Category Archives: privatization

Meals On Wheels: Canary in the GOP Coal Mine

The entire “skinny budget,” which somehow manages to keep lots of fat on the Pentagon budget, offered up by the current administration is a mass of mischaracterizations packed into a myriad of outright lies.  The assault on programs like Meals on Wheels is a handle providing a way to understand the totality of the right wing Individualism of the GOP. It’s there, blatantly set forth without excuse, and as emblematic of the Culture of Selfishness as can be imagined.

Cast me not off in the time of old age; forsake me not when my strength faileth. Psalms 71:9

“Trump’s proposed budget completely eliminates the Community Development Block Grant, which provides $3 billion every year for, according to The Washington Post, “targeted projects related to affordable housing, community development and homelessness programs.” Among those is the Meals on Wheels program, which provides meals—and vital human contact—for older, impoverished Americans, many of whom are largely home-bound. According to MOW, one in six American seniors struggles with hunger, and the organization claims it saves the nation about $34 billion a year in medical expenses by decreasing the rate of falls for seniors. The program gets the vast majority of its funding from non-government sources, but the proposal still seems unnecessarily harsh.” [Esquire]

And the rationale for all this would be what, please?

“After a reporter brought up the Meals on Wheels controversy, Mulvaney at first tried to subtly evade the question. But then, as is the wont of this administration, he fell head over glutes explaining that while Meals on Wheels “sounds great,” the administration couldn’t keep wasting money on programs like it that “don’t work.” As in, feeding the elderly apparently isn’t showing strong enough empirical benefits to merit continued federal spending by this White House, which is now deeply wedded to evidence-based policymaking.” [Slate]

There are a couple of things to unpack herein. First, empirical benefits are hard to compile without first establishing a matrix of goals.  Benefits are precisely why the program “sounds good,” the goal is to feed people, and people are being fed in their own homes. In fact some 2.4 million elderly persons are participating in the program at a total cost of $1.4 billion. 500,000 of these are veterans of our Armed Forces. A study in New York City reports that the average age of a participant was 80, meaning the person was likely born around 1937, and if the person is a veteran he or she likely saw service during the Cold War into the Vietnam Era. How goals are framed makes a difference.

If the goal is to provide 2.4 million elderly people one meal per day with a minimum of 625 calories, then we can say it’s working.  If our goal is to be that no elderly Americans go a day without a sustenance level meal for a relatively inactive person, then, no the program has too many people on waiting lists to say it’s an unqualified success.

“The need is growing rapidly, and federal funding has not kept pace. The network is already serving 23 million fewer meals now than in 2005, and waiting lists are mounting in every state. At a time when increased funding is needed, we fear that the millions of seniors who rely on us every day for a nutritious meal, safety check and visit from a volunteer will be left behind.”[MOWAm]

At this point it needs to be said that Federal funding is combined with charitable and individual donations to keep the program literally on its wheels.  Further, the only logical way to pronounce the services a failure is to absurdly assert that because seniors get hungry the next day the program isn’t meeting its goals. However, it’s crucial to take a look at the second feature of GOP rationalization for pure selfishness.

Ultra-right wing conservatives are fond of explaining that services like Meals on Wheels could be better done by local charitable institutions, ignoring the fact that as mentioned above the Federal funding is not the primary source, and IN FACT is supplementary to local charitable funding sources. Catholic leadership, for example, is wary of the implications of the administration’s budget priorities, and Catholic Charities of Southern Nevada is providing some 2,000 daily meals to those on its list. Reducing funding for this single program by one third would have a profound, and profoundly negative, impact on its services.   There are times when the intersection of governance and religious institutions illustrates the point that while private donations are the core, when the need overruns the capacity then it’s time for a little help from friends around the country.  This Cult of Selfishness only works in the ethereal world of ideological fantasies, it doesn’t deliver a meal, even one of a minimum of 625 calories, to a single individual anywhere.

What makes the skinny budget so alarmingly obnoxious is that curtailing funding for Meals on Wheels is merely illustrative of a budget building process based on what the rich want to pay, rather than on what our society needs to be a truly great nation. It is a budget process to Make American Mean Again.

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Filed under health, Politics, privatization, public health, Republicans

Unsolicited Advice for a Police Union

Rockwell cops I write this from the perspective of a former public sector union member and officer. I write this without rancor for other public section union members and their officials, but I write this because there is a difficult line to walk between protecting the interests of the membership and drawing lines between the members and the communities they serve.  Once those lines are drawn they are very difficult to erase.

There is always a temptation on the union side of the ledger to focus  on protecting the individual member from disciplinary actions, from demotions, involuntary transfers, dismissals, or refusals to re-employ.  That’s part of the job.  However, some disciplinary actions are both appropriate to the situation and often inevitable. Therefore, the focus of the union representatives is more productive in the long run if the philosophy is to protect the due process rights of the member, and the provisions of the master contract.  Put ever so much more bluntly, there are times when it’s necessary to tell a member, “I’m here to help you offer the best defense you can, if you can dream one up.”  

What is not helpful is to operate on the assumption that every member (or non-member in some instances) is worthy of full throated public support.  Nor is it helpful to assume that criticism of one, or a few, is necessarily criticism and vilification for all.    Yet, that seems to be the standard operation in a few high profile union/community examples.

“The St Louis Police Officers Association claimed that officers found the actions of (St. Louis Rams) Tavon Austin, Stedman Bailey, Kenny Britt, Jared Cook, Chris Givens and Tre Mason to be “tasteless, offensive and inflammatory”, and demanded that they be disciplined.

Five of the players emerged for their game against the Oakland Raiders on Sunday with their hands aloft, a gesture used by protesters who claim that Brown was surrendering when he was shot dead by officer Darren Wilson on 9 August. Last week a grand jury decided not to indict Wilson.” [Guardian] December 1, 2014

Wouldn’t it be nice if ALL police officers, firefighters, teachers, nurses, aviation employees, letter carriers, and state and municipal employees were respected for the countless hours of service they provide?  If everyone understood that first responder vocations are of paramount importance? If everyone understood that teaching and nursing are high stress occupations with long hours and little overtime?  However, respect doesn’t necessarily indicate adoration, reverence, and exaltation.   Further, demanding veneration means there will be higher standards applied to the members of the organization.  The old line applies: If you want to be respected do your job; if you want to be worshipped you have to do your job perfectly.

Mix a bit of racial tension into this toxic stew and there’s a recipe for unhelpful recrimination.  

“Pat Lynch, president of the Patrolmen’s Benevolent Association, blasted de Blasio for his inflammatory remarks, which followed Wednesday’s decision by a Staten Island grand jury not to indict cop Daniel Pantaleo in the chokehold death of Eric Garner.

“What police officers felt yesterday after that press conference was that they were thrown under the bus,” Lynch said.

De Blasio had called the Garner case “profoundly personal for me,” saying that because of “the dangers [Dante] may face, we’ve had to literally train him . . . in how to take special care in any encounter he has with the police officers who are there to protect him.” [NYPost] December 4, 2015

That a father would have The Talk with his son about interactions with police officers is common in the African American community.  I have yet to meet an African American who hasn’t been followed in a department store at least once, or hasn’t had The Talk with a son, grandson, or nephew.  Yes, The Talk implies a negative perception of the police, but an essential part of The Talk is to show respect for the officer and the directions given.  No one is getting tossed under the wheels of any imaginary bus – this is simply generational wisdom passed along regarding how to cope with some people in authority.  There are also  Talks about how to cope with cranky teachers, or how to behave in a department store.  These same talks are replicated in the white community, although without the sense of urgency and fear.  “Respect your teachers, respect police officers, keep you nose clean and mind your manners.”  Aren’t those things what we want all kids to do?

When the dust settles, let it settle. The outcome of mediation, arbitration, or litigation may not be the desired outcome for the union, but once it’s done it should probably “stay done.”  Such as in the case of the Eric Garner settlement in New York:

“Sergeants Benevolent Association head Ed Mullins, meanwhile, had a different take. In an interview with the NY Post (who else?), Mullins described the settlement as “obscene” and “shameful,” asking the tabloid’s readers, “Where is the justice for New York taxpayers? Where is the consistency in the civil system? In my view, the city has chosen to abandon its fiscal responsibility to all of its citizens and genuflect to the select few who curry favor with the city government.” [Translation: AL SHARPTON AL SHARPTON AL SHARPTON.] [Also: AL SHARPTON.]

“Mr. Garner’s family should not be rewarded simply because he repeatedly chose to break the law and resist arrest,” Mullins concluded. (Police claim Garner had been selling loose cigarettes outside a Staten Island deli when officers approached him.)” [Gothamist]  July 14, 2015

Or, in the case of Tamir Rice’s family in Cleveland:

“The head of the Cleveland rank-and-file police union says the family of 12-year-old Tamir Rice should use money from a $6 million settlement to educate children about the use of look-alike firearms.

Steve Loomis, the president of the Cleveland Police Patrolman’s Association association, was criticized on a national scale for statements he made to the media in the weeks and months after two officers in his union were involved in Tamir’s death.” [Cleveland PDealer] April 25, 2016

When enough has been said, enough has been said.  Until it happens again —

“Four off-duty Minneapolis police officers working the Minnesota Lynx game at Target Center on Saturday night walked off the job after the players held a news conference denouncing racial profiling, then wore Black Lives Matter pregame warm-up jerseys.  Lynx players did not wear T-shirts supporting the Black Lives Matter movement ahead of Tuesday’s game in San Antonio.

“The Lynx organization was made aware about the concerns of the off duty Minneapolis police officers,” the team said in a statement. “While our players message mourned the loss of life due to last week’s shootings, we respect the right of those individual officers to express their own beliefs in their own way. … We continue to urge a constructive discussion about the issues raised by these tragedies.” [MSTrib]

[…]

“Kroll (Minneapolis Police Federation) criticized Lynx players, citing the “false narratives” in the past two years in which some allegations of police misconduct in the killing of black people were refuted. “Rushing to judgment  Police sign up for off-duty jobs to work Lynx games, Kroll said. “They can start or stop a job whenever they want,” he said. “They are working on an independent contract.”

Asked about a report that seven or eight officers had walked off the job, Kroll said, “They only have four officers working the event because the Lynx have such a pathetic draw.” [MSTrib]

Here we go again.  Lt. Bob Kroll commends the officers for walking off, and then slathers on a bit of misogyny about the “pathetic draw.”  Putting distance between your union and your community doesn’t serve most positive purposes – in terms of  issues both philosophical and practical.

On a philosophical level, if we assume  there is already a divide between the African American community and the police – how does walking away from a potential opportunity for “constructive discussion” help anyone? What of, “I protect and defend your rights, including freedom of speech, until you say something I find offensive?” From a practical standpoint, the Lynx organization already hires private security; does it help other police officers trying to earn  extra pay if they are perceived as potential ‘walk outs’ should they be in any way offended by players’ statements?   The police chief tried to tamp down the rhetoric:

“Walking off the job and defaulting on their contractual obligation to provide a service to the Lynx does not conform to the expectations held by the public for the uniform these officers wear,” she said. “While I do not condone the actions of the officers, I realize how every member of law enforcement throughout this country, including myself, is feeling right now.” [MSTrib]

Here’s a thought: When the employer is trying to smooth the waters for the union, there’s a possible need to curtail wave making actions.  There are already calls for the privatization of police  [HuffPo] popular in some libertarian quarters, and touted as a ‘solution’ to police/community relations.  If your opponent wants to make a cudgel, refrain from handing him a tree branch.   Or a tree trunk, as in Denver:

“It’s only natural that some police departments reassess how they handle protests after the terrible shootings in Dallas last week that left five officers dead. But the demand by the Denver police union in the wake of the tragedy that local cops wear riot gear during protests was truculent and out of line.

The union has been pushing for the use of riot gear at protests for two years, ever since demonstrations in Ferguson, Mo., spread across the country. But the tone adopted by Nick Rogers, president of the Denver Police Protective Association, in a letter to Mayor Michael Hancock and police Chief Robert White, was rude and combative, while some of its factual content was questionable.

Basically, Rogers warned those two officials that if any officer not wearing riot gear is injured during a protest, the union will attempt to hold them personally liable, citing federal court decisions that “officials can be liable for the acts of third parties where those officials ‘created the danger’ that caused the harm.” Presumably he means the union will sue the mayor and chief in an effort to blame them.” [DenverPost]

There’s also something to be said for an employer who is trying to maintain the public image of police as public servants and not an armed militia out to suppress citizens, some of whom are already reluctant to give the police the benefit of the doubt.

Highly publicized emotional comments in highly volatile times, too often made from intransigent positions predicated on “us vs. them,” may garner approval from some quarters but approbation from others.   It’s best to function from the position that there are those who will always be in support no matter what the issue; however, it’s the increasing level of approbation which ought to be of primary concern.  Listening to supporters is always comforting; listening to the adversaries is always necessary.  On a more tangible level one thing the police unions would do well to avoid is the perception (now conveniently applied to public school teachers) that the union will protect the “bad apples.”

The recent devolution of respect for the teaching profession includes the argument that “schools are bad, they are bad because of bad teachers, and unions are bad because they protect those bad teachers.”  That none of this makes any sense isn’t the point. We certainly don’t need for some elements in the political spectrum to start arguing that “policing is bad, it’s bad because of bad officers, and the unions are bad because they protect those bad officers.”  Once this contamination spreads it’s more difficult to resist the privatization proponents.

If the perspective is truly to defend the due process rights of police officers, and to protect the provisions of the master contracts, then it’s much easier to defuse confrontations.  Due process and contractual elements aren’t personal.  Personalizing them adds emotion, emotion reduces discourse, and reduced discourse increases confrontations.  Negotiations are rarely improved by adding confrontation into the milieu. There is, indeed, a time for more collaboration and less conflict.

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Filed under civil liberties, conservatism, labor, Politics, privatization, public employees, racism, unions

Grab the Money and Go: Nevada School Funding Case Scheduled

Turkey

It’s a turkey, no matter how one looks at it – the proposal for parents to be able to grab public money for “private” education in the state of Nevada and run off to do heaven only knows what with it.  And, now the case comes to the courts.  [LVRJ]

“The law passed by the Republican-controlled 2015 Legislature and signed by Gov. Brian Sandoval allows parents to set up education savings accounts to receive a portion of state per-pupil funding and use the money, about $5,100 annually, to send their children to private school or pay for other educational options. The program, administered by the state treasurer’s office, has received more than 6,000 applications.

A group of parents sued in Carson City, arguing it will illegally divert money from public schools. A Carson City judge in January agreed and issued an injunction.

The ACLU challenged the law on separate grounds, claiming it violates a constitutional prohibition against using money for sectarian purposes. A Clark County judge last month rejected those arguments and upheld the law.” [LVRJ]

I’m not at all sure why the ACLU case didn’t have a better outcome, because the Nevada Constitution is very clear about prohibiting public funds for sectarian use.   Additionally, I’m a bit fogged about why the ultra-conservatives in Nevada would want to allow funds for potentially radical religious instruction of any stripe.  There’s a question here – would these same people be so supportive if the private school receiving the money were, say, a madrasah?

And, it’s notable that we aren’t talking about peanuts here.  If 6,000 families each grab $5,100 every year from taxpayer funds for private schooling, then we’re speaking of some $30,600,000, or $61,200,000 for the biennium.

If  the idea is to bankrupt public education and then privatize the remnants, this is a perfect formula.  Complain that the public schools are not performing to some artificially established standard, then promote the creation of private schools, followed hard by the transfer of funds away from public education into those private “reformers,” and perpetuate the cycle of under-funded public  schools trying to compete with corporation sponsored private ones.  There’s no way for the public schools to win, and that’s precisely what the privatizers have in mind.

Stay tuned, the Nevada Supreme Court will hear the case on July 29, 2016.

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Filed under education, nevada education, Nevada judiciary, Nevada legislature, Nevada politics, privatization, profiteering

Amodei Quacks Like A FLAG-waving Duck

Amodei 3

Representative Mark Amodei (R-NV2) doesn’t like being categorized as “anti-public land,” or more precisely lumped in with the Bundy Boys.  However, his sponsorship of legislation and other activities have him on the Anti-Public Land list:

“Amodei landed on the list for sponsoring legislation that would give the state control of 7.2 million of the approximately 58 million acres of federally controlled land in Nevada, opposition to the creation of the Basin and Range National Monument, membership in Federal Lands Action Group and a statement about the Malheur occupation.

The statement, attributed to Amodei and two other members of the action group, said the lawmakers didn’t condone the Oregon action but added, “we do understand their frustration with increasingly heavy handed federal agencies that continue to violate the rights of hardworking American farmers and ranchers.” [RGJ]

Duck looks The poor little Republican has been cast amongst the Bundys.  How did he end up bunched up with them?  First, he’s a “FLAG” member.

“Rep. Amodei is a FLAG member and introduced H.R. 1484, the Honor the Nevada Enabling Act of 1864—which would seize Nevada public land for state control. In 2015, Rep. Amodei also introduced H.R. 488, which would cripple the Antiquities Act by blocking the extension or creation of national monuments in Nevada, unless authorized by Congress. Rep. Amodei has also cosponsored four other bills aimed at curtailing the Antiquities Act and seizing public lands. In response to the occupation of the Malheur National Wildlife Refuge, Rep. Amodei signed on to a joint statement that condemned federal officials for law-breaking, rather than condemning the actions of the armed militants.” [CAP]

So, what is FLAG, and how does it relate to the Anti-Public Lands crowd?  The organization is the brain child of two Utah Representatives, Stewart and Bishop, who announced its creation on April 28, 2015.  And, the purpose?

Today, Representatives Chris Stewart (R-Utah) and Rob Bishop (R-Utah) launched the Federal Land Action Group, a congressional team that will develop a legislative framework for transferring public lands to local ownership and control. […] This group will explore legal and historical background in order to determine the best congressional action needed to return these lands back to the rightful owners. We have assembled a strong team of lawmakers, and I look forward to formulating a plan that reminds the federal government it should leave the job of land management to those who know best.” [Stewart]

Who were among the first members of the FLAG group? “Other members of the Group include Representatives Mark Amodei (R-Nev.), Diane Black (R-Tenn.), Jeff Duncan (R-S.C.), Cresent Hardy (R-Nev.), and Cynthia Lummis (R-WY).” [Stewart]

We should assume the group means what it says.  It wants to transfer public land to local ownership and control.   Towards this end the FLAG group held its first “forum” in June 2015, and among the speakers was a representative of the “Independent Institute.”  Board members of this organization include a private equity manager, a person from Deloitte & Touche USA, a member of the Howley Management Group, the Botto Law Group, a managing director of Palliser Bay Investment Management, Reditus Revenue Solutions, Audubon Cellars and Winery, Berkeley Research Group LLC, and the former chair of Garvey International.  [II.org]  This isn’t a list that inspires one to ask if they are primarily interested in public land for the sake of conservation.

Prof. Elwood L. Miller (UNR) was on the initial panel, adding a touch of accounting expertise to the argument that the federal government is too bureaucratic and caught up in procedural questions to be a good steward of public lands.  Attorney Glade Hall added the usual federal control isn’t constitutional argument. “It is a patent absurdity to assert that such full powers of governance cover 87 percent of the land surface of a state of the Union and at the same time assert that such state has been admitted to the Union on an equal footing with the original states in every respect whatever,” Hall said.” [STGU] A sentiment echoed by the head of the Natural Resources Group, whose book on the “theft” of the environmental issue is available from the Heritage Foundation.

In short, there was nothing to remind anyone of a fact-finding operation in this inaugural panel sponsored by FLAG.  It was of, by, and for individuals who want to ultimately privatize federal lands.

It’s also interesting that the panel members offered these opinions based on personal experience, or “talking to people,” but nothing in the presentations was offered to demonstrably prove that the federal government has no authority (beyond the usual crackpot interpretations spouted by the Bundy-ites and allies) or is actually and provably incompetent to manage public lands.  The guiding assumption – however poorly demonstrated – was that the local agencies could do a better job. Period.

If anyone is still unsure of the ideology driving FLAG, please note that the Heritage Foundation and the Mercatus group aren’t the only players supporting the efforts.  There’s also the John Birch Society (They’re still around) touting the confab on Facebook.  Additionally, there’s the ever-present American Legislative Exchange Council (ALEC) imprimatur on the project.

One segment of ALEC testimony from a February 2016 FLAG meeting can serve as an illustration of their argument:

“Bureaucratic inflexibility and regulatory redundancy make it almost impossible for the federal government to handle the lands in its charge for optimal environmental health. Any change in strategy on how to manage the lands, such as harvesting trees on forest lands to reduce wildfire fuel loads and prevent pest infestation, can take years to adopt and implement. By the time the federal government is able to act, it is often too late.”

Examples? The argument is made that three factors are responsible for the severity of wildland fires – poor logging practices, overgrazing, and over aggressive fire control. At this juncture, we could well ask how, without regulatory control, can better logging practices be promoted throughout the region? Or, if the Bundy Bunch isn’t convinced by the Federal authorities to pay their grazing fees and not trespass on BLM lands, then how is a state with less in the way of resources supposed to take on the task? 

However, the most intriguing element of the ALEC position is this: Further, they have operated with budget shortfalls for over a decade calling into question whether they even have adequate funds to get the job done.”  At this juncture it’s appropriate to ask – and who is touting cutting the federal and state budgets?  Who, if not ALEC?  Thus, the federal government can’t do a better job because the funding has been cut, and because the funding has been cut it can’t do the job?  Circular Reasoning at its finest, looped in with the obvious cuts and shaving from state budgets.   The ultimate argument would be that neither the federal government nor the state governments can “do the job” and therefore the lands should be transferred to private hands.  Nothing would please the Koch Brothers more?

The second way one gets attached to the Bundy-ites is to get mealy and smushy about their activities.  As in, “we do understand their frustration with increasingly heavy handed federal agencies that continue to violate the rights of hardworking American farmers and ranchers.” [RGJ]  It’s past time to get specific.  Exactly what constitutes “heavy handed federal agencies?”  Are they agencies which are tasked to collect grazing fees?  How long is an agency expected to wait for a person to decide to pay those fees? 

Exactly what constitutes a “violation of rights of hardworking people?”  Exactly what rights have been violated?  How is it a violation of my rights to have to pay the same grazing fees, or have to move cattle from overgrazed areas, just like every other rancher in a given area under Federal management?  Freedom, rights, and independence are easy words to toss around, but without actual evidence of real violations of RIGHTS then the argument is hollow.

Bundy rally And, one lands on the anti-public lands roster by sponsoring legislation like Representative Amodei did in April 2015:

“Most recently, Congressman Mark Amodei (R-NV) introduced a “large-scale” public lands bill, which would allow the state of Nevada to seize and sell off public lands. Representative Rob Bishop (R-UT), chair of the House Natural Resources Committee, also requested $50 million in the federal budget in order to facilitate immediate transfer of public lands to state control.”  [TP]

Looks like a duck, walks like a duck, quacks like a duck, then there’s no reason to list it as anything other than a duck.

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Filed under agriculture, Amodei, ecology, koch brothers, National Parks, Nevada news, Nevada politics, Politics, privatization, public lands, Rural Nevada

Great Retirement Scams: GOP pins hopes on Primerica Testimony?

GRANNY retirement As of 2013 the Census Bureau counts 13.7% of Nevada’s population as aged 65 or over.  The handy Plastic Brain tells us that amounts to 382,435 people.  Unfortunately, there’s a chunk of the 2,839,099 (2014) people in Nevada who have some silly and alarmingly self-serving ideas about how retirees should plan for those Sunset Years; and, more egregious ideas yet about how those under 65 should be planning for their retirement.  These would be the people in the “privatizer and opportunist” category. Let’s take a look at both. First, a quick review of the privatizers and Social Security (and by extension any public retirement program), and then a gander at the opportunists as exemplified by the unfortunate choice of champions brought to us by Senate Republicans.

The Great Scam

FALSE: “Social Security is Going Broke!”  Underpinning the Great GOP Retirement Scam shuffle is the notion that somehow Social Security “isn’t going to be there for young people…” and therefore younger Americans should pile their retirement funds into private sector wealth management schemes.  “But, but, but,” blubber the privatizers, “the Trustees Report and the CBO agree it will be b’b’b’..bankrupt by 2042 or 2052.” [CNNNo they didn’t.

They reported that in order to provide promised benefits for elderly people  the Social Security Administration will have to tap into the reserve fund – it is not – repeat not – going bankrupt. Nor, will those receiving benefits from the reserve funds live forever, thus at some point the system will stabilize. Tapping into the reserve fund – which was put in place to deal with the Baby Boomers – is not the same as “going bankrupt!”  There are some basic facts (of life) to deal with at this point.  The Census Bureau report, An Aging Nation, (2014) explains carefully: 

“In 2050, every age group is projected to be larger than it was in 2012. This is not the case between 2012 and 2030 or between 2030 and 2050. For instance, the number of men aged 48 to 58 and the number of women aged 47 to 58 in 2030 are projected to be smaller than those in the same age groups in 2012 (see Figure 2). This is because large cohorts of baby boomers were in these age groups in 2012, and smaller and younger cohorts will have replaced them by 2030. Similarly, the number of women aged 66 to 77 is projected to peak in 2030 and be smaller in 2050 than it was in 2030, as the smaller birth cohorts born in the late 1970s moves into these age groups.” [Census pdf]

A “smaller” cohort means that once the baby boomers die off, and they will do that because they are human beings, there will be less demand on the system for benefit payments.  That’s what the entire idea of the Trust Fund was based on, the knowledge that the system needed a “savings account” to get past the baby boomer generation.   “But, but, but..” sputter the privatizers, “there won’t be enough young people paying into they system..” Nonsense.  Take a look at this chart from the report on aging: (figure 2)

age structure us population chartSeriously, does anyone really think there are going to be more elderly retired people than younger workers in the foreseeable future?  If someone believes that then I guess I would try to sell them some scammy retirement savings plan!  I could also try to sell them an automatic kitchen gadget that “Cools your water in an instant! No Ice Cubes Required!”

FALSE: “Social Security won’t guarantee your retirement…”  this is right so far because Social Security was never meant to be an entire retirement program – it was meant to keep elderly people out of abject poverty.  However, the rest of the privatizers’ pitch gets more dicey, “therefore we should privatize the system and let people have a Choice…”  There’s a reason Social Security is called a Social Safety Net. It’s the safety net in case all else fails and an elderly person has little else to fall back on.  That we have a Social Security system to keep people from falling into an abyss of poverty doesn’t mean that people can’t choose to augment their retirement plans with pension plans, savings accounts, equity accounts, and all manner of other savings vehicles.  The privatizers would like for us to forget that we already have (and have had for decades) alternative savings plans for retirement!  The privatizers would be perfectly pleased to get all the money that’s paid into Social Security funneled into the hands of Wall Street traders… now there’s a thought that should lower one’s body temperature, or raise the blood pressure?

And now we get to the good part wherein the privatizers and scammers walk the halls of Congress to promote those alternative and supplemental retirement savings financial products.

retire savingsHowever, some of the plans are a dream for some and nightmares for others.  

The Smaller but Painful Scams

Consider:

“Sen. Elizabeth Warren (D-Mass.) on Tuesday embarrassed Primerica President Peter Schneider, who Senate Republicans had invited to testify against a new regulation designed to protect retirement savings from dodgy investment managers. The Obama administration estimates that Americans lose $17 billion a year from investment professionals who manage retirement accounts by prioritizing their own financial interests over those of their clients. It has proposed a simple solution: making that illegal.” [HuffPo]

Hmm, the Senate Republicans INVITED Primerica’s testimony against a fudiciary responsibility standard? And, what was Primerica testifying against?

“In February, the President directed the Department of Labor to move forward with a proposed rulemaking to require retirement advisers to abide by a “fiduciary” standard—putting their clients’ best interest before their own profits. And today, the Department of Labor is taking the next step toward making that a reality, by issuing a Notice of Proposed Rulemaking (NPRM) to require that best interest standard across a broader range of retirement advice to protect more investors.” [DoL] (emphasis added)

Thus, we could assume that the Senate Republicans are in favor of allowing retirement advisers to put their own profits AHEAD of consideration for their client’s best interests?  Okay, so what can happen when an investment adviser steers a client into territory which is not in the best interest of the client but really bolsters the firm’s bottom line?

“A system where firms can benefit from backdoor payments and hidden fees often buried in fine print if they talk responsible Americans into buying bad retirement investments—with high costs and low returns—instead of recommending quality investments isn’t fair. A White House Council of Economic Advisers analysis found that these conflicts of interest result in annual losses of about 1 percentage point for affected investors—or about $17 billion per year in total. To demonstrate how small differences can add up: A 1 percentage point lower return could reduce your savings by more than a quarter over 35 years. In other words, instead of a $10,000 retirement investment growing to more than $38,000 over that period after adjusting for inflation, it would be just over $27,500.” [DoL]

Actually there was more bad news from the Council of Economic Advisers in its report on the Effects of Conflicted Investment Advice on Retirement Savings (2015 pdf).   There’s this conclusion: “A retiree who receives conflicted advice when rolling over a 401(k) balance to an IRA at retirement will lose an estimated 12 percent of the value of his or her savings if drawn down over 30 years. If a retiree receiving conflicted advice takes withdrawals at the rate possible absent conflicted advice, his or her savings would run out more than 5 years earlier.”  And, if this weren’t bad enough, there’s another item: “The average IRA rollover for individuals 55 to 64 in 2012 was more than $100,000; losing 12 percent from conflicted advice has the same effect on feasible future withdrawals as if $12,000 was lost in the transfer.”

Thus, in general terms, retirees are losing an aggregate of some $17 billion from conflicted financial advice, losing a potential of five years worth of retirement savings value, and dropping 12% “in transfer” because of conflicted advice in the process.

And, to dispute this the Senate Republicans hauled in the CEO of Primerica? Oh, what a tangled web we weave when first we practice to deceive?

Let’s begin our Primerica Story in Florida in 2002 with a classic case of privatization:  

“Primerica’s legal battles stem from a change to Florida’s retirement system in 2002. It gave employees the option to switch from a traditional pension plan, in which they would receive lifetime benefits based on their salaries and years of service, or convert the value of their pension to a lump sum payment which they could invest in mutual funds and other securities offered through the state retirement system.”

Primerica told potential investors that they could put their pension money into an account which could (note Could) earn more than their pension benefits, and could be inherited by family members unlike standard pension benefits.   What Primerica sort of forgot to tell the state employee  investors was that the market could also go down. South. Pear-shaped. In the commode… And thus it did in 2007-2008.  By July 2013 Primerica was fighting off lawsuits in Florida and allocating $3.9 million to defend its claims in court cases and arbitrations. [Reuters]  As of January 2014 the amount set aside to settle various and sundry complaints against the company climbed to $9.3 million. [BfH]  The 2015 figure for fighting off the litigation was up to $15.4 million. [HuffPo]  And THIS was the company Senate Republicans thought would be a good source of testimony against the fiduciary responsibility rule?

So, what did the Senate Republicans get for their efforts to include Primerica’s CEO Peter Schneider on the witness list?

bamboozalah The Big Bambooza-a-lah began with Schneider’s written testimony:

“We are believers in educating the households we serve about fundamental financial concepts. Our investment education and philosophy is geared toward the needs of middle‐income households, who often are new or less experienced investors.  In that regard, we produce easy to understand educational pieces teaching fundamental investing concepts including the critical importance of taking the steps needed to start along the path of financial security.”

Uh, if your investment education process is “easy to understand” then why the escalating amount of funds the company is plowing into defending the itself  in some 238 cases?  When your defense fund increases by 295% in two years it’s pretty clear someone didn’t have a solid grip on “investment education” or “the fundamental investment concepts.”

Having wailed on about how Primerica was serving the Middle Class, a reference tossed in at just about every possible location in the testimony, Schneider got down to his real complaint “Guv’mint Regulations,” and the favored GOP buzzword, “burdensome.”

Those wonderful, admirable, Middle Class customers would be cheated of their opportunity to invest with Primerica because the rules for investment advice would be too “burdensome.”  Here comes the “Daze and Dizzy:”

“We draw this conclusion first and foremost because the Department’s expanded definition of fiduciary turns into a fiduciary act almost every conversation about an IRA that a financial professional might have. ERISA and the Internal Revenue Code prohibit fiduciaries from receiving commissions and other traditional forms of variable compensation in connection with a covered benefit plan such as an IRA unless what is known as a “prohibited transaction exemption” applies and provides relief.  Effectively, the DOL’s expanded definition of fiduciary makes an exemption from the prohibited transactions rules necessary to continue to effectively serve individuals investing in IRAs. Unfortunately, the exemption the Department has proposed to preserve the commission‐based services for IRAs – the Best Interest Contract Exemption (BIC) – is not operational.”

Translation: A conversation including investment advice for an IRA  would be covered unless there is an exemption, and the “best interest contract is not operational.”  We can take it that “not operational” means it won’t work.

This is followed by more “Daze and Dizzy” as Schneider attempts to explain, and at this point we need to parse the testimony carefully:

Instead, our primary concern is that the requirements and uncertainties of the BIC exemption are so complex and burdensome that the exemption is neither administratively nor operationally feasible. (1)  The trouble is that, from start to finish, the BIC exemption fails to offer certainty.  In operating our business, “certainty” with respect to regulatory compliance matters is critical because a failure to satisfy the proposed exemption may result in steep prohibited transaction penalties, including the forfeiture of compensation and excise taxes, as well as consumer lawsuits for breaches of contract, and potentially even class action lawsuits. (2)   Critically, the technical implementation of the exemption promises to be a substantial burden, and to cause a significant disruption of services to our clients, with no true added benefits in the way of investor protections. (3)

(1)Complex and burdensome,” could any phrase be more illustrative of any and all Republican complaints about consumer protection rules, product safety regulations, clean air and water standards?  This is standard GOP rhetoric, and no more probative because it is repetitive. Nor does this explain WHY the rule, and the exemption, would be a burden to a company intent on supervising its employees and representatives in such a way as to insure they properly represent the risks and rewards of their products.

(2)Creates uncertainty,” and again we have good old reliable Republican boiler-plate.  The well worn phrase has been applied often  to banking regulations (somehow the banks are still with us and doing quite well.) Once more the testimony doesn’t explain WHY anyone should be uncertain – IF the firm were providing the best financial advice it could in the most educational way possible.  If, however, the company was prone to, say, wrap backdoor payments and hidden fees in the fine print then they might be “uncertain” about how much they could get away with.   The fact sheet from the Department of Labor is really clear, for a technical document, about what constitutes investment advice.

(3) More boiler-plate. Now the implementation is a “substantial burden.” Not just any old regular garden variety burden, it’s substantial!  It’s interesting how many investment advisors there are in this country who don’t seem to have any trouble offering investment advice without selling products with hidden fees and backdoor payments.  In this instance old fashioned capitalism works, the firms sell products that people understand, and know both the rewards and the risks involved, then people recommend these firms to their friends and relatives – and so it goes.   If providing clear and honest investment advice without playing backdoor payment and hidden fee games is a “substantial burden,” then perhaps the business isn’t worthy of its clientele?

Then comes the “threat.” Consumers will lose their “freedom” to choose their investment advisers:

“This shift to advisory services is likely to cause millions of small balance IRA owners to lose access to the financial professional of their choice, or any at all. Those with enough investments to meet the account minimums will face higher costs and experience losses in retirement savings. These resulting losses by some estimates could be as high as $68‐$80 billion each year.”

Please. Let’s look at this from the consumer’s perspective – no one chooses to be ripped off. And, if one’s investment advisor is playing games for the firm’s bottom line at the expense of the retiree’s retirement savings then that future retiree should not be prey for the predators.   Is Mr. Schneider serious that NO brokerage firm will consider a small IRA or other investment?  That our little Middle Class man or women will be left shivering in the cold, facing the closed door of Merry, Berry, & Itch LLC, with $1,000 in hand?   Trust me, that money will go somewhere, and if it doesn’t meet Merry, Berry, & Itch’s minimum it will certainly find its way into a money market account at the local bank. If, the amounts do meet the minimum, would there be “higher costs?” Maybe, but they wouldn’t be hidden. Do private retirement accounts invested in equities lose money? Yes, again, but why shouldn’t the customer, the consumer, be made aware of this very fundamental fact?   However, we should observe in Mr. Schneider’s testimony that he presents no substantiation for his assertion that the costs will be higher and the losses any greater, other than his un-sourced “some estimates” phrase.

Senator Warren was correct to make an example of Mr. Schneider and his business model.  It should be noted that (1) the privatizers with their claims of insolvency for both Social Security and state retirement programs are doing a national disservice with false claims intended to frighten people into putting both the social safety net and public pension programs into the hands of the players in the Wall Street Casino; (2) private firms which utilize questionable business practices which involve lots of fine print hiding fees and management charges and which engage in back-door payoffs are not functioning in the customer’s best interests; and (3) trying to pass off clichéd, stale, and trite boilerplate as Congressional Testimony is unhelpful in the legislative process.

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Filed under Economy, financial regulation, Nevada politics, privatization, public employees, Social Security

SLABS: How to make money off someone else’s private student loan

SLABS

SLABs, and no we aren’t talking about the stuff of which patios are made, or the tiles that can be laid on kitchen floors. Nor, are we talking about some Silicon Valley laboratory firm.  Let’s focus on Student Loan Asset Based securities.  Yep, “securitized” assets – like mortgages, auto loans, credit card receivables, etc.  We do remember the mortgage thing? Right?

SLABs were hot in 2013. [WSJ]  In fact, see if you can make sense of the following description:

“Student loans are souring at a growing rate—and investors can’t seem to get enough. SLM Corp., the largest U.S. student lender, last week sold $1.1 billion of securities backed by private student loans. Demand for the riskiest bunch—those that will lose money first if the loans go bad—was 15 times greater than the supply, people familiar with the deal said.” [WSJ]

Why would investors be banging on the doors for those loans which are the most likely to go into default?  I think we’ve seen this movie before, and the ending (2007 – 2008) wasn’t pleasant for anyone.

The Basic Materials

Once upon a time Sallie Mae or SLM, was a government sponsored lending firm specializing in student or educational loans.  That was the case until 2004 when Sallie Mae went private and it’s now a publicly traded private sector corporation. SLM securitizes private education loan by selling them to the SMB Private Education Loan Trusts. The Loan Trusts (2014 and 2015) show “issuance details” online (here’s 2014-A)  There was $382 million in the August 7, 2014 records; divided into five categories with varying rates of return. Scrolling down we find the ‘master servicer’ as Sallie Mae Bank, the sub-servicer as Navient Solutions, Inc., the indentured trustee being Deutsche Bank National Trust Company, and the underwriters Credit Suisse and the Royal Bank of Scotland. [SLM]   Navient Solutions, Inc. is simply the name adopted in 2014 for Sallie Mae’s loan management, servicing, and asset recovery operation. [Bloomberg]  An ‘indentured trustee’ is:

“A financial institution with trust powers, such as a commercial bank or trust company, that is given fiduciary powers by a bond issuer to enforce the terms of a bond indenture. An indenture is a contract between a bond issuer and a bond holder. A trustee sees that bond interest payments are made as scheduled, and protects the interests of the bondholders if the issuer defaults.” [Investopedia]

The underwriters, in this instance Credit Suisse and RBS, are the firms which act as sales personnel for the bonds bases on securitized private student loans.  So, we have SLM issuing the bonds, Deutsche Bank National Trust acting as the agency responsible for bond registration, transfer, and payment of bonds, while Credit Suisse and RBS are the ones selling the bonds.   Sounds impressive, however those private loans comprise only about 8% of the total student loan market – the remaining 92% are Federal Stafford and PLUS program loans.  But – the numbers are still sufficiently high to interest SLM, Deutsche Bank, Credit Suisse and RBS, because there’s about $92 billion involved in the private student loan market. [PSL]

Slabs without much mortar

Recall for the moment what got Wall Street in major trouble during the Housing Bubble.  Investment firms issued bonds, and then played with derivatives based on those mortgage based bonds, without being all that sure the loans were going to be paid off.  Thus, it was extremely difficult, and in some instances impossible, to calculate what the bonds were actually worth. Enter the credit rating agencies who (for a nice fee) stamped AAA+++ on what should have been recognized as piles of garbage; the investors couldn’t get enough of these, so even more garbage piled up as the investment houses bet on whether or not the assets were worth anything.  Enough garbage was included in the piles of paper that the whole pillar of paper crashed.

What’s saving us from the prospect of another bubble of epic proportions is that the market in private student loans is very small – that $92 million is a drop in a very large bucket of corporate and commercial debt. [Atlantic]  Another bit of good news is that because of the Dodd-Frank Act there is more transparency required in dealings in asset based securities.  [SEC]  [WSJ] The bad news is that Republicans in Congress have been wailing for the repeal of the Dodd-Frank Act as “burdensome regulation” of the banking industry.  Or, “make the SEC back off and let us get back to trading asset based securities like we used to in the Good Old Days.”

Who’s holding up the scaffolding?

Another bit of bad news is that while lenders are looking for new customers (students willing to take on private loans) we’re not tracking some important information about those loans.  For example, the default rate for Harvard is less than 2%, while the default rate for the Arizona Automotive Institute is nearly 42%.  [Bloomberg] Interestingly enough, there’s a long list of for-profit educational institutions with default rates higher than 28%. What we don’t need to see are more for-profit training schools encouraging more private student loan debt, debt which someone somewhere hopes will be hedged with private loans more likely to be paid off – because at bottom the funds to pay investors have to come from students paying off the loans.

Don’t panic yet, yes – there’s a hungry market for student loan asset based securities (perhaps in part because some old Federally backed loans were in the pipeline originally) and the market is relatively small albeit subject to some of the valuation mistakes of the Old Investment Houses – the ones who went bust in 2007-2008.   There’s another reason for hope: The Consumer Financial Protection Bureau – the agency the Republicans can’t seem to wait to dismantle. [DB 7/30/14]

One of the provisions of the Dodd-Frank Act was the creation of an ombudsman for student loans which is part of the CFPB.  In the 2014 annual report (pdf)  it’s of interest to note that the biggest problem area was NOT repaying student loans but in getting financial institutions to cooperate with repayment programs and dealing with servicers and lenders (57%). If this sounds like a reprise from the Mortgage Meltdown Days it might be because some of the same actors are involved, at least in terms of complaint volume: JPMorganChase up 56% from 2013; Sallie Mae Navient up 48%; Wells Fargo up 8%.  The annual report indicates problems in the following areas: (1) There is no clear path to avoid default. (2) Proactive outreach from borrowers was too often unsuccessful. (3) When repayment options are made available they are too often too little too late. (4) In some cases repayment options were allowed only after the loan went into default. (5) Short term forbearance options were often associated with processing delays, unclear requirements, and unaffordable fees. (6) Many lenders force a choice between staying in school and repaying the loans.   There is a reason for the Ombudsman’s concern. The Sallie Mae Settlement.

The FDIC announced a settlement with Sallie Mae on May 13, 2014 in which Sallie Mae was charged with (1) inadequately disclosing its payment allocation methodologies to borrowers while allocating borrower payments across multiple loans in a manner that maximizes late fees; (2) misrepresenting and inadequately disclosing in its billing statements how borrowers could avoid late fees; (3) unfairly conditioning receipt of benefits under the SCRA upon requirements not found in the act; (4) improperly advising servicemembers that they must be deployed to receive benefits under the SCRA; and (5) failing to provide complete SCRA relief to servicemembers after having been put on notice of the borrowers’ active duty status.

The Structure

As long as the private student loan market remains a small part of the total structure we can breathe a bit easier about its effect on capital markets. Secondly, the private student loan market has relatively low yields and thus doesn’t get included in most structured derivatives.  Third, the old ‘recourse loans’ (for those with really low credit scores) are a thing of the past, most private loans now take higher scores into consideration. [QuoraWhat will continue to keep investors whole?

  • Continued monitoring of the private student loan market by the CFPB so that loans taken out will continue to be loans paid off, even if this means some reduction in the revenue streams for the bankers.
  • Continued oversight by the SEC and FDIC under the terms of the Dodd-Frank Act so that we don’t return to the Wall Street Casino of old should there be changes in the private student loan market.
  • Improvement in the servicing of private student loans such that there are clear pathways to avoid default; effective and efficient communication between borrower and lender regarding repayment options; and, that this communication happens in a timely manner.
  • Requiring lenders to make all the term of the private student loan clear at the outset including forbearance conditions, and any and all fees associated with deference, late payments or defaults.

The Foundation

From a Wall Street perspective private student loan asset based securities are a niche market, with some revenue potential – enough to keep the big banks interested – however, not with enough total clout to cause major financial displacement should the Quake happen.  And yes, there are some institutions making nice fees for making student loans, selling student loans, securitizing student loans, servicing student loans, and collecting payments on student loans.  Capitalism works, the trick is to keep free market capitalism from becoming casino capitalism and/or financialism.

A more existential question is how to maintain a system in which students are burdened with so much debt (Federal program/Private loan program) that they are deferring consumer purchases which would contribute to the growth of the overall economy.  Deferred student loans can impact mortgage qualifications. [credit.com]  We know this because the  rate of homeownership among those with student debt is 36% below that of unencumbered home buyers, and we’re losing about $6 billion annually in new car buying capacity.  [Forbes]  And, this is not an inconsequential problem:

“Student loan debt is the only form of consumer debt that has grown since the peak of consumer debt in 2008. Balances of student loans have eclipsed both auto loans and credit cards, making student loan debt the largest form of consumer debt outside of mortgages.” [NYFed]

Given some of the trends reported by the NY Federal Reserve’s study of educational loans, how do we make sense of an economic system in which wages and salaries are stagnant while it is taking those from lower and middle income backgrounds longer to repay student loans?  How do we sustain an economy when 29% of borrowers are paying off their loans, while 34% are making regular payments but the balance is increasing, and 20% have reported credit related problems, with another 6% delinquent and 11% in default?

These are not simply economic issues, they are also political as well. Is there the political will to make post secondary education more affordable for more people?  Are we headed toward the privatization of our public institutions of higher education and post secondary training, and is this trend combined with the rising level of student indebtedness creating cracks in our economic foundations?

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Filed under consumers, Economy, education, financial regulation, privatization

Grand Old Ivy Gets More Expensive

Grand Old Ivy

When Shepherd Mead published “How to Succeed in Business Without Really Trying” in 1952 tuition at Harvard University was $600.00.  When the Loesser & Burrows musical rendition was produced on Broadway in 1961 Harvard tuition was about $2,370, and the tuition for a four year public institution was about $1825.00.

As the following chart demonstrates it was a whole lot easier to sing the Alma Mater 50  years ago than it is for middle income students today:

Tuition increases chartNote that the precipitous climb begins around 1984.   One factor involved in this fiscal situation is that from FY 1980 to FY 2011, with only two exceptions (Wyoming, North Dakota) all the states have reduced their financial support in a range from 14.8% to 69.4%. Colorado reduced support by 69.4%, South Carolina by 66.8%, Rhode Island by 62.1%, Arizona by 61.9%, Oregon by 61.5%, Minnesota by 55.8%, Virginia by 53.6%, and Vermont by 51.3%.  [ACEnet]

The Bottom Line: “Based on the trends since 1980, average state fiscal support for higher education will reach zero by 2059, although it could happen much sooner in some states and later in others. Public higher education is gradually being privatized.” [ACEnet]

“Down At the Bottom of the Heap, Where The Mud Is So Very Very Deep”

There are various and sundry explanations for this, and most critics start by contending that without showing inflation adjusted amounts the argument can’t be made that state support has been dwindling, or in some cases spiraling downward.  This would be a valid argument except that when inflation adjusted figures are used the results are essentially the same. [ChronHE]  State support is dropping and tuition and fees are increasing.

The next common refrain from the privatizers is that the universities are full of “administration bloat.”  This, too, fades when the numbers are crunched.  There’s a chart for that too:

College Admin What the actual numbers show is that for research universities what’s increased is the category of part time faculty. What’s decreased is the category including “executives and administrators.”  The same holds true for non-research based institutions. [Demos]  A rational explanation for the increase in professional positions might be found in additional numbers of individuals involved in information technologies, health care services, and security services.

One of the more self-serving arguments is that if you give students more student aid, the colleges and universities will simply raise their tuition to absorb more of the financial benefits.  This notion was popularized by Reagan appointee William Bennett, and while it’s been debunked almost entirely since, it’s an argument which simply won’t disappear.  The GAO was the most recent research to debunk the Bennett Hypothesis:

“The most recent, conducted by the Government Accountability Office (GAO) in 2011, took advantage of a unique “natural experiment” to test the Bennett hypothesis: the substantial increases in Stafford Loan limits between 2007 and 2009.22 In 2007, the yearly loan limits, adjusted for inflation, ranged from $2,925 for freshmen to $6,125 for upper classmen. By 2009, they had risen to $5,750 and $7,825, respectively. All told, the yearly borrowing limit for all undergraduates increased by an average of $2,340. However, average tuition at public 4-year universities rose by just $540 over the same two years, in line with recent historical averages, leading the GAO to reject the possibility of a relationship between the two. Additionally, these increases in borrowing limits were the first since 1993, meaning that the inflation-adjusted value of the limit had declined for more than a decade during which tuitions rose steadily. All told, both the empirical evidence and academic consensus deem the Bennett hypothesis false.” [Demos] [original GAO pdf]

Actually since the Demos Report there have been some more recent studies by the GAO.

The GAO looked at the possibility of increased tuition caused by the reforms made to the federal student loan programs and reported in February 2014: (pdf)

“Although college prices went up, we were unable to determine whether or not these increases resulted from the loan limit increases because of the interference of various economic factors occurring around the same time these loan limit increases went into effect. Specifically, when the loan limit increases went into effect, the nation was in a recession which created one of the most tumultuous and complex economic environments in recent history, affecting families’ employment, income, and net worth (see fig. 4). As shown earlier, the availability and types of federal and institutional financial aid available to students increased around the time the new loan limits went into effect (see table 1), also making it difficult to discern any effect those loan limits may have had. For example, the dollar amounts of Federal PLUS loans, federal tax benefits, Pell grants, and federal veterans grants all increased. Further, the amounts of state and institutional grants and loans also increased, while the amounts of state appropriations for colleges and college endowments decreased.”

In short, a direct cause and effect relationship cannot be discerned because there are simply too many other economic and demographic factors which have to be considered in the mix.  Not only is there not a way to establish causality, it isn’t possible to even propose a correlation.

Perhaps the most ear drum splitting whine from those who advocate for the eventual privatization of American public colleges and universities is the whinnying that those institutions are accepting people who “should never have gone to college in the first place.”  The inference is clear, these young people are a “waste.”  The American Enterprise Institute offers a softer, albeit more verbose, rendition of this complaint.

Brookings, more interested in BLS statistics on education and the labor force than in compiling survey based impressions of the value of education, offered this rejoinder:

“… it is indisputable that workers with more education typically earn significantly higher wages and are far more likely to be employed than workers who have no post-secondary education. For example, the latest figures from the Bureau of Labor Statistics show that workers with only a high school education are twice as likely to be unemployed as those with at least a bachelor’s degree. Among the employed, the median college educated worker earns 84 percent more than the median worker with only a high school education. Even those with just some college and no degree or an associate’s degree earn 16 percent more. College educated workers are also much more likely to be in the labor force.” [Brookings Edu] (emphasis added)

The correlation between education and employment thus secured, we can probably dismiss this complaint from the Conservatives as simply another layer of the anti-intellectualism all too common in that sector.

One thing that makes the Conservative arguments against increased funding for colleges and universities yet more incredible  is their interminable reference to “liberal elites;” note the Santorum jabs at President Obama for being a “snob” because he wants more young people to go to college, or charging that colleges are simply a form of “indoctrination.”

It appears that the one way to bring college tuition levels down, or at least to stabilize the situation, is to support increasing levels of state funding for both the research based and teaching oriented public institutions of higher education.   However, this advocacy will be faced by the forces of privatization (not an inconsequential element in Austerity Politics and Economics) and those who have found a way to increase their wealth through investments in SLABs (student loan asset based securities) – a topic for a post down the road.

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Filed under conservatism, education, privatization