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Yearly Archives: 2013
DATA DRIVEN VIEWPOINTS
Top 10 Blog Posts of 2013
(in order of popularity)
- A 99 YEAR HISTORY OF TAX RATES IN AMERICA
- OUR VOTING RIGHTS – A State by State Analysis
- TEA BAG FILTER PAPER CONTAINS PLASTIC
- Abe Lincoln on Corporate Corruption
- Teen Pregnancy and the Bible Belt
- HOUSTON, TAKE DOWN THIS THREATENING MESSAGE
- Media Silent on Fukushima Radiation Impact in US
- FUKUSHIMA – An Unstoppable Slow Motion Disaster
- Four Graphs on What’s Hurting The Working Class
- Capital Investment Income Drives Income Inequality These Days
by Brian T. Lynch, MSW
People often accuse the Federal government of being an entrenched bureaucracy, which it is. They blame the bureaucracy for all of the government’s problems, but the truth is a bit more complex. After all, it isn’t the bureaucracy passing sweetheart legislation, it is our elected un-representatives. The bureaucracy may write the rules but it does not runs the show.
Believe me, having worked in the bureaucracy my entire career, I can tell you it isn’t in charge. It is subject to enormous political pressures from elected executives, representatives and even the courts. No rules are passed without political sign off. Elected official send their political appointees deeply into the bureaucratic hierarchy to infiltrate and transform their missions. Politicians often say one thing and do another, using the bureaucracy as their cover. In truth, bureaucracies are only as good as the politicians we elect to run them.
Obamacare is a great illustration of this. In states where the chief executive wants it to work the bureaucracy has created workable systems and overcome large obstacles to make it work. In states where the chief executive would like to see it fail the bureaucracy has made a hash of things. I call it planned incompetence. The bureaucrats were given a mixed mandate to create a faulty system to prove the politicians position that Obamacare doesn’t work and that government doesn’t work. Bureaucracies are tools that can be used for good or evil by people in power. Bureaucracies are the interface between ordinary citizens and political rulers.
Did you know that the modern bureaucratic government structure was established by an enlightened English King (one of the Henry’s) to assure that his erratic, sometimes irrational sons could not, on a whim, destroy the good government administration he created to serve his people? We don’t think much about it today, but bureaucracy still serves a vital, useful purpose in assuring the smooth and planful administration of government.
The very characteristic most often criticized, its slowness to respond, is also its primary benefit. It methodically operationalizes the dictates of our political rulers to maintain continuity and order in government administration, not that it always succeeds. But if we didn’t have it we would be subject to every impulse of the chief executives and this would lead to real chaos in government services. So while I am quick and well experienced to criticize the bureaucracy, I am less inclined to condemn it.
Graycoat Conservatives – The Neo-Confederate Secessionists
by Brian T. Lynch, MSW
They are still small in number, but spread widely across the county. They are articulate, highly motivated and influential members within the Tea Party, the Christian right movement, Libertarians groups and nationalist groups in every state. They are the philosophic rear guard of the conservative movement pulling conservatives ever further to the right. They may not have a central organization, but they do have a significant social media presence. They remain under the radar of the national press which fails to take them seriously. The best way to find them is to type “secessionist” into your internet search engine. They are the Neo-Confederates, a polarizing counter-force behind the growing rift in the Republican Party.
The secessionists anti-government interests overlap with the corporate conservative wing of the Republican Party, and both groups favor free market economics, but the graycoat conservatives envision a very different America. So while wealthy conservatives continue to fund the Tea Party, graycoat conservatives are busy winning over hearts and minds to their radical alternative.
The following graphic is taken from one of the many secessionist Websites. It maps the number of secessionist petitioners from around the country. In effect it shows where they are most active and how they are distributed across the country. It doesn’t represent how popular or unpopular the movement might be.
Plotting whitehouse.gov secession petitions
Signers to White House secession petitions by county. Color based on proportion of residents signing, with darker colors showing higher levels of secession support. Current as of 9am on Saturday, November 24th. Works best in Chrome or Safari.
Since Election Day, more than 60 petitions have been posted on the White House’s website requesting that states be allowed to withdraw from the United States and create their own government. As of November 13, 2012, the following states had active petitions: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Virginias, West Virginia, Wisconsin, and Wyoming. [http://www.unc.edu/~ncaren/secessionists/]
A 2009 Zogby poll quoted on a number of secessionist Websites found that 20% of American’s believe states have a right to secede from the Union. Just today (12/18/13) Michael Hill, President of one of the Southern groups called League of the South, posted ten reasons for secession. They are:
- The U. S. government is an organized criminal enterprise, secession is the only way to return to legitimate government
- The U. S. economy is failing, secession makes economic sense
- The South’s unique history and culture is worth protecting
- The criminal nature of the bank bailouts and the Fed
- A dysfunctional national electoral system, secession may be the only way to restore integrity to elections
- Third World immigration into the South, secession removes the federal government’s interference and lack of performance
- Organic community vs. the globalism of the elites
- The implementation of an American police/surveillance state
- The Christian South v. secular America, secession provides the opportunity to return to Our Founding Principles
10. Because we think we can rule ourselves better than we are being ruled by DC, secession is a path to American Liberty http://dixienet.org/rights/2013/reasons_for_secession.php]
What these secessionist groups most have in common is a desire to facilitate the collapse of the Federal Government and the breakup of the Union of States. They see this as the natural and inevitable course of history. As they see it, every great empire has followed this path.
They oppose all forms of collectivism and eschew society as we know it. Among some groups there is a distinct “cultural” component. All groups seem to reject democratic majority rule. As one of them put it to me, ”
According to one person who wrote me, they are, “… committed to the cause of individual liberty and [individual] sovereignty. [They] would prefer secession, to revolution.” But revolution it will be if the majority opinion of the Americans go against them. They have a strong patriotic connection to our founding fathers even though their commitment to our Union is weak. Pin them down and they reluctantly choose the union of states over a return to a confederacy, but only if the Federal governments control over the states is weakened and individuals are free from all federal interference.
If you start to pin these folks down in a debate they squirm away. They are viscerally opposed to the our system of government, their anti-federal rage concealed only by their passion for an extreme interpretation of individual rights and freedoms. These passions are covered over by a thin veneer of selective scholarship. Scratch the scholarship and their passion flares. Challenge their constitutional interpretations and they circle the wagons.
They have no sense of responsibility towards society and nothing but contempt for majority rule. They believe the majority of American’s is just another special interest group, and one that is biased against minority rights. When majorities opinions prevail they force minorities to accede to their will which violates their rights. This is how they interpret the Constitution.
The only legitimate role they see for the federal government is the protection of the individual’s right to follow their conscience within Constitutionally defined boundaries. One major flashpoint seems to be taxes. They don’t want to pay any federal taxes, but when pressed say they agree to contribute only for spending within the limits of their narrow interpretation of the governments enumerated powers.
They resent being forced to pay taxes for national parks, education, environmental protection, food and drug administration, foreign diplomacy administration or anything else that isn’t specifically named in our Constitution. They claim a sovereign right not to pay for anything outside of the federal governments enumerated powers, as they define it. They reject all collectivism. For example they resent that the Federal government spends any money on highways and bridges, believing federal spending should be restricted to “postal roads.”
As one person wrote: ” For [the federal government] to “do” it must take. That violates rights. The only function of [government] is protect rights, not “do.”
Tenth Amendment: The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
The 10th Amendment is the source of their narrow interpretation of federal powers. Their interpretation provides all the justification they require. Below is a reprint from one of their Websites that lists the enumeration of federal powers which they feel the government has exceeded. These powers are listed on the Tenth Amendment Center Website where the members call themselves “Tenthers.: [http://tenthamendmentcenter.com/]
Disdain for the Federal Government or any large democracy is a central feature for these neo-confederate groups. They see majority as a special interest and would strip the government of its ability to show any favoritism to all special interests. This suggests that the only role of government must be the protection of the individuals rights yet they may concede collective rights to businesses. Perhaps this is why it is so important that corporations be viewed as people. It gives them individual status while denying other types of organization status as a collective entity.
MIDDLEBURY INSTITUTE PAPER V
March 2007 – Introduction to “Minimal Rights and Freedoms of Individuals in a Sovereign State”
Because questions keep coming up as to the kinds of states that secessionist organizations are working toward, and because each organization in the movement has an interest in the objectives of any other organization, it seemed to us here that it might be appropriate to send out a suggested platform of the rights and freedoms that might be guaranteed to individuals in any future seceded state. [SNIP] There are important issues here and we hope you take them seriously.
MINIMAL RIGHTS AND FREEDOMS OF INDIVIDUALS IN A SOVEREIGN STATE
Life, liberty, security
Equality before the law
Trial before competent tribunal, due process, counsel, appeal
Possess property and not be arbitrarily deprived thereof
Periodic elections with universal adult suffrage
Secession by any coherent unit
Speech, opinion, expression in any media
Peaceable assembly, association
Belief, thought, religion, worship
Movement within any state, and to leave and return
Slavery or servitude
Discrimination on the basis of race, color, sex, religion,
political belief, nationality, property, or birth
Torture or degrading treatment
Arbitrary arrest or detention
Invasion of privacy
Arbitrary deprivation of citizenship
Any action by the state to destroy or deny any of these rights and freedoms
Middlebury Institute, February 2007
Second Vermont Republic, March 2007
Southern National Congress Committee, March 2007
The role of a state to infringe on individual rights is not well thought out among members of this group. Because states are smaller they believe them to be inherently less intrusive in the lives of individuals. They consider themselves to have an individual right to not be “interfered with” by any government, but apparently feel that smaller, state governments would be easier to control. In a large constitutional democracy, such as the United States, a majority opinion is viewed as a form of tyranny against individual dissenters, even if that majority opinion is deemed constitutional according the the Supreme Court. On the other hand, they don’t see anything wrong with a minority group preventing the majority from governing in opposition to them. They see this as their right and duty as “soverigien citizens.” It isn’t clear whether this is true only when the minority feels the government is legislating beyond its enumerated powers, or if they claim this right under all circumstances. As one person put it:
“But you don’t see that resisting (but not compelling) action from a majority isn’t a tyranny of the minority? The minority isn’t forcing the majority to do anything, only to refrain from forcing the minority to do something. The rights of any minority supersede the wants or needs of any majority.”
In the face debt ceiling financial cliffs, government shut downs, and the nearly total inability of Congress to pass legislation, it is time to recognize that there are forces on the far right, and in Congress, who see this as successful strategy. Their intentions are malevolent and quite contrary to the motivations most often attributed to them by political analysts in the main stream press. It is time to pay attention to these groups and their impact on American politics. A failure to open a public debate that directly confronts both the graycoat secessionists and the corporate elite now would be a huge mistake.
Part 1 – Losing Majority Rule
Most people pay attention to pocketbook issues that affect our family or retirement, but quite understandably avoid the rancorous politics we see on TV. There is a sense that government is failing because elected officials can’t agree and the country is evenly divided, but many important issues do get rationally settled in the opinion of vast majorities of the public.
For example,a large majority agree that global warming is happening and we are causing it in some way. Almost 90% of us agree we spend too much on defense. Large majorities believe we should generate more electricity from wind and solar. About 80% of us believe there should be universal background checks on gun sales and almost everyone agrees that big banks caused the great recession. Despite a near consensus on these and other issues there is gridlock in Washington.
One explanation is that there is not a lot of passion behind these majority views, so meaningful change against an organized and well funded opposition is out of reach. In the face of majority agreement, Congress fails to act, or act contrary to the will of its citizens. On the surface it may seem like political gridlock between evenly matched forces, but this is an illusion. There are many issues supported by majorities in both parties that can’t even get a hearing in Congress because a tiny minority who oppose it are able to kill it. This is tyranny by the minority when the majority isn’t allowed to govern. To understand what’s happening really requires us to pierce the noise of partisanship and media bias.
The voting majority has lost its ability to govern. In frustration more and more ordinary citizens feel alienated or betrayed, leaving us vulnerable to the radical fringe.
Evidencethat the majority has lost the ability to govern is everywhere. The smallest special interest group, the wealthy elite, are by far the most influential and obvious force in Congress. CEO’s of major corporations testified in Congress that they don’t want or need tax subsidies and Congress increases their subsidies. Wall Street asks for and got billions in bailout money with no strings attached. Try to attach some strings or implement substantial financial reform and Congress kills it, either outright or later on through the budget process. There is evidence of the failure of majority rule in the way the filibuster has shut down open debate and killed popular legislation. There is evidence in the inability of Congress to debate and vote on immigration reform, which is popular and has strong bi-partisan support. The debt ceiling crisis, the budget cliffs and the government shutdown are all signs that the majority has lost control of the federal government. The growing assault on voting rights, recently passed anti-abortion legislation and the imposition of emergency managers over democratically elected city and municipal leaders are other examples.
The truth is forces on the political spectrum are not evenly matched. Many political battles are asymmetrical. The nations shift to the right is mostly due to the success of highly motivated and well funded conservative action groups. For example there are right wing Christian groups opposed to secular society and what they see as moral decay. These groups promote socially conservative issues. There are Tea Party groups opposed to taxes. They promote free market capitalism and limited government. Then there are many extreme nationalists groups, gun rights groups, militial groups and the like. All of these groups have different aims but are drawn together by strong anti-tax, anti-government sentiments and by at least a laissez-faire view of capitalism.
Money and organizational clout for these action groups comes mostly from wealthy capitalists who want to weaken the power of government to tax and regulate commerce. There is an anti-government alignment of interests between the wealthy elite and each of these groups.
There is another, less visible segment in these groups as well, a far right group with a welll defined ideology but no central organization. These are the real insurgents fighting for control of the Republican Party. Their goal is to dismantle the Federal government as we know it, limiting its powers to the narrowest extent possible under their interpretation of the U.S. Constitution. They are the members of the Tea Party who pull it further to the right. They are the members of conservative Christian right groups that fan the flames of anti-government rhetoric. Some belong to hate groups, conservative issues groups or libertarian organizations. Everywhere they show up they agitate to pull the organization further to the ideological right by sowing dissatisfaction with our Federal government. They seek an individual level of freedom that transends any personal responsibility to society or majority rule.
Who are these far right ideologues and what do they want?
Imagine a future in which our Federal government is forced to cut back on every service or function not specifically named in the U.S. Constitution. What if, to keep Wyoming and a few other Mid-West and South-Western states from seceding, we give up our national parks. These are sold off to corporation such as Disney, ExxonMobil, Boise Cascade, Massey Energy Corp. and various land development corporations. Under this scenario Texas or some other states may have already seceded and we now have to worry about the nuclear armed country of Texas on our southern border.
Imagine the Federal government no longer able fund departments and agencies over the objection of a minority of sovereign citizens. Gone are the Departments of Education, Energy, Housing and Urban Development, Health and Human Services, Interior, Labor, Transportation.. all gone and replaced by individual state control, subject to the ability to fund them over the objections of “sovereign citizens” in each state.
The Environmental protection agency, The FDA, FCC, SEC and almost all federal regulatory agencies would all be gone. These are considered outside the enumerated powers of the Federal government. Medicare, Medicaid and Social Security are obviously gone as well. It is up to the sovereign citizens of each state to decide what they decide to fund or not fund within their own state.
In this future all Federal powers would be limited strictly to military defense, protection of the rights of individuals with respect to constitutional liberties and settling interstate commerce disputes among the states. In this future citizens could target where their tax money goes. In effect, majority rule would be subject to minority consent, in fact to consent by each sovereign citizen’s consent.
Continued in Part 2 – Meet the Gray Coat Conservatives.
(Part 2 will detail the belief system of the neo-confederate conservative)
We never hear any reference to the working class these days. The media and our politicians only speak of the “middle class” as if that covers everyone who isn’t either poor or wealth. Even references to the poor are scarce. The working class exists. They are sandwiched between the poor and the middle class and they are being squeezed into poverty. It is cruel to ignore them and the terrible pain they are suffering. What has happened to them, aside from being ignored can only be touched on by the four graphs that follow. These were presented in a conversation I had with conservative friend of mine who has forgotten the working class exists. There are many factors hurting the working class. This conversation was only about four factors, wage suppression, the upward redistribution of wealth, working class decent into poverty and declining upward mobility. Post this is my way of addressing what I believe is the most hurtful factor of them all… public silence.
Q: I always thought of the owners as the producers of the jobs that the workers have. You say that it is the workers who are the producers. Have you ever been employed by someone on welfare?
A: Owners coordinate the workforce, but it the employees who do the work that makes the products or services. So in a real sense, the workers ARE the producers. And this has nothing to do with welfare at all. Jobs are not a product. Stuff is a product. Things to sell or trade is a product. Workers are key to making stuff or offering stuff yet when they want a fair share of the value they create they are treated like thieves. Read this and you will know what I am talking about even if you don’t agree:
I also just ran across this table (below) that shows were all the Hourly GDP wealth has gone since the mid-’70’s.
Q: Why should it matter how much a C.E.O. makes if their workers remain on the job? It’s one of the great things about this country. You can work where ever and for whom ever you want. Someone please explain to me why it is greed for C.E.O.’s to make deals to be paid as much as the market will bear but it is ok for workers to make deals to make as much as the market will bear.
A: It may not matter to you at all, but anyone who wonder why they can’t have collective barganing while the CEO is making 400 times their salary might have questions, especially since this is strictly a feature of the US economy and others around the world are paid better than we are relative to their economies.
Don’t forget, almost 40% of people who work full time are poor. I’m not sure what percentage of the poor they account for, but it is clear when we speak of the poor we are not speaking only of people who are disabled, elderly, retired or unemployed.
Note here that in the US, the number of working poor (blue bar in right hand column) is twice the number of non-working poor. So when you and I talk about the poor, you are defining it as welfare recipients while I broadly define it as everyone living below the poverty line, the majority of whom work full time. That’s partly why we have a disconnect on this topic. In my understanding, most poor people work.
Q: I wonder how many of the poor who are now C.E.O.’s would agree with you? Or would they say : “Work hard towards your goal, as I did, and you can achieve anything.”. Isn’t this what made our economy great? Not people who wanted a wage so they could be comfortable in the position they have today? Flipping burgers at McDonalds is not supposed to be a permanent career goal. Even the management at McDonalds wants people to move up. Or am I wrong about incentive and ambition?
A: There are 17,000 companies with 500 employees or more. There are 43 million poor. If 20% of CEO’s started out as poor children that would mean there are only about 4,200 CEO openings for 43 million potential applicants. It’s a safe bet that far fewer than 20% of CEO’s come from poverty. In fact, less than 20% of children born to poorest families will make it into the middle class in their lifetime. Less than 8% will make over $140k/year, which is approximately the income line where the richest fifth starts. Of those at the top, only the smallest fraction will become a CEO. I believe that if you really understood the economic situation in America you, of all the folks I know, would be a big supporter of the working class.
As for incentive and ambition, a good paying job that makes one economically self-sufficient is the highest motivator. But a self-sufficient wage for a single earners is over $30,000/year whereas the median wage for a single earners is less than $26,000/year. In other words, the incentives are less than optimal in today’s economy, and no amount of hard work or individual effort will make a difference for most people until even low wage workers receive a fair wage for a days work.
by Brian T. Lynch, MSW
College graduates have always earned more in their lifetime than non-college graduates, but higher tuition costs is increasing borrowing and the higher interest rates on these loans is taking a bit out of their future. In addition, there continues to exist a higher unemployment rate for college graduates.
The Federal Reserve Bank of New York just released its quarterly Household Debt report. It reveals that non-housing debt is rising and student loans are a big contributor. Non-housing debt increased 2.8% since last quarter and 4.9% from a year ago. Housing debt decreased 1.9% from a year ago.
Looking at just the non-housing debt, student loans account for 36% of the total, up a percent from a year ago. Auto loan debt is increasing faster over the last year and now accounts for 30% of all non-housing debt. Student loan debt rose 4% from the last quarter and 7.29% from a year ago. Meanwhile credit card debt is unchanged over the past 12 months while other forms of non-housing debt declined by over 3%.
The Federal Reserve also reported good news that 90-day delinquency rates on household debt has declined. For the banking industry it is a twin blessing when borrowing rises and delinquency falls. For consumers it is a mixed blessing, at best. But, when you look at the particular, it is immediately clear that college educated adults are in serious trouble. They are defaulting as never before. Look at the line graph below and you will see what I mean. The student loan default is the red line that starts as the third highest default rate in 2004 to exceed credit card and auto loan defaults as of last year.
Source: Fed Report http://www.newyorkfed.org/regional/householdcredit.html
According to the Fed report, outstanding student loan balances increased to $1.027 trillion as of September 30, 2013, a $33 billion increase from the second quarter. The 90+ day delinquency rate increased, and is now at 11.8%.
Higher tuition costs means greater borrowing which results in higher monthly payments on the debt. The high rate of unemployed, or underemployed college graduates is part of the reason for the higher default rates. What follows is a snippet from an excellent article in the Atlantic Monthly. (Go there to read it in full)
How Bad Is the Job Market For College Grads? Your Definitive Guide
JORDAN WEISSMANN APR 4 2013
They’re Better Off Than High School Grads … Bachelor’s holders (in blue below) have about half the unemployment rate of high school graduates (in red below). BA’s are still suffering from double the low rate of joblessness they enjoyed pre-recession. And yes, they’re even worse off than they were during the tepid economies of the early nineties or pre-housing bubble oughts. But on the whole, you’d much rather have a degree in this job market than not.
But They’re Still Hurting… That’s all bachelor’s holders, though (or at least the ones over 25, who the Bureau of Labor Statistics routinely tracks). So what about young adults just off campus? The numbers aren’t a nightmare, but they aren’t especially pleasant either. Last month, the Bureau released a special report looking at Americans under 30 who’d earned a bachelor’s in the past year, as of October of 2011. About 73 percent were employed (the paper didn’t specify between full time and part-time). More than 11 percent were still looking for work.
In addition to the higher rate of unemployment, rising tuition costs over the past decade has meant larger monthly payments. College tuition costs have even risen faster than medical costs, and much faster than the consumer price index. Below is a very clear graphic depiction of this from Professor Mark J. Perry out of the University of Michigan.
Professor Mark J. Perry’s Blog for Economics and Finance
The chart above illustrates graphically the “higher education bubble” by comparing the annual increases in the CPI for “College tuition and fees” (7.45% per year since 1978) to annual increases in the CPI for “medical care” (5.8% per year since 1978) to annual increases in the median price for new homes (4.3% per year) to the annual increases in the “CPI for all items” (3.8% per year)
[See more at: http://mjperry.blogspot.com/2011/07/higher-education-bubble-college-tuition.html#sthash.HF1DSyOu.dpuf ]
The good news, according to the Trends in Education Website, is that the rate of tuition increases is declining. Here below is a snippet from their Website.
Average Rates of Growth of Published Charges by Decade
The 2.9% one-year increase in average published tuition and fees for in-state students at public four-year institutions in 2013-14 was 0.9% after adjusting for inflation. This relatively small increase in prices means that despite very large annual increases earlier in the decade, tuition inflation between 2003-04 and 2013-14 was similar to that between 1983-84 and 1993-94.
Figure 4: Average Annual Percentage Increases in Inflation-Adjusted Published Prices by Decade, 1983-84 to 2013-14
Each bar in Figure 4 shows the average annual rate of growth of published prices in inflation-adjusted dollars over a 10-year period. For example, from 2003-04 to 2013-14, average published tuition and fees at private nonprofit four-year colleges rose by an average of 2.3% per year beyond increases in the Consumer Price Index.
A third reason why so many college students are unable to pay their loans is the rising cost of financing those loans. Karen Weise recently wrote a an article in Business Week that laid out the problem of higher student loan rates. A snippet appears below.
Why Your Student Loan Interest Rate Is So High
By Karen Weise April 04, 2013
Joe Szczepaniak pays a 3.5 percent interest rate on the mortgage for his house in a Chicago suburb. His car loan is 1.79 percent. The federal education loans he took out to send his four sons to college? They’re all above 7 percent. “Student loans have been the big black holes of my budget,” he says. Szczepaniak, who calls himself “Mr. Quicken” because he carefully tracks his finances, questions why the $200,000-plus he owes on the student loans doesn’t “reflect reality” and today’s low rates.
The answer is that Congress, not the market, sets rates for federal loans—which account for 85 percent of the roughly $1 trillion in outstanding education debt—and refinancing to a lower rate is rarely an option. Now some lawmakers and private lenders are looking for ways to give education borrowers more repayment and refinancing options.
Student loan rate had been set to double, so congress acted to mitigate the sudden increase that was to occur. There is good information on the Consumer Financial Protection Bureau Website detailing the recent changes. An update on government student loan interest rates was recently published (see below). At a time when I can get a car loan from my credit union with an interest rate below 3%, our college students can’t get a federally subsidized student loan for under 3.86%, and private bank loans for students is even higher.
Consumer Financial Protection Bureau
Updated on August 13, 2013:
Last week, the president signed legislation passed by Congress to adjust federal student loan interest rates for this academic year. Here’s what the new rates look like:
We have to stop and ask ourselves what the long term impact will be on our children and our economy if we don’t do more to make college affordable.
Imagine owning a small manufacturing business with 25 happy employees. After paying overhead , suppliers, employees, benefits and your Potter’s Bank business loan you have just enough to get by.
One day your suppliers find they can’t get raw materials because of artifical shortages and price spikes caused by futures speculators that work at bank. The suppliers they need to borrow money to pay for higher priced raw materials, at least until they can adjust with worker layoff and cutbacks. Potter’s Bank charges them higher interest rates because now they’re “risky” borrowers.
Your suppliers must pass along their higher costs to you, so now its your turn to cut wages, benefits and hours. Your employees grumble and can’t keep up with the workload. Production stalls, but also sales start to drop because all the affected workers are also your customers.
One day you discover you can’t pay the bank loan, so you go to Potter’s Bank to renegotiate terms. Potter tells you what he has been telling everyone:
“You’re a credit risk! Your workers make too much and the cost of their benefits is rising. Cut benefits, cut wages, layoff some of those lazy workers and you will be more efficient. Only then will I loan you the money you need. Do as I ask or Ill raise your interest rates further or foreclose on your business.”
This is the austerity trap. Bankers use their leverage to play both ends against the middle forcing both businesses and governments to be more labor efficient. It squeezes more production out of fewer workers for lower wages and benefits. It also suppresses consumption because fewer consumers are employed and those who work have less income or job security. It doesn’t matter if austerity is imposed on businesses or the public sector, the effects are the same.
Imposing austerity is like digging a hole in the economy, the more you dig the deeper the hole. It is good for bankers but bad for workers. It increases corporate profits but reduces personal incomes (except for the very rich). It shrinks the size of government but reduces support to the poor and unemployed people it creates. What ever hurts workers hurts consumers which suppresses consumption and depresses the economy, which then hurts more workers in a literally vicious cycle.
Making debt reduction a priority during a recession, rather than creating jobs and putting money back into the hands of consumers, is austerity. As the article below points out with a graph, shutting down the government and causing the government sequester to lower government spending at this time has hurt recovery. It is the wrong prescription.
In a World Without Austerity…
By Adam Hersh | October 4, 2013
Thanks to the federal government shutdown, there is an absence of new U.S. job market data for September 2013. Let’s take a moment to imagine the kind of economy we might see in the United States today had we not just lived through three years of fiercely divisive politicking for fiscal austerity—sharp cuts to public services and investments, as well as cuts to taxes on America’s wealthiest people.
If federal and state governments had not adopted policies of fiscal austerity, today’s jobs report from the Department of Labor would likely be telling us, as shown in Figure 1:
- U.S. employers added more than 260,000 jobs in September.
- The unemployment rate for September fell below 6 percent.
- Since December 2010, the U.S. economy has added more than 8.2 million new jobs—or 2.4 million more than have actually been added.