Tag Archives: student debt

Back Up and Running: Because Things Aren’t Changing

Okay, now the Internet connectivity is back … as in there wasn’t any Internet Connectivity for a few days … it’s time to get back up and running.  And, time to get back to nagging, entreating, nagging, begging, nagging, pleading, nagging…  it’s time to VOTE.

Why?  Because stuff’s not changing.

There are still children who are separated from their families at our borders.  The government has been told to reunite them.  Has been ordered to reunite them.  However, when cruelty is combined with incompetence we have a situation in which deported parents may lose their children to adoption. [NBC]  There was a two year old girl called to an immigration hearing. Two years old. 2. [NYT]  A five year old girl was persuaded to sign away her rights. [NewYorker]  Five years old. 5.

We know what two year old children can do, the average ones are walking and pulling their toys around; they climb on furniture; they can identify objects when the objects are named for them;  begins to know that objects have permanence even if they are covered by three or four layers.  And we put a child such as this in an immigration hearing?  Who on this planet could possibly believe this is right?

Four and five year olds?  We’re usually happy if they put sentences of more than five words together, if they can correctly name at least four colors, if they can draw some basic geometric shapes, if they use future tense, if they can count ten objects, and if they can name basic common household items.  And we want a five year old to understand a Flores bond?  Really.  Who on this planet could possibly believe this is right?

We could have comprehensive immigration policy reform coming from the Legislative branch of our Federal government, but we won’t get it as long as Republicans are content to shove show-pieces through the process which don’t address the essential cruelty and racism of current administration policy.   We won’t get comprehensive immigration policy reform accomplished unless and until Republicans no longer control the Legislative branch. Period. Full. Stop.

There are still children in our elementary schools learning shelter in place procedures for school shootings.   Additionally, it’s been over a year since the massacre at the Las Vegas music concert.  Still there are no bans on bump stocks; we’re told to wait patiently there’s something in the works… how long does it have to be in the works?  It’s been a year for crying out loud, for crying in silence, for crying on each others’ shoulders for young lives lost, church members slain, concert goers murdered, office workers killed, journalists shot and fatally wounded…  However, as long as the National Rifle Association and its myrmidons in the House and Senate refuse to consider common sense gun ownership, storage, and sales laws we’ll still be crying out loud.

We won’t get rational gun safety laws enacted in this country unless and until the Republicans and their NRA (Russian money) allies are no longer able to spread fear, anxiety, and money around the electorate.  Vote them out, and we can start to make sense, and we can stop crying out loud.

There are still children and families at risk of financial and physical peril for a lack of secure health care insurance coverage.   And the Republicans’ answer? Let people buy junk insurance that doesn’t cover pre-existing conditions, doesn’t meet the standards of coverage for the ACA, and doesn’t protect families from medical bill bankruptcies.  This isn’t the solution — this is a return to the situation that created problems for families in the first place.

There are students who are graduating from colleges and universities with crushing levels of student debt.   The New York Federal Reserve has been trying to tell us for years now that student debt levels have a tangible impact on our economy.   We yawn over the statistics, shiver when the statistics include someone or some family we know, and worry when the children are our own.  Will they be able to make a down payment on a house by age 30?  Some 60% of them may not be.  Will they be able to make long term purchases for automobiles and appliances?  At what borrowing rates?  Are we investing in the one commodity that can truly guarantee the success of this nation in the future — our children?  Right now… not so much.

We could do this, but we’ll have to stop buying in to the Republican line that children, especially other people’s children, are merely expenses, and not investments.  GOP politicians would have us believe we can’t afford to educate our children — Think of the Taxes! — the reality is we can’t afford not to.  We need those schools (and colleges) to educate them, those libraries to encourage them, those park and recreational facilities to help keep them healthy so we end up with a generation of educated, healthy, and productive members of the next work force.  Without that, as the saying goes, “we got nothing going for us.”

So we should vote our hopes not our fears.  Vote our hope for immigrant children and babies (and their families,) hope for the safety and well being of our children, hope for next generation’s productivity and wealth creation. The optimist may say he believes the elections will turn out “right.”  The hopeful person understands that while “things may turn out right in the end,”  the end is better achieved when hope is supported by action.  Act. Vote. Change. It can start happening in 2018.





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Filed under Guinn, Gun Issues, Health Care, health insurance, Heller, Immigration, Nevada politics, Politics

Nevada and the Tax Scam: Debts Debts and More Debts

The Bureau of Economic Analysis has some important numbers for the state of Nevada.  As of September 26, 2017 the agency reports Nevada’s per capita personal income was $43,567 ranking 32nd in the US and 88% of the national average.  However, the numbers don’t signify as much as they could without looking at the trends in which they occur.

“The 2016 PCPI reflected an increase of 1.0 percent from 2015. The 2015-2016 national change was 1.6 percent. In 2006, the PCPI of Nevada was $39,930 and ranked 15th in the United States. The 2006-2016 compound annual growth rate of PCPI was 0.9 percent. The compound annual growth rate for the nation was 2.6 percent.”

There are at least two things to unpack from this. First, it’s evident Nevada took a wallop from the Great Recession in the wake of the Housing Bubble and Wall Street Casino collapse. Secondly, Nevada’s per capita personal income isn’t growing at a pace which would make anyone too confident of increased disposable income for Nevada consumers.   In fact, it makes one think we’re going to be looking at increased levels of household indebtedness — again.

Another number to toss into this mix is the inflation rate, ranging in 2017 from about 1.6% to 2.7%.  And now we come to the inflated promises of the President* and the members of the 115th Congress who claim that their tax plan will “put more money into consumers’ pockets.”  Not. So. Fast.

It’s no secret the Tax Bill benefits those in the upper income brackets far more than it does those in the lower quintiles of the tax brackets.  Nor is it any surprise that the pass through benefits inserted into the bill are a windfall for a select group of businesses which in most circumstances don’t really qualify for the brand “small business.”  Therefore, it’s hard to visualize how this plan truly benefits the “average” Nevada taxpayer.

It’s even harder to see how the bill would create the kind of growth necessary for the bill to “pay for itself.”  The conclusion of the Tax Policy Center isn’t exactly comforting:

TPC has also released an analysis of the macroeconomic effects of the Tax Cuts and Jobs Act as passed by the Senate on December 2, 2017. We find the legislation would boost US gross domestic product (GDP) 0.7 percent in 2018, have little effect on GDP in 2027, and boost GDP 0.1 percent in 2037.

If you’re thinking this isn’t enough to boost the per capita personal income level in Nevada, except for a chosen few, you’re probably right on target. Nor is there much reason to believe the Growth Fairy will wave her wand more strenuously anywhere else in the country.  What do people do when wages and salaries don’t increase by all that much, inflation creeps up, and those people want to maintain their standards of living? The borrow.  And this is where DB starts jumping up and down again sounding alarms.

Look, for example, at the NY Fed Report from February 2017: (pdf)

Aggregate household debt balances increased substantially in the fourth quarter of 2016. As of December 31, 2016, total household indebtedness was $12.58 trillion, a $226 billion (1.8%) increase from the third quarter of 2016. Overall household debt remains just 0.8% below its 2008Q3 peak of $12.68 trillion, but is now 12.8% above the 2013Q2 trough.

Yes, this dry as dust account is saying that levels of household debt are perilously close to what they were just before the Bubble splattered all over our economy in 2008.  There are a couple of reasons not to panic — quite yet.  The level of debt delinquencies hasn’t approached the 2008 level, and we’re seeing fewer bankruptcy filings.  [CNN Money]  There are a few more dessicated sentences from the Fed of note:

“…while comparable in nominal aggregate size, the composition of current household debt is very different from that in 2008. We pointed out in a recent press briefing that debt balances are evolving; mortgages now have a much smaller share than in 2008, auto and student loans have increased in their share, and balances are increasingly shifting towards more creditworthy and older borrowers.”

Read: Mortgage debt is down, student and automobile debt is up. Banks are lending to older borrowers with better credit.  This situation is fine for the banks and those who invest in them, it isn’t exactly cause for young people to rejoice.

At the risk of sounding alarmist — we do need to watch the effects of those automobile loans on the financial sector because those loans (like the mortgages before them) are sold into secondary markets (securitized) and there are some initial warning signs.

One industry analysis doesn’t provide all the comfort I’d care to feel at the moment:

In fact, S&P Global Ratings has issued 881 upgrades and no defaults or downgrades on the subprime auto ABS deals it’s rated from 2004 to present. However, the company ran a stress test simulating what another financial crisis-like event would look like today and found that subprime losses would rise 1.67 times higher than S&P’s baseline expectations for the economy. So while the markets are stable, there are certainly economic factors to watch for.  “Yes, losses are going up from 2015 and 2016, and are even approaching recessionary levels,” Amy Martin, S&P’s senior director, told Auto Finance News. “But you have to look at it relative to what’s happening with the ratings, and the ratings are very stable.”

Yes, auto loans are up, increasing the transactions in the secondary market, but we should all relax because the ratings are stable? The last time we put our faith in the ratings agencies every investment bank on Wall Street fell into its own sink hole.

If I’m a little shaky on the subject of auto loans and their securitization, I’m even less enthusiastic about what’s been happening on the student loan front.  Again, from the NY Fed which as a good track record for keeping tabs on the student loan situation:

Interestingly, though the difference in default rates between two- and four-year private college students is not large (less than 5 percentage points at age thirty-three), this is not the case for public college students. Default rates for community college (two-year public college) students are nearly 25 percentage points higher than those for their counterparts in four-year public colleges. The chart below also shows that while for-profit students have the highest default rates, the default rates of community college students are not too different from those of for-profit students (36 percent versus 42 percent for two-year and 39 percent for four-year for-profit students, respectively, at age thirty‑three).

And now comes the trap: While the administration and GOP controlled Congress make it harder for students to escape the clutches of student loan purveyors, the default rates are ominous.  Further, once in the student loan trap it becomes harder for younger people to become those “older creditworthy” souls to whom banks want to offer mortgages. The following assessment isn’t all that encouraging for the housing market:

“At any given age, holding debt is associated with a lower rate of homeownership, irrespective of degree type. While the homeownership gap between debt-holding and non-debt-holding bachelor’s-plus students remains relatively constant, that for associate degree students expands with age. Associate degree students who take on debt buy homes at almost the same rate as those who never went to college until they reach age twenty-five, when their homeownership rate rises above that of those who never went to college. At age thirty-three, the non-college-goers are almost 4 percentage points behind their peers who enrolled in associate degree programs and took on student debt, while lagging behind debt-free bachelor’s-plus students by 25 percentage points.”

The situation isn’t immediately indicative of economic peril BUT there are some points to remember.  While home-ownership is down (banks are looking for older more creditworthy borrowers) auto loans and student debt are up, and student indebtedness is linked to a reduction in home-ownership.  Meanwhile, the per capital personal income keeps slogging upward at a pace making garden snails look swift.   If you are wondering  from whence comes the fuel for the Growth Fairy — so am I.

Thus far the only elements I see emanating from this GOP controlled Congress are an untoward enthusiasm for giving tax breaks to those who need them the least, an equally unpropitious capacity to ignore trends in household indebtedness, coupled with an almost vexatious tendency to put the burdens on younger generations of Americans for whom education is increasingly costly.

If Nevadans are suspicious of Republican claims of “fiscal responsibility” it’s because they should be.

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Filed under Economy, Nevada economy, Politics

Quick note: $29,400

That $29,400 figure is the new average student debt, via NPR.  Money spent paying off student debt is money not spent on transportation, clothing, housing, and other basic elements of the economy. It’s rising, and the question is whether there’s the political will to do something about it.

Meanwhile,  the technical issues persist so posts will be short. Thanks for your patience.

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The GOP Ignoring Two Elephants: Student Debt and Dis-investment

Mortar Board DiplomaThirty seven members of the U.S. Senate voted to sustain the filibuster of S. 2432, the bill to allow students to renegotiate interest on their student loans, including Senator Dean Heller (R-NV, banks, hedge funds, and capital management firms.)  However, by filibustering the bill the Republicans get  bonuses — the first of which is that they don’t have to have the Elephant in the Room conversation about the benefits of the capital gains tax.

The “pay-for” in the bill is required (or demanded if that might not be a better term) because the federal government would make less money from the interest payments on new student loans, and therefore would cost the Treasury in terms of expected revenue.  Beware of those tossing around the CBO estimates of exactly how much this would cost because the projections were based on S. 2292, an earlier form of Senator Warren’s bill — but the measures are close enough for the amounts not to be dismissed out of hand.  The $55.6 billion is probably a good ball park figure.  However, listen carefully to the critics because this bill doesn’t actually “cost” the federal government much of anything in terms of direct spending — it simply reduces the projected revenue from student loan interest payments.

Here’s the exact language from the CBO Report:

“CBO estimates that about half of the outstanding loan volume for federal student loans and loan guarantees (about $460 billion) would be refinanced under the bill. Because of the lower interest rates on the refinanced loans, the federal government would receive less interest income over the life of the new loans, which would make those loans and loan guarantees more costly for the federal government. Thus, CBO estimates that enacting S. 2292 would increase direct spending for federal loans that are currently outstanding by $55.6 billion (on a present-value basis) in 2015.” (emphasis added)

We could have simply said, why bother with any “pay-for” requirement?  There are some questions which might be appropriate to ask at this point.  (1) How does one ‘score’ the costs of an increasing number of young citizens being able to spend increased amounts of money in other sectors of the economy besides the financial sector?  Might not more taxes be collected as a result of more economic activity?  (2)  Higher education degrees correlate to higher incomes, and higher incomes yield higher tax revenues.  May we not increase our tax revenues by the expedient of having more people with higher incomes, because they have the education and training necessary for higher paying jobs?  The CBO report doesn’t address these two inquiries.

But political realities demand a ‘pay-for’ if the topic under consideration isn’t part of the military-industrial complex and so we move on.

What the Republicans truly objected to, such that the expression Poison Pill was attached to the proposed legislation, [LAT] was the Buffett Rule Tax.  In its simplest form the rule would have those who earn at least $1 million annually in adjusted gross income pay at least 30%.  To insure that we don’t suddenly see innumerable returns all claiming AGIs of $999,999 the Senate version phased in a general statement of “between $1 million and $2 million.” [NYDN]

Before anyone starts shouting “They’re Raising Your Taxes,” breathe.  There does tend to be some fluctuation in the number of millionaires filing tax returns over the years, but the last few give the distinct impression that the range is between 237,ooo and 268,000 filers (since the Mortgage Meltdown) reporting AGIs of a million or more. [TaxFoundation]

Now take another breath, because the IRS estimated there were 236,791,500 income tax filings for 2011, and predicted about 3 million more for 2012.  [IRS pdf]  Some sloppy cocktail napkin calculation with the numbers readily at hand would have us divide 267,996 (the number of millionaire filings for 2010) by 236,791,500 (the number of filings for 2011) and voila –> our plastic brains tell us that the millionaire filings are 0.001131653 of the total, or more understandably, 0.113%.  That’s not even 1%.  But what no one appears to want to discuss is how much of that income is earned.

Capital gains.  The most commonly accepted estimations is that while the statutory rate on interest income is 15% the actual effective rate is about 14%.  And, yes, the people earning massive amounts of income do pay a large portion of the income taxes collected — because we have a progressive tax system in which if a person earns more he or she pays more.   Remember, the idea of minimizing the taxes on capital gains was to encourage investors to buy stock in corporations for the purpose of expansion (and creating more economic activity and jobs), an idea that would work except for what the Wall Street Casino’s been doing of late.

When the financialists grabbed the tiller the ship has been redirected into creating investment products for the sake of creating investment products.   Who benefits from a hybrid class of derivatives based on derivatives based on derivatives?  What business expansion is created when corporations indulge in stock buy backs — not to create more capacity and jobs — but to keep the stock prices afloat?

At some point, whether we are talking about student loans, or SNAP benefits, or the funding of the FDA, the discussion about the equity and efficacy of the tax differentiation between ‘honest labor income’ and interest income needs to be undertaken. If we’re not getting anything desirable (like business expansion) from the differentiation, and we’re just get more destructive exercises in increasing short term  “shareholder value,” then the longer we put off the debate the worse the situation is likely to get. [The “flat tax” flat-earther proposal is a matter for another day, as simply one more way to shift the tax effort from the upper to the middle income earners.]

There’s another equally large Elephant in the Corner which can be safely ignored so long as the filibuster is in place: How did we get into the mess in which students are being inundated with debt?

That one’s not too difficult to answer.  A large portion of the problem is summed up in the word: Dis-investing.*  Demos sums it up:

Up until about two decades ago, state funding ensured college tuition remained within reach for most middle-class families, and financial aid provided extra support to ensure lower-income students could afford the costs of college.

Twenty five years ago tuition provided about 20% of the operating costs for a public college or university, today it’s about 44%.  State legislatures have been “dis-investing” in higher education for the last quarter of a century and it’s catching up with us.  Frankly speaking, it doesn’t quite do to tell public colleges and universities to keep their tuition and fee costs down when their state legislatures are increasingly reluctant to fund them out of general resources.

And at this point it’s probably time to bring up a vote taken by the Nevada Board of Regents about five days ago to increase registration fees.

“Beginning fall 2015, university and community college undergraduate registration fees will rise 4 percent per year for four years. At universities, graduate registration fees will rise 2 percent each year for four years. Nevada State College’s undergraduate fees will rise 2.5 percent in the first year and 3.5 percent each year for the following three years. Tuition was last raised by 8 percent in 2011.” [LVRJ]

What does this look like in real money?

“Registration fees at UNLV and University of Nevada, Reno are now $191.50 per credit. By the 2018-2019 school year, they will be $224 per credit, meaning students taking a full load of 15-credits per semester will pay $487.50 more per semester during the 2018-2019 school year. [LVRJ]

A garden variety BA in Math at UNR requires 120 hours of coursework.  A Math major isn’t required to calculate what’s happening.  A BA in Math now costs $22,980 in fees (we’re not counting tuition, books, other fees, housing, and food) and will cost $26,880 in 2018-19 (not counting tuition, books,other fees, housing, and food.)  In good old arithmetic, that’s a 16.97% increase.

There’s a real balancing act herein. An institution can’t keep its professors, at least not the good ones — since capitalism does work — without keeping salaries at least chasing inflation.  There are only so many “adjunct” personnel adjustments available, and a finite number of graduate students willing to work for peanuts to keep classes going.  At some juncture, unfortunately not that far off, the Band-Aid approach to college and university funding begins to spring leaks.

Somewhere amidst the dis-inclination to discuss taxing the 0.113% and the reluctance to debate the dis-investment in higher education, we have a situation in which students from middle income families, and students trying to become those middle income earners are getting squeezed by the Elephants in the Room.

* For more information on dis-investment as it specifically applies to the University of Nevada, Reno, see: “Final Commission Report – Future of the University, December 2012″ (pdf) See also: The Great Cost Shift Continues: State Higher Education Funding After the Recession, Demos, March 2014.

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