Tag Archives: economy

Half of All Public School Kids in Poverty? Be Careful.

by VirgieBenjafiel Posted on January 17, 2015

Mother Jones

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What’s up with the copy desk at the Washington Post? Here’s a new story about our public schools:

Majority of U.S. public school students are in poverty

By Lyndsey Layton

For the first time in at least 50 years, a majority of U.S. public school students come from low-income families, according to a new analysis of 2013 federal data, a statistic that has profound implications for the nation.

The Southern Education Foundation reports that 51 percent of students in pre-kindergarten through 12th grade in the 2012-2013 school year were eligible for the federal program that provides free and reduced-price lunches. The lunch program is a rough proxy for poverty, but the explosion in the number of needy children in the nation’s public classrooms is a recent phenomenon that has been gaining attention among educators, public officials and researchers.

The headline is wrong, even though Layton gets the facts pretty much right: 51 percent of kids are eligible for free or reduced-price lunches, which are available only to low-income families. That’s an important story. But participation in the federal lunch program is, as she notes, only a rough proxy for poverty: you qualify if you have a family income less than 185 percent of the poverty line. For a family of four this comes to about $44,000, which certainly qualifies as working class or lower middle class, but not poverty stricken.

But it’s more complicated than that! The 51 percent number is attention grabbing because it’s a majority, but perhaps the more important number is that 44 percent qualify for free lunches. For a family of four, that’s $31,000, just barely over the poverty line. If you got rid of the word “majority,” it would be safe to use the phrase “near poverty.” And frankly, I wouldn’t be bothered much if you just called it poverty, even if that’s not quite the official federal government definition.

But wait! It’s even more complicated than that—and this part is important. On the one hand, lots of poor kids, especially in the upper grades, don’t participate in school lunch programs even though they qualify. They just don’t want to eat in the cafeteria. So there’s always been a bit of undercounting of those eligible. On the other hand, a new program called the Community Eligibility Provision, enacted a couple of years ago, allows certain school districts to offer free meals to everyone without any proof of income. Currently, more than 2,000 school districts enrolling 6 million students are eligible, and the number is growing quickly. For example, every single child in the Milwaukee Public School system is eligible. Overall, then, although the official numbers have long undercounted some kids, CEP means they now increasingly overcount others. Put this together, and participation in the school lunch program becomes an even rougher proxy for poverty than it used to be—and any recent “explosion” in the student lunch numbers needs to be taken with a serious grain of salt. This is especially true since overall child poverty hasn’t really changed much over the past three decades, and if you use measures that include safety net programs it’s actually gone down modestly since the end of the Reagan era.

This is, perhaps, a bit too much nitpicking. Unfortunately, we’re forced to use school lunch data as a proxy for poverty among school kids because we don’t really have anything better. What’s more, child poverty increased during the Great Recession and God knows that I’m all in favor of calling attention to it. In a country of our wealth it’s a national scandal by any measure, and a massive problem that infects practically every aspect of education policy.

Still, it’s a subject that can’t easily be reduced to a single school lunch number. Both headlines and copy should do their best to treat the subject accurately.

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Half of All Public School Kids in Poverty? Be Careful.

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President Obama Starts to Focus on the Middle Class

by JacobHaralson Posted on January 9, 2015

Mother Jones

One of the hot topics of conversation in progressive circles these days is the middle class. Democrats support plenty of programs that provide benefits to the poor (Medicaid, minimum wage, SNAP, etc.), but what about programs that benefit the middle class? What do Democrats do for them?

By coincidence, this week provides a couple of examples of programs that are targeted more at the middle class than the poor. First up is President Obama’s proposal to fund two years of free community college for everyone. As Libby Nelson explains, Pell Grants already make community college free for most low-income students:

The most radical part of Obama’s free community college proposal isn’t that it’s free — it’s that it’s universal….So the best way to look at the Obama free college plan is as a promise to the middle class. Families who earn too much for federal financial aid but aren’t wealthy enough to afford thousands of dollars of college bills are rightly feeling squeezed as tuition prices rise.

This might not be the most effective way to spend federal money. But it’s politically smart. To see why, look at pre-K. Most of the research on pre-kindergarten effectiveness is about whether it helps poor children catch up to their peers from wealthier families. But in 1995, Georgia decided to use lottery winnings to make free pre-K available not just to the poor, but to any family who wanted to join.

Two decades later, Georgia’s universal pre-K program is very popular, championed by liberals and conservatives alike. And the reason it’s managed to stay relatively apolitical and noncontroversial is that it’s universal, Fawn Johnson wrote in National Journal last year. A program just for the poor “would be about class warfare,” one Georgia Republican told her.

Elsewhere, Greg Sargent notes that new rules governing overtime wages could benefit middle-class workers:

Obama will soon announce a rules change that governs which salaried workers will get time-and-a-half over 40 hours under the Fair Labor Standards Act….“The spotlight is now on raising wages,” AFL-CIO president Richard Trumka told me. “Raising wages is the key unifying progressive value that ties all the pieces of economic and social justice together. We think the president has a great opportunity to show that he is behind that agenda by increasing the overtime regulations to a minimum threshold of $51,168. That’s the marker.”

….A lower threshold could exclude millions. In raising his voice, Trumka joins Sherrod Brown, Elizabeth Warren, and other progressive Senators who have urged a threshold of $54,000, and billionaire Nick Hanauer, who is urging $69,000. The Economic Policy Institute estimates that raising the threshold to a sum approximating what the liberal Senators want could mean higher overtime pay for at least 2.6 million more people than raising it to $42,000. EPI says setting it at over $50,000 could mean over six million people, or 54 percent of salaried workers, are now covered.

Both of these proposals would primarily benefit middle-class workers which makes it unlikely that either of them will get any support from Republicans or from the business community. But they’re worth pursuing anyway. At least they let everyone know whose side each party is on.

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President Obama Starts to Focus on the Middle Class

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Road Funding Isn’t Broken. Why Fix It?

by JarrodLNFcyejkz Posted on January 6, 2015

Mother Jones

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James Pethokoukis is skeptical that even with gasoline prices plunging toward the two-dollar mark, Congress will consider raising the gasoline tax. Me too. But then there’s this:

Of course, another idea — as transportation experts Matthew Kahn and David Levinson wrote in a 2011 report — is to just freeze the gas tax as is and use revenue solely to bolster existing roads and bridges, including the addition of new pricing schemes to reduce congestion. Funding for new capacity would come from a new federal highway bank, which would loan money to states contingent on meeting stringent performance tests and demonstrating ability to repay the loans. Other options include axing the tax completely and letting states fund their own projects or public-private partnerships. How about some fresh, innovative thinking on infrastructure rather than defaulting to the status quo?

There are plenty of places where we could use fresh thinking. But is this really one of them? It’s infrastructure development. The simplest and most straightforward way of doing it is to raise money via taxes and then spend it. Loans aren’t innovative. Dumping it all on the states isn’t innovative. Public-private partnerships aren’t innovative.

In fact, all of this is the opposite of innovative. They’re just Rube Goldberg mechanisms to avoid transparent taxation and spending, something that we already do way too much of via subsidies and tax expenditures. Here’s my idea of innovative:

  1. We figure out how much we want to spend on transportation infrastructure.
  2. We decide which taxes are the fairest, most efficient funding source.
  3. We set tax rates to match (1) and (2).
  4. We spend the money.

That’s clear and transparent. It’s reasonably efficient. It’s an appropriate way to fund public goods. What’s not to like?

Generally speaking, my point here is that just because something is traditional doesn’t mean it’s a dinosaur. We should pick and choose our targets for reform and innovation, not use them merely as buzzwords. If you want to build a road, nothing much has changed over the past century. You just need to raise the money and then break ground. You might want to do more or less of it, or build different kinds of roads, or build roads to different places. But funding them? We already know how to do that. Why muck it up?

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Road Funding Isn’t Broken. Why Fix It?

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Chart of the Day: Hooray for the Economy!

by ChristeCarder Posted on December 30, 2014

Mother Jones

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Yesterday featured several gloomy posts—strictly a coincidence, I assure you—so today here’s some good news. Matt Yglesias passes along the word that for the first time since the Great Recession, Gallup’s Economic Confidence Index broke into positive territory this week. Here’s Gallup’s explanation for the steady rise since mid-September:

While various factors likely contribute to the rise in economic confidence, the weekly average price of gas in the U.S. began to fall precipitously in the late summer and, over the last four months, the price has fallen by nearly 30% — an economic boon to most Americans. In fact, for the week of Dec. 22, the average price of gasoline was as low as it has been since the first half of 2009. Additionally, the U.S. stock market rose in December to its highest levels in history while Gallup’s unemployment rate fell to the lowest since its daily tracking began in January 2008.

So there you have it. A little late to help Democrats in the November midterms, but not too late for 2016.

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Chart of the Day: Hooray for the Economy!

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How Much Would You Pay For $4,905 In Pension Benefits?

by JanetTTWWo Posted on December 24, 2014

Mother Jones

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Adam Ozimek points us to some recent research suggesting that people don’t actually value pensions very highly:

The study utilizes a change in policy in Illinois that allowed teachers to purchase more pension benefits in exchange for a one-time fee. This allowed the determination of how much teachers are willing to pay for marginal pension benefits. The authors found that on average, teachers valued each $1 in marginal pension benefits at $0.20.

This is useful information for two reasons. First, it suggests states may be able to save money and make teachers better off by buying back pension obligations in exchange for current lump sum payments. Second, it suggests that for districts looking to cut costs, decreases in benefits do not need to be offset with equal dollar value increases in current pay in order to maintain labor supply.

(Yes, that’s 20 cents for one dollar of present value. Specifically, the study finds that on average, teachers are willing to pay only $1,000 for benefits that the pension fund has to pay $4,905 to purchase.)

But does this mean that Illinois teachers would snap up a $1,000 lump sum today in return for a decrease of $4,905 in future pension benefits? Not so fast, pardner. A combination of status quo bias, loss aversion, and the endowment effect suggests that things wouldn’t be so easy.

Status quo bias is just what it sounds like: we all tend to succumb to a sort of emotional inertia that favors whatever benefits we happen to be getting at the moment. Loss aversion is the well known effect that people work harder to avoid the loss of $X than to secure the gain of $X. And the endowment effect causes people to ascribe greater value than normal to things they own, solely because they happen to own them. Put all these things together, and it’s highly unlikely that Illinois teachers would be willing to sell off a dollar of benefits they currently get in return for 20 cents today. In fact, it’s quite possible they’d only sell it off for more than a dollar.

Of course, this applies only to workers who are already vested in a pension system. For brand new workers, given a choice of salary today vs. pension tomorrow, it’s quite possible they’d undervalue the pension. In fact, I’d say it’s almost inevitable, since most of us do exactly that. Nonetheless, I’m skeptical that this research tells us much about either the size of this effect or whether it would be good public policy to even offer the option. The circumstances are just too different.

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How Much Would You Pay For $4,905 In Pension Benefits?

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Let Us Now Praise Obama’s Economic Policies

by ChristoSlama Posted on December 23, 2014

Mother Jones

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Steve Benen evaluates recent economic news by the standards of Republican promises from two years ago:

The Romney Standard: Mitt Romney said during the 2012 campaign that if Americans elect him, he’d get the unemployment rate down to 6% by 2016. Obama won anyway and the unemployment rate dropped below 6% two years faster.
The Gingrich Standard: Newt Gingrich said during the 2012 campaign that if Americans re-elected the president, gas prices would reach $10 per gallon, while Gingrich would push gas down to $2.50 a gallon. As of this morning, the national average at the pump is a little under $2.38.
The Pawlenty Standard: Tim Pawlenty said trillions of dollars in tax breaks would boost economic growth to 5% GDP. Obama actually raised taxes on the wealthy and GDP growth reached 5% anyway.

Is this fair? Meh. Maybe, maybe not. But there’s not likely to be a whole lot of news to blog about today, so why not poke holes in some Republican balloons instead? As Benen says, “By the party’s own standards, Obama is succeeding beautifully. They established the GOP benchmarks and now the Democratic president is the one meeting, and in some cases exceeding, the Republicans’ goals.”

The downside of all this is that in the past Democrats haven’t promoted their own economic policies plainly enough to get credit now that the economy has finally turned around. Republicans, by contrast, simply cut taxes and then loudly and relentlessly repeat their promise that the economy will improve. Eventually it does, of course. Maybe not a lot, and maybe not for long, but economies always improve eventually. If Kansas ever manages a quarter or two of decent growth, for example, you can be sure that Gov. Sam Brownback will be crowing about it for the rest of his political career.

To some extent, of course, Democrats were stymied in their economic policy, which gave them less to brag about back in 2009. And five years is a long time to wait for a recovery. Still, Dems did pass a stimulus; enact a payroll tax holiday; extend unemployment benefits; pass Obamacare; reform Wall Street; raise taxes on the rich; and pass several jobs bills. It’s true that this laundry list doesn’t quite have the simple oomph of “Tax cuts will bring the economy roaring back to life!” But it is an economic program, and eventually it got us to where we are today: a pretty good recovery, and one that looks like it might be sustainable since it’s not built on the sandy foundations of tax cuts and deficits. Democrats should be louder about demanding more credit for all of this.

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Let Us Now Praise Obama’s Economic Policies

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There Is No Higher Ed Bubble. Yet.

by MabelBugnion Posted on December 22, 2014

Mother Jones

Is there a higher-education bubble? Will technology produce cheaper, better alternatives in the near future? Are kids and parents finally figuring out that if Bill Gates can drop out of Harvard and become the richest man in the world, maybe an Ivy League degree isn’t actually worth 50 grand a year? Dan Drezner thinks the whole idea is ridiculous, and he’s willing to put his money where his mouth is:

If, in fact, there really is a higher ed bubble, it should pop before 2020. And if it does pop, then tuition prices for college should plummet as demand slackens. After all, that’s how a bubble works — when it deflates, the price of the asset should plummet in value, like housing in 2008. So who wants to bet me that an average of the 2020 tuition rates at Stanford University, Williams College, Texas A&M and the University of Massachusetts-Lowell will be lower than today?

I’m open to changing the particular schools, but those four are a nice distribution of private and public schools, elite and not-quite-as-elite colleges, with some geographic spread. Surely, true believers in a higher ed bubble would expect tuition rates at those schools to fall.

I really don’t think that will be the case. So anyone who believes in a higher ed bubble should be happy to take the other side of that bet.

Not me. I’d be willing to bet that eventually artificial intelligence will basically wipe out the demand for higher education completely. But “eventually” means something like 30 years minimum, probably more like 40 or 50. Maybe even more if AI continues to be as intractable as some people think it will be.

In the meantime, Drezner is right: the vast, vast majority of college students don’t want to strike out on their own and try to become millionaire entrepreneurs. They just want ordinary jobs. And that’s a good thing, since if everyone wanted to run their own companies, entrepreneurs wouldn’t be able to find anyone to do all the non-CEO scutwork for their brilliant new social media startups.

So if something like 98 percent of college grads are aiming for traditional jobs in which they work for somebody else, guess what? All those somebody elses—which probably includes most of the people who think there’s a higher-ed bubble—are going to want to hire college grads. They sure don’t want to hire a bunch of losers who were too dim to drop out and become millionaires and couldn’t even manage the gumption to accrue 120 units at State U, do they?

Look: the rising cost of higher education has multiple causes, but it’s mostly driven by two simple things. At public schools, it’s driven by declining state funding, which transfers an increasing share of the cost of higher ed onto students. Unfortunately, I see no reason to think this trend won’t continue. At private schools, it’s driven by the perception of how much a private degree is worth—and right now, all the evidence suggests that even with fairly astronomical tuitions at elite and semi-elite universities, the lifetime value of a degree is still worth more than students pay for it. Universities understand this, and since these days they mostly think of themselves not as public trusts, but as businesses who simply charge whatever the traffic will bear, they know they still have plenty of headroom to increase tuition. So this trend is likely to continue as well.

If I had to guess, I’d say that there’s a class of 2nd or 3rd tier liberal arts colleges that might be in trouble. They have high tuitions, but the value of their degree isn’t really superior to that of a state university. They might be in trouble, and if Drezner added one of these places to his list it might make his bet more interesting.

But he’d still win. He might lose by 2040, but he’s safe as long as he sticks to 2020.

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There Is No Higher Ed Bubble. Yet.

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Elizabeth Warren: Wall Street Just Got Another Giveaway

by AdriennLeCouteu Posted on December 19, 2014

Mother Jones

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Last week, Congress did Wall Street a solid. When lawmakers passed a giant spending bill that funds the government through September, they included a provision written by Citigroup lobbyists that allows banks to make more risky trades with taxpayer-insured money. Then, on Thursday, bankers got another giveaway: The Federal Reserve announced it would delay for up to two years implementation of a crucial section of the Volcker rule—one of the most important regulations to come out of the 2010 Dodd-Frank financial reform bill. The rule generally forbids the high-risk trading by commercial banks that helped cause the financial crisis. The move by the Fed pushes the deadline for banks to comply past the next presidential election and gives Wall Street lobbyists more time to weaken it.

“Less than a week after Wall Street slipped a bailout provision written by Citigroup into the government spending bill, the Fed has given the big banks another victory,” Sen. Elizabeth Warren (D-Mass.) said in a statement Friday.

“It’s really hard to see an excuse for this,” says Marcus Stanley, the financial policy director at Americans for Financial Reform, an advocacy group.

The Volcker rule ensures that financial institutions don’t engage in something called proprietary trading, which is when a bank trades for its own benefit as opposed to for the benefit of its customers. Banks were supposed to comply with the Volcker rule by July 21, 2014. Last year, when banking watchdogs finalized the rule, the Fed granted banks a year-long extension. The Fed’s Thursday announcement gives banks another year to get rid of certain investments—including those in private equity firms and hedge funds. The central bank also noted Thursday that it plans to push out the deadline again next year, by another 12 months. That brings the new compliance deadline to July 2017, far past the 2016 election. If the new president is a Republican, he could fill his administration with Wall Street insiders opposed to the rule, making it even easier for lobbyists to gut it.

Before the Volcker rule was finalized last year, the financial industry fought like mad to weaken it. The regulation could slash the total annual profits of the eight largest US banks by up to $10 billion, according to an estimate by Standard & Poor’s. Banking reform advocates were fairly happy with way the final reg turned out. But now the financial industry has extra time to take a few more whacks at rule before banks actually have to obey it. “Wall Street’s loophole lawyers and other hired guns will… continue to hit at the rule as if it were a piñata,” Dennis Kelleher, the president of the financial reform advocacy group Better Markets, said when regulators completed the rule in 2013.

The Dodd-Frank law already contains a provision allowing banks that will have difficulty getting rid of particular investments before the initial compliance deadline to request an extension from banking regulators. The Fed’s announcement yesterday amounts to an unnecessary “blanket” extension, Stanley says. “It’s hogwash.”

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Elizabeth Warren: Wall Street Just Got Another Giveaway

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Rick Perry Is One Lucky Dude

by ChristiGuest Posted on December 18, 2014

Mother Jones

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From James Pethokoukis:

The energy sector gives, and the energy sector takes. The stunning drop in oil prices looks like bad news for the “Texas Miracle.” (Texas is responsible for 40% of all US oil production — vs. 25% five years ago — and all of the net US job growth since 2007.) This from JPMorgan economist Michael Feroli: “As we weigh the evidence, we think Texas will, at the least, have a rough 2015 ahead, and is at risk of slipping into a regional recession.”

Man, Rick Perry is one lucky guy, isn’t he? It’s true that the “Texas Miracle” may not be quite the miracle Perry would like us to believe. As the chart below shows in a nutshell, the Texas unemployment rate has fared only slightly better than the average of all its surrounding states.

Still, Texas has certainly had strong absolute job growth. However, this is mostly due to (a) population growth; (b) the shale oil boom; and (c) surprisingly strict mortgage loan regulations combined with loose land use rules, which allowed Texas to escape the worst of the housing bubble. Perry had nothing to do with any of this. And now that oil is collapsing and might bring the miracle to a sudden end, Perry is leaving office and can avoid all blame for what happens next.

One lucky guy indeed.

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Rick Perry Is One Lucky Dude

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Citigroup Wrote the Wall Street Giveaway Congress Just Snuck Into a Must-Pass Spending Bill

by BethBolendjcmjr Posted on December 10, 2014

Mother Jones

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A year ago, Mother Jones reported that a House bill that would allow banks like Citigroup to do more high-risk trading with taxpayer-backed money was written almost entirely by Citigroup lobbyists. The bill passed the House in October 2013, but the Senate never voted on it. For months, it was all but dead. Yet on Tuesday night, the Citi-written bill resurfaced. Lawmakers snuck the measure into a massive 11th-hour government funding bill that congressional leaders negotiated in the hopes of averting a government shutdown. President Barack Obama is expected to sign the legislation.

“This is outrageous,” says Marcus Stanley, the financial policy director at the advocacy group Americans for Financial Reform. “This is to benefit big banks, bottom line.”

As I reported last year, the bill eviscerates a section of the 2010 Dodd-Frank financial reform act called the “push-out rule”:

Banks hate the push-out rule…because this provision will forbid them from trading certain derivatives (which are complicated financial instruments with values derived from underlying variables, such as crop prices or interest rates). Under this rule, banks will have to move these risky trades into separate non-bank affiliates that aren’t insured by the Federal Deposit Insurance Corporation (FDIC) and are less likely to receive government bailouts. The bill would smother the push-out rule in its crib by permitting banks to use government-insured deposits to bet on a wider range of these risky derivatives.

The Citi-drafted legislation will benefit five of the largest banks in the country—Citigroup, JPMorgan Chase, Goldman Sachs, Bank of America, and Wells Fargo. These financial institutions control more than 90 percent of the $700 trillion derivatives market. If this measure becomes law, these banks will be able to use FDIC-insured money to bet on nearly anything they want. And if there’s another economic downturn, they can count on a taxpayer bailout of their derivatives trading business.

In May 2013, the New York Times reported that Citigroup’s proposed language was reflected in more than 70 lines of the House financial services committee’s 85-line bill. Mother Jones was the first to publish the document showing that Citigroup lobbyists had drafted most of the legislation. Here is a side-by-side of a key section of the House bill:

The bill—sponsored by two Dems and two Republicans—passed easily out of the House financial services committee on a 53-6 vote. The six no votes came from Democrats. In October 2013, the measure passed the Republican-controlled House 292-122. Seventy Dems voted in favor, but that was far fewer than expected, partly due to press coverage of Citi’s involvement in the bill’s drafting.

Back then, the bill’s chances of becoming law seemed dim. Treasury Secretary Jack Lew voiced his opposition to the measure, saying it would be “disruptive and harmful.” Obama signaled to lawmakers that he opposed it. It never came up for a vote in the Senate.

And the legislation was left on the table for corporate-friendly lawmakers on both sides of the aisle to now sneak into the pending spending bill. But Democratic leadership is raising concerns about the Wall Street-friendly provision. House Minority Leader Nancy Pelosi (D-Calif.) blasted out a statement Wednesday morning slamming the provision for allowing “big banks to gamble with money insured by the FDIC.” And Sen. Elizabeth Warren (D-Mass.) is calling on the House to strike the Citi-written language from the spending bill.

“I am disgusted,” Rep. Maxine Waters (D-Calif.), the ranking Democrat on the House financial services committee, said in a statement. “Congress is risking our homes, jobs and retirement savings once again.”

Rep. Alan Grayson (D-Fla.) issued an even more dire warning, calling the bill “a good example of capitalism’s death wish.”

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Citigroup Wrote the Wall Street Giveaway Congress Just Snuck Into a Must-Pass Spending Bill

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