to credit, affordable credit, people turn to high-cost 
lenders, some paying 100 percent APRs on small-dollar loans, 
and significantly more for short-term payday loans.
    Barriers to economic mobility are not just financial. 
People are also burdened with uncertainty from the current 
anti-immigrant political climate, fearing losing their families 
and draining their savings. Many worry about being detained for 
lack of documentation, igniting a financial crisis. Bail alone 
can strip them of $5,000. Obtaining legal representation, up to 
$20,000. And the costs mount from there.
    So how can we help people realize their potential when they 
are financially invisible and also facing enormous challenges 
in their lives? We found answers in how our clients leverage 
social capital: their relationships with family and friends in 
order to survive and thrive.
    Our clients practice a time-honored tradition of lending 
and saving money together. It is an activity known by a hundred 
different names the world over, but which is essentially the 
same. A group of people come together and agree to pool their 
money so that one member of the group can take the lump sum. 
And they do it again on a weekly or monthly basis until 
everyone in the group has had a chance of getting the lump sum.
    So when people do not have access to loans, this is how 
they create their own, using their word and trust. We built our 
lending serving program on this tradition. We formalize loans 
by having participants sign promissory notes which MAF then 
services and reports to credit bureaus. Since launching the 
program in 2008, we have made over 11,000 loans to help 
participants build credit. In fact, they see an average 
increase of 168 points, opening a world of possibilities for 
them in the credit market. And the repayment rate is 99.3 
percent, an unheard-of rate in the micro lending world.
    Lending Circles is an example of what we could do with and 
for people if we designed programs and policies for success 
based on people's strengths and social capital to create 
lasting change.
    But despite the promise of this approach, it is not enough 
to help the millions of people that are still trapped with 
barriers that diminish their economic potential.
    We need better data to understand people's challenges. 
Research reports based on national data sets often ignore those 
who are financially invisible, thereby missing critical 
segments of our society. Congress can also remove asset limits 
to further benefit programs like SNAP that are a lifeline for 
families not earning enough to make ends meet.
    Congress could also provide clarity that U.S. citizenship 
is not a prerequisite for accessing financial services, and 
allow for more government-issued IDs when opening accounts. 
Congress could also significantly reduce the number of credit-
invisibles by allowing positive payment data from utilities, 
rent, and telecoms to be included in credit reports. And 
Congress can require ability to repay underwriting standards, 
and longer repayment terms for small-dollar and payday loans.
    I believe these reforms can go a long way in unlocking 
people's economic potentials and help them realize their 
American Dreams, too. So thank you for holding this hearing, 
and I look forward to the conversation.
    [The prepared statement of Mr. Quinonez appears in the 
Submissions for the Record on page 49.]
    Chairman Lee. Thank you.
    Dr. Sharkey.

 STATEMENT OF DR. PATRICK SHARKEY, PROFESSOR AND CHAIR OF THE 
    SOCIOLOGY DEPARTMENT, NEW YORK UNIVERSITY, NEW YORK, NY

    Dr. Sharkey. Thank you, Chairman Lee, Senator Hassan, and 
the members of the Committee. I will focus my comments on a 
basic question to the study of social capital: How do we build 
stronger communities?
    Let me first give a sense of the problem we are facing. 
Several decades of evidence, which has been bolstered by the 
work of Dr. Hendren and his collaborators, has led to a clear 
conclusion: Neighborhoods in which children are raised play a 
central role in influencing their academic achievement, their 
cognitive development, their physical and mental well-being, 
and their economic mobility.
    Labor market opportunities, environmental hazards, the 
quality of institutions like schools, libraries, financial 
institutions, police departments, vary dramatically depending 
on where one lives, creating a rigid geography of vulnerability 
and opportunity. And the problem is multi-generational. The 
vast majority of children who currently reside in poor 
neighborhoods are from families that have lived in similarly 
poor neighborhoods for multiple generations. So we know, the 
evidence tells us, that the consequences of living in highly 
disadvantaged neighborhoods are cumulative, with long-lasting 
effects that persist across generations.
    There are good reasons to think that this link between our 
communities and our life chances is growing stronger. As income 
inequality in the Nation as a whole has increased, economic 
segregation has grown. Meaning, the rich and the poor are 
increasingly likely to live apart, sorting into separate 
communities.
    Inequality between cities and regions is also growing. 
While many coastal and sunbelt cities like New York and San 
Diego have attracted newcomers with higher income, better 
education, other sections of the country, rustbelt cities like 
Detroit and Cleveland, have seen higher income, better educated 
residents leave.
    As a result, metropolitan areas have begun to look more and 
more different from each other, some with bustling economies 
offering relatively high-wage jobs, others isolated from 
economic opportunity. And as this type of regional inequality 
has increased, long-range geographic mobility, the kind of 
mobility that has always served as a way to allow Americans to 
take advantage of new opportunities in new places, has fallen, 
particularly for the less advantaged segments of the 
population: racial and ethnic minorities, people with less 
education.
    This is the challenge that faces America's neighborhoods. 
Now how did we get to this point? As urban economies began to 
shift starting in the 1940s and 1950s and all the way through 
the 1980s, a set of social problems like joblessness, 
segregation, pollution, and poverty became concentrated in 
central cities.
    Our response was not a sustained national project of 
investment to respond to these challenges. Instead, our 
response was to abandon central cities, to withdraw resources, 
and to provide ways for the most advantaged segments of the 
population to leave central cities and to head to the suburbs.
    As the share of city budgets from Federal sources 
plummeted, public housing deteriorated, public schools 
crumbled, fiscal conditions worsened, neighborhoods emptied 
out, institutions like churches and community organizations 
withered away. This is what happens when communities are 
abandoned. If we want to build stronger communities, we need to 
shift from a model of abandonment to a model of community 
investment. In the American Enterprise Institute's Survey on 
Community and Society, a national sample of respondents was 
asked what makes a community successful? The responses are 
revealing.
    The two top responses were: good local schools and having 
libraries and community centers nearby. A great deal of 
evidence suggests that the respondents are on the right track. 
The most effective way to build stronger communities is to 
invest in core public institutions like schools and libraries 
that bring people together in shared spaces, and in local 
organizations, including faith-based organizations, community 
development corporations, prisoner re-entry programs, childcare 
providers, mentorship and after-school programs, organizations 
like the Mission Asset Fund that provide the foundation for 
every community making them less vulnerable to the next crisis 
to hit America's neighborhoods. Thank you for bringing us 
together. This is a great group of speakers, and I look forward 
to your questions.
    [The prepared statement of Dr. Sharkey appears in the 
Submissions for the Record on page 52.]
    Chairman Lee. Thank you very much. We will now begin the 
five-minute question rounds. I will go first, followed by 
Senator Hassan, and then we will alternate Republican and 
Democrat in order of arrival at the hearing.
    Dr. Hendren, I will start with you. You mentioned my home 
town of Provo, Utah, in your testimony today, and you have 
listed Utah communities as among the most upwardly mobile in 
some of your writings.
    Now in my experience, there's a Moscow in Idaho, there is a 
London in Kentucky, there is even a Newark in Delaware, but 
there is no other ``Provo.'' Nonetheless, there are some 
communities like Provo where upward economic mobility is 
possible. What is it that you found in your research that 
differentiates Provo and communities like it from other 
communities where you do not see that kind of social capital 
and economic opportunity?
    Dr. Hendren. Well thanks for the question. So I will 
preface this by saying I have not actually been to Provo, Utah, 
so I will----
    Chairman Lee. That's a shame. You need to remedy that.
    [Laughter.]
    Dr. Hendren. But what I will say is, when we look broadly 
across the U.S. in places like Provo that have some of the 
highest rates of upward mobility, what we find is really the 
four characteristics that I mentioned in my testimony. It is 
places that have strong schools. It is places that have less 
residential segregation and less income inequality. Places that 
have stronger measures of social capital. And places with 
stronger family structures.
    Now what is it about a place in particular that drives its 
high rates of upward mobility? That is a question to which we 
do not know the exact answer. But in a place like Utah, the 
ways of measuring social capital, two things sort of come to 
mind. It is a place where a wide range of social capital 
measures score highly. There is a high fraction of religious 
populations there, and in the U.S. more broadly we see that 
places that have a higher fraction of people who are religious, 
we do see higher rates of upward mobility.
    We also see in places that have people that return their 
Census forms have higher rates of upward mobility--speaking to 
some of that civic engagement. And so I think you phrased it 
right, that what we see is something amorphous that is hard to 
really put a finger on what exactly is driving the high rates 
of upward mobility, but what we can say is there are these 
characteristics that do correlate more broadly across the U.S.
    Chairman Lee. I found it interesting when you mentioned in 
your written testimony that there are some poor neighborhoods 
in Provo where children raised in those neighborhoods, by the 
time they are 35 earn $60,000-$65,000 a year. There are other 
neighborhoods where that is not the case.
    Are these same correlators present or absent in one 
neighborhood or the other? Are those the same things that 
differentiate one neighborhood within the same town as one town 
from another?
    Dr. Hendren. Yeah, exactly. And I think it comes back to 
the statements earlier. Across the U.S., metro areas that have 
a higher degree of things like residential segregation, or 
lower measures of social capital, have lower rates of upper 
mobility on average.
    When you zoom in within a locality, what you find is the 
children growing up in the segregated neighborhoods tend to 
have lower rates of upward mobility. Or, in places where 
measures of social capital are lower, those are places that 
have lower rates of upward mobility even within cities, if that 
makes sense.
    Chairman Lee. Thank you. That is helpful.
    Dr. Streeter, in recent years there has been really rapid 
growth in technology. You know, we have seen the rise of the 
iPhone, Twitter, other social media platforms, and those are 
things that have in some ways enabled easier communication 
between people. It connects one person to a whole lot of other 
people.
    But it has also been argued that the same technologies 
might degrade--might undermine people's ability to access an 
education, and also interfere with somebody's ability or 
inclination to have personal interactions with someone else.
    I heard from one--the president of a large university 
recently. She told me that as people have become more 
accustomed to learning things by YouTube and through Google 
searches, students today, even highly performing students in 
terms of their entering test scores and high school GPA, 
sometimes do not like to memorize because they consider it 
useless. That is one of many ways in which it is changing the 
way people learn.
    But what do you think about the potential effects of 
technology on social capital formation?
    Dr. Streeter. Well I would start out by saying there is a 
lot that we still do not know about the effect of technology on 
social capital. And there is some evidence that increased 
screen time among younger people on their phones correlates 
pretty strongly with increased incidences of self-reported mood 
disorders, depression, and the like.
    There is some evidence that that is the case. What I would 
say is that from our own survey work we found that people who 
regularly interact with people that they consider close friends 
and family are generally less lonely and happier. And the more 
friends that you have, the less lonely you are. That might seem 
to make sense.
    What we found through our own survey research is that, when 
people use digital technology to communicate with friends on a 
regular basis, that is like interacting often face to face. Now 
there is nothing quite like joining together in a room and 
solving problems together. We all know from experience there is 
something very valuable there.
    We know that when people are concentrated in well-
functioning neighborhoods that social capital has benefits, for 
the reasons that have been articulated here. But I think one 
thing to help maybe mitigate some of our worry and concern 
about the increased screen time, when you walk into a room and 
your kids are there and they are all on their phones and they 
are not looking up at you, there is something wrong with that--
and I think there is evidence to suggest that we are seeing 
problems, particularly among teenagers, that are related to 
that phenomenon.
    However, I also think, from our own work, we see that, when 
people are in regular communication with people they are close 
to, whether that is texting, or on phone calls, or using other 
social media, it helps sustain those relationships and it helps 
people feel less lonely. So there is reason to be optimistic 
that some of this social media technology actually can help us 
do things together.
    And if you actually just examine some of your own 
interactions, think about people you are close to and how you 
stay in touch with them--I have a daughter that is in school in 
the UK. I thought SnapChat was terrible when I heard about it, 
when it was invented, but now I love it. It is a way for me to 
have visibility into her life every day. I think a lot of 
people can identify with that.
    I have a closeness that is enabled through that technology 
that I did not have before it existed. And our survey data 
shows that there is reason to be optimistic that that actually 
does help keep us more closely connected with people that we 
love and care about.
    Chairman Lee. Thank you.
    Senator Hassan.
    Senator Hassan. Well thank you again, Mr. Chair, for 
convening this panel. And thank you again to the panelists for 
your testimony.
    Dr. Hendren, I would like to ask you about the research you 
and your Harvard colleagues published in 2014 on the factors 
that impact the future economic mobility of children across the 
country. Because in my view, the defining aspect of the 
American Dream is the ability of parents to expect that their 
children will have a better future, a more prosperous future, 
than they had.
    In your study, you single out social capital and you 
mention that some of the characteristics of social capital are 
somewhat amorphous. You also said that important factors in 
increasing a child's economic opportunities include school 
quality, income inequality, racial segregation, and family 
structure. And that those factors also impact future economic 
mobility, and I would suggest they are somewhat less amorphous. 
They are measurable. Can you tell the Committee about how these 
other major factors I just referenced, such as school quality, 
also impact a child's future economic opportunities? And also, 
do these factors mutually reinforce and interact with one 
another? For example, do neighborhoods with both higher-quality 
schooling and more social capital provide greater future 
economic mobility for children?
    Dr. Hendren. Great. Thanks for the question. So you are 
correct that broadly we find five factors that correlate with 
upward mobility: school quality, income inequality, social 
capital, strength of the family structure, and poverty rates.
    In terms of school quality in particular, the ways in which 
we measure school quality are broad and vast, and I agree there 
are many ways to measure it. So you can look at 3rd grade or 
8th grade test scores of students on State exams in places or 
in neighborhoods that have stronger scores on those exams, and 
particular scores by low-income students you see higher rates 
of upward mobility.
    In places that have less residential segregation, either on 
the race dimension or the income dimension, you see higher 
rates of upward mobility. And to get to your last question, it 
looks like these five factors are in a sense additive across 
the U.S. Each factor seems to correlate with higher rates of 
upward mobility conditionally on the other factors as well. And 
so in places that have both high--strong schools and more two-
parent households, those neighborhoods tend to have higher 
rates of upward mobility.
    Senator Hassan. Thank you. Mr. Quinonez, I would like to 
ask you about an important issue you raise in your essay, 
``Latinos in the Financial Shadows.'' You point out that, as 
online banking becomes more mainstream, some families may lose 
access to bank representatives, such as tellers or other 
employees who help them navigate the financial system.
    This is an especially important concern in New Hampshire 
where many of my constituents also lack access to quality, 
affordable broadband internet. So on the one hand you have 
fewer human beings to interact with and help navigate the 
financial system, and on the other hand you also have people 
who really do not have access to the online banking functions, 
as well. So fewer bank storefronts and inadequate broadband 
access can make building credit a real challenge. One way to 
fill this gap in service, as you say in your essay, is for 
community nonprofits to partner with financial institutions and 
to provide families with financial advice.
    How do you think community relationships between nonprofits 
and financial institutions can help fill gaps between 
storefront and online banking services? And how can Congress 
support and encourage these relationships?
    Mr. Quinonez. Thank you so much for that question. I think 
it goes back to the question of being present, being there. 
Because as those bank branches are starting to close--and not 
just banks, but credit unions are beginning to close all over 
the country--they are not present in those communities anymore. 
So those institutions are going to be lacking.
    And so I am just lifting up the fact that there are 
nonprofit organizations. There are faith-based organizations in 
those locations, as well. So there is another way for us to 
sort of interact and provide them with the tools and resources 
so that they can be the front facing relationship bridge 
between what people are experiencing in terms of the hardships, 
or even advice and suggestions, so that they can continue 
moving on with their economic lives.
    So I believe the nonprofits could play a key role there, 
but that has not been part of the conversation just yet. So in 
that particular essay, I was just like here are the 
organizations that are already in those communities, we can 
figure out how to either provide them with resources or maybe 
connect them more closely with financial institutions, so that 
as they close those branches those nonprofits can actually step 
in and provide more of those services there.
    Senator Hassan. Well thank you very much. And I appreciate 
all of you being here today very much. I had a question that I 
will ask for the record, in which I will ask you all to help us 
prioritize steps we could take to encourage and grow social 
capital in our communities, and address some of the issues you 
have all identified. Thank you all for your very important 
work.
    Thank you, Mr. Chair.
    Chairman Lee. Representative Marchant.
    Representative Marchant. Thank you, Mr. Chairman.
    Members of the House have a--we represent communities that 
unfortunately change every 10 years. So we have kind of 
artificially created districts that are many times kind of 
drawn together in a very interesting way.
    My District has 15 communities that surround an airport. So 
you have an economic driver. Then you have 15 communities. Many 
of those communities share school districts. So you do not have 
15 different school districts, but it has a great diversity 
of--racial diversity, and great economic diversity.
    Over the period of 10 years, most people think that these 
kind of changes come over decades. But in our environment, the 
suburban environment that we live in, these districts evolved 
very quickly. So in our area, we have had a--because it's a 
corporate atmosphere around the airport, and because of the 
airport the population growth has tended to bring in a very 
high earner into the community, while the community stays 
pretty much the same. But it's making those that were there 
before the hirees arrived, actually pushing them into a lower 
economic strata.
    And of course when the school districts grow at that level, 
it forces them to rezone the schools on a regular basis. So 
that when you begin to rezone the schools, you zone it more 
towards the neighborhood. The neighborhood then pretty much 
throws diversity kind of out the window because it's looking 
for proximities. So you end up with very stratified racial 
school district zones where you have less diversity among the 
students learning together.
    And my question is: When you look at a situation like that, 
is the question of school choice more important? Is the 
question of a district evolving from 90 percent homeowners to 
50 percent apartment dwellers now because the corporations are 
bringing in workers that are not going to live there long. They 
are staying in an apartment. They are not as connected to the 
community. So this is becoming, across the Nation, as big a 
problem as these old stratified neighborhoods that are slowly 
declining, but you have districts that are kind of exploding as 
far as these problems go.
    Dr. Streeter? Dr. Hendren? Any of you that would like to 
comment on that, I would appreciate it.
    Dr. Streeter. Just to one part of your remarks and 
question. I do think that what is driving this is an 
interrelation of a couple of complex things, right. And so I 
will not diagnose those all entirely, although I have some 
things to say there, and I know the others here are more 
qualified than I am to talk about that. But I do think in that 
environment, allowing flexibility with where families can send 
their children to school is an important thing. I think having 
options--that competitive pressure that happens when there is a 
competitive educational marketplace--is generally a good thing. 
I think it has been good just a few blocks from here. You can 
visit neighborhoods that have benefited where traditional 
schools and charters and et cetera have benefited from that 
kind of competition.
    I do think that the challenges for this sort of sorting and 
segregation that happens by income at the regional level is 
driven very much by local choices. And I think the tools 
available to Federal policymakers on some of these things are 
actually quite limited.
    I think that, when it comes to how zoning is done and the 
way that neighborhoods are sort of constructed, that is driven 
very much by local and State policy. And I think that right now 
is driving a lot of these factors that we see in terms of 
inequality by geography.
    Dr. Hendren. Yeah, I think that you raise tough questions. 
I think when it comes to zoning and other policies that are 
traditionally done at a local level, the only thing that I 
would be able to bring to that conversation is to note that it 
has national implications. Kind of the outcomes we see in 
adulthood for kids that grow up in those neighborhoods tend to 
be higher in places where kids from different backgrounds tend 
to grow up together.
    And so thinking about the types of policies, the ways in 
which policy interacts with those incentives, is what I would 
say is important. But exactly how to turn that into local 
policy or regulations about local policy, I do not have a 
strong view at this time.
    Dr. Sharkey. If I could just add one last comment on that, 
you are describing the growing phenomenon of economic 
segregation. High- and low-income people living nearby in the 
same area, but living in different communities. And the reason 
it becomes important is because, as neighborhoods become more 
and more segregated, investment in different communities 
becomes more and more unequal.
    So, you know, there are steps to take. A, if there is 
affordable housing in every neighborhood around the airports 
and in every neighborhood within your district, then you will 
have some level of economic segregation and schools will become 
more integrated as well. But the key is that if there are 
investments, if there are core organizations in every single 
neighborhood, then the consequences of that kind of economic 
segregation become less severe.
    Chairman Lee. Representative Heck.
    Representative Heck. Thank you, Mr. Chairman. This is my 
inaugural meeting of the JEC. I just want to signal, it is a 
privilege and an honor to join the Committee, and I am very 
pleased to be here. I also want to express my appreciation to 
the Chair for selecting this topic. I think it is an important 
and very worthwhile use of our time. Although my concern is 
that we would devolve down the track of either/or, either 
social investment or social capital, which frankly I think, (a) 
reminds me of the old beer commercial where two people bark at 
each other, ``less filling,'' ``tastes great,'' to no end.
    And, frankly, and unfortunately, is emblematic of 
everything that is wrong with this town, the ``either/or'' 
stuff. But having said all that, it seems to me that we have 
got a couple of kinds of communities that are relevant to this 
conversation: those for whom there has been an absence of 
opportunity for quite some time, it is structural, it is 
associated with all the factors that have been researched. Dr. 
Sharkey, Dr. Hendren, racial discrimination and others. And 
then you have other communities where it did not used to be 
that case, but then there is traumatic job loss and it becomes 
the case.
    Everybody has that perspective, whether it is the mining 
community in Appalachia, or the factory town in the Midwest, or 
in the part of the country that Congresswoman Herrera Beutler 
and I live in, the closure of the sawmill where there's just 
been this precipitous loss.
    We have some counties in Washington State, for example, 
that have had double-digit unemployment literally for 25 years 
because of the closure of the timber industry, double digit for 
25 years.
    And so to me it kind of begs the question, however, with 
respect to social capital. Is it destroyed, demeaned, deluded, 
by traumatic job loss? Dr. Sharkey? Let's go down the line.
    Dr. Sharkey. Thank you, Representative Heck, for the 
question. It is a great question. I think in sections of the 
country that have gone through this kind of economic 
dislocation, then it set the stage for a whole set of 
additional problems. It sets the stage for the loss of social 
capital that we have all been discussing.
    It is not inevitable, however. I think what destroys 
communities is when there is a combination of this kind of 
economic shock, or long-term economic distress, combined with 
the absence of a foundation of strong community institutions 
that are unable to absorb people who are unemployed, people who 
need additional training, people who need to go back to school, 
or who need short-term support in order to get back on their 
feet and reintegrate into the labor market.
    So it is really this interaction between economic distress 
and the absence of a strong foundation of community 
institutions that creates the kind of----
    Representative Heck. But they affect one another.
    Dr. Sharkey. I think they interact together, exactly.
    Representative Heck. My time is limited, so I guess I want 
to get to my second and last question, Dr. Hendren. A lot of 
your really informative research relates to upward mobility and 
going from one income bracket to another. But I am curious as 
to your reaction about the context here.
    The truth of the matter is, for 40 years about 88 percent 
of this country has been within an income bracket which has not 
budged. Wage stagnation. That is the context. Your research is 
how do I get from here to here, but the fact of the matter is 
wherever ``here'' is has been flatlined for 40 years. And you 
did not say anything in your testimony, nor am I aware of 
anything in your research, that says how does that context bear 
upon the upward mobility.
    Dr. Hendren. I thank you for the question, and it is a 
delight to be able to answer that. You are absolutely right 
that the statistics I quoted on the 7.5 percent of kids from 
low-income families that reached the top of the income 
distribution is sort of a comparative statistic within the 
income distribution.
    In terms of statistics that capture exactly that 
phenomenon----
    Representative Heck. If I may interrupt, as it relates to 
social investment, it is much higher in countries that have 
greater social investment. But I interrupt. Go ahead.
    Dr. Hendren. That is true. When you look across cohorts, 
people who are born in 1940, 90 percent of them grew up to earn 
more than their parents. The reason that is is because we 
experienced broad-based equal growth across the income 
distribution.
    Today, 50 percent of kids grow up to earn more than their 
parents. And the exact reason for that, statistically, is 
exactly the phenomenon you mention, which is that there has not 
been real wage growth at the median of the income distribution. 
That is simply kind of a mathematical restatement of exactly 
the phenomenon you are mentioning.
    So in terms of whether or not kids earn more than their 
parents, that is a direct implication of the statistics you are 
describing.
    Representative Heck. And if I had more time, we would talk 
a little bit about the importance of the Fed's monetary policy 
on that fact, and how it is that their over-concern about over-
heating of the economy has caused them to tap the brakes too 
rapidly, thus suppressing wage growth. Thank you, sir.
    Chairman Lee. Thank you. Representative Herrera Beutler.
    Representative Herrera Beutler. Thank you, Mr. Chair.
    This is the busy season here in D.C., but I feel like this 
is one of those conversations that could go over several days, 
and should, quite frankly. Because when I think about the 
issues at home--you know, Representative Heck mentioned West 
Coast has been decimated in certain areas by the timber 
industry, and Federal policy, quite frankly, but how do we grow 
back? I am sandwiched between Seattle and Portland. I am the 
great sandwich part in the middle, with bones on either ends, 
but they are struggling with housing policy, and it is 
impacting all of us.
    There is some incredible tragedy taking place because of 
the impacts on people's lives, people who are losing their 
lives. And I think this conversation directly relates to how we 
change that.
    I found it really interesting that you mentioned--you were 
talking about--and I have heard it several times now, and Dr. 
Sharkey was talking about, the difference in the strength of 
the schools, and the community foundations, and institutions, 
the strength of the family, and what I keep coming back to is: 
Well what does that actually mean?
    You know, I have an idea in my mind. I can tell you, my 
family--my father is of Hispanic heritage, and they grew up 
very poor and had very little; 10 kids in one room, and here I 
get to sit before you today. And it is not because my parents 
did anything more than work hard. And I know that these 
elements were there, but I cannot define it.
    So how do we define it? Is it--it is not always money, and 
schools, you can compare Utah schools to D.C. schools, to other 
schools, and in Washington State we have a lot of school 
choice, believe it or not. There are a lot of people who 
choose--and I think this is critical--choose to, whether, we 
have public home schools in Washington State. So there are all 
these different choices, and I think that contributes. But what 
does it look like? How do we find a definition for this? How do 
we put a more concrete--some concrete examples, because I think 
it is kind of open to everybody, because I think everybody had 
a piece, but I would like to hear thoughts.
    Mr. Quinonez. Thank you for having a broader perspective, 
or any question about that, because I would caution us in 
trying to define ``social capital'' very narrowly, of only 
thinking about institutions, because sometimes even those 
institutions are just vessels where relationships actually 
happen.
    And if anything from my story and the story of MAF, is that 
poor people also have social capital, because they also have 
relationships. It is based on those relationships that we rely 
on to survive to weather any economic shock, or any political 
sort of antagonism against people. And it is those 
relationships that really are central to the human condition.
    So this is not new, right? This is why people left Africa 
to start migrating out and conquering the world, right, because 
we had those relationships to base it on. So this is not 
anything new. But if we only think of them as being very 
specific to a very specific type of folk, then I think we miss 
the bigger picture.
    And so I think once we start realizing and validating that 
the relationships that people have to bear, and start doing 
away with policies that actually try to break down families--I 
mean, you know, I mentioned our current political climate. That 
actually deteriorates the social capital within very specific 
groups of individuals.
    And so it is kind of acknowledging the broader sense of 
what the capital is, and trying to not put up policies that 
could break up families in that process.
    Dr. Streeter. I would also just add to those good comments 
two quick things. From our own work, it is really important 
that people feel like they belong. And I think that is one big 
element here.
    If you actually have people that you can point to in your 
lives that you can rely on in times of need when things are 
tough, that helps against a whole range of other types of 
problems.
    So truly lonely people are people not who just have 
feelings of loneliness from time to time, but people who 
actually do not have someone to turn to when they have real 
needs. We see that pretty clearly in our data.
    Secondly, I would say--and thank you, Dr. Sharkey, for 
referring to this earlier in our survey work on community 
institutions, we have another study coming out on this in a few 
weeks, which I am happy to share with your staff, that really 
does show that when you have access to libraries, good schools, 
the way a community is designed, even gyms, even if you do not 
use the gyms, it turns out, when you are close to a range of 
things that create cohesiveness in a community, it is 
predictable of a lot of things: lower levels of loneliness, 
higher trust in institutions, and the like.
    And I realize that is not a panacea. That is not a response 
to a major economic shock. If a factory closes, or an entire 
industry evaporates from a community, you cannot then say after 
the fact we are going to build these institutions. But it is an 
argument for investing in those institutions in those types of 
communities now.
    We find this to be true whether it is large cities, 
suburbs, or rural areas. It does not matter what type of 
municipality you live in. It is when you have a density and 
proximity to those kinds of community institutions that 
actually make a community a community that are predictive of a 
whole bunch of very good things.
    Representative Herrera Beutler. Thank you, Mr. Chair.
    Chairman Lee. Representative Beatty.
    Representative Beatty. Thank you, Mr. Chairman. And thank 
you to our panel. And let me also say what an honor it is for 
me to serve on this Committee, not only for a personal reason, 
but I also think it is a good marriage for me, serving on the 
House Financial Services Committee and being Chairwoman of the 
Diversity and Inclusion Subcommittee, because much of what we 
are doing here is talking about how can we be more inclusive as 
we look at expanding opportunities and making families and 
communities in a better position and place to thrive 
economically.
    I have a great appreciation for all of your research, your 
writings, and your comments today, and can actually say that I 
liked just about everything that you said. But it gives me 
pause to ask a few questions.
    Dr. Hendren, in your testimony you state that current data 
limitations prevent us from identifying the best policies for 
improving upward mobility. Can you be, quickly, a little more 
specific about what that means?
    Dr. Hendren. Sure. So that is a reference to the fact that, 
frankly, the way in which the Census is constructed is a 
repeated cross-section survey of people in the population. And 
at present it is actually quite difficult to link people over 
time in that data.
    So as we look at the historical policies that have been 
implemented in our neighborhoods over the last 50 years, it is 
actually quite difficult to understand the extent to which 
those policies have improved the lives of people in those 
neighborhoods versus simply changed where people live.
    So that was the particular reference I was providing there.
    Representative Beatty. Thank you. All of you presented data 
and information, but it made me, sitting here as an African 
American female who was not born quite in the 1940s, as you 
talked about the wonderful opportunities of children making 
more, living better than their families. And you all talked 
about whether it was schools, or neighborhoods, or housing. It 
made me feel like we needed a little history lesson to remind 
us of Brown v. the Board of Education in 1950s, Ruby Bridges in 
1960, and in some of those Southern states in 1964 and 1965, 
during my lifetime, you could not even vote because of the 
color of your skin and there was something called ``red 
lining.'' You could not live in communities.
    So here we are today in 2019 basically talking about the 
same things that I heard my parents talking about in the late 
1940s and in the early 1950s. So here we are. What are your 
thoughts on the effect of the growing income/opportunity gaps? 
Do you think it presents a national emergency? We are talking 
about it here in the wonderful Senate on this Committee, but 
what is the resolve? Are we in an emergency nationally? And 
what should this Committee do? Quickly, we are going to go 
right down the line with you, Dr. Sharkey.
    Dr. Sharkey. Sure. It is a great question. Thank you for 
the question, Congresswoman. I think there is a hard answer, 
okay?
    Representative Beatty. Is it a national emergency? Yes, or 
no? Only so I get through----
    Dr. Sharkey. The growth in income inequality I think is a 
national trend that has very----
    Representative Beatty. Is it a national emergency?
    Dr. Sharkey. I would say close to yes.
    Representative Beatty. Okay. We're going to go here, only 
because I only have a minute left.
    Mr. Quinonez. I say also it is a national emergency, and I 
also brought up the IRCA in 1986 clause as a way of history.
    Representative Beatty. Sure.
    Mr. Quinonez. My social capital was realized because of 
that particular legislation. I was able to adjust my status, 
and I think if we do that to the millions of people that are in 
similar situations we can also allow for the social----
    Representative Beatty. I hate to interrupt again. So that 
is a ``yes''?
    Mr. Quinonez. That is a hard ``yes.''
    Representative Beatty. Dr. Streeter.
    Dr. Streeter. It is an emergency in some places, and it is 
not an emergency in other places. But it is an emergency in 
enough places across the country that I do think it is an 
emergency. And I don't know that that then justifies one sort 
of national policy response. I think in----
    Representative Beatty. Okay, we are going to get to the 
next part of that after him.
    Dr. Hendren. If calling it a national emergency leads to 
change, I am all for it.
    Representative Beatty. And what should that change be? 
Three seconds each. Is it legislation? Is it money?
    [Laughter.]
    Only because I have 30 seconds to go.
    Dr. Sharkey. They have got more time than me to prepare.
    Representative Beatty. Come on.
    Dr. Sharkey. I would say invest in communities. Invest in 
community institutions.
    Mr. Quinonez. I would start with a comprehensive 
immigration reform.
    Dr. Streeter. Subject our workforce development policies to 
the same creativity and reform-mindedness that we have with K-
12 and other forms of higher ed.
    Dr. Hendren. I would take a life course approach across all 
ages of children and think about where in places where a 
particular age of kids are falling behind, target programs at 
those ages.
    Representative Beatty. Let me just say thank you very much, 
and I yield back my one second.
    [Laughter.]
    Chairman Lee. A very good use of time. Representative 
Schweikert.
    Representative Schweikert. One second early, one second 
wasted. Okay, as you know there are dozens of questions here. 
But if I was to--if I came to you and said give me the one or 
two top priorities, if I cared a lot about velocity, the 
movement in particularly upward mobility and stratas, as you 
know right now there is some very interesting noise in some of 
the data that has come in over the last 12 months, still too 
early to--but there seems to be, particularly in wage and 
employment stability, those things, some really interesting 
numbers happening in our lower quartiles of some real health--
you know, we have a fairly robust economy.
    But if I was to look at that in the longer term, if I came 
to you and said, hey, over the next 20 years I want to maximize 
this upward velocity, what would you do?
    Dr. Hendren. So I think the surprising thing is I would say 
focus on children. Even though you are looking at wages you see 
today, those were produced 20 years ago, at least. So I think 
going back into the schools and realizing that the kind of 
economic statistics we read every day were formed a long time 
ago.
    Representative Schweikert. Okay. So when you say 
``children,'' is it the way we train children in the household 
formation? What is that?
    Dr. Hendren. So that comes back to the factors we were 
discussing. So things like the quality of the schools. So I 
think investing in children. I do think some of the other 
factors we have been discussing that are, frankly, more 
amorphous, like the strength of the family structure, measures 
of social capital. I do not have a good solution for how--what 
types of policies are best suited to address those issues. But 
what I can tell you is that they look like they are important.
    Representative Schweikert. Doctor, what would you do for 
velocity?
    Dr. Streeter. I agree with Dr. Hendren that the younger the 
age of the person when you make the investment the better that 
velocity will show itself out over time.
    I think that making it possible for people to move around, 
even just within regions, I think is important. I think 
portability of benefits, but also more flexibility in the way 
we do workforce development training, so that when people are 
living on the east side of town and the best school for what 
they want to do is on the west side of town, making it possible 
for them to actually go to school over there and finish. And if 
the car breaks down, to have resources to fix the car.
    I think some of the very real----
    Representative Schweikert. So a transportation barrier----
    Dr. Streeter. Yeah, just greater geographic mobility even 
within regions I think is something that would help a lot of 
people, if we thought more creatively about that.
    Representative Schweikert. When you look at your community, 
what creates success? What creates that mobility, that 
velocity?
    Mr. Quinonez. So a great question. Most of the people can't 
even get on a plane to fly from the East Coast to the West 
Coast. And I think we have a lot of people, again, in this 
country that cannot--that are barred from doing that, or even 
barred from having the notion of being, you know, that they 
belong in this country. So I think we need to address those big 
questions, you know, nonetheless. And of course financial 
inclusion, having more direct ways of having people being 
banked and being included in the credit system is very 
important.
    Representative Schweikert. Dr. Sharkey.
    Dr. Sharkey. Well I would agree with my colleagues here. 
And I would say let's make sure that inequality in the country 
as a whole does not translate into more and more unequal 
communities. So that every kid has equivalent opportunity. That 
is unrealistic, but close to equivalent opportunities, no 
matter where that child grows up. Okay? So if the schools are 
functioning well, if there are community centers, after-school 
programs, then that child has a better chance of rising up. And 
that happens when there is affordable housing in every 
neighborhood across a city and a metro area, and opportunities 
are more equally----
    Representative Schweikert. So in the House when we look at 
some of the housing statistics, you know, the Phoenix area is 
having wonderful growth right now, but it is also putting quite 
a squeeze on affordable housing. So in that case it's a local 
zoning issue.
    Can I ask, and I am going to sort of say something and then 
ask you if you have a suggestion for what I can read to absorb. 
I think there are some very creative ideas out there. As you 
have written about, libraries, and those things, we are seeing 
some communities that are now setting up sort of a community 
page. I have a 3\1/2\-year-old daughter, and my wife went on 
this community page and was getting the playpen and those 
things from a neighbor I never knew.
    It turns out, we are seeing--there are some writings out 
there using that type of social relationship through one of 
these. There are patterns. And being bankable. We had an 
situation in Arizona maybe 20-some years ago where someone 
cashing a check was paying a 20 percent fee. They were 
literally giving up one day of labor.
    So there was an experiment allowing a number of churches 
and others to actually have a functioning ACH certificate 
through the banking department and so the Catholic Church over 
here was cashing checks, and it crashed the price. So there are 
creativities out there.
    On the transportation side, it turns out that some 
organizations, these ride-sharing platforms, will actually do a 
discounted. So waiting for the bus in Phoenix when it is 110 
out when you can hit the button on a phone and get that ride 
sharing. We are working on an experiment right now with our 
local homeless campus where they have lots of jobs, but 
transportation was our barrier. It turns out, once again, 
technology may be that solution. And, you know, the choice 
that's now coming through where we are starting to have to 
rethink education, is education sitting in a room with bricks 
and a ceiling and this and that? Or is part of my education 
coming through a screen? Part of it a neighborhood working 
group, a neighborhood robotics club?
    I guess what I am throwing out, Mr. Chairman, is everything 
here is quite real but yet we seem to approach it from 20-year-
old solutions instead of understanding we are living in a 
digital revolution around us. And with that, I yield back.
    Chairman Lee. Thank you. Representative Beyer.
    Representative Beyer. Thank you, Mr. Chairman. And, 
Senator, thank you for doing this. I talk to my four children 
all the time about the need to build as much social capital as 
they can, loneliness, happiness, their progress in life.
    Dr. Sharkey, you talked about the positive level and 
decreased levels of ``violence,'' how violent crime has really 
come down a lot since 1990, but we are still in the dilemma 
that we have 4.4 percent of the population and 22 percent of 
the world's prisoners. Although I just read that the 
incarceration rate is the lowest it has been in 20 years.
    You talk about increased investment in the re-entry 
programs, things like offender aid and restoration. But what 
are the other strategies we can use, recognizing that locking 
up mom, dad, sister, uncle, whatever, destroys the family.
    Dr. Sharkey. It's a great question. Thank you for the 
question. So the decline in violence has brought enormous 
benefits that have been experienced by the most disadvantaged 
segments of the population. But the methods that we have relied 
too heavily on for the last 50 years, which is intensive 
policing and mass incarceration, have generated these just 
staggering costs that you mentioned.
    So what's next? What's the next model? I think we have 
models in place. For instance, the incarceration rate has 
plummeted in New York. There is no increase in violence. Okay? 
We know that this--we can reduce the incarcerated population 
without consequences on violent crime.
    I would argue for an investment in law enforcement that 
allows law enforcement to do their job differently, to build 
trust, to regain trust, and build relationships particularly 
with low-income communities of color. I would argue that local 
community organizations played a central role in contributing 
to the drop in violence. They expanded on a large scale in the 
1990s and took back parks, and playgrounds, and city streets, 
and communities. This contributed. We have causal evidence. 
This contributed to the crime drop.
    If we invest in those organizations that run re-entry 
programs, that work to try to re-integrate people coming out of 
the prison system into jobs, into homes, back into their family 
life, then the best evidence we have suggests that that is the 
right approach. That is the next model moving forward.
    Representative Beyer. Thank you very much. In Northern 
Virginia that I represent we have very strong community 
policing. And not accidentally, all four sheriffs tell me they 
have the lowest number of people in their jails in a couple of 
decades.
    Representative Beyer. Mr. Quinonez, I was fascinated by the 
increase in credit scores. I wonder if you could help me on 
that. But I am also a car dealer in real life, and it is 
amazing how many of the customers we see have terrible credit 
scores. And I would love to connect you later with some of the 
national NADA and others about providing--we sold 17 million 
new cars last year, 40 million used cars. That is an enormous 
impact. If you could do the kind of financial training that you 
do with your folks to help Americans.
    Mr. Quinonez. That's right. Thank you for pointing that 
out. Credit reports nowadays, I see them as sort of like 
passports to the marketplace, to the financial marketplace, 
that without that passport you are really denied everything. 
And so that is why we put so much emphasis on helping people 
become visible in the credit marketplace.
    And one of the ideas that we are pushing is the idea of 
having a credit system have more visibility of the totality of 
people's financial lives. And so the idea of including rental 
payments, or the idea of including even telecom, or even paying 
their cellphones, to be included in the credit reports is 
actually something that could actually make them become much 
more visible by really having a fuller description of what they 
are doing with their money.
    Recently Experian, the company Experian, has started a 
program called ``Boost.'' And I have a personal story to share 
here, because one of my--my nephew, I actually told him about 
this product, and he went online and he signed up to Boost, and 
then within a minute his FICO score went up by 29 points. 
Nothing happened, nothing changed with him, all he did was just 
say, yes, you look at my transactional information on his 
checking account, and through that the credit system was able 
to sort of recognize him better. Whereas before, they thought 
he was more risky, but now he is less risky, and it is all 
because the logarithms included more data about him that 
increased his credit score by 29 points. So there's a lot of 
different things we could be doing to get him----
    Representative Beyer. Let me interrupt you because I only 
have three seconds left. I will sign up for Boost tonight, 
though, thank you.
    And, Dr. Hendren, I want to have two more graphs on your 
opening chart, which is the poverty rate and also the rate of 
increase in income, just to really understand why the mobility 
isn't happening.
    But the elephant in the room is income inequality. What 
would be the impact of doubling the earned income tax credit?
    Dr. Hendren. I guess it would depend on how you pay for it, 
but I think there is evidence to suggest that it would increase 
labor force participation. It would increase after-tax incomes 
for a lot of Americans. And so I think, you know, that would 
probably be the impact.
    But again, I think the key thing for creating 
intergenerational change is whether or not it has spillover 
effects on children. And there I think there's some interesting 
work suggesting that it might, but I think there's a lot of 
interesting work that needs to be done.
    Representative Beyer. Okay, thank you.
    Chairman Lee. Representative Trone.
    Representative Trone. We are now seeing a new type of 
segregation in some of the school districts, gerrymandered 
school borders that fence out students, which often means 
segregating students along racial lines.
    The 2016 GAO report found the public schools are more 
segregated today by race and class than every before since the 
1960s. In many ways, a child's zip code determines their 
economic prospects. A few weeks ago we had Secretary of 
Education DeVos and we asked her--and she was very evasive--a 
question regarding racial segregation posing a threat to the 
educational opportunities of children of color.
    Mr. Sharkey, can you speak about the long-lasting 
consequences of segregation as they relate to social capital, 
and also the lack of social capital impeding upward mobility in 
communities of color?
    Dr. Sharkey. Yes, thank you for the question. So there is 
very strong evidence that--well, first off, we know that 
segregation gets worse for families with school-age kids. So 
segregation is not an accident, okay? It is intentional. We 
have set up policies that allow people to sort into different 
communities, and then to set up barricades that make sure that 
their kids go to schools with resources and the other kids do 
not. This is opportunity hoarding. It is very explicit. It is 
very intentional. It has gone on for decades.
    We also know, with very strong evidence, that when kids get 
the opportunity to go to more economically diverse schools, 
they do better. Okay? Heather Schwartz has done excellent 
research on this based on data from Montgomery County, which 
has a very strong inclusionary zoning program, where kids were 
randomly assigned to housing developments. Some were in more 
economically integrated schools than others.
    The low-income kids who went to more integrated schools did 
better. Those improvements in academic achievement lasted for 
several years following. Okay? So we know that segregation 
harms the academic achievement of low-income kids. We know that 
economic segregation is particularly severe among families with 
children, and we know that the consequences extend into later 
in life.
    Representative Trone. Mr. Quinonez, studies indicate 80 
percent of jobs are found through social capital through 
connections, relationships. What government actions have 
historically prevented communities of color from accessing 
social capital needed for that economic mobility?
    Mr. Quinonez. I mean I will speak on that from an immigrant 
perspective. And so one of the realities is that immigrant 
communities, because of the different types of legal statuses 
that we may have and we may live in mixed-status families, some 
may have legal documentation, others may not. And that is a 
huge impediment from really realizing the economic potential.
    So to some extent even like my own family, I mean we were 
able to help each other because we were family, we were helping 
each other, and so that was the essence of our social capital, 
through friends that we were in a similar situation. So the 
idea of linking--and I hope I am being clear about this--that 
when we think about economic mobility, we have to think about 
the broken immigration system because that in and of itself is 
really causing a lot of people from like not really reaching 
their economic potential.
    Representative Trone. Mr. Sharkey, given that persistence 
of neighborhood segregation and the inequality of social 
capital, what investments need to be made to ensure every 
community has the opportunity to succeed, and our children can 
succeed?
    Dr. Sharkey. Thank you for the question. So there are two 
sets of investments we can think about, and Dr. Streeter 
mentioned one of them. One, we can give people more chance to 
move to areas of opportunity. And the types of moves that 
typically lead people to opportunity are long-range moves, 
moves that bring people into new parts of the country that 
offer greater opportunities. Okay? Those types of moves have 
become less common over time. So that is one strategy. And 
there are a whole bunch of approaches--housing mobility 
approaches, but also just funding a mobility bank that lets 
people take risky moves, bringing them to different parts of 
the country. So that has to be one part of the strategy.
    And then the second part is making sure that in areas that 
have struggled, in areas where economic opportunities have 
become more sparse, that we have investments in the core 
institutions, public schools, libraries, community 
organizations that prop up a neighborhood, that make sure that 
if economic conditions go downhill, that the community doesn't 
fall apart, that kids have a place to go that the public 
schools don't deteriorate, that churches don't dry out and 
people stop coming. Okay? These types of investments, which are 
taken for granted in most communities across the country, have 
been absent particularly in low-income communities of color.
    So we need to make sure that every community across the 
country has these basic investments that provide the foundation 
for community life.
    Representative Trone. Thank you, Mr. Chairman.
    Chairman Lee. Senator Peters.
    Senator Peters. Thank you, Mr. Chairman.
    I want to--Dr. Sharkey, I want to pick up on some of those 
comments, because the issue that I think is incredibly 
important for our country is to make sure, as you have all 
addressed, that economic opportunity is everywhere in the 
country. We are not seeing that now.
    In fact, the numbers are pretty dramatic. I think, Dr. 
Sharkey, you mentioned in your testimony as well that if you 
look at just a few geographic areas, most all of the economic 
growth--I think a 2016 study from the Economic Innovation Group 
showed that New York City, Miami, Los Angles, Houston, and 
Dallas have as large an increase of business as the rest of the 
Nation combined, just those few urban areas are growing whereas 
the rest is being left behind. And we are finding in rural 
areas, in particular, as people leave.
    You mentioned in terms of mobility one of it is to allow 
long-range moves, which is true. And I think it is hard for 
folks who are seeing it very difficult to move to those areas 
that are very expensive. There isn't the social safety net for 
them, so they stay home.
    But if we are encouraging people to move, they will move to 
these areas. And those areas continue to grow. And you have 
folks who have the ability to move, leaving other areas, you 
are actually accelerating the situation.
    And I get your point about investing in these other areas, 
but it seems as if we actually accelerate it. What's your 
thought on that?
    Dr. Sharkey. Yeah, so you have to balance--again, thank you 
for the question--you have to balance these two goals. One is 
making sure that every American has access to areas of high 
growth. So that partly involves encouraging moves, and even 
risky moves. It also involves transportation policy that brings 
people nearby those centers of growth that allows them to 
commute in quickly on high-speed rail and still live in 
affordable housing nearby.
    Senator Peters. That only makes those few areas just 
bigger.
    Dr. Sharkey. Well that's--so that's the second part of it. 
And this is the challenge that we haven't grappled with as a 
Nation right now, is that there are large sections of the 
country that are left behind. Okay? And so the policies that 
have to be oriented to those sections of the country left 
behind are very different.
    This is not about purely focusing on economic growth; it is 
about making sure that those sections of the country left 
behind, those towns and cities, have functioning institutions 
that, as job opportunities become less common, people have 
access to retraining; people have access to education; people 
have access to child care; people have access to financial 
institutions; kids have access to community centers and after-
school programs.
    These are the types of investments that can get people back 
on their feet and that can make a community start to thrive 
again. But those investments have been absent. And there are 
several programs that it would be good to talk about because 
they are proofs of concept.
    One was carried out in Milwaukee in the 1990s. That was the 
New Hope Program. What was unique about this program is that it 
was targeted toward people in low-income communities, and it 
guaranteed community service jobs for anyone who was willing to 
work 30-plus hours per week. It guaranteed them a job. It was 
available to people without families. It was available to 
single men, okay, unlike many similar programs.
    It did not just reduce poverty among the people who took 
part--and there was a randomized control trial to evaluate--it 
did not just reduce poverty and increase work hours, it also 
affected the children. So it also improved academic performance 
of people who took part. It reduced behavioral problems of 
people who took part.
    So this is a proof of concept, that if we provide these 
kinds of investments, (a) it gets people back into the 
workforce; but (b) it also supports families. It brings people 
back into the community.
    Senator Peters. There's a minute left. Does anybody else 
want to take a stab at regional inequality? What do we need to 
do?
    Dr. Hendren. So I would be happy to add one piece of data 
to that discussion, and I think we often talk about promoting 
jobs, and I don't want to downplay that by any stretch, but if 
you look across the United States at places that have the 
highest rates of upward mobility, they are not necessarily the 
places that have had the highest job growth over the last 30 
years.
    A couple of notable examples are places like Atlanta and 
Charlotte, two localities that have had some of the highest job 
growth, the highest income growth of any metropolitan area in 
the United States, but they have some of the lowest rates of 
upward mobility.
    And intuitively what's going on there is that the economy 
today that is there is in a sense importing the talent from 
other areas of the country. And I think this sort of highlights 
a distinction when we talk about the role of educational 
investment, social capital investment, and we're talking about 
the production of that human capital for the next generation 
that will be in the labor market in whatever city they choose 
to live as an adult.
    Senator Peters. Thank you.
    Chairman Lee. Okay, it is now nearly 11:30. We have just 
completed our first round. We are going to go ahead and start a 
second round of questioning. We have the room until noon. That 
is when we get kicked out. We will go as far into the second 
round as we can before we are evicted.
    Dr. Hendren, you have previously co-authored a paper in 
which you discuss racial inequalities in intergenerational 
mobility. And in that you cast some doubt on the viability of 
policies such as temporary cash transfers or minimum wage 
hikes, at least as far as providing a viable, sustainable 
solution.
    Instead, as I understand it, you and your co-authors 
suggest that intra-neighborhood solutions such as mentorship 
for African-American boys, or efforts to facilitate interaction 
across racial groups, could provide for more effective 
solutions in the long run.
    How should we as policy makers, as Federal lawmakers, 
specifically, be thinking about increasing access to social 
capital, not just for this generation but for future 
generations as well, looking at it from a sustainability 
standpoint.
    Dr. Hendren. That's a great question, so thanks for the 
opportunity to talk about that. So you're absolutely right. 
What we found is that in every neighborhood in the United 
States upward mobility for low-income Black children is lower 
than the upward mobility for low-income White children. And so 
that suggests that in order to address the race gap in economic 
outcomes that we see in adulthood, you actually have to go 
within the neighborhood.
    It is not just about across neighborhoods directly. So I 
think what to do on that front, we have some speculative 
solutions that you discussed, things like mentorship and things 
like promoting greater integration within neighborhoods and 
within schools.
    I think it comes back to some of the earlier discussion 
about zoning, and to what extent people that might live fairly 
close together are actually growing up in the same community. I 
think, thinking about this as kind of a national issue, even 
though the decisions are being made locally, I think that is 
what is crucial here, that all of the local decisions that are 
going in in the local zoning board have national implications. 
And I think that makes, obviously, policymaking quite 
difficult. But I think it is the reality.
    Chairman Lee. Thank you. Dr. Streeter, you cite the 
enduring connection between civic engagement in America and 
religion in America. In the past we have seen some attempts by 
the Federal Government to try to incorporate faith 
organizations into the provision of various services. For 
example, when George W. Bush was President, he had an Office of 
Faith-Based and Community Initiatives.
    How else might public policy protect and perhaps even 
empower, or further the efforts of faith-based organizations in 
communities in their charity and their civic engagement work?
    Dr. Streeter. Great question, and I think the first answer 
to that is to invite them in. And then to ensure that the 
barriers to entry are as low as possible while protecting these 
important distinctions that we have in the First Amendment.
    I think the regulatory reform work that was done in the 
Bush Administration through that office was actually a good 
step in the right direction, kind of leveling the playing 
field, without requiring religious quotas or anything like 
that, but making it easier for organizations that are very 
missional, whether they are rooted in religion or not, to 
actually be involved as part of the solution.
    I think that--and this just dovetails off of some comments 
I made earlier in my prepared remarks--I think that sort of one 
practical thing we can do as policymakers is look at the way in 
which our devolutionary policymaking gives incentives to 
municipal leaders and others to invest in institutions very 
broadly, those that are best equipped to solve problems that 
they are invited into the solution equation, whether they are 
religious groups or not.
    I think that was one of the effects, whether it was 
superintended or not, I think it was partially intended by 
welfare reform. I think some of the community partnerships that 
we've seen in community policing where neighborhoods really 
have ownership over the safety of their parks and their 
streets. A lot of times when you get on the ground and you go 
to the communities where this is affected, you actually have 
houses of worship that are involved in those partnerships.
    And so I think creating incentives without requirements is 
the best thing to do. And fortunately we have some things in 
our own policymaking history that serves as a guide.
    Chairman Lee. Are there things in our own policymaking 
history that also serve as a guide of what not to do? Is there 
anything in particular that may be harmful?
    Dr. Streeter. Yes, I think--well certainly erecting 
barriers that go beyond the case law with respect to religious 
organizations was a problem. This kind of crowding out effect 
that government programs had on religious organizations. I 
think a lot of that was corrected during those reforms in the 
early 2000s that you cited.
    But I think providing an environment that is overly hostile 
to houses of worship disadvantages communities that need that 
help the most, here those institutions are super strong. We 
just have to acknowledge that. And when you look at the civic 
backbone of this country, you really can't disentangle it from 
the religiosity of people that are involved. I mean a lot of 
our civic activity in this country is fueled and driven by 
people that are motivated through their faith and through 
organizations that are faith-based.
    And so we certainly don't want to crowd out their good 
efforts.
    Chairman Lee. Thank you.
    Representative Heck.
    Representative Heck. Thank you, Mr. Chairman.
    Dr. Hendren, let's talk housing. Did you study the 
relationship at all between long-term homeownership and either 
upward mobility or the factors supporting strong social 
capital?
    Dr. Hendren. So homeownership in particular is not 
something that has popped out at us as one of the strongest 
correlates of upward mobility. We have done a lot of work 
looking at the rule of housing policy, though, in shaping 
upward mobility for low-income kids, most notably the impact of 
the Moving To Opportunity Experiment relating to some of the 
discussions we were having earlier about the negative impact of 
large-scale public housing investments that were disinvested in 
over the course of the years.
    Representative Heck. But that is not a homeownership 
program.
    Dr. Hendren. No, it is not a homeownership program.
    Representative Heck. So you did not study homeownership?
    Dr. Hendren. So we have looked the--if I recall correctly, 
and I could get the statistic for you exactly--we have looked 
at the relationship between upward mobility and the fraction of 
people who own a home. And my recollection is that that was not 
as strong of a correlate as some of the other things we found. 
But I could provide that for you afterwards.
    Representative Heck. I would appreciate it very much. And 
let me lay out the facts and ask you to accept them as a given 
for at least now.
    Dr. Hendren. Sure.
    Representative Heck. The fact is that demand far exceeds 
supply right. An objective analysis suggests we are about 5 
million homes short in this country. It is not uniformly 
concentrated. It's here, and it is there. We are not building 
enough homes. Construction is not keeping up with demand. Wages 
are not keeping up with prices.
    And if you actually follow that through, here's what 
happens. Because we are especially not building new starter 
homes now. The profit margins in starter homes is just not 
there as it once was in this country. So people stay renting. 
People stay renting. Occupancies go up. If occupancies go up, 
rents go up. This is all verifiable.
    If rents go up, more people become rent burdened. If more 
people become rent burdened, more people become subject to the 
need of publicly subsidized housing, and indeed more people 
become homeless.
    The fact is, notwithstanding popular discussion, the single 
largest increase in household budgets in the last 15 years is 
not the cost of a college education, and not the cost of health 
care; it's the cost of shelter. Those of us who have been 
fortunate to be in our own home for longer than that don't have 
eyes on that, don't experience that, except insofar as, I'll 
just use the random example, our 27-year-old son is still 
living upstairs. Not quite sure who that would relate to. Oh, 
yes, it would relate to my household.
    So this is all despite the fact that homeownership, which 
is now being deferred, and which is now still commonly aspired 
to by the average American, we have a situation where we are 
nonetheless one of the lower percentages of homeownership in 
modern history.
    And we also know--these are all facts--that homeownership 
is the largest net worth building tool of the average American. 
So I cannot square that it is not a significant factor in 
upward mobility with that set of facts; that it is the largest 
increase in household budgets in the last 15 years; that 
homeownership is being deferred; and that it is the largest net 
worth building tool of the average American.
    Can you square your conclusion with that set of facts?
    Dr. Hendren. Yes. So what I would say is that when you look 
across the United States, what you are referring to is more of 
what I would argue is a factor that is affecting almost every 
family. And I think that is largely true.
    Now I don't want to say for one second that the role of 
homeownership has no place in thinking about upward mobility, 
but what we can say is that when you look across the 
metropolitan areas of the United States that is not one of the 
strongest factors that jumped out to us in the data.
    Now that doesn't mean that it is not playing a factor. This 
comes back to a lot of the discussion we were having at the 
beginning of the hearing about do we know exactly what the 
right policies are for promoting upward mobility? The answer 
is, no. And it very well could be homeownership. And I don't 
think any of us want to say that that's something that is or is 
not.
    Representative Heck. Well thank you for that. And to say 
nothing of the fact that if you happened to be a person of 
color, the long-term pattern is you've been systematically shut 
out of buying in certain areas, and the manner in which credit 
is extended to low-income people of color is disproportionate 
and discriminatory over a long period of time and upward 
mobility, Dr. Hendren.
    Dr. Hendren. And today in places that were historically 
redlined, you see lower rates of upward mobility.
    Representative Heck. Thank you, sir. Yield back, Mr. 
Chairman.
    Chairman Lee. Representative Herrera Beutler.
    Representative Herrera Beutler. Thank you, Mr. Chair. It is 
interesting, I think it might have been Representative 
Schweikert's questions, that I kept hearing a theme about the 
next generation in children; if you want to change the trends, 
yes, you want to improve things for folks today, right now, but 
if we really want to change the--I think you were saying 
velocity, a little bit of Whitney Houston, which I loved--but 
it is true that if we want to change it, we have to look at 
where they're at. The formative years. You know, I'm thinking 
about girls in STEM, and by third grade if you're not 
encouraged in math and science you're going to opt out.
    We have identified some of these more sensitive times. With 
that in mind, I think this is probably to Dr. Hendren. If 
better schools and neighborhoods, similar to the conversation I 
think you just had, improve upward mobility for children, it 
seems important that families have more choices about where 
they live and where to educate themselves.
    Families in the study that you referenced used the Federal 
Housing Voucher Program to make this move, but there are a lot 
of families that do not fit into that mold and cannot access 
that for many reasons, so they are outside the Federal Housing 
Program and would like to duplicate this and move to different 
neighborhoods with greater opportunity, or greater flexibility 
to educate the kids how they want to.
    What are some ways that we can affect policy to benefit 
that and loosen those reins a bit? Or, nudge locals, you know, 
local municipalities and so on? We can't tell them what to do, 
but we certainly--I'm thinking about CBDG funds, I'm thinking 
about Housing Funds, low-income tax credit, there's a lot of 
things that we do have some rein on.
    Dr. Hendren. No, I think that is exactly right to think 
about. I think, you know, outside of the voucher program, 
thinking about the LYTEC program, where those investments are 
being made, and are they being made from the perspective of 
trying to improve upward mobility for children? I don't think 
that's the common lens that's used for guiding those 
investments today. And so how do we shape at a national level 
the incentives for those local decisions?
    And within the voucher program, I do think there's an 
additional discussion about the ability to make opportunity 
moves to better neighborhoods for your children using a 
voucher. There's a lot of discrimination that is faced by 
voucher holders, by people of color, by people of different 
backgrounds. And I think policy at a national level that can 
help break down some of those barriers for families is 
important.
    Representative Herrera Beutler. Alright, I yield back. 
Thank you.
    Chairman Lee. Representative Beyer.
    Representative Beyer. Senator, thank you very much. My 
friend, Congressman Heck, left. I wanted to pile on on the 
housing issue because I noticed one of the recommendations, I 
think maybe it was Dr. Sharkey's, about ending the mortgage 
interest deduction and reinvesting all of that. Obviously our 
realtor friends won't be very happy with that. But the whole 
notion I think of having the mortgage introduction in the first 
place was that the American Dream, that every American wants to 
own their own home, that this would stimulate homeownership.
    And I had the advantage of living in Switzerland for four 
years where homeownership was 30 percent only, relatively low, 
but 80 percent of the people lived in apartments. And with the 
increased urbanization of America, what we are seeing in so 
many places is increased urbanization and people moving into 
apartments, condos, things like that.
    By the way, the net worth of the average family in 
Switzerland is much higher than it is here, as is the life span 
and the happiness. Can you dive, either, any of you, dive a 
little deeper into--yes, right now homeownership is an 
essential part of our net worth. Does it need to be? And is 
this now the time in an urbanized America to rethink 
homeownership and the stimulus that we put to it?
    Dr. Sharkey. Well let me start. Thank you for the question, 
Representative. So I think the question, the broader question 
that I think about is how do we invest in housing? And that is 
where my critique of the mortgage interest deduction comes in. 
This is a regressive policy. This is a policy that 
overwhelmingly benefits the highest income Americans and 
encourages people to buy the most expensive home they can. 
Okay?
    So when we think about how we want to invest our Federal 
resources in housing, I would prefer a policy that does not 
encourage people to buy the most expensive home in the most 
exclusive neighborhood they can, and then to do whatever 
possible to make sure that property values are stable, or that 
they increase by keeping other people out, by building fewer 
homes around them.
    And so that is the pattern of development that we have 
seen, that there are strong incentives for people to invest 
heavily so that their home is their main source of assets. And 
then they have the very strong incentives to reduce development 
around them, to make sure that affordable housing is not built 
because people are concerned about property values.
    So my broader approach is, if we are going to invest in 
housing, I think we should invest in affordable housing. I 
think we should try to give the opportunity for homeownership 
or for affordable rental housing to a larger segment of the 
population.
    Representative Beyer. Mr. Quinonez, you talked about the 
Mission Asset Fund. How participatory have the community banks, 
the credit unions, and the big banks been with you in terms of 
providing the capital necessary to grow that?
    Mr. Quinonez. Yeah, we've got a lot of backing from 
financial institutions to do our work, frankly. You know, 
Chase, Citibank, you know, Bank of America, all those 
institutions have supported our work, because ultimately they 
are the ones that actually are benefiting from this work. Which 
is, you know, we are expanding the pool of eligible borrowers 
so that they can go into those institutions and get those loans 
to buy those homes, or get loans to buy cars, or invest in 
their businesses.
    And so I make sure to remind them of that, that they are 
there to--and it is a good thing, because we actually want our 
clients to engage with those mainstream financial institutions. 
But we also want them to support the actual work that goes 
behind it.
    But to your prior question about homeownership, I also 
would love to sort of--for us to sort of think about renters, 
to sort of say how can we elevate renters and how they manage, 
because right now there's a lot of benefit that we accrue to 
homeowners, and by way of the interest deductions and so forth, 
but by renters themselves have very little benefit. And so even 
making the rent payments don't get recognized.
    So I mentioned, you know, the idea of including rental 
payments in credit reports could be one of those other ways of 
incentivizing or supporting that as a housing strategy.
    Representative Beyer. You had a couple of bullet points 
about Congress should clarify that U.S. citizenship is not a 
prerequisite for a bank account. Do banks think it is a 
prerequisite now?
    Mr. Quinonez. So right now, you know, we have heard from 
some of our clients, some of our colleague organizations where 
some banks are actually asking for proof of their legal status, 
either proof that they're U.S. citizens, or proof that they are 
legal permanent residents. So even just to maintain their 
checking account.
    There are a lot of other financial products that require a 
Social Security number, and because of that requirement that 
actually leaves out a lot of legal permanent residents. Others 
may not have that. They may have an ITIN number, they have 
other things, but the idea that to create a financial product 
with a requirement of a Social Security number actually does 
leave out a lot of--millions of people in America from 
accessing those services.
    Representative Beyer. Thank you very much. Mr. Chairman, I 
yield back.
    Chairman Lee. Thank you.
    Mr. Schweikert.
    Representative Schweikert. Thank you, Mr. Chairman. I will 
do this quick.
    Mr. Quinonez, there are actually data analytics out there 
that actually do create sort of an A-B alternative credit 
score, a lot of alternative lenders already use that----
    Mr. Quinonez. Yes.
    Representative Schweikert. Where some of the barriers, 
actually can Fannie, Freddie, others, also look at an A-B type 
credit score system. So the person that's traditionally not 
been bankable, but has always been really good on their 
cellphone payment, this and that, and those actually have 
existed for years now.
    Mr. Quinonez. That's right.
    Representative Schweikert. We took a run at that a few 
years ago in the Financial Services Committee, but were not 
able to get it through.
    There seems to be--and I know that it is a snapshot so it 
is hard for you all to do your analytics. In the last 
particularly 12-18 months, you know, being someone--and the 
staff right behind me, she is incredibly smart. We have been 
trying to do digging into the U-6 data, some of the other 
things that we've seen, the employment data, and the 
populations that all of a sudden are gaining work, and some of 
the change in wages.
    Are you actually seeing right now this economic growth 
cycle, this employment cycle, is starting to create some real 
opportunities, or some movement with populations that, as 
economists or demographers, if it were just a couple of years 
ago we were saying this population is probably part of our 
permanent underclass? You know, I obviously have an intense 
interest in economic mobility.
    Dr. Hendren, are we starting to see anything at least as a 
snapshot in this current cycle?
    Dr. Hendren. So I think the improvement in median wages 
recently suggests that there are more children in these current 
years that are earning more than their parents than there were 
several years ago. I think that is likely true. And so I think 
that is obviously a good thing.
    As we think about coming back to the homeownership 
question, the role of these financial products, I think the 
idea of creating pathways for people to grow up--climb up the 
formal credit system is one way to continue to make that broad-
based.
    Representative Schweikert. Well, and I know I am jumping on 
my own question, but the homeownership housing policy is 
something I have always been very interested in, is more 
complicated. If it is 2009-10, all of a sudden the fact we 
bought a house, it becomes crushing to mobility because you 
can't sell it, or you are upside down on the mortgage.
    So we have to sort of understand that a vibrant housing 
market does also create the ability to I can sell and move, I 
can chase a job, and those things.
    So it turns out it is more complicated than just the fact 
it is a forced bank account. Does anyone else see actually some 
interesting things in the data runs of the last 12 months?
    Mr. Quinonez. I will share just one quick bit. What we have 
seen with our clients is that there has been some improvements 
on their incomes. But what was most interesting is how they 
managed to couple their wages with government programs, or how 
they managed the money within their family to make ends meet.
    And so the idea that the more choice, or the people that 
have more strategies for managing income, those are the ones 
that are better off, rather than people that have just very 
limited or one strategy.
    Representative Schweikert. Mr. Chairman, he may have said 
the magic word, ``creating options and choice,'' instead of a 
sort of bureaucratic command/control may be the solution for 
that optionality that everyone should have. With that, I yield 
back. Thank you all.
    Chairman Lee. Thank you, Congressman Schweikert. I want to 
thank each of our witnesses. You've been terrific, the 
testimony you've prepared, both in writing your prepared 
statements today and your answers to our questions have been 
enormously helpful. And I thank you for coming. This hearing 
stands adjourned.
    [Whereupon at 11:52 a.m., Tuesday, April 30, 2019, the 
hearing was adjourned.]

                       SUBMISSIONS FOR THE RECORD

Prepared Statement of Hon. Mike Lee, Chairman, Joint Economic Committee
    Good morning, and welcome to this hearing of the Joint Economic 
Committee.
    To begin, I'd like to welcome back the members of this committee 
from the previous Congress, as well as our new members, and I'd like to 
congratulate Representative Maloney on her return as Vice Chair this 
Congress. I look forward to working with all of you.
    The topic of this hearing--expanding opportunity--is in many ways a 
quintessentially American topic. As Abraham Lincoln put so eloquently, 
the leading object of our government has been to ``elevate the 
condition of men--to lift artificial weights from all shoulders--to 
clear the paths of laudable pursuit for all--to afford all, an 
unfettered start, and a fair chance in the race of life.'' In other 
words, to remove barriers to opportunity.
    Often, however, policymakers have a limited understanding of what 
opportunity is. We sometimes see opportunity purely in terms of 
economic outcomes--namely, educational or financial success. And 
moreover, we can view financial capital as the only important source of 
wealth on which opportunity depends.
    Economic wealth is no doubt important, and it is right that the 
Federal Government should seek to remove barriers to it. But to see 
opportunity exclusively in those terms fails to capture an invaluable 
source of wealth on which human beings draw, and one that is in fact 
key to expanding opportunity: social capital.
    Social capital is the wealth produced from our associational life--
what we do together. It inheres in the web of social relationships 
through which we pursue joint endeavors, and it comes from our 
families, communities, workplaces, churches, rotary clubs, and little 
leagues. And it is through these institutions of civil society that we 
make a happy and productive life with other people. They shape our 
characters and capacities, help us address the challenges we face in 
life, and provide us with meaning and purpose.
    For the past two years, the ``Social Capital Project'' of the Joint 
Economic Committee has documented trends in our associational life and 
its distribution across the country. It has studied the evolving 
nature, quality, and the importance of our associational life and the 
relationship it has to different problems our Nation is facing.
    The Joint Economic Committee has recently undertaken the work of 
exploring the connection between opportunity and social capital. And it 
is has found that opportunity is largely dependent on social capital, 
available to us through the relationships we have with our families, 
friends, neighbors, fellow congregants, and coworkers. These 
relationships are crucial for both our economic opportunities and our 
opportunity for producing and sustaining a vibrant, healthy, and 
meaningful community life.
    And so the goal of the JEC is now to craft policies rooted in 
social capital--policies that will expand opportunity for all Americans 
by strengthening families, communities, and civil society.
    This undertaking will not be without its challenges. After all, 
social capital is not something we can see, touch, or directly measure. 
In addition to difficulties of measurement, there are also difficulties 
in establishing its causal importance. And while policy can certainly 
help promote the bases for a flourishing civil society, we must also 
inevitably confront its limits, and determine when and to what extent 
the Federal Government has a part to play in this project and the 
extent to which it is inflicting harm.
    To bound the types of policies under consideration, and based on 
the past two years of its research, the Project has identified five 
broad goals related to opportunity: making it more affordable to raise 
a family, increasing how many children are raised by happily married 
parents, connecting more people to work, improving the effectiveness of 
investments in youth and young adults, and rebuilding civil society.
    Our distinguished panelists will help us to shed light on these 
issues and questions today. I look forward to hearing their testimony, 
and to seeing the fruits of our discussion going forward.
    I now recognize Senator Hassan for opening remarks.
                               __________
                               
 Prepared Statement of Hon. Margaret Wood Hassan, a U.S. Senator from 
                             New Hampshire
    Thank you, Chairman Lee, and thank you for holding a hearing in 
which we can examine innovative ways to increase economic opportunity 
in all of our communities.
    And I want to thank all of the witnesses for being with us today.
    I want to focus today on how we can create opportunity for 
entrepreneurs by increasing their access to social connections and 
personal networks--or, in other words, by helping build their ``social 
capital.''
    Entrepreneurs frequently use their personal connections to identify 
business opportunities, find community mentors, and secure the capital 
that they need to launch and grow their startups.
    However, not everyone starts off with connections to the business 
community, and entrepreneurs outside these informal networks can find 
it harder to access vital resources like financial counseling and 
capital investment.
    This presents particular challenges for women entrepreneurs.
    Last year, the National Women's Business Council issued a report 
that found that women's personal networks have fewer connections with 
ties to resources like financial capital.
    This is also an acutely important issue for entrepreneurs in rural 
areas of my State.
    In rural areas, there is often extremely limited access to high 
quality, affordable broadband internet, which is an absolute necessity 
for any business hoping to compete in the modern economy.
    Limited broadband access slows entrepreneurship and contributes to 
the so-called ``brain drain''--a problem for rural areas that I know, 
Mr. Chairman, you focused on in a report on social capital released 
just last week by this Committee.
    Fortunately, there are successful initiatives that Congress can 
build on.
    In New Hampshire, we have many non-profit organizations and 
business incubators that are leveraging community interest and Federal 
investments to build social capital for entrepreneurs from all walks of 
life.
    New Hampshire's Small Business Development Center provides business 
advertising and mentorship, for example.
    Our Regional Development Corporations provide business gap 
financing, and we have startup accelerators that tailor their services 
in innovative ways.
    So there are many programs already underway in the Granite State 
that can serve as models for our efforts to expand opportunity for 
entrepreneurs, and I expect there are models in lots of other states as 
well.
    In my view, having the opportunity to start and grow a business 
shouldn't be all about ``who you know.''
    Equality of opportunity for entrepreneurs should be predicated on a 
willingness to work hard to transform an innovative idea into a 
reality.
    The bottom line is that we must do more to level the playing field 
and help aspiring business owners build social capital.
    Our country was founded on the idea that nurturing the talent and 
the energy of every person promotes human dignity and ignites a vibrant 
and competitive economy, and government certainly has a role in 
ensuring that we do just that.
    When we bring people in from the margins, our communities, our 
democracy, and our economy all benefit; we thrive and we build a strong 
future for our children.
    So, I look forward to our witnesses' testimony today on how we can 
help all Americans build social capital. Thank you, Mr. Chairman.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

  Question for the Record for Dr. Hendren Submitted by Senator Hassan
    1. As I noted during the hearing, social connections are often 
critical for entrepreneurs seeking the counseling, investment, and 
other resources necessary to start and grow a small business.
    Given the unique challenges faced by entrepreneurs with limited 
social capital--such as women entrepreneurs and entrepreneurs in rural 
areas lacking quality broadband internet--what are some specific steps 
that you would recommend Congress take in order to encourage the 
development of social capital and promote economic opportunity in 
disadvantaged communities?
    Thank you for the opportunity to discuss this question. On the one 
hand, you can work to promote entrepreneurship of adults interested in 
pursuing such a career. However, our work would suggest one should also 
focus attention on cultivating the entrepreneurial opportunities and 
skills in the next generation. At this point, we don't know the best 
policies to do this, but we do know that the development of ideas, 
starting of a business, and creation of economic opportunity is rooted 
in childhood environments. I would consider the encouragement of more 
programs in schools to help promote entrepreneurship. I would also 
consider after-school programs to promote a greater understanding of 
how to start a business. I would also support programs that facilitate 
greater summer youth employment programs, perhaps helping youth work in 
small businesses, which would allow them to be exposed to the type of 
internship opportunities children from more affluent backgrounds use to 
develop social capital during childhood and succeed later in life. To 
be sure, these policy suggestions are speculative at best, and so I 
would also encourage implementing policies in this area that are 
rigorously tested (e.g., through randomized control trials). But 
nonetheless, I do believe a greater focus on growing the opportunities 
available for the next generation holds the most promise for addressing 
this important issue.
                               __________
  Question for the Record for Dr. Streeter Submitted by Senator Hassan
    1. As I noted during the hearing, social connections are often 
critical for entrepreneurs seeking the counseling, investment, and 
other resources necessary to start and grow a small business.
    Given the unique challenges faced by entrepreneurs with limited 
social capital--such as women entrepreneurs and entrepreneurs in rural 
areas lacking quality broadband internet--what are some specific steps 
that you would recommend Congress take in order to encourage the 
development of social capital and promote economic opportunity in 
disadvantaged communities?
    Because it is difficult to jump-start economic activity in 
disadvantaged communities through traditional tactics such as luring a 
company with tax credits, it seems regional strategies are more 
promising. Finding ways to connect disadvantaged communities with 
growing areas within a distinct geographic region is more likely to 
help the former, rather than focusing on individual communities by 
themselves. This is typically how outlying areas around a central hub 
of economic activity, such as small towns outside a growing urban area, 
continue to remain economically viable themselves. Factoring this 
reality into our policymaking would be useful.
    One example where this kind of thinking has been implemented as 
policy is in the Regional Cities Initiative in Indiana (https://
iedc.in.gov/programs/regional-cities-initiative/home). By way of full 
disclosure, I was involved in the conception and design of the 
initiative under then-Governor Mike Pence. The reason we pursued the 
Regional Cities strategy was for the foregoing reasons above--namely, 
the uncomfortable but sober acknowledgement that some towns and 
counties simply would not bounce back on their own. The initiative 
provides matching funds to regional plans that connect disinvested 
areas with the regional city around which most of the economic activity 
in that part of the State occurs. This kind of structure gets people at 
the community level within a region thinking more broadly and 
strategically about what they have to offer the region, and forming 
relationships to that end.
    These kinds of regional partnerships could flourish more broadly if 
incentives within our HUD-based and workforce (DOL) funds, for 
starters, pushed community leaders at the State level in this 
direction.
                               __________
   Question for the Record for Mr. Quinonez Submitted by Vice Chair 
                                Maloney
      How would you address the problem of bank closings and 
the lack of banking services in low-income communities? How could 
financial institutions, nonprofits and governments work together to 
give residents access to those services?

    Banks are closing branches at record rates. Between 2009 and 2018, 
banks closed 111,251 branches all across the country, a drop of 11.4%, 
leaving low-income families in urban and rural communities in what is 
now known as ``bank deserts.'' \1\ While analysts attribute industry-
wide market forces, consumer preferences, and technology as drivers of 
this trend, the loss of bank branches has been attributed to worse 
financial outcomes in the surrounding neighborhoods.\2\
---------------------------------------------------------------------------
    \1\ Top Branch Trends for Banks and Credit Unions in 2019.'' The 
Financial Brand. Retrieved on 5-13-2019 from: 
    \2\ Consider, for example, the evidence provided by the author of 
this paper, linking bank branch closings with loss of credit within a 
six-mile radius: Nguyen, HLQ. ``Are Credit Markets Still Local? 
Evidence from Bank Branch Closings.'' American Economic Journal: 
Applied Economics 2019, 11(1): 1-32 Retrieved on 5-13-2019 from 
---------------------------------------------------------------------------
    There is an opportunity to reinvent bank branches into ``Financial 
Community Centers'' that can prevent the proliferation of bank deserts 
and preserve access to essential financial services.
    The idea is simple: In neighborhoods with a dearth of financial 
services or where branch shutdowns are imminent, banks could partner 
with community-based organizations who are already present in the area 
to repurpose their branches into Financial Community Centers. Depending 
on the particular needs and limitations of each branch, Financial 
Community Centers could provide much-needed services like:

      Smart ATMs to allow consumers to access their accounts. 
In most cases, banks could simply leave their ATMs operational and 
agree to service them as they do with smaller branches in grocery 
stores.
      In-person bank tellers. Tellers employed by the bank 
could be present to assist consumers in person, or the bank could 
enable nonprofit staff members to help consumers open new accounts, 
apply for credit, and access money orders and other services from their 
existing accounts.
      Ongoing financial education and coaching services to 
consumers, including guidance about how best to leverage the financial 
and banking products they already have.
      International money transfer products, allowing clients 
to send remittances to family abroad.
      Business incubators programs, homeownership programs, and 
referrals to other critical services pertinent to that specific 
community. Banks could even fund some of this programming using dollars 
from the Community Reinvestment Act.

    Partnerships like these leverage the unique strengths of nonprofits 
and financial institutions--giving community organizations the tools to 
better serve the clients with whom they already have built 
relationships and trust, and allowing banks to more profitably deliver 
high-quality products to a larger customer base.
    Such partnerships are not out of the ordinary. In fact, some banks 
and communities have already struck partnerships, presenting viable 
models for what more that could be done with the right guidance and 
direction from Congress.
                               __________
  Question for the Record for Mr. Quinonez Submitted by Senator Hassan
    1. As I noted during the hearing, social connections are often 
critical for entrepreneurs seeking the counseling, investment, and 
other resources necessary to start and grow a small business.
    Given the unique challenges faced by entrepreneurs with limited 
social capital--such as women entrepreneurs and entrepreneurs in rural 
areas lacking quality broadband internet--what are some specific steps 
that you would recommend Congress take in order to encourage the 
development of social capital and promote economic opportunity in 
disadvantaged communities?
    Traditional employment alone, it turns out, does not lead to 
financial security for the working poor. Infrequent hours and low, 
stagnant wages have made entrepreneurship an appealing alternative 
despite higher risks. Many entrepreneurs are choosing to monetize their 
skills in solopreneurship, contract or gig work, side jobs, and other 
forms of self-employment. These ``nano-ventures''--small, local, and 
often informal entrepreneurial endeavors--are an important, 
increasingly popular source of employment in the U.S.\1\
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    \1\ See, for example, Gallup's estimate that over a third of U.S. 
workers participate in the Gig Economy: 
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    Nano-ventures face many of the same challenges as small business, 
including working with tight budgets, accessing capital, marketing and 
building connections, and managing high levels of risk and uncertainty 
in their personal and professional lives.
    Many of these entrepreneurs struggle to navigate hurdles since 
existing services and policies are not designed for them. Much of the 
social services infrastructure is designed to provide safety nets for 
those who are traditionally employed, and business counseling and 
capital is geared towards larger-scale enterprises, leaving nano-
ventures without the support they need to succeed. For example, groups 
like the Small Business Administration (SBA) provide small businesses 
(formally incorporated businesses with up to 500 employees and under 
$7.5 million annual receipts \2\) with high levels of support, 
including low-interest loans averaging over $100,000; however, the 
corresponding high bar to entry, including needing to submit detailed 
business plans and financial projections, makes them inaccessible to 
nano-ventures.
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    \2\ See SBA's site for more nuance around this definition: 
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    There is an opportunity to expand programs that are already helping 
small businesses,\3\ to be inclusive of, and accessible to nano-
ventures. This could include expanding the eligibility criteria to 
include those who are self-employed and just starting up, or offering 
smaller supports with easier application processes. These services 
could be delivered through local ``Financial Community Centers,'' \4\ 
open to nano-ventures, micro businesses, and small businesses alike. 
These centers could create opportunities for human interaction where 
professional relationships can form, and be the focal point for 
Congress to support entrepreneurs in many ways:
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    \3\ For example, like the Small Business Administration, Community 
Development Financial Institution Fund, Community Development Block 
Grants, Workforce Investment Act, and Temporary Assistance for Needy 
Families, which most states already use to support small businesses: 

    \4\ For more details about Financial Community Centers, see the 
answer we provided to Vice Chair Maloney's question about access to 
banking services.

      Dedicate space for members to network with each other, 
share resources, collectively address challenges particular to their 
industry or locality, and even use their numbers to purchase group 
insurance plans at lower rates.\5\
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    \5\ Freelancer collectives that already exist tend to give their 
members many of these same benefits: See, as an example, ``The Rise of 
the Freelance Class'' 
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      Offer counseling and educational services to nano-
ventures--for instance, in choosing the appropriate designation 
(contractor, LLC, corporation, etc.), separating personal and business 
finances, developing business plans and financial documents, and filing 
taxes
      Provide ``nano-loans''--affordable, small-dollar capital 
with fewer application requirements and less stringent underwriting 
than the typical small business loan--to support the development of 
nano-ventures and close the gap in credit availability between the 
median $5,000 personal credit card limit and the minimum $50,000 SBA-
backed small business loan.
      Extend tax incentives, such as the Qualified Business 
Income deduction and write-offs for allowable business expenses, to 
nano-ventures; eliminate disincentives like higher social security 
taxes on entrepreneurial income; and extend VITA tax preparation 
assistance to nano-ventures
      Offer alternatives to traditional work-based safety nets 
\6\ like portable and entrepreneur-owned benefits, government-sponsored 
retirement accounts, and tax write-offs for healthcare and other 
insurance payments
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    \6\ An important part of supporting entrepreneurship is thinking 
about how entrepreneurs, especially those with nano-ventures, can 
access financial products that traditionally are made available through 
the workplace. See, for example: 
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      Amend means testing for public benefits to make it easier 
for nano-ventures to report their true personal income. Like small 
businesses, nano-ventures should be able to exclude business income and 
assets so that those who are self-employed don't have to worry about 
business ventures affecting their families' eligibility for social 
safety net programs.
      Eliminate asset limits and benefit cliffs altogether, to 
encourage more people to pursue entrepreneurship.
    Congress could also invest in research to better understand the 
role that nano-ventures play in expanding opportunities for financial 
empowerment, and the strengths and needs of these entrepreneurs. With 
the right action, we can support people in building economic 
opportunity through entrepreneurship and thriving in our rapidly 
evolving labor market.
  

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