Michael Sheradden's compounding interest: two decades ago an obscure academic revolutionized thinking about poverty. Now his insights might just save the middle class.

• Author: Schmitt, Mark
• Position: THE FUTURE OF SUCCESS

In 1991, a professor of social work at Washington University named Michael Sherraden published a book called Assets and the Poor. Sherraden was neither a big name nor a natural self-promoter, the book was published by an obscure academic press, and his topic was not earth-shattering--he proposed a new approach to ameliorating poverty by helping poor families save for the future, as an alternative to programs that simply provided enough income for day-to-day sustenance. But the book caught on quickly in Washington. In a city susceptible to intellectual fads, what's even more remarkable is that Assets and the Poor sparked the emergence of something that has lasted, and that has come to be known over the ensuing twenty years as the asset movement. Its adherents grew to include dozens of academics, policy entrepreneurs in nonprofits and foundations, mayors, governors, and members of Congress. The story of Sherraden's book shines an unusually clear light on an often obscure part of the policymaking process. Everyone knows how a bill becomes a law. But how does an idea become a cause?

It started in 1991, when William Raspberry, then a columnist for the Washington Post, latched on to the ideas in Sherraden's book. According to Bob Friedman of the Corporation for Enterprise, Raspberry's column led Jack Kemp, then secretary of housing and urban development under President George H. W. Bush, to seek out the book, and "wave his dog-eared copy around at speeches." The converging enthusiasm of Raspberry, a liberal columnist; Kemp, a free-market conservative with an unusual interest in poverty and race; Friedman, an innovator working to develop self-employment opportunities as an anti-poverty strategy; and Will Marshall of the Progressive Policy Institute, the moderate Democratic think tank that had published Sherraden's early work, showed the broad appeal of the idea.

Sherraden made four points: First, poverty was characterized not just by a lack of income, but by a lack of assets, such as small amounts of savings that could cushion a financial setback. (Disparities in wealth by race were, and still are, far wider than disparities of income.) Second, poor people, with help and encouragement, could save and would be far better off if they did. Third, the existing safety net contained significant traps, in the form of asset limits that prohibited recipients from saving much or even owning a reliable car without losing food stamps or other benefits. Finally, he demonstrated that government programs to encourage assets were not new, but were overwhelmingly tilted toward the middle class and above, in the form of the home mortgage interest deduction, Individual Retirement Accounts, and dozens of other policies.

These four themes resonated on different parts of the political spectrum. Kemp and a handful of creative conservatives saw the possibility of "empowerment," or...