Category Archives: Economy

Ferguson: Time to put the brakes on the Kid Bashing?

Teen PostOne of the more unfortunate responses from white voices to the issues raised by the shooting of Michael Brown, Jr. in Ferguson, Missouri is the “Get A Job!” refrain.  Thus far members of the Great Uninformed have taunted a financial analyst, and generally assumed that if a person were on the street protesting the individual ‘must’ be unemployed. It’s a good guess, but not a rational assumption.

Jobs, Jobs, Jobs

Approximately 47% of young men aged 16 to 24 in St. Louis County are unemployed. [Guard] However horrifying that statistic may be, it still means that over half of the young men in the county are, in fact, working.  To another point, I have a problem with putting 16 and 17 year old kids in the employment statistics generally, even though the technical notes from the BLS advise counting only those who have looked for work in the target four week period.   Call me old fashioned, but my idea of what a 16 or 17 year old youngster should be doing is Being In School.  That’s their job — to be in school.

There’s certainly nothing wrong with compiling statistics on how difficult  boys and girls find getting a summer job, or on trends about their part time employment, BUT my bottom line is that young people 16 and 17 years old have no business being included in employment statistics other than on a seasonal basis.

Education, Education, Education

Speaking of school.  About 37% of young African American young men are enrolled in college.  That’s too low, but again there’s a need for some perspective.

“Increasing numbers and percentages of Black and Hispanic students are attending college. Between 2000 and 2011, the percentage of college students who were Black rose from 11.7 to 15.1 percent, and the percentage of students who were Hispanic rose from 9.9 to 14.3 percent (source). Also, the percentage of Black 18- to 24-year-olds enrolled in college increased from 30.5 percent in 2000 to 37.1 percent in 2011 and the percentage of Hispanics enrolled increased from 21.7 to 34.8 percent (source).”  [NCES]

More young Blacks and members of the Hispanic community are, in fact, enrolled in college.  We also need to remember that the cohort is a declining one, the general 18 to 24 year old category is expected to be reduced in the next decade by about 4%, so a 13.9% predicted increase in college enrollment is a pretty positive thing. [IHE]

So, before the Great Uninformed pass judgment on the kids, they should know that the odds are about 50/50 they are yelling at someone who does have a job, and that they are spewing on about kids who are more likely to have plans for college than the previous cohort.

College isn’t the only thing those ear-bud inserting cocked hatted little Apples of Mother’s Eye are doing — there are also apprenticeship programs, with an national enrollment of 164,000 in FY 2013; and, across the nation about 375,000 individuals are currently receiving apprentice training. [DoL] As of mid 2013 there were another 60,000 signed up for Job Corps training at 125 centers nationwide. [JC]

It’s probably not occurred to the Great Uninformed that the individual they are currently insulting could be the person who will show up after completing their training from the air-conditioning repair service to fix their AC, or stop the flood in the bathroom, or get the transmission repaired in the family wagon.  On that fine day, the baggie pants T-Shirt clad ‘thug,’ ‘criminal’ and ‘creep’ will look like Salvation Personified  in his or her business logo white/blue shirt, tool kit in hand.

If we’d like more doctors, teachers, nurses, accountants, engineers, designers, EMTs, air conditioner repair technicians, construction workers, plumbers, electricians, …. there are some things we can do to help.  The St. Louis Community College System, literally in the heart of the Ferguson situation, acknowledges some of the problems.

The St. Louis CC reports on their efforts to attract more young African American men, and lists the problems they face:

“There are numerous reasons that can be attributed to the low numbers of African-American men persisting at community colleges and attaining their educational goals. The lack of on-campus support services, low or no financial assistance, lack of transportation, legal issues, the need for childcare, under prepared for college, and most importantly the lack of positive role models are just to name a few.”  [StLCC]

On campus support services range from one on one tutoring to group learning sessions, help using informational technology, study groups, and language instruction.  These efforts aren’t cheap and shouldn’t be approached as such. Cutting public college/university budgets because of lack of state support is counter-productive if we truly want the next generation to pick up the economic baton.

Don’t get me started on the lack of public transportation in general — the rant could go for days.  However, it doesn’t do to disparage young people who live in suburban sprawl or in metropolitan areas with meager public transport for not jumping at the chance to hike miles to a bus station, then transfer to a Metro, travel more miles, and then repeat the process at the end of the school day — IF there is a bus and IF there is a Metro.  I know, those of us of a certain age walked to school, up-hill both ways, in blizzard conditions…. Spare me.

Legal Issues

Legal issues? Could this be a euphemistic way to describe police records for petty crimes, misdemeanors or class Z felonies, plaguing kids these days?   Please stare at the following chart from ChildStats.Gov for a moment.  Who, by the percentages, has a more visible rate of drug and alcohol dependency?

Drug Use ChartThis is an eye test: Whose line is the lowest on the chart? If you said “Blue” you pass. Blue, for Black, non-Hispanic 18 to 24 years of age.  Member of the Great Uninformed who fail this test are probably listening to other members of the Great Uninformed instead of the kids themselves.  If African American young men are the lowest on the chart tracking alcohol or drug dependency where does the impression they are likely to be drug dealers come from?  Try the judicial system.

‘Since blacks are more likely to be arrested than whites on drug charges, they are more likely to acquire the convictions that ultimately lead to higher rates of incarceration. Although the data in this backgrounder indicate that blacks represent about one-third of drug arrests, they constitute 46 percent of persons convicted of drug felonies in state courts.[21] Among black defendants convicted of drug offenses, 71 percent received sentences to incarceration in contrast to 63 percent of convicted white drug offenders.”  [HR]

Notice, it’s not that African Americans are more likely to DO drugs, but that it’s more likely they will be arrested and convicted than their white cohorts.  And for this, those “legal issues” will haunt a young African American in terms of housing, education, and employment.  As the old saying goes, “Justice may be color blind, but the War on Drugs isn’t.”

 Family Family Family

Child care? Here’s another topic for another day.  The U.S. has little to no real child care services when compared to other developed nations.  The role model issue offers some cause to pause.  If the media were to be believed, especially some facets of our national media, every Black child grows up in a single parent household without a father.  Not quite.

The Census Bureau’s 2013 report (pdf) shows approximately 55% of African American children in single parent homes, 31% for Hispanic children, White 21%, Asian 13%.  Read these numbers in reverse and note that 45% of African American children are growing up in household with two adults.  As in the case of the employment figures, there’s a better chance that the Great Uninformed will automatically assume the Black youngster is in the 55% category and not the 45% classification.  For further clarification, there are maps included in the Census Bureau Report which illustrate that children in Missouri are more likely to live in two-adult homes, and fewer live in single family homes than the national average. {figures 4 and 5}

Every reporter in the country has been speaking to the 67% African American population in Ferguson, Missouri — perhaps this is an outlier?  Not. So. Fast.  The Census Bureau also tells us that 68% of the 8,751 Ferguson households are defined as family homes.  Of these, some 31% have children residing there.  2,669 of these households, or 31.3%, are single parent (female) homes.  7.4% are single parent (male) homes.  Again, before jumping to the conclusion that the youngster on the TV screen marching down West Florissant Ave. is from a ‘broken’ home with a single mother — look at the actual numbers.

We almost inevitably get from the Single Mother narrative to the Absent Dad.  “These kids have no role models.”  First, it’s true that many African American men live separately from the mothers of their children — but don’t jump to the conclusion this means they are absent from their children’s lives.

“Recent data published by the Center for Disease Control reveal that African-American fathers spend more time in their children’s day-to-day lives than dads from other racial groups, defying stereotypes about black fatherhood. The Pew Research Center has found similar evidence that black dads don’t differ from white dads in any significant way, and that there isn’t the expected disparity found in so many other reports. Although black fathers are more likely to live in separate households, Pew estimates that 67 percent of black dads who don’t live with their kids see them at least once a month, compared to 59 percent of white dads and just 32 percent of Hispanic dads.” [HuffPo]

When we speak of role models it’s nearly always in a positive sense. “Dad” or “Mom” is the primary role model.  Is it necessarily ‘negative’ to have a parent known in the household for working two jobs to make ends meet? Or, ‘negative’ to have parents who shift child care roles in order to juggle employment schedules?  There are other ‘negatives.’ What kind of a role model is a local police officer who assumes kids sitting on the stoup are up to no good?  Would this encourage a youngster to want to be a police officer?  What kind of role model is it if a Black youngster is trailed through the department store by security or sales personnel who assume that shoplifting is the order of the day? Would this encourage a youngster to want to work in retail sales?

What kind of a role model might a teacher be who calls on the white children in the room first, and the Black students rarely if at all? Would this encourage a young person to be a teacher? What kind of a role model is a secondary school principal who illustrates the national statistics that Black young people are more likely to receive more and longer suspensions than white students? Does this encourage a young Black person to want a career as an educator?

Imagine a Black teen entering an office building, do the women clutch their purses? Do the men move back and check their wallets? Who would want to grow up and work in that office building?  Before the Great Uninformed pontificate on the roles of fathers and mothers, they might want to consider how their own actions convey ‘models’ to young people of color.

Kids Kids Kids

The problems evident in the Ferguson situation won’t be solved over-night, nor are there quick Band-Aid solutions at hand.  However, it might help if the youngsters who feel threatened in their own community were seen for what they are: Baggy pants, ear-bud inserted, caps askew, often silly teenagers –much like everyone else’s baggy pants, ear-buds likely requiring surgical removal, caps smashed down on expensive hair cuts, silly teenagers; texting constantly to see if She said He Liked Her better than Him maybe but He didn’t like Her better even if She looked at Him in the hall while He was with Her.

God love them, they will grow up, and if God has a sense of humor they’ll have at least one child just like themselves.

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Cracks in the Economic Mirror

cracked glassWhy not come out and say it? Wall Street is not your friend. At least it’s not your friend if you are among the group casually known as American Workers.  I know, much has been said about our “Nation of Investors” and how millions of Americans have a stake in the financial markets.  [SEC] However, all that palaver papers over the obvious.  Wall Street’s financial markets are dominated by institutional investors, and such connection as the average American does have is often limited to the tertiary strings which attach to retirement savings accounts and pension funds.

There are forces which generate revenue for Wall Street investment houses that have a negative impact on those American Workers, for example — when Walgreen Inc. decided to eschew a corporate inversion, keeping its headquarters in Chicago the Market pounced and instead of rewarding the company for maintaining its American identity and retaining its American workforce at the Chicago HQ the Wall Street Wizards dumped its stock. [CBS]  More examples?

Merck, Cisco Systems, AOL, HP, Citigroup, Bank of America, and Wells Fargo — all companies which were rewarded by Wall Street for cutting expenses (read employees). [MoneyCNN] Cost cutting (read layoffs) will be rewarded because…? If revenues are at least stable and expenses are reduced there will obviously be more profits for shareholders.  If Wall Street has an anthem it must be “Onward Shareholder Value.”

The problem with marching to this tune is a loss of corporate focus.  Henry Ford’s big idea was to manufacture automobiles.  Merck may be the oldest pharmaceutical company in the world, beginning with Friedrich Merck’s purchase of an apothecary shop in 1668 — a firm which grew to sell the first commercial small pox vaccine in the United States in 1898. [Merck]  Henry Wells and William Fargo started their San Francisco business in 1852 offering banking and express services. [WF] In each of these instances the founders, whether a middle western mechanic, the descendents of an apothecary owner, or the bankers during the Gold Rush, opened their doors to provide products or to deliver a service.

A firm gets to be an institution by providing goods or services, sold to people who need or want them. There is no other way to build a business.  However, when the management of a company is more interested in the stock price than in the goods or services rendered to the public we start to see the cracks in the system.

The mythology takes over — We, say the managers, must guarantee to our shareholders (owners) the highest possible return on their investment.

Crack Number One:  How long must one wait for the return on the investment?  We have a relatively recent example of what happens when the management of a commercial enterprise decides to cash in on quick returns instead of waiting for long term results. Back in 2003 CBS News asked “Who killed Montana Power?”  The short answer is the management. Montana Power management took a blue chip company, a formerly solid investment, a source of economical electric power, and transformed it into … a disaster.

Crack Number Two: Institutional and professional investors aren’t investing in long term corporate strategies which they expect to grow over the next 90 years. They are instead attuned to the quarterly reports, the earnings estimates, and the pronouncements of the analysts.  Volatility, not stability, is the key to high and quick returns. Stability protects long term investors, volatility rewards short term speculation. [BusIns]

Crack Number Three:  When the Finance Department meets the Production Department who wins?   In the 1990s the financial sector accounted for about 20% of all corporate profits, by 2011 the sector rebounded from the Mortgage Meltdown and accounted for approximately 29% of all corporate profits. [HuffPo] The process happens in the remainder of the economy as well. Consider the recent information coming from General Electric.

The company’s industrial division (medical equipment, oil & gas drilling equipment, aircraft engines, locomotives, and gas turbines) reported revenue increases of 9%, its oil and gas revenues were up an impressive 25%, its financial services were up 7%.  In fact, the financial services end of the business, Synchrony Financial, is to be spun off getting GE out of the private label credit card business by 2015. Oh, and by the way — the corporation is planning to get rid of its appliance manufacturing. “Mr. Immelt made a promise to investors that the company would expand its industrial businesses and get rid of non-core segments.” [MBN]

The company formerly synonymous with nearly all things electrical is going to profit from selling off its private label credit card operations and dropping the appliances end of the business.  There’s nothing intrinsically wrong with the evolution of a corporation moving with the tides to stay profitable — but this does illustrate how a firm can move from manufacturing into financials as a core segment of its business.

Meanwhile there are several Wall Street investment banks no longer in existence that were enamored of generating fast revenue in derivatives markets and moved with another tide — out to sea.

Crack Number Four: Insert the hedge fund managers here.  Its one thing to argue for shareholder activism when speaking of the managers of pension funds, 401(k) funds, or the like, it’s quite another when the shareholder activists are hedge and wealth management types.  The Harvard Business School issued a report (July 9, 2014) coming to the following, rather depressing conclusion:

“As in prior research, we find positive announcement-period returns of around 4% to 5% when a firm is targeted by activists and a 2% increase in return on assets over the subsequent one to five years. We find that activist directors are associated with significant strategic and operational actions by firms. We find evidence of increased divestiture, decreased acquisition activity, higher probability of being acquired, lower cash balances, higher payout, greater leverage, higher CEO turnover, lower CEO compensation, and reduced investment.”

We can lump “increased divestiture, decreased acquisition, higher probability of being taken over, more debt, and less investment” under the general category of short term interests.

What is a pension fund or 401(k) administrator to do?  If pension funds, both public and private, are to be invested in corporations increasingly likely to be managed for short term revenue results, and those results are all too likely to be hinged on a swinging door of price volatility; and, if corporations are more likely to be managed with an eye toward the financials, coupled with increased divestiture and greater leverage — how does one invest for the long term in a short term environment?

So, here comes the dilemma.  The fund managers and administrators may decide to swim with the sharks — to go along with the short term investment strategies and applaud the volatility of the financial markets.  However, we’d have to ask: Does the very volatility of the markets or the acquisition of more indebtedness actually work against the best interests of the people who are paying into those retirement or pension funds?

Those who are now working, expecting retirement benefits or pension payments, seem to be at the mercy of a financial sector which rewards their layoffs and applauds the divestiture of their firms.  The message is reflecting from a cracked mirror: If you are lucky and the financial markets are up on your 65th birthday you can retire — If not?

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Filed under Economy, Nevada economy, Nevada politics

The Two’fer Talking Point and the Pointless House Suit

Old news:  Nevada Representatives Amodei (R-NV2) and Heck (R-NV3) voted in favor of “Providing for authority to initiate litigation for actions by the President or other executive branch officials inconsistent with their duties under the Constitution of the United States,” otherwise known as H.Res 676. [HouseClerk] What hasn’t been as widely available is the text of the resolution:

“Resolved, That the Speaker is authorized to initiate or intervene in one or more civil actions on behalf of the House of Representatives in a Federal court of competent jurisdiction to seek any appropriate relief regarding the failure of the President, the head of any department or agency, or any other officer or employee of the executive branch, to act in a manner consistent with that official’s duties under the Constitution and laws of the United States with respect to implementation of any provision of the Patient Protection and Affordable Care Act, title I or subtitle B of title II of the Health Care and Education Reconciliation Act of 2010, including any amendment made by such provision, or any other related provision of law, including a failure to implement any such provision.” [HouseRules] (emphasis and links added)

Notice the weasel words? “…the Speaker is authorized to initiate or intervene in one or more civil actions on behalf of the House….  Do we see the magic legislative words “may” or “shall,” or even the less common “will?”

No, all we see in the actual resolution is the authorization for the initiation or intervention into a civil case against the President or a member of the Executive Branch.  In short, the House said — in a party line vote — that the Speaker can (but maybe not necessarily will, or may, but might not) bring a civil suit against the President.  This is a far cry from the “House Votes To Sue” headlines which offer red meat to the Obamaphobe Republican Base.  There are substantive bills, there are ceremonial bills — but this one is neither fish nor fowl, in case there is no standing or if the political winds don’t fill the sails, the Speaker has a back door exit.  Nothing in the bill really requires him to act, it only says he is authorized to do so.

Viewed from this perspective, H. Res. 676 has no more “substance” than the 40+ odd efforts of the Republican controlled House of Representatives to repeal all or portions of the Affordable Care Act.  Even the usually adept publication, The Hill, presented the authorization of a  law suit as an alternative to impeachment, not as a possible alternative to …. anything?

“The lawsuit focuses on Obama’s decision to delay the healthcare law’s employer mandate, which requires employers with 50 or more workers to provide insurance coverage. The mandate was slated to originally take effect this year, but it has been pushed back for gradual implementation in 2015 and 2016.” [TheHill]

So, why the delay in the first place?  Business interests questioned whether the rules regarding the application of ACA provisions could be promulgated and reviewed in the time available one, for example, being  the restaurant owners:

“The National Restaurant Association, whose nearly 500,000 members were concerned because many industry employees work odd schedules and do not receive benefits, lauded the phase-in. “It’s welcome news, as is anything that helps employers figure this out and gives them time to comply,” said the group’s director of labor and workforce policy, Michelle Neblett, who noted that many members do not yet have systems in place to keep track of worker hours.” [WaPo]

The Restaurant owners weren’t the only business groups seeking more time, as this post from the Treasury Department indicates when describing some of the devilish details:

“The ACA includes information reporting (under section 6055) by insurers, self-insuring employers, and other parties that provide health coverage.  It also requires information reporting (under section 6056) by certain employers with respect to the health coverage offered to their full-time employees.  We expect to publish proposed rules implementing these provisions this summer, after a dialogue with stakeholders – including those responsible employers that already provide their full-time work force with coverage far exceeding the minimum employer shared responsibility requirements – in an effort to minimize the reporting, consistent with effective implementation of the law.” (7/2/13)

In sum, the reporting requirements and implementation were discussed with stakeholders (both labor and management) prior to the decision to delay the matter until the provisions could be ironed out over the ‘shared responsibility requirements.’  The temerity of the House Republicans to authorize a civil case for the failure to implement the provisions of the ACA which they’d tried to repeal (without replacing) during the 112th and 113th Congresses has been duly noted.  What’s been less publicized is the fact that the delay came at the request of business owners — the very group the GOP purports to enthusiastically support.

Since H.Res 676 doesn’t actually DO anything, and because it’s beyond ironic to have the House GOP file suit to require the instant implementation of a law it tried every which way to repeal, there’s perhaps another rationale for this risible legislative exercise. Publicity.

The Two’fer Talking Point

Opposition to the Affordable Care Act isn’t what it used to be.  In the Golden Age of Astroturfed Koch Brothers sponsored, Freedom Works sustained, and Tea Party sycophancy, elections were carried based on Obamacare Bashing. No more. [LATimes]  The generic “Obamacare” may not be popular, but the provisions are. People like the parts wherein health care cost increases are contained and the provisions on pre-existing conditions. [Pew]  As could easily be predicted, opposition to the law centers on the “Too Much Government” ideology.

So, if talking about allowing insurance corporations to abuse rescission clauses isn’t popular, and no one’s thrilled to go back to the days when being a woman was a “pre-existing condition,” what can the GOP do for an encore to 2010?  Try The Lawless President.

Google “lawless president” and all the usual voices come forth. Bachmann, George Will, The American Spectator, The National Review, Breitbart, Jeff. Sessions, Fox News, and that’s just from the first page of results.

Back in May, 2014, the New Republic was predicting the latest theme from the GOP for the mid-term elections would be the “lawless President.” ” This tactical change makes sense. Obamacare is no longer struggling and Democrats are putting Republican congressional candidates in difficult positions over the Medicaid expansion. Criticism of Obama’s lawlessness will rile up the base and bolster turnout.”

And there we have it.

So, Representatives Amodei (R-NV2) and Heck (R-NV3) added their names to the roster of theme promoters for the benefit of the base in the 2014 mid-term elections.  Not so the Affordable Care Act will be quickly implemented, but because they can say they are against the “lawless President.”  And then talk about the “lawless President,” and keep talking about the ‘lawless President,” until the narrative sticks with copious assistance from Fox News.  Again, it is sound and fury signifying nothing… except for riling up the Republican base.  It’s a two’fer, Republican politicians get to say Obamacare + Lawless in the same sentence. What could possibly go wrong?

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Filed under Economy, Health Care, Politics

Getting From the Swampy No to a Functional Yes

SwampWith all due respect to my fellow liberals and progressives — and with this introduction you know the criticism is about to pour forth — enough ink and pixels have given their all in the effort to analyze, explain, or otherwise explicate the ‘problems with the Republican Party’ specifically those who’ve been elected to the House of Representatives.  Enough. It doesn’t matter all that much.

It doesn’t really matter, for example if one adopts the “Neoconfederate” model [Salon] or the “two foundings” explanation [Salon], and we can argue if the ‘two foundings’ in question were the Continental Congress and the Federal System, or the Early Federal Period and the U.S. Civil War.  It’s interesting, it’s academic, and as amusing and thought provoking as the argument is it’s not very useful at the moment.

It doesn’t matter too much if the origins of the present dysfunction are religious, social, racial, psychological, pathological, psychiatric,  or a combination of all the above. What matters is that something is very fundamentally wrong with the way the people’s business in conducted in the Congress of the United States.

Getting To No

As of January 6, 2013 there were 48 members of the Tea Party Caucus, all Republicans.  Of the 435 voting members of the House, 234 are Republican, 199 are Democrats. Two independents caucus with the Democrats.  218 votes are needed to pass legislation. If all the members directly affiliated with the Tea Party Caucus refuse to join their other GOP caucus members, the GOP leadership can control only 186 votes.

In short, the ultra-conservatives in the House of Representatives do not have anywhere near the number of votes necessary to enact the agenda of their choosing, but they have more than enough votes to prevent the leadership from enacting legislation cobbled together with Democratic support.

This is the perfect recipe for NO. No action. No real pragmatic politics. No major legislation. No long term solutions.  The high wire act in the 113th Congress is more conducive to (1) short term stop gap measures to alleviate large problems, (2) interim short term budget appropriations and resource allocations, and (3) periodic breakdowns.

Little wonder then the Absolutely Do Nothing Congress has passed only 34 “ceremonial” bills and “108” substantive bills so far. [WaPo] However, if governmental gridlock is the desired result then the 113th is doing splendidly.

Getting Nothing Done

One of the problems with polarized politics is that hyperbole replaces reasoned discussion, and all too often things become A CRISIS!  There are a couple of ways a crisis can occur. First, and most obviously, there is a situation, unforeseen, which arises from a natural or man-made disaster or catastrophe.  Floods, tornadoes, an attack, an unpredictable infrastructure failure might all qualify as a crisis.

The second crisis category is manufactured.  There appear to be two forms of manufacturing of late. One manifestation is the “political crisis” in which a problem of long standing has been ignored or left unresolved for enough time to create an overwhelming backlog — the Veterans’ Administration issues in regard to wait time for medical services is a classic, as is the number of refugee children who have arrived unattended from Central America — a number that’s been increasing since October 2013.

The other form is more ephemeral and depends upon the Crisis, or Scandal du Jour.  For example, the Benghazi attack in 2012 has generated 25,000 pages of documents submitted in 13 hearings. That the documents have done nothing but reinforce the initial reporting, and that the hearings have generated nothing but easy copy and headlines, is immaterial.  The Congress is ‘dealing with the crisis…’

Meanwhile

While Congress fritters and frets its way to the end of the 113th session there are some issues which may fall into the first manufactured category — the backlog swamp.

Infrastructure: Residents of Los Angeles were recently reminded that 92 year old water pipes cannot be expected to last forever, and when they fail they have no regard for sacred public spaces — like Pauley Pavilion. Over 170 school buildings and 165 bridges in New York were constructed over a century ago. The average age of the 6,800 water lines in New York is 69 years, and 2/3rds of them are susceptible to internal corrosion and failure. [FutNy]  One out of every nine bridges in this country falls in the structurally deficient category, and the average age of a U.S. bridge is 42 years.  [2013RC] We have a early 20th century power grid which is supposed to keep us going in the 21st century. Failure to address aviation needs is costing the U.S. economy valuable revenue as a result of congestion and delays.  [2013rc]

Civil Rights:  The Civil Rights Act, and the provisions safeguarding voting in America are overdue for review. Voter intimidation, suppression, and curtailment are no longer the sole province of the old Confederacy.  We continue to put this issue on the back burner at our peril as a democracy.

Public Health and Safety: Heart disease and cancer continue to be the main causes of death in this country, but Alzheimer’s is climbing up the tables.  An aging population will require more health care services in a wider variety of settings than our current system can address.  We kill 34,677 of us every year in traffic accidents, but we continue to defer highway improvements because of budget constraints.

We kill off 26,631 individuals annually in firearm accidents, another 19,766 in firearm related suicides, and yet another 11,101 in firearm homicides. [CDC]  Still we wrangle about requiring universal background checks and how we might prevent straw purchases.  We can’t even seem to agree that stalkers and spousal abusers shouldn’t have immediate access to firearms.

Whether it’s Alzheimer’s or assault rifles, we’re still operating with entirely too many Medically Under-served Areas, there are 297 such reports for Nevada, and a search of neighboring California turns up 2,065 records. [HRSA]

Immigration: We have a mess going in this department.  It’s hard to ignore the fundamentally racist rantings of the Deport’em Now crowd, who never seem to have much to say about the northern border.  However, we will need to tune them out, or at least down,  if we are going to attract the best and brightest scientific and technical minds we’ll need for a 21st century economy.  We’ll need to figure out how to invite in those who have joined our Armed Forces, willing to die for this country, only to discover later there are voices demanding that they mustn’t  live here. Something rational needs to be done to meet the needs of children who came here as toddlers and have known no other country, and those who have one native born or naturalized parent and another who is not.  Comprehensive immigration policy reform would help. So would adequately funding the judicial, social, and educational components of our immigration policy — security is the easy part — it’s the larger, more complicated portions of the problem we’re delaying.

Might we add more to this list? — items which if we let them progress on their own long enough we’ll find ourselves in a “crisis” situation — climate change, income disparity and inequality, educational funding and curriculum development, and the regulation of capital markets to improve stability.

Our Bottom Line

One of the more egregious practices of failing businesses is the Run To Ruin mentality.  Got an aging delivery truck? Never mind, just keep depreciating it without putting any funds in replacement and capital improvement accounts, and when the thing finally gives up the ghost go out and get another loan to cover the cost.  Delaying serious proposals for maintaining our national safety, health, economy, and infrastructure is tantamount to adopting the Run to Ruin model on a national scale.

Another highly questionable business practice which will lead directly to bankruptcy court is the Disposable Asset Theory of Management  wherein all facets of an enterprise are ultimately disposable, including personnel.  Low wages and paltry benefits yielding high employee turnover? No problem, just hire more and cheaper labor. With 3 job seekers for every position available there will always be somebody.  Eventually those training and retraining expenses will add up, predictably levels of service will decline… and those adherents of the DAT management style should be looking for a buyer sooner rather than later.  Deferring the issues of hiring and retaining well trained and competent public employees is, again, like trying to run the country on the cheap (DAT) and then expressing surprise when “things don’t get done.”

By far one of the most predictable ways to go out of business is to ignore the changing circumstances and economic atmosphere around a firm.  Ever so redundantly speaking — Rule Number One: If you have an increasing share of a declining market you are in very real trouble. Think Kodak.

Let’s be optimistic and believe that eventually we will move from dependence on fossil fuels and toward renewable energy sources.  In old fashioned retail terms this means fossil fuels will be a declining market.  So, WHY are we subsidizing an industrial sector which we know to be on the way out?  Again, if we take a short-term defensive approach to energy policy we’ll be violating Old Rule Number One in ways that will not be helpful in the future — or we can wait for the Crisis in which the oil sector sputters out and takes a chunk of the economy with it.

Avoiding the Run to Ruin, Disposable Asset Theory, and the Ostrich Stance mistakes means we are going to have to stop lurching from crisis to crisis, and start doing some serious public policy planning.  We need to stop talking about running government like a business, and start doing precisely that — running it as a long term, asset rich, enterprise with public service as its core.

Instead of the Doctrine Of No, how about functioning based on the belief that Harry Truman was right: “It is amazing what you can accomplish if you do not care who gets the credit.”

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Heller Helps Sustain Another GOP Filibuster

Heller 3What if there were a bill in Congress which would do the following?

“Amends the Internal Revenue Code to: (1) grant business taxpayers a tax credit for up to 20% of insourcing expenses incurred for eliminating a business located outside the United States and  relocating it within the United States, and (2) deny a tax deduction for outsourcing expenses incurred in relocating a U.S. business outside the United States. Requires an increase in the taxpayer’s employment of full-time employees in the United States in order to claim the tax credit for insourcing expenses.”

In short — offer corporations tax incentives to bring American jobs back to America, or S. 2569.

But then, there’s the GOP side of the aisle saying things like:

“Some Republicans argue that if Democrats truly wanted to keep companies in the United States, they would work with Republicans to overhaul the tax code and reduce corporate tax rates.“It’s a bill that’s designed for campaign rhetoric and failure — not to create jobs here in the U.S.,” Senate Minority Leader Mitch McConnell (R-Ky.) said Tuesday. “Everyone knows that the Democrats aren’t being serious here.” [The Hill]

First, Senator McConnell’s taunt, that the bill is a purely political exercise without any redeeming merit, is simply a legislative version of the Ad Hominem Attack — name calling without addressing the issue at hand. Secondly, Senator McConnell’s definition of “working with” all too often means give us everything we want and we’ll still keep filibustering a measure.  To wit: The bill to require background checks and close the gun show loophole, in which the total gun safety legislative package was pared down to a single issue to appease the GOP and then the GOP filibustered the bill anyway.  Or the Affordable Care Act, originally a Heritage Foundation proposal, which after numerous amendments to assuage the concerns of Senate Republicans received no support from that quarter.

Third, there’s the matter of “working with Republicans to overhaul the tax code,” which assumes that the Republicans have a plan to overhaul the tax code.  The latest GOP tax proposal comes from the House, and would cut the top tax rate from 39.6% to 25%, impose a surtax on some  incomes above $450,000, but leave capital gains taxes at the low rate, to the benefit of hedge fund and wealth management firms. [WaPo] However, the problem with Representative Camp’s proposal is one shared with other GOP plans (health plans, budgets) – the devils haven’t been specified in the details.

The Joint Committee on Taxation analysis indicates the ‘plan’ doesn’t specify the special interest tax breaks which litter the IRS regulations will get the axe in order to make up for revenue lost in the bracket reductions.   The Camp proposal also comes with its own set of complexities, summarized in the Tax Policy Center’s analysis.  To mention just one, there’s the resurrected specter of the Alternative Minimum Tax implicit in Camp’s legislation — nothing like taking up something complicated in order to make another thing simple?

Then there’s some bad news for states, such as Nevada, which do not have a state income tax:

“Camp would repeal the deductibility of state and local taxes, including both property taxes and income taxes. He’d abolish tax-exempt private activity bonds. And he’d impose a 10 percent surtax on municipal bond interest for high-income households, a step likely to raise the cost of issuing state and local debt.But Camp’s plan also includes some less obvious changes that could increase state income tax revenues, especially for states that piggyback on the federal income tax. By limiting deductions—and thus boosting taxable income—Camp’s plan could also increase state income tax revenue, just as the Tax Reform Act of 1986 did.”  [Tax Policy Center]

No matter, the local and state income taxes, which Nevada doesn’t have, would no longer be deductible, but unless there is a state income tax on which to “piggy back” state income tax revenue doesn’t increase under the provisions of Camp’s bill.  Thus we lose the property tax deductions, and gain very little else.

Then there’s the matter of reducing the corporate tax rate. To what? There’s the statutory rate, which Republicans are fond of citing, and then there’s what taxes cost the corporations — or, the effective tax rate.  The GAO reported the effective tax rate for U.S. corporations at 12.6%.  [CNN]  Of course, the GOP response is “ya’shouldn’t hafta get a lawyer to figure out your taxes,” but that’s precisely what major corporations DO. And, they do it with a raft load of tax attorneys.  It doesn’t seem too far out of line to suggest that if the statutory rate were to be reduced to X%, the rafts of tax attorneys would be hard at work seeing how the liability might be reduced to X-Y%.

And while we’re on the subject of complicated tax codes — it does appear a bit unseemly to have the self same initiators and  protectors of tax break loopholes for corporations advance arguments that the tax code is “broken” because it is so complicated.  This would be a good time to click on over to Jon Stewart’s classic rant on tax avoiding corporations, “The Inversions of the Body Snatchers.”

However, speaking of tax breaks for corporations which bring jobs back to American shores… We aren’t going to see those because the Republicans in the U.S. Senate are successfully filibustering S. 2569, and kept their filibuster going in a vote on July 30, 2014 at 10:50 AM. The cloture motion failed on a 54-42 vote, with Senator Dean Heller (R-NV) voting along with Senate Minority Leader Mitch McConnell (R-KY) to further stall the Bring the Jobs Back Bill.

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They’re Back: Banks, SLABS, and the Opponents of Dodd Frank

bankerThere are several reasons the Banker’s Boys in the U.S. Congress would like to rip the guts out of the Dodd Frank Act.  There’s a reason they fought the creation of the Consumer Finance Protection Bureau, and more reasons why the 113th Congress has tried to grab control of the agency, strip the agency of funding, or otherwise make the Bureau a hollow shell of protective camouflage for the bankers.  Here’s one of those reasons:  The Securitization of Student Debt.

Flashback: On August 29, 2012 the Consumer Finance Protection Bureau issued a report on student debt. (pdf)  One section of the Executive Summary contained information which ought to have triggered some alarms:

“From 2005–2007, lenders increasingly marketed and disbursed loans directly to students, reducing the involvement of schools in the process; indeed during this period, the percentage of loans to undergraduates made without school involvement or certification of need grew from 18% to over 31%. As a result, many students borrowed more than they needed to finance their education. Additionally, during this period, lenders were more likely to originate loans to borrowers with lower credit scores than they had previously been. These trends made private student loans riskier for consumers.”

Sound familiar? Have some of the tonal qualities of the Subprime Mortgage Debacle? Over-extending credit, to the less credit worthy, placing them at greater risk of default, and doing it during the Great Housing Bubble?

Flashback 2005: Indeed, by 2005 there was a new bit of jargon in the world of fixed income investments — SLABS, or Student Loan Asset Based Securities.  The definitions can be illustrated by this information from one part of the securities industry:

“Student Loan ABS (SLABS) can be appealing to fixed income investors because they offer high credit quality, credit stability, and low spread volatility. SLABS backed by federally reinsured loans command tight spreads, in roughly the same range as deals backed by credit card receivables or auto loans. SLABS backed by other loans (so-called “private” student loans) command somewhat wider spreads, reflecting incrementally greater perceived credit risk.” [Nomura 2005 pdf]

Not to oversimplify too broadly, but there it was in 2005, a description of asset based securities (packages of student loans securitized into financial products) divided into two parts, the products based on guaranteed student loans and the less secure private student loans.  Note, please, that the advice on offer in this report doesn’t apply to the students who took out the loans — it is advice for “fixed income investors.”

Have we mentioned, at least a gazillion times, that one man’s debt is another man’s asset?  And so, the student loans were packaged (just like the home mortgages) by such dealers as Nelnet Student Loan Trust, Sallie Mae Student Loan Trust, Northstar Education Finance, Collegiate Funding Services, Access Group Inc., Education Funding Capital Trust, College Loan Corporation Trust, and others. [Nomura 2005 pdf]  Here we meet our old friend, the Tranche.

“A piece, portion or slice of a deal or structured financing. This portion is one of several related securities that are offered at the same time but have different risks, rewards and/or maturities.”

Perhaps it was that SLABS were sold as somehow being “safer” investments than their home mortgage cohorts, and maybe safer than the consumer credit securitized assets.  After all, the borrower couldn’t walk away from a student loan in most instances.  What could go wrong?

Flashback 2012:  What, indeed, could go wrong?

“Meanwhile banks have been slicing and dicing student loans into derivative financial instruments called “SLABS” — student-loan asset backed securities. We’ve seen this movie before — the one where big banks mass-market loans to a population with stagnated wages and dwindling economic prospects, then bundle them and sell them to investors who haven’t reviewed the way they were underwritten and sold.” [Eskow, HuffPo]

And, it all worked really well … until it didn’t.  There are those “derivative financial instruments” (read financial paper products) again, and again, and again.  In the wake of the derivative debacle of 2007-2008 the financial sector did some belt tightening and the CFPB was able to report underwriting and marketing changes which were far more responsible.  Additionally, the CFPB ‘autopsy’ of the student loan situation revealed some of the previous practices associated with economic issues:

#1. Some of those who took out private student loans did not understand that they had fewer repayment options than if they had assumed Stafford loans.  This sounds remarkably similar to the mortgage sales which didn’t quite lead to an understanding  about balloon payments, interest rate changes, etc.

#2. The private student loans were most commonly sold to people who were attending for-profit institutions.  While private loans were taken out by only 14% of the total undergraduates, students at for-profit schools held 42%.

And, to make matters even more murky, many of the loans were tied to LIBOR, which was perhaps not as above the board as one might have assumed before 2008. [TP]

July 28, 2014: If a person were thinking the provisions of the Dodd Frank Act, and the activities of the Consumer Financial Protection Bureau may have put more than a damper on the financial sector proclivity to create ways to peddle paper in order to create more ways to peddle paper — please think again.

Enter So-FI, Lending Club, and Prosper. “SoFi’s niche is refinancing student loans. But not just any loans. The kind of schools that are most represented in the program are selective colleges like Harvard, New York University and Northwestern. Their alumni provide the money — The students must also have a job lined up after graduation.” [CNN]  But wait, here comes the packaging. Compliments of Eaglewood Capital which securitized loans from Lending Club.

This time is slightly different. Did we notice that the packaged loans aren’t from the for-profit educational sector? Or, that most undergraduates won’t get re-financed via this new securitization scheme?  Low risk, coupled with above average returns and who might be interested in this newly peddled paper?  If you’re thinking we have the rich bailing out the rich for the benefit of the richer, the conclusion might be close to the target. Fitch explores the prospects:

“In our view, most future securitizations are likely to be concentrated with large non-bank servicers, who are also the traditional FFELP buyers. Of the 13 Fitch-rated FFELP deals that closed in first-half 2014, 10 were issued by Navient Corporation, Nelnet Inc. and the Pennsylvania Higher Education Assistance Agency (PHEAA). As some portfolio acquisitions include servicing transfers, we believe some small NFPs could experience lower account volume and profitability. These servicers are already facing sustainability issues, as some may not have the scale to weather the pressures brought by the Budget Control Act of 2011 and the termination of FFELP. They may also be pressured in the near term by rules proposed by Congress that would establish a common set of performance metrics, incentive pricing for servicers and allocate accounts to NFPs that meet the requirements.” [Reuters] *NFP = not for profit servicers

Those major players from 2008 (Nelnet, PHEAA, etc.) are still playing, and some of the newer participants in the game may not be so profitable in the long run because someone might be watching over their shoulders. “Under a law that took effect in March 2010, the government stopped making student loans through private companies that funded themselves in the market. The government now issues loans directly. Lenders sold $20 billion of student-loan securities last year, down from $62.2 billion in 2005, according to Wells Fargo.” [BloombergNews]

The good news may be that there is less Casino Activity among the bankers in the securitization of student loans, or the creation of SLABS. The bad news is that the bankers are going full bore to get rid of those pesky regulations and the CFPB which serve to put a lid on the Bubble Behavior of the recent past.

The July 23, 2014 session of the House Financial Services Committee took testimony from all the usual suspects on “Dodd Frank: Four Years Later.”  Rep. Hensarling’s Committee heard from the CEO of First State Bank, a partner in Treasury Strategies, an FMC representative on behalf of the Coalition of Derivative End Users, and a ‘resident scholar’ of the American Enterprise Institute.  The counter-balance? Former Representative Barney Frank.  The AEI testimony is instructive, [Pdf] if predictably repetitive.  A summary:

Regulation creates uncertainty, discourages investor due diligence, increases regulatory burdens, gives too much power with too little Congressional oversight, promotes a ‘naive strategy for promoting financial stability, and doesn’t solve the Too Big to Fail problem.

There is nothing new here, merely the recital of every anti-regulation talking point since the dawn of time.  However, redundant as the arguments may be, the  Republicans in the House of Representatives would very much like to repeal the Dodd Frank Act.  During the 112th Congress H.R 87, H.R. 1062, H.R. 1539, H.R. 1082, H.R. 1610, H.R. 1573, H.R. 1121, H.R. 1315, H.R. 836, H.R. 1223, @. 746, and  S. 712 were all introduced intending to either repeal or diminish the regulations in the Dodd Frank Act. In the 113th Congress, H.R. 46 is an outright repeal bill coming from Rep. Michele Bachmann (R-MN) Rep. Ted Yoho (R-FL) and Rep. Adrian Smith (R-NE)

The prospect of a wholesale repeal is dim, but not the notion that the statute could be ‘nibbled to death by ducks.’ [Hill]  House Republicans did manage to get one bill passed in June 2013 to restrict SEC and CFTC rule making capacities — arguing ironically that the agencies had 3 years to get the rules done and had not made enough progress — in the face of nearly overwhelming stalling tactics by financial sector interests and their litigators.

While the CFPB attempts to alleviate the more obvious abuses perpetrated by unscrupulous or unethical lenders, and issues annual reports (most recent 2013) noting that there were 3,800 consumer complaints about student loans, 87% of which were directed at 8 companies. The House Republicans persist in attempts to subject the agency to Congressional micro-management, if not outright dissolution.

We should expect the mid-term election rhetoric to mirror the testimony of the AEI in the most recent House Financial Services Committee hearing.  The Dodd Frank Act will be attacked “in general.” It’s reasonable to predict much will be made of the Too Big To Fail Argument, as if the consolidation of the financial sector is a function of federal statute rather than processes associated with the cyclical nature of financial enterprises.  It will be attacked as “too burdensome” for small banks.  It isn’t. It will be attacked as “big government.” Any attempt to reign in the Bankers will always be so characterized.

What opponents of financial regulatory reform won’t discuss is how the Consumer Financial Protection Bureau is attempting to guide the lenders and by extension their secondary markets into the construction of a more equitable, operable, less volatile, and more sustainable student loan sector.

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Keeping the Ladies in Waiting: The Paycheck Fairness Act

Woman's List 2On January 23, 2013 — yes, that’s 2013 — Representative Rosa DeLauro (D-CT3) introduced H.R. 377, the Paycheck Fairness Act.  The House Subcommittee on Workforce Protections has jurisdiction over bills of this nature, and by April 2013 the bill hadn’t moved.  Supporters of the bill filed a discharge petition. As of Tuesday, April 1, 2014 the petition to get a vote on the bill got its 197th signature. (113-1) It is 21 signatures shy of the 218 required.

Discharge petitions are a strategy of questionable value, since depending upon how such maneuvers are analyzed the success rate ranges from about 2% to 9% of all such attempts. [WaPo]

Nor has the idea met with enough support in the U.S. Senate.  As the last signature was being appended to the House Discharge Petition 113-1 in April 2014, Republicans in the Senate were blocking consideration of a companion bill.  [Nation] S. 2199, Senator Barbara Mikulski’s (D-MD) Paycheck Fairness Act was blocked when Senate Republicans refused to lift their filibuster on a 53-44 vote. [rc 103] Senator Dean Heller (R-NV) was among those voting to sustain the filibuster.

Republican opposition to the Paycheck Fairness legislation appears to be a masterpiece of ideological spin.  We, announce the members of the GOP, are really supportive of women’s issues — but government isn’t the answer.

There was this example: “The fact is the Republicans don’t have a war on women, they have a war for women, to empower them to be something other than victims of their gender,” Mike Huckabee said at the Republican National Committee winter meeting in January.” [Nation] Huckabee offers a talking point in which any attempt to assist women (or any other group for that matter) merely serves to create a sense of ‘victimhood’ thus disparaging attempts by individuals to grab their own bootstraps at improve their own economic circumstances. It’s little more than the hoary Moral Hazard Issue, modified and transformed into an excuse to do nothing to help anyone, ever.

And this one:  “All Republicans support equal pay for equal work,” wrote Republican National Committee press secretary Kirsten Kukowski, communications director Andrea Bozek and NRSC press secretary Brook Hougesen in a memo. “And while we all know workplace discrimination still exists, we need real solutions that focus on job creation and opportunity for women.” [Nation]  This might be characterized as the Double Side Step Dance.  Oh, we’re all in favor of equal pay for equal work, but — we need more tax breaks for multi-national corporations, etc. offering more support for those elusive Job Creators.

And these: “Republicans have said that, although they support equal pay for equal work, the bill would increase civil lawsuits. They also say that the bill is unnecessary because discrimination based on gender is already illegal.” [WaPo] Ah, the recurring Republican nightmare, on display with nearly every bill which ever sought to regulate corporate behavior — It will spawn litigation.

The Lily Ledbetter Act was supposed to have done that [TNR]… except it didn’t.  Redundancy is another GOP argument for doing nothing.  The line can be summarized as, “There is no need to improve any employee protections because current statutes already provide enough protection.” This is an argument which neatly avoids the rationale set forth in the legislation which explains the necessity of the proposed improvements.  Witness, the prohibition of penalties for employees who discuss their wages, and the authority of the EEOC to collect data from employers about wages.

And finally: It’s just election year politicking. [NYT] Translation: You’re just trying to make us look bad. If so, it was successful.

So, what might disgorge the Paycheck Fairness Act (equal pay for equal work) from the Congressional bill grinder?

Get Specific:  At town hall sessions, and public Q&A events — Instead of asking “Do you, Congressman Bilgewater or Senator Sludgepump, support equal pay for equal work?” Ask them: What is wrong with prohibiting employers from penalizing employees who discuss their wages or salaries?  What is wrong with allowing the EEOC to collect data on wages and salaries from employers?

If they stammer out that those sound like good ideas, then ask “Why didn’t you support the Paycheck Fairness Act which included those two items?”  Or, if the individual is not an incumbent, ask “Will you support legislation which includes those provisions?”

Get rational: At bottom the Paycheck Fairness Act is of a piece with family finances. [Additional here]  From a previous post:

“The pay gap has some very real economic consequences.   One analysis projects that if the pay gap could be mitigated, and more women could participate in the workforce, we could add about 3 to 4% to our national economy.”

Again, specifics matter.  In Nevada, a woman earns approximately 88 cents for every dollar earned by a man.  Additionally:

“125,402 households in Nevada are headed by women. About 26 percent of those households, or 32,479 households, have incomes that fall below the poverty level. Eliminating the wage gap would provide much needed income to women whose salaries are of critical importance to them and their families.” [NatPart pdf]

Allowing a politician to pontificate about the highly generalized moral hazard of hypothetical victimhood, or rattle on about redundancy and projected litigation only serves to skirt real economic issues faced by real families.  Ask, “What would be the overall economic benefit to Nevada if the $6,319 yearly wage gap between the earnings of men and women were narrowed?”

Playing with the calculator — if only 1,000 of those households in Nevada, headed by women, were to get the same wages as their male counterparts for doing the same job, and that $6,139 gap were closed, the result would be $6,139,000 added to the aggregate demand for goods and services in this state.

Get Out and Vote.

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Filed under Economy, equal pay, Heller, Ledbetter Decision, Nevada economy, Politics, Republicans, Women's Issues, Womens' Rights

Think of the Children

ChildrenSpare me the piteous cries of, “Think of the children and grandchildren!” emanating from the right wing when any allocation of resources is mentioned which could possibly help darn the holes in our social safety net programs.  IT (whatever it might be) will burden them with the horrible no good awful national debt — unless, of course we’re talking about reducing taxes for millionaires, billionaires, oil companies, hedge fund managers, and ….  Nevada’s managed, yet again, to hit the bottom in the Child Well Being category. [RGJ]

One of the nice things about thinking in ideological generalities is that one’s not required to consider the practical, all too real, consequences.  For example, that Nevada ranks 48th in the child well being category in the Kids Count analysis. (pdf)

That would be 48th in overall ranking, 47th in economic well being, 50th in education, 47th in health, and 44th in family/community rank.

These rankings aren’t something to dismiss out of hand. First, the Annie E. Casey Foundation is a private philanthropy based in Baltimore, MD, that specializes in compiling statistics on children’s environments, and promoting cost effective solutions for legislative and community consideration — and it’s been doing this since its inception in 1948.

Nor is the Foundation merely a font of doom and gloom, when speaking of trends in child welfare, they note some progress in the overall safety and well being of children since they started their Data Book project in 1990:

“There also is a positive trend in parental education that benefits kids: A smaller percentage of children live in families in which no parent has a high school diploma — from 22% in 1990 to 15% in 2012. In addition, the teen birth rate is at a historic low and the death rates for children and teens has fallen as a result of medical advances and increased usage of seat belts, car seats and bike helmets.”  [AEC]

So, how did Nevada get into negative territory? In 2008 the number of children in the state whose parents at least 35 hours per week for 50 weeks per year (classified as employment insecurity) was approximately 173,000, or about 26%.  By 2012 that number increased to 226,000 or 34%.  In 2008 there were 54,000 children living in Nevada homes in which at least one parent was unemployed.  In 2012 the number was 79,000, or about 12%.  [AECF]

Measuring by the number of children living in homes in which the family income was less than twice the official federal poverty level and at least one parent was working at least 50 weeks per year (defined as low income working families), Nevada had 68,000 children in that category in 2008, a number which increased to 88,000 four years later. [AECF]

Have we been mentioning that what this state needs are JOBS? Once more, spare me the “we can’t afford it” wailing when we speak to the necessity of maintaining and improving our state infrastructure — and thus creating JOBS.  When the 2007-08 Recession pounded the state of Nevada, Las Vegas lost 1,053 public sector jobs, while the state pared down a total of 2,170. [CEPR] In the Pie/Sky ideological generalities of the right wing this would be a good thing — fewer public employees — but when the brass tacks are counted this means fewer teacher’s aides, librarians, educational special services, kitchen employees, road maintenance workers, parks and recreation employees, police officers, firefighters, and so on. In other words — these aren’t the “bureaucrats” so belittled by the conservatives, they are the people who do jobs which improve communities.

We’ve lost about 4.08% of our state workforce, another 10.77% of our local workforce, and 9.03% of those classified as “state/local” since the Recession. [Governing]

Another grating refrain is the moan that we are “transferring money from the private sector to the public.”   In the rarefied atmosphere of ultra-conservative thinking this means that tax revenue is collected from private sources and used for public services, which is somehow determined to be a “bad” idea.  Since when was it “bad” to have well maintained roads, well stocked libraries, pleasant and useful parks, good schools, safe neighborhoods, responsive fire departments, and all those features which real estate agents tout as part of the “excellent location” of the houses they are trying to sell?

Or, to look at it from the other angle — what effect does it have on a person’s property value to have failing schools, unkempt parks, inadequate libraries, and slow response times from fire and police services?  In this realm, the ultra-conservatives fall easily into the Something for Nothing crowd; they certainly don’t want declining property values, but they don’t want to pay the taxes necessary to keep the value of their property increasing.  They want the assets which factor into their property value — they just don’t want to pay for them.

Private sector employment has done better in the Silver State. Nevada’s climbed up from a dismal 10% unemployment rate this time last year to a 7. 7% unemployment rate as of June 2014. [BLS] That’s a nice 2.3% increase, putting us in the running for the most private sector jobs created in the last year.  If we’d decide to do something about our 149 high hazard dams, our $2.7 billion worth of drinking water infrastructure needs in the next two decades, our $2.9 billion in waste water treatment needs in the same period, our 40 structurally deficient bridges, and the 20% of our roads which are classified as in poor or mediocre condition [ACE] perhaps our employment numbers would be even better?

Perhaps if more parents were working we’d not see the disparity in the numbers of youngsters attending pre-schools?  The number of children from families functioning on less than 200% of the federal poverty level who are not getting some sort of early childhood education increased from 24,000 in 2005-07, to 31,000 between 2010-12.  The number of preschoolers from families in which the income was above 200% of the federal poverty line who were enrolled in some form of early childhood education increased. In 2005-07 about 67% of the kids were not enrolled, a percentage which improved to 60% by the 2010-12 period. [AECF]

The specific indicators on which Nevada’s rankings were based are available online at this location.   As with all compilations, there’s good news and bad news, gaps and spaces.

However, finding indicators of improvement should not divert us from trying to do something about those miserable national rankings.

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Amodei and the Perils of the Second Question

Amodei 3I lasted for two questions and Amodeian Answers during last evening’s telephone town hall session.  The Second Question I  heard was from “Dorothy from Fernley” asking: “I live in Lyon County, what does the government plan to do to bring jobs…”

The previous post described the nature of any response on offer from Nevada’s 2nd District Congressman, Mark Amodei (R-NV2).  So, imagine the serpentine syntax and the following reply:

Representative Amodei was quick to let the caller know that the House had just passed a Jobs Bill, one that was a “general measure, instead of extending unemployment benefits.”

The Congressman didn’t specify what bill that was, but might have been referring to the Highway Trust Fund bill, or to the Federal Register Act, but those aren’t generally classified as “jobs” bills by the Republican leadership.  The bill to which he was most likely referring was H.R. 4718, amending the IRS code to make bonus depreciation permanent.  The bill “generally” helps businesses, and is an exemplar of Trickle Down in its almost pure form.

The bill passed on an almost  party line vote 258-160. [roll call 404] The Nevada delegation supported the measure. So, what would it do?

One rather brutal way to describe the bill is that it adds some $287 billion to the Federal budget deficit without doing much more than allowing businesses to write off the costs of capital improvements and investments more quickly.  [HuffPo]

If a person is waiting for a job in Yerington, Fernley, or Silver Springs — this bill doesn’t shorten the time. First, the corporation would have to make a capital investment or improvement, and the investment would have to be an expansion, and if it were an expansion, then it would have to expand in Lyon County…. you get the picture.  Describing the bill as “generally” promoting jobs is generous indeed.

More importantly, under the Austerian/Trickle Down Theory of Republican economics this kind of measure is supposed to have an overall stimulative effect.  First, bonus depreciation breaks have been in effect from 2008 to 2013.  Secondly, according to the Congressional Research Service report, (pdf) they weren’t all that stimulative:

“A temporary investment subsidy was expected to be more effective than a permanent one for short-term stimulus, encouraging firms to invest while the benefit was in place. Its temporary nature is critical to its effectiveness. Yet, research suggests that bonus depreciation was not very effective, and probably less effective than the tax cuts or spending increases that have now lapsed.”

It was a bust.  However, it was a tax break and Republicans believe, as an article of faith, that all tax breaks have a stimulative effect on the economy.

Not only was it a bust, but at the moment it is an expensive bust; again according to the CRS analysis:

“If bonus depreciation is made permanent, it increases accelerated depreciation for equipment, contributing to lower, and in some cases more negative, effective tax rates. In contrast, prominent tax reform proposals would reduce accelerated depreciation. Making bonus depreciation a permanent provision would significantly increase its budgetary cost.”

Remember how all those major corporations are forever telling us that the are paying the highest corporate tax rate in the Universe and that they can’t compete with other corporations based in foreign lands?  Well, here’s a tax break they can enjoy:

“Compared to a statutory corporate tax rate of 35%, bonus depreciation lowers the effective tax rate for equipment from an estimated 26% rate to a 15% rate. Buildings are taxed approximately at the statutory rate. Total tax rates would be slightly higher because of stockholder taxes. Because nominal interest is deducted, however, effective tax rates with debt finance can be negative. For equity assets taxed at an effective rate of 35%, the effective tax rate on debt-financed investment is a negative 5%. The rate on equipment without bonus depreciation is minus 19%; with bonus depreciation it is minus 37%.”  [CRS pdf]

Someone has to love the part wherein the capital improvements or investments are financed, the interest is deducted, and the effective tax rate can be a negative — what’s not to love? Except:

#1. The tax break was supposed to be a temporary stimulus for business expansion, with a temporary incentive for business spending.

#2. The way the current bill is drafted it’s going to cost the Federal government about $263 billion in lost revenue — from corporations, not the little guys.

#3. The CBPP informs us: ” Under current law, companies pay far less than the statutory 35 percent corporate tax rate on the profits flowing from those investments.  In some cases, they pay nothing and actually receive a tax subsidy.  Bonus depreciation only increases this favorable tax treatment.”

While the residents of Lyon County, Nevada are waiting for some business to expand and start hiring — the accountants at the corporate HQ of Soakem & Runn, Inc.  are tasked with finding yet more ways they can reduce their federal tax liability.  Therefore, the Lyon County residents must wait for the corporation to take its deductions, decide to use the money saved to expand the business, decide to locate the firm’s new improvements in the county, and take the plunge to build or expand operations.  Please do not hold your breath during this process.

Meanwhile, the extension of unemployment benefits, so disparaged by Representative Amodei have a far more immediate stimulative effect on the economy.

When we were discussing the extension of unemployment benefits back in 2011, the Congressional Budget Office estimated (pdf) that the cost of the extension would be approximately $44.1 billion during the first year. [Roosevelt Inst]  Yes, there is a cost, but the money circulates back into state and local economies.  The Congressional Budget Office estimated more recently that not extending unemployment benefits puts an approximate 0.2% “drag” on the overall economy. [CNN]  The percentage may not sound like much but when we consider that our gross national product is $17,268.7 billion [FRED] that isn’t chump change.

Instead of waiting for Soakem & Runn, Inc. to decide whether to use the new tax break for any expansion, and to determine what kind of expansion that will be, and if it will actually be in the county — Lyon County citizens might pin their hopes more realistically on the continued growth in the American GNP:

US GNP

With all due respect, they’ll have a shorter wait watching the GNP and GDP charts than they’ll have waiting for the corporations to decide how to apply their new tax breaks.  However, there’s more, as Representative Amodei tried to get more specific about Lyon County.

He referred to the need to pass the “Yerington Bill” which would create jobs and passed in the 112th Congress, but not in the present 113th.  Again, we’ll have to speculate that he meant the bill to assist the Pumpkin Hollow Mining operations, [PHM] one which has previously gotten itself mired in partisan politics, wherein an amendment was attached allowing Border Patrol agents to bypass environmental laws they deemed too restrictive.  [LVSun]

Representative Horsford (D-NV4) and Senator Heller (R-NV) are both supportive of the bill so it may have some future… but again the residents of Lyon County will have to wait.   It’s July 16th, and the House is only scheduled to be in session for nine more days until the month long August break, after which the House will have ten working days in September, another two in October, seven in November, and finally another eight working days in December. [House Cal. pdf]  That leaves a total of 36 legislative working days from now until the end of the year.  Again, Lyon County residents might want to just keep watching the GNP and GDP trends.

 

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Filed under Amodei, Congress, corporate taxes, Economy, Nevada economy, Nevada politics, Politics, tax revenue, Taxation

The Economic Idiocy of Immigration Protests

Earlier this month Senator Harry Reid (D-NV) commented on the House Republican refusal to move on the Comprehensive Immigration Policy Reform bill stalled on their side of the Congress:

“Comprehensive immigration reform would have added an average of 121,000 more jobs per year over the next 10 years,” Reid said. “Unfortunately, House Republicans, under the influence of the Tea Party, refused to bring it up for a vote. Their refusal is costing our economy added growth that we need.” [The Hill]

The comment underpins a simple concept:  Refusal to consider comprehensive immigration policy reform comes at the cost of American economic growth.  The figures cited by Senator Reid are fairly common.

“Numerous studies and the nonpartisan Congressional Budget Office found that the Senate’s bill would lead to significant economic growth as immigrants fully enter into our society and economy. Over the next 10 years, the Border Security, Economic Opportunity, and Immigration Modernization Act, S. 744, would increase our gross domestic product, or GDP, by 3.3 percent and would raise the wages of all Americans by a cumulative $470 billion, while creating on average 121,000 jobs each year.” [CAP]

Where does this come from? Once more, we have to look at the demand side of the supply/demand equation.  Tired of having me call it “aggregate demand?”  The total demand for goods and services, can also be described clumsily as  the willingness on the part of people to part with their wealth in order to possess some goods or receive some services.  Put in the simplest possible terms, the more people the more demand.

However, it’s not just the addition of more human beings that factors into economic growth, it’s how much wealth or income they have available to part with at the check out counter which factors in as well.

Here’s the point at which the ‘They’re Taking Our Jobs” Crowd of screamers has missed the macro-econ bus by at least an hour.  If Congress were to enact S. 744, the Comprehensive Immigration bill as it passed the Senate, we’d have about 10.4 million new legal U.S. residents — who need cars, kitchen tables, television sets, toothbrushes, towels, shoes, homes, rugs, lamps, sofas, and all the other Stuff of Life — who would be permanent residents. [CBO]   Therefore, those purchases and payments would not be interrupted by temporary status.  That’s money into the economy! Money into the economy equates to economic growth.  It doesn’t get much simpler.

The “They’re Making Our Wages Lower” Crowd is similarly out of touch with reality.  Currently our undocumented residents are part of the Shadow Economy, and being in the shadows means that about 8 million people are working in a system in which their earnings are not declared.  If as an employer my avarice exceeds my common sense, then I can keep “wages depressed” by hiring undocumented individuals for less than what I should have to pay a fully qualified resident — the fact that as an employer I have the option to function in the shadows depresses wages.  The wages paid is not an option for the worker — it’s a decision on the part of the employer, and the greediest among us will opt for the expedient of hiring someone for whom earnings aren’t declared.

Immigration protest graffiti

Bring people out of the shadow economy, bring their earnings out of the shadows, and watch the increase in money available to be spent in our commercial and retail sectors.   Again, the more money, the more spending, the more spending the more economic growth.   It’s hard to miss this point but several individuals who seem to be challenged by the spelling of illegal (“illeagle”) have done so.

And, by the way, declared earnings are taxable, thus adding to the funding of Social Security, etc., and apply toward the reduction of the debt and deficit some people are perpetually bellowing about.

In short, we’re losing about $80 billion annually in terms of economic output by stalling on Comprehensive Immigration Policy reform, along with absorbing an estimated $40 billion in annual budget deficits.  Additionally, we risk losing some 40,000 STEM graduates — in fields we really shouldn’t want to vacate for competitors.  [WH]

It might be interesting to find out how the following question would poll:

Do you believe that the United States should continue to operate with $80 billion in lost economic output and risk the loss of 40,000 STEM university graduates or should the Congress take action?

OK, that’s a question in the Push Poll manner of pseudo-research, but it makes the point — continued opposition to Comprehensive Immigration Policy reform makes no sense.

At least it makes no sense in economic terms, but the right wing conservatives seem incapable of contemplating the issue in economic terms in either the macro or micro realms.  It appears to have become a tribal, racial, emotional, primitive reaction to Us vs. Them.  At the least it’s xenophobic in the classic manifestation of NINA signs, and outlawing German language classes during World War I.

NINA

At the worst, it’s racist, harkening back to the faces of anti-integration supporters during the modern Civil Rights Movement.  I’ll repost this image for emphasis:

Murrieta Little Rock

* There’s more from DB back issues:  Here, here, and here.  For the human, and humanitarian side click over to the Nevada Progressive.

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Filed under Economy, Immigration, Nevada politics, Politics