Posts tagged ‘politics’

June 11, 2014

President Obama expands student loan forgiveness program

by Grace

President Obama has signed an executive order forgiving repayment for millions of student-loan borrowers.

The president announced Monday the expansion of 2010’s “Pay as You Earn” program that caps some graduates’ repayments at 10% of their monthly discretionary income. The executive order increases eligibility of the program to include those who took out loans before October 2007 or stopped borrowing by October 2011, a move the White House says will expand payment relief to nearly five million people.

Sweetening the pot of loan forgiveness

The federal government offers different repayment plans to help cash-strapped borrowers, including income-based repayments, the graduated repayment program, and forgiveness programs for on-time payments and public-sector employees.

Under many of the plans, low-income borrowers can have their balance canceled after 25 years of on-time payments. The president’s plan moves the forgiveness date to 20 years or 10 years for those in public service jobs.

It’s not likely to boost the economy, which is suffering from the effects of rising student loan amounts.

“It will slightly increase the amount of debt that is forgiven, but it’s not going to be enough to stimulate the economy,” says Kantrowitz. “If the government were to forgo all student loan debt immediately, it would have a 0.4% impact on the GPD. It wouldn’t really move the economy.”

But it my “unintentionally” push college costs higher.

Beth Akers, a fellow in the Brookings Institution’s Brown Center on Education Policy, says the move could also unintentionally push college tuition prices higher.

“The income piece is a necessary safety net for borrowers. It gives security to not be afraid to take on debt to go to college, but the forgiveness part isn’t always necessary. It induces people to borrow more than they need to, which can have a negative impact on college prices.” She says students are still getting a positive return on their college education investment—but too often, people are borrowing more than necessary. “We need to be careful when granting aid to borrowers because it can raise the prices on the front end.”

Joanne Jacobs seems to agree.

The big winners are people who borrowed for graduate school and private colleges, which can keep raising tuition without fear of scaring away students.

Related:  “Federal student loan programs create perverse incentives” (Cost of College)

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Kathryn Buschman Vasel, “Obama Announced Student Loan Changes–What it Means for Borrowers”, FOXBusiness, June 09, 2014.

May 19, 2014

Democrats want to lower interest rate for refinancing student loans

by Grace

Democratic Senator Elizabeth Warren is leading the charge to allow refinancing of student loan debt at a lower interest rate.

Democrats said their measure would let holders of both federal and private undergraduate loans – some with rates of 9 percent or higher – to refinance at 3.86 percent.

Drafted in coordination with the White House, the bill is part of Senate Democrats’ 2014 legislative agenda aimed at giving all Americans “a fair shot” and rallying the party’s liberal base in advance of the November elections.

But like earlier rejected measures to raise the minimum wage and renew expired long-term jobless benefits for millions of Americans, it faces Republican opposition that could kill it.

“This bill would be hugely expensive,” said Republican Senator Jeff Flake of Arizona. “I don’t think it will be seriously considered.”

Democrats are sending a message to the middle class and attempting to bolster voter turnout.

The effort is part of of a broader messaging battle meant to portray Republicans as out of touch with the middle class. It goes part and parcel with the Democratic push to raise the minimum wage.

It also comes as Democrats seek ways to bolster turnout among their core supporters for the midterm elections, when an older and whiter electorate generally shows up to vote.

Let the rich pay for it.

The bill would cover the costs of those refinancings by enacting the “Buffett Rule,” a Democratic policy prescription that would ensure the wealthy pay some minimum amount of tax.

The costs are unknown, but taxes would be raised as much as needed.

Lawmakers still do not know how much the refinancing plan would actually cost, but they say they will adjust the terms of the Buffett Rule to fully cover the expenses of letting people refinance down to lower rates.

‘It’s the economy, stupid.’

They also argued that letting borrowers refinance at lower rates would be good for the overall economy. For example, freeing up funds that would have gone to pay higher interest could enable younger people to save money to buy a house or a car.

A study from the New York Fed released Tuesday found that 25-year-olds have an average of $21,000 in student loan debt. And young Americans with student loan debt are taking on mortgages at the lowest rate in a decade, and lag behind their peers who do not have college loans.

Schumer said student loan debt, which has grown in recent years to more than $1 trillion and is now the largest type of consumer debt, is “one of the major reasons our housing market is down in the dumps.”

“The whole economy has been weighted down by the huge debt burden on 40 million Americans aged 22 to 42 or so,” he said.

Related:  Federal student loan programs create perverse incentives (Cost of College)

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Thomas Ferraro, “U.S. Senate Democrats offer student debt refinance bill”, Reuters, May 14, 2014.

Peter Schroeder, “Dems ready student loan push”, The Hill, May 14, 2014.

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February 28, 2014

‘We have 500 cable channels and a one-size-fits all school system’

by Grace

Joe Trippi, a longtime Democratic political strategist. has been a proponent of school choice ever since he was a kindergartener and his mother fought to allow him to attend a safer school outside his neighborhood.

Trippi was recently interviewed by Reason.tv at a National School Choice Week event.

“… The status quo is not working.  Let’s put everybody’s ideas on the table.  If you’re in support of current public school system the way it is let’s talk about it, but I don’t think it’s working….

The reason for School Choice Week is because technology is moving so fast that most government bureaucracies can’t keep up with it.  One of them is education….

We have 500 cable channels and a one-size-fits all school system.”

Not having school choice has “been wrong for 50 years”.

“…  we have more choice at a 7-Eleven them in the way we educate our children. That’s crazy….”

School choice is becoming more of a bipartisan movement.

Democrats and school choice have a long, tangled relationship. Few know better than Trippi. He’s been deep inside Democratic politics since the 1970s, and his firm, Trippi & Associates, has advised National School Choice Week since its inception in 2010. So what’s he seeing on the ground now? A lot of Democrats coming around on school choice, especially at the local level, especially in inner cities.

Along with the trend of increased support for school choice, Trippi sees a libertarian president in the near future.

… Four important changes in American politics are creating this opportunity: a socially tolerant public, the effective end of the two-party system, disruptive technologies, and the growing popularity of politicians such as Sen. Rand Paul (R-Ky.).

“The younger generation is probably the most libertarian and sort of tolerant, and has more libertarian values, I’d say, than any generation in American history” …

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February 20, 2014

‘The War on Poverty became the welfare state.’

by Grace

Robert Samuelson writes that the War on Poverty has been a “success at strengthening the social safety net” but a “failure as an engine of self-improvement”.

The War on Poverty is often branded a failure because the share of Americans below the official poverty line has barely budged. In 1982, at the end of a harsh recession, it was 15 percent. In 2010, after the Great Recession, it was 15 percent.

The trouble is that the official poverty rate is a lousy indicator of people’s material well-being. It misses all that the poor get — their total consumption. It counts cash transfers from government but not non-cash transfers (food stamps, school lunches) and tax refunds under the EITC. Some income is under-reported; also, the official poverty line overstates price increases and, therefore, understates purchasing power.

Based on material well-being, the poverty rate is actually only about 5%.

Eliminating these defects, economists Bruce Meyer of the University of Chicago and James Sullivan of the University of Notre Dame built a consumption-based index that estimates the 2010 poverty rate at about 5 percent.

People at the bottom aren’t well-off, but they’re better off than they once were. Among the official poor, half have computers, 43 percent have central air conditioning and 36 percent have dishwashers, report Meyer and Sullivan. These advances are especially impressive because the massive immigration of unskilled Hispanic workers inflated the ranks of the poor. From 1990 to 2007, all the increase in official poverty was among Hispanics.

But LBJ’s vision of “a hand up, not a handout” failed miserably.

… America remains a tiered society with millions at the bottom still living more chaotic and vulnerable lives. Government’s capacity to boost them into the mainstream was oversold. Although Head Start produces some gains for 3- and 4-year-olds, improvements dissipate quickly; one study found most disappeared by third grade. Schools are continually “reformed,” because they don’t produce better results.

The War on Poverty became the welfare state.

Marriage trends point to a gloomy outlook.

Worse, the breakdown of marriage and spread of single-parent households suggest that poverty may grow.

From 1963 to 2012, the share of families with children under 18 headed by a single parent tripled to 32 percent. It’s 26 percent among whites, 34 percent among Hispanics and 59 percent among African-Americans. Just why is murky. Low-income men may flunk as attractive marriage mates. Or, “women can live independently more easily rather than put up with less satisfactory marriages,” as Brookings’ Isabel Sawhill says. Regardless of the causes and despite many exceptions, children in single-parent households face a harder future. They’re more likely to drop out of school, get pregnant before age 20 or be unemployed.

Poverty becomes self-perpetuating.

Handing out money is the easy part.

The War on Poverty’s success at strengthening the social safety net — a boon in the Great Recession — should not obscure its failure as an engine of self-improvement. Government is fairly good at handing out money; it’s less good at changing behavior. The two roles intersect. If the safety net is too generous, it will weaken work incentives. If it’s too stingy, it will condone suffering. This tale of two wars has left the fight against poverty in a costly and unsatisfying stalemate.

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January 31, 2014

Changes in marriage patterns have affected poverty and income inequality

by Grace

Florida Senator Marco Rubio’s recent comments on the benefits of marriage in reducing poverty were soundly criticized by some left-leaning voices.  Rubio had offered up “a very old idea”:

Social factors also play a major role in denying opportunity. The truth is that the greatest tool to lift people, to lift children and families from poverty, is one that decreases the probability of child poverty by 82 percent. But it isn’t a government program. It’s called marriage.

National Review Online clarified that “cajoling impoverished single mothers into marrying men who don’t have particularly bright labor market prospects” is not the solution proposed by Rubio or other conservatives.  Rather, the idea is to encourage marriage before having children.

Even amid strong resistance to this idea among liberals, the New York Times has reported about the effect of marriage on poverty.

changes in marriage patterns — as opposed to changes in individual earnings — may account for as much as 40% of the growth in certain measures of inequality.

20140129.COCWeddingTopperRich1
Another notable trend is how the rise of assortative mating has increased income inequality.

… Income inequality has gotten worse in past decades in part because college-educated, high-earning men and women are more likely to marry each other, rather than get hitched to partners with divergent education or wage levels.

This is the finding of a research paper, “Marry Your Like: Assortative Mating and Income Inequality”  authored by economists Jeremy Greenwood, Nezih Guner, Georgi Kocharkov, and Cezar Santos.

No “solution” is proposed.

The rich, married, and educated get richer while the poor, single, and uneducated fall further behind.

… College-educated households are more likely to be married and thus more likely to have secondary earners contributing to household income.

… “assortative mating” … married college-educated persons are more likely to have a college-educated spouse. Thus, they are more likely to have a spouse with high earnings.

Related:  Lack of college-educated men may be a reason for declining marriage numbers (Cost of College)

January 30, 2014

Support for school choice unites strange political bedfellows

by Grace

Support for school choice unites Rep. Sheila Jackson Lee, who is about as liberal as it gets, and Sen. Ted Cruz, who’s about as conservative, reports Reason.

20140128.COCLeeCruzCollage1

74% of Americans favor school choice, and this popularity may be pushed even higher by the growing dissatisfaction with Common Core Standards, newly adopted by most public schools.

. . .

Two senators have proposed redirecting $35 billion in federal funds to supplement school choice

20140129.COCAlexanderScottVouchers1

Sen. Lamar Alexander, R-Tenn., and Sen. Tim Scott, R-S.C., proposed plans Tuesday to redirect nearly $35 billion in existing federal education funds to supplement school choice programs in different states. Under Alexander’s Scholarships for Kids Act, students in eligible states would receive $2,100 scholarships that would follow those children from families in poverty to the school of their choice. Alexander said the legislation would reach about 11 million American students….

Piggybacking off Alexander’s proposal, Scott said he plans to introduce legislation, known as the CHOICE Act, which would also redirect federal funds to three areas in education: students with disabilities, students from military families and students in the District of Columbia’s Opportunity Scholarship program (DC OSP).

The CHOICE Act would direct federal IDEA funds to offer school choice for special education students.

National School Choice Week is January 26 — February1.

Related:  Confidence in public schools at historic low (Cost of College)

January 15, 2014

Governor Christie signs New Jersey DREAM Act

by Grace

Amid Chris Christie’s “Bridgegate” controversy, the New Jersey governor last week demonstrated his progressive position toward New Jersey illegal immigrants by signing a bill allowing them to pay in-state tuition at New Jersey public colleges.

On Tuesday, Christie made good on a campaign promise and held a ceremonial signing of New Jersey’s version of the DREAM Act, which allows unauthorized immigrants who have lived in New Jersey for three years and graduated from an in-state high school to pay in-state college tuition rates. Previously, many “Dreamers” were paying close to double that rate (the normal out-of-state tuition rate) because of their non-legal status.

20140114.COCChristieDreamAct1In a compromise with Democrats, Christie only approved the bill after he had vetoed the section that would allow students to receive state financial aid.

“Our job, I believe as a government, is to give every one of these children — who we have already invested hundreds of thousands of dollars in — an opportunity to maximize that investment for their own benefit, for the benefit of their families, and for the benefit of our state and our country,” Christie said on Tuesday.

Political impact

The question remains how his soft touch on the hot-button immigration issue will affect his popularity on the national political stage.  Bridgegate, DREAMgate . . . what’s next?

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November 28, 2013

Should tax policy encourage two-parent families?

by Grace

Tax policy has often been used as an incentive for certain desired behaviors, and now it’s being considered as a way to strengthen two-parent families.

“The problem of poverty is linked to family breakdown and the erosion of marriage among low-income families and communities.”

Those are the words of Utah Senator Mike Lee in a speech to the Heritage Foundation.

Lee is careful not to cast opprobrium on single or divorced parents. But he insists on pointing to the uncomfortable but undeniable fact that economic outcomes for their children have been far worse than those of children raised in two-parent families.

That produces many personal tragedies. And in cold economic terms, it means that society is losing gross domestic product because of less than optimal development of human capital.

Government policy can’t force people to get or stay married. But it may be able to encourage them to do so.

That happened in the years after World War II. A steeply progressive income tax combined with generous dependent deductions ($500 originally, later raised to $600) played some unquantifiable part in stimulating the Baby Boom and family stability for a generation after the war.

Over the years, more tax policies have been implemented to encourage retirement savings, home ownership, energy savings, and other behaviors.  In addition, a profusion of tax incentives exist on a corporate level.  Would tax incentives actually work in encouraging parents to marry?

Lee proposes a $2,500 child tax credit — less in real dollars than the postwar deduction — applied to both payroll and income taxes.

He also proposes allowing employees to claim flex time when they have worked overtime, as federal employees can do. He wants Congress to hack away at the marriage penalties embedded in various benefits programs and Obamacare.

Would it work?

While I am a strong advocate of two-parent families, I’m not convinced these proposed changes would encourage marriage.  Additionally, with the tax code already burdened by complicated rules and regulations that often promote inequity, I tend to favor simplifying the process.  Social engineering through government intervention has too many unintended consequences for me to place much faith in ideas like Lee’s.

Related:  Missing fathers are at the core of a ‘vicious cycle’ of poverty (Cost of College)


Thank you for reading my blog!  I hope you have a happy Thanksgiving.

November 15, 2013

Cynical Colorado voters turn down higher school taxes

by Grace

Earlier this month, Colorado “voters resoundingly rejected an effort to raise taxes by $1 billion a year to pay for a sweeping school overhaul”.

The outcome, a warning to Democrats nationally, was a drubbing for teachers unions as well as wealthy philanthropists like Mayor Michael R. Bloomberg of New York and Bill and Melinda Gates, who pumped millions of dollars into the measure, and it offered a sharp rebuke to Gov. John W. Hickenlooper and the Democratically led legislature, who have recently tugged Colorado to the left with laws on gun control and clean energy.

Is Colorado more liberal or libertarian?

Waves of newcomers and growth across Denver and its suburbs have made Colorado fertile ground for Democrats in local and national elections in recent years, burnishing its reputation as a liberal outpost flanked by more traditionally rural and conservative states, a place where craft beer abounds, marijuana is legal and same-sex couples can get civil unions. But analysts say those changes belie a bedrock of libertarian disdain for higher taxes and overarching government reforms….

Democrats thought a 28% increase in taxes on middle-class families would be approved.

Had the referendum passed, the current flat state income tax rate of 4.6 percent would have been replaced with a two-tier system. Residents with taxable incomes below $75,000 would have paid 5 percent; taxable incomes above $75,000 would have been taxed at 5.9 percent. The measure would have poured money into poor, rural school districts, expanded preschool, bought new technology and encouraged local innovations like longer school days and school years, supporters said.

Obama supporter realized that more money doesn’t always solve problems.

“I felt a little guilty when I voted against it,” she said. “It tugged at my heartstrings. I just don’t always believe that money solves problems. It’s difficult for me to write a blank check to the government.”

She may have been thinking of this:

20131111.COCMoreMoneyForSchools

August 5, 2013

Compromise reached on student loan interest rates

by Grace

After a compromise was finally reached last week, a new student loan bill was sent to President Obama for signature.

Under the old federal student loan program, borrowers were offered a fixed rate. Under the new rate structure, which still drew opposition from nearly one-third of Senate Democrats when it passed last week, loans to undergraduates and graduate students, along with parents in the PLUS program, would be subject to a fixed rate plus the yield on the 10-year Treasury note.

Rates for loans taken out after July 1 of this year would be 3.9 percent for undergraduates, 5.4 percent for graduate students and 6.4 percent for those receiving PLUS loans. The rates are fixed over the life of the loan but would change for new borrowers each year.

In a compromise that pleased many Democrats who had initially been wary of using a rate that was subject to inflation and fluctuated with the markets, Congress set a cap on all loans: 8.25 percent for undergraduates, 9.5 for graduate students and 10.5 for PLUS recipients.

Perkins loan rates were unchanged.

20130801.COCLoanInterestRates2

* Interest is paid by the federal government during the in-school period.

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