Replies to post #146706 on Tornado Alley (PROG)

[F6]

Debt Limit Options

Posted by Bruce Bartlett
04 Jul 2011

For more than I year, I have been warning [ http://www.thefiscaltimes.com/Columns/2010/06/11/Debt-Default-It-Can-Happen-Here.aspx ] about the danger of a debt default resulting from Congress’s failure to raise the debt limit in a timely manner. Now, we are getting close to the 11th hour and it is clear that there are many Republicans willing to risk a default to achieve their ideological goal of slashing government. Although they say they are motivated by a concern for the nation’s finances, their total unwillingness to consider so much as $1 of tax increase proves that such claims are hollow.

As a consequence, I continue to believe that a debt crisis is imminent. I have serious doubt that Congress will raise the debt limit in time to prevent the Treasury from running out of cash to pay its bills, including interest and repayments on the debt. And since the ultimate crisis may come during Congress’s August recess, the Treasury may have no recourse except to consider radical options for preventing default.

One idea comes from Peterson Institute economist Joseph Gagnon, a former Federal Reserve official. He suggested to me that the Federal Reserve could temporarily buy some of the Treasury’s $300 billion stock of gold. This would allow the Fed to create cash that the Treasury could use to pay its bills until the debt limit is increased, at which time Treasury could simply buy it back. It would be a purely paper transaction that would have no real effect on the price of gold or anything else. The Fed could simultaneously sell an equal amount of securities from its portfolio to prevent the money supply from rising more than it desires.

A more radical solution would be to simply disregard the debt limit altogether on constitutional grounds, an idea I suggested [ http://www.thefiscaltimes.com/Columns/2011/04/29/The-Debt-Limit-Option-President-Obama-Can-Use.aspx ] in the Fiscal Times on April 29. University of Baltimore law professor Garrett Epps made a similar suggestion [ http://www.theatlantic.com/politics/archive/2011/05/our-national-debt-shall-not-be-questioned-the-constitution-says/238269/ ] in The Atlantic on May 4.

The essence of the argument involves section 4 of the Fourteenth Amendment to the Constitution, which reads: “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”

In my view and that of Prof. Epps, this means that the president would have constitutional authority to take extraordinary measures to protect the public credit and prevent a debt default even if it means disregarding the debt limit, which is statutory law subordinate to the Constitution.

Since my article appeared, I have had the opportunity to do further research on this topic and now feel even more strongly that the Fourteenth Amendment trumps the debt limit. I found strong support for this position in a law review article by George Washington University law professor Michael Abramowicz. Writing in the Tulsa Law Journal (“Beyond Balanced Budgets, Fourteenth Amendment Style,” 33:2, Winter 1997, pp. 561-612), he concludes that any government action “making uncertain whether or not a debt will be honored is unconstitutional.” As Abramowicz explains:

“A debt does not become valid or invalid only at the moment payment is due. A debt’s validity may be assessed at any time, and a debt is valid only if the law provides that it will be honored. Therefore, a requirement that the government not question a debt’s validity does not kick in only once the time comes for the government to make a payment on the debt. Rather, the duty not to question is a continuous one. If as a result of government actions, a debt will not be paid absent future governmental action, that debt is effectively invalid. The high level of generality recognizes that instead of referring to payment of debts, the Clause bans government action at any time that affects the validity of debt instruments…. Moreover, there is no such thing as a valid debt that will nonetheless not be honored; a debt cannot be called “valid” if existing laws will cause default on it. So as soon as Congress passes a statute that will lead to default in the absence of a change of course, the debt is invalid (or at least of questionable validity) and Congress has violated the original meaning of the Public Debt Clause.”

To my mind, this means that the very existence of the debt limit is unconstitutional because it calls into question the validity of the debt. So would any other provision of law. That is a key reason why Congress created a permanent appropriation for interest payments at the same time that the Fourteenth Amendment was debated. Previously, Congress had to pass annual appropriations for interest.

Of course, if the administration takes my position and ignores the debt limit to prevent a default on constitutional grounds, there are certainly those who would claim that it has violated the law. However, Jonathan Zasloff, a professor of law at UCLA, raises an interesting question [ http://www.samefacts.com/2011/05/watching-conservatives/if-the-debt-ceiling-is-unconstitutional-how-would-anyone-know ]: who would have standing enjoin the administration’s action?

The Justice Department would certainly not sue the president or the Treasury secretary under these circumstances, so who would? Zasloff thinks only the Congress as a whole would have standing, which means that both the House and Senate would have to pass a joint resolution condemning the president’s action and authorizing a law suit, something that would be very unlikely given Democratic control of the Senate.

According to a June 28 report [ http://www.huffingtonpost.com/2011/06/28/14th-amendment-debt-ceiling-unconstitutional-democrats_n_886442.html ] in the Huffington Post, Democratic senators, including Chris Coons of Delaware and Patty Murray of Washington, are warming to the constitutional option for breaking the deadlock on the debt limit and preventing a default. At a press conference on Wednesday, President Obama was asked directly about this by Chuck Todd of NBC News and he refused to rule it out.

It goes without saying that provoking a constitutional crisis over the debt limit is a bad idea, but a debt crisis would be worse. At a minimum, the Fourteenth Amendment greatly strengthens the president’s hand in getting the debt limit increased in a timely matter. He should not be afraid to use it.

Addendum

Since I wrote this, I discovered that Prof. Abramowicz has posted an even stronger article arguing for the unconstitutionality of the debt limit. It is available at SSRN [ http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1874746 ]. Prof. Jack Balkin of Yale has posted a legislative history [ http://balkin.blogspot.com/2011/06/legislative-history-of-section-four-of.html ] of sec. 4 that supports a broad reading of its applicability to the debt limit issue.

The content of CapitalGainsandGames.com is licensed under a Creative Commons Attribution-Noncommercial-Share Alike 3.0 United States License.

http://capitalgainsandgames.com/blog/bruce-bartlett/2296/debt-limit-options [with comments]


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What our Declaration really said

By E.J. Dionne Jr., Published: July 3[, 2011]

Our nation confronts a challenge this Fourth of July that we face but rarely: We are at odds over the meaning of our history and why, to quote our Declaration of Independence [ http://www.archives.gov/exhibits/charters/declaration_transcript.html ], “governments are instituted.”

Only divisions this deep can explain why we are taking risks with our country’s future that we’re usually wise enough to avoid. Arguments over how much government should tax and spend are the very stuff of democracy’s give-and-take. Now, the debate is shadowed by worries that if a willful faction does not get what it wants, it might bring the nation to default [ http://www.washingtonpost.com/politics/congress ].

This is, well, crazy. It makes sense only if politicians believe — or have convinced themselves — that they are fighting over matters of principle so profound that any means to defeat their opponents is defensible.

We are closer to that point than we think, and our friends in the Tea Party have offered a helpful clue by naming their movement in honor of the 1773 revolt against tea taxes [ http://www.time.com/time/specials/packages/article/0,28804,2080036_2080037_2080049,00.html ] on that momentous night in Boston Harbor.

Whether they intend it or not, their name suggests they believe that the current elected government in Washington is as illegitimate as was a distant, unelected monarchy. It implies something fundamentally wrong with taxes themselves or, at the least, that current levels of taxation (the lowest in decades) are dangerously oppressive. And it hints that methods outside the normal political channels are justified in confronting such oppression.

We need to recognize the deep flaws in this vision of our present and our past. A reading of the Declaration of Independence makes clear that our forebears were not revolting against taxes as such — and most certainly not against government as such.

In the long list of “abuses and usurpations” the Declaration documents, taxes don’t come up until the 17th item, and that item is neither a complaint about tax rates nor an objection to the idea of taxation. Our Founders remonstrated against the British crown “for imposing taxes on us without our consent.” They were concerned about “consent,” i.e. popular rule, not taxes.

The very first item on their list condemned the king because he “refused his assent to laws, the most wholesome and necessary for the public good.” Note that the signers wanted to pass laws, not repeal them, and they began by speaking of “the public good,” not about individuals or “the private sector.” They knew that it takes public action — including effective and responsive government — to secure “life, liberty and the pursuit of happiness.”

Their second grievance reinforced the first, accusing the king of having “forbidden his governors to pass laws of immediate and pressing importance.” Again, our forebears wanted to enact laws; they were not anti-government zealots.

Abuses three through nine also referred in some way to how laws were passed or justice was administered. The document doesn’t really get to anything that looks like Big Government oppression (“He has erected a multitude of new offices, and sent hither swarms of officers to harrass our people, and eat out their substance”) until grievance No. 10.

This misunderstanding of our founding document is paralleled by a misunderstanding of our Constitution [ http://www.archives.gov/exhibits/charters/constitution.html ]. “The federal government was created by the states to be an agent for the states, not the other way around,” Gov. Rick Perry of Texas said recently [ http://thecaucus.blogs.nytimes.com/2011/06/14/perry-speaks-but-avoids-big-question/ ].

No, our Constitution begins with the words “We the People” not “We the States.” The Constitution’s Preamble speaks of promoting “a more perfect Union,” “Justice,” “the common defense,” “the general Welfare” and “the Blessings of Liberty.” These were national goals.

I know states’ rights advocates revere the 10th Amendment [ http://www.archives.gov/exhibits/charters/bill_of_rights_transcript.html ]. But when the word “states” appears in the Constitution, it typically is part of a compound word, “United States,” or refers to how the states and their people will be represented in the national government. We learned it in elementary school: The Constitution replaced the Articles of Confederation to create a stronger federal government, not a weak confederate government. Perry’s view was rejected in 1787 and again in 1865.

We praise our Founders annually for revolting against royal rule and for creating an exceptionally durable system of self-government. We can wreck that system if we forget our Founders’ purpose of creating a representative form of national authority robust enough to secure the public good. It is still perfectly capable of doing that. But if we pretend we are living in Boston in 1773, we will draw all the wrong conclusions and make some remarkably foolish choices.

[e-mail]

© 2011 The Washington Post

http://www.washingtonpost.com/opinions/what-our-declaration-really-said/2011/07/02/AGugyvwH_story.html [with comments]


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[F6]

First Study of Its Kind Shows Benefits of Providing Medical Insurance to Poor

By GINA KOLATA
Published: July 7, 2011

When poor people are given medical insurance, they not only find regular doctors and see doctors more often but they also feel better, are less depressed and are better able to maintain financial stability, according to a new, large-scale study that provides the first rigorously controlled assessment of the impact of Medicaid.

While the findings may seem obvious, health economists and policy makers have long questioned whether it would make any difference to provide health insurance to poor people.

It has become part of the debate on Medicaid, at a time when states are cutting back on this insurance program for the poor. In fact, the only reason the study could be done was that Oregon was running out of money and had to choose some people to get insurance and exclude others, providing groups for comparison.

Some said that of course it would help to insure the uninsured. Others said maybe not. There was already a safety net: emergency rooms, charity care, free clinics and the option to go to a doctor and simply not pay the bill. And in any case, the argument goes, if Medicaid coverage is expanded, people will still have trouble seeing a doctor because so few accept that insurance.

Until now, the arguments were pretty much irresolvable. Researchers compared people who happened to have insurance with those who did not have it. But those who do not have insurance tend to be different in many ways from people who have it. They tend to be less educated and to have worse health habits and lower incomes, said Dr. Alan M. Garber, an internist and health economist at Stanford. No matter how carefully researchers try to correct for the differences “they cannot be completely successful,” Dr. Garber said. “There is always some doubt.”

The new study [ http://www.nber.org/papers/w17190 ], published Thursday by the National Bureau of Economic Research [ http://www.nber.org/ ], avoided that problem. Its design is like that used to test new drugs. People were randomly selected to have Medicaid or not, and researchers then asked if the insurance made any difference.

Health economists and other researchers said the study was historic and would be cited for years to come, shaping health care debates.

“It’s obviously a really important paper,” said James Smith, an economist at the RAND Corporation. “It is going to be a classic.”

Richard M. Suzman, director of the behavioral and social research program at the National Institute on Aging, a major source of financing for the research, said it was “one of the most important studies that our division has funded since I’ve been at the N.I.A.,” a period of more than a quarter-century.

In its first year of data collection, the study found a long list of differences between the insured and uninsured, adding up to an extra 25 percent in medical expenditures for the insured.

Those with Medicaid were 35 percent more likely to go to a clinic or see a doctor, 15 percent more likely to use prescription drugs and 30 percent more likely to be admitted to a hospital. Researchers were unable to detect a change in emergency room use.

Women with insurance were 60 percent more likely to have mammograms, and those with insurance were 20 percent more likely to have their cholesterol checked. They were 70 percent more likely to have a particular clinic or office for medical care and 55 percent more likely to have a doctor whom they usually saw.

The insured also felt better: the likelihood that they said their health was good or excellent increased by 25 percent, and they were 40 percent less likely to say that their health had worsened in the past year than those without insurance.

The study is now in its next phase, an assessment of the health effects of having insurance. The researchers interviewed 12,000 people — 6,000 who received Medicaid and 6,000 who did not — and measured things like blood pressure, cholesterol and weight.

The study became possible because of an unusual situation in Oregon. In 2008, the state wanted to expand its Medicaid program to include more uninsured people but could afford to add only 10,000 to its rolls. Yet nearly 90,000 applied. Oregon decided to select the 10,000 by lottery.

Economists were electrified. Here was their chance to compare those who got insurance with those who were randomly assigned to go without it. No one had ever done anything like that before, in part because it would be considered unethical to devise a study that would explicitly deny some people coverage while giving it to others.

But this situation was perfect for assessing the impact of Medicaid, said Katherine Baicker, professor of health economics at the Harvard School of Public Health. Dr. Baicker and Amy Finkelstein, professor of economics at M.I.T., are the principal investigators for the study.

“Amy and I stumbled across the lottery in Oregon and thought, ‘This is an unbelievable opportunity to actually find out once and for all what expanding public health insurance does,’ ” Dr. Baicker said.

They had just a short window of time. Within two years, Oregon found the money to offer Medicaid to the nearly 80,000 who had been turned down in the lottery.

As an economist, Dr. Finkelstein was interested, among other things, in whether Medicaid did what all insurance — homeowner’s, auto, health — is supposed to do: shield people from financial catastrophe. Almost no one had even tried to investigate that question, she said.

“It is shocking that it is not even in the discourse,” Dr. Finkelstein said.

The study found that those with insurance were 25 percent less likely to have an unpaid bill sent to a collection agency and were 40 percent less likely to borrow money or fail to pay other bills because they had to pay medical bills.

Dr. Finkelstein said she had thought that the people were so poor to begin with that they just did not spend very much out of pocket on medical care when they did not have insurance. “Yet look at the results,” she said.

Dr. Baicker interviewed people for Part 2 of the study and was impressed by what she heard.

“Being uninsured is incredibly stressful from a financial perspective, a psychological perspective, a physical perspective,” she said. “It is a huge relief to people not to have to worry about it day in and day out.”

© 2011 The New York Times Company

http://www.nytimes.com/2011/07/07/health/policy/07medicaid.html

[F6]

Black economic gains reversed in Great Recession

Associated Press
July 9, 2011

BALTIMORE (AP) — Growing up black in the segregated 1960s, Deborah Goldring slept two to a bed, got evicted from apartment after apartment, and watched her stepfather climb utility poles to turn their disconnected lights back on. Yet Goldring pulled herself out of poverty and earned a middle-class life — until the Great Recession.

First, Goldring's husband fell ill, and they drained savings to pay for nursing homes before he died. Then Goldring lost her executive assistant job in the Baltimore hospital where she had worked for 17 years. The cruelest blow was a letter from the bank, intending to foreclose on her home of almost three decades.

Millions of Americans endured similar financial calamities in the recession. But for Goldring and many others in the black community, where unemployment has risen since the end of the recession, job loss has knocked them out of the middle class and back into poverty. Some even see a historic reversal of hard-won economic gains that took black people decades to achieve.

Goldring remembers her mother taping the window shades to the wall so no one could see them stealing electricity. She remembers each time she sat on the curb with her three brothers, surrounded by her family's belongings, waiting for a new place to live. Sitting on those curbs, she promised to always pay her bills on time.

Now, after finding herself poor again, "the only word I can say is devastated," says Goldring, 58.

"For me to live that life we were so comfortable in, we never had to worry about finances, we always had money where I can help my kids and my grandchildren — to go to calling my daughter to borrow $100 because I can't pay a bill …" Goldring's voice trails off as she struggles to hold back tears.

Economists say the Great Recession lasted from 2007 to 2009. In 2004, the median net worth of white households was $134,280, compared with $13,450 for black households, according to an analysis of Federal Reserve data by the Economic Policy Institute. By 2009, the median net worth for white households had fallen 24 percent to $97,860; the median black net worth had fallen 83 percent to $2,170, according to the EPI.

Algernon Austin, director of the EPI's Program on Race, Ethnicity and the Economy, described the wealth gap this way: "In 2009, for every dollar of wealth the average white household had, black households only had two cents."

Since the end of the recession, the overall unemployment rate has fallen from 9.4 to 9.1 percent, while the black unemployment rate has risen from 14.7 to 16.2 percent, according to the Department of Labor.

"I would say the recession is not over for black folks," Austin says. He believes more black people than ever before could fall out of the middle class, because the unemployment rate for college-educated blacks recently peaked and blacks are overrepresented in state and local government jobs that are being eliminated due to massive budget shortfalls.

Maya Wiley, director of the Center for Social Inclusion, says the anti-discrimination laws passed in the 1960s took decades to translate into an increase in black economic security — and that was before the recession.

"History is going to say that the black middle class was decimated" over the past few years, Wiley says. "But we're not done writing history."

Goldring was born and raised in Baltimore, and her mother was single for much of Goldring's childhood. At 16, she dropped out of school and went to work cleaning hotel rooms.

"That's when I first met white people. Some of them would stay a month at the hotel. They would have all their children with them," she remembers. "I thought, one day I'd like to hang out at a hotel."

She didn't know any middle-class people in her all-black neighborhood. "Where we lived, everyone struggled. We just struggled a little harder," she says. "If the lights stayed on for a whole year, if we didn't get put out, I thought we were doing really, really well."

At 21, pregnant with her second child, Goldring decided to get her GED. Then she went to community college, got a degree in secretarial work, and began a career.

She met her husband in 1983. He had a steady job as a heating and air-conditioning installer, and owned a brick two-bedroom home in Morgan Park, a leafy, integrated neighborhood.

With two incomes, money was not a problem. He liked to travel. She had never been out of Maryland.

"I thought, 'Is this how rich people live?'" Goldring remembers. "From where I was to where I ended up, it was way different."

Her husband had been married before. As a condition of the divorce, his daughter's name was added to the deed of the house. After Goldring's husband died in 2007, Goldring took out a 30-year fixed-rate mortgage, with a 6.5 percent interest rate, to purchase the house outright.

Everything was fine until her hospital "restructured" in 2009. Her boss, a senior vice president, was transferred to the corporate office. Executives were now sharing secretaries. A few months later, they let Goldring go.

No more family vacations. No more trips to the mall. No more filling the grocery cart.

But what Goldring misses the most is her checkbook. Her unemployment payments arrive on a debit card.

"Just being able to pull out my checkbook and pay a bill, even though there might not be much left in there," she says. "I really miss that checkbook with my name on it."

This May, black male employment fell to the lowest level since the government began keeping track in 1972. Only 56.1 percent of black men over age 20 were working, compared with 68.3 percent of white men.

Chris Wilder, a Philadelphia journalist, lost his job in 2008 as the media industry suffered huge losses. Unemployment benefits amounted to about one-third of his salary. Ever since they ran out, his income has been near zero, other than sporadic freelance work.

If not for a policy in his apartment co-op to assist people who lose their jobs, "I might be living with my mother," he says.

He has felt depression and anxiety. He's gone from a six-figure salary to having to check his balance before using his bank card. "I miss being able to go into a store and go off budget," he says. "Now, when I go to shop for something, I have to stick to exactly what I came to get. I never have money to buy anything else."

Wilder, 43, grew up solidly middle class, the son of a newspaper editor and a college administrator. Now the single parent of a 15-year-old, he has managed to keep his son in cleats and baseball camps, but thoughts of dying poor have crept into his mind. All of his savings are gone.

"It's definitely harder for black people to get jobs," Wilder says. "With the economy as bad as it is, people are hiring nephews and family friends and friends of friends. It's hard for black people to break that cycle. We don't own or even run the big companies."

"It's hard to keep jobs as well, because they're gonna 'last hired/first fired' you," he adds.

Wilder isn't giving up on finding a job in his field, "but I should."

"I call everyone. I send resumes. It is extremely rare that I get a call back," he says. "When I was growing up, I never imagined there would be a time when I was out of work for three years."

College-educated blacks fared worse than their white counterparts in the recession. In 2007, unemployment for college-educated whites was 1.8 percent; for college-educated blacks it was 2.7 percent. Now, the college-educated unemployment rate is 3.9 percent for whites and 7 percent for blacks.

"I've definitely played by the rules," Wilder says.

He's not desperate enough to break the law, but "I see why people become drug dealers."

Horace Davis did become a drug dealer. He illustrates another dimension of the recession's impact on blacks: While law-abiding folks are falling out of the middle class, those who got in trouble with the law are further than ever from a second chance.

After serving four years for drug trafficking, Davis walked out of prison into the middle of the recession in 2008. "I thought to myself, I'm older, I need to get a job, move on. The dope game was dead to me," Davis says, sitting on a concrete porch in an Asheville, N.C., housing project.

In the past few decades of the "War on Drugs," harsh sentencing laws have sent a disproportionate number of black people to prison, even though blacks are not more likely than whites to sell or use drugs, according to a 2008 report by the Sentencing Project. Today, about 280,000 African-Americans emerge from behind bars each year. They are often the last of the last to be hired.

After Davis got out, he spent months applying for dozens of jobs mopping floors or flipping burgers. He carried a letter from the state offering a $2,500 tax credit for hiring ex-offenders. He got one call back, from a chicken restaurant. "We'll be in touch," Davis remembers them saying. They weren't.

"Nobody wants black felons in their businesses," says Davis, 26.

A 2003 University of Chicago study by Devah Pager sent young white and black "testers" to apply for real low-wage jobs. Some of the testers were randomly assigned felony convictions. The study found that whites with felonies were slightly more likely to get callbacks than black applicants without criminal records.

"The penalty of a criminal record is more disabling for black job seekers than whites," Pager and other researchers wrote in a follow-up study in 2009.

Davis says he learned skills in prison: "How to cook, clean, horticulture, janitorial. I can do it. I've been trained. Tile, carpentry, mortar, edging and trimming, all that. I can operate a backhoe, a roller. Any opportunity to do something that would show my talents, I'd do it. It would be my ticket out the streets.

"I just need someone to give me that chance. A nice construction job, anything. I would hold onto that until I die."

Some economists say the real black unemployment rate is as high as 25 or 30 percent, because government figures don't count "discouraged" workers who have stopped looking for jobs and dropped out of the labor force.

Davis now falls into that category — partly due to societal forces and partly, he knows, because of his own bad decisions.

Recently, police said they caught Davis with a half-ounce of marijuana. His trial date is approaching. As a habitual felon, he could get a 10-year sentence.

Some see a bitter irony in soaring black unemployment and the decline of the black middle class on the watch of the first black president.

"I thought Barack Obama could have provided some way out. But he lacks backbone," Princeton professor Cornel West told truthdig.com recently.

He said Obama had sold out the poor and become "a black mascot of Wall Street oligarchs and a black puppet of corporate plutocrats … I don't think in good conscience I could tell anybody to vote for Obama."

Yet many jobless blacks do not blame their plight on the president.

"I have no problem with Obama when I look at what the alternatives are," Wilder says.

Goldring doesn't think Obama is doing a bad job either. "The unemployment situation is not the best, but I don't think it has a lot to do with him," she says. "Fixing this economy, it's going to take time.

Wiley, the Center for Social Inclusion director, says Obama should be applauded for several initiatives that have helped the black middle class, such as programs to modify certain mortgages and prevent foreclosure due to job loss.

She would have liked Obama to aggressively counter the suggestion that first black president would be showing favoritism if he specifically helped black people.

"It's the right thing to do for the nation," she says. "Black people are a huge segment of the population, they're especially hard-hit, and the country cannot recover if the black community — as well as the white community and others — does not recover."

Black homeownership hit an all-time high in 2004, with 50 percent of African-Americans owning their homes, according to census data.

Today, the black homeownership rate is 45 percent, compared with 74 percent for whites. Nearly 8 percent of African-Americans who bought homes from 2005-2008 have lost them to foreclosure, compared with 4.5 percent of whites, according to an estimate by the Center for Responsible Lending.

Goldring remembers that when she got the foreclosure notice from the bank, "I bawled."

Her son, Chris Fredericks, says she was "vulnerable, more than I have ever seen her, but she still kept moving."

He was incredulous that his mother was in such a position. "At any point, you can slip back. It's just the way the economy is going," he says. "Once you get into a spiral, there's no telling how far down you could go."

One day, at a counseling session on how to prevent foreclosure, Goldring learned about a new Maryland program that offered help to people who were behind on their mortgages due to layoffs or medical bills.

She thought it was too good to be true. It wasn't.

The Emergency Mortgage Assistance program, financed by federal money, offered a zero-interest loan of up to $50,000. The money would pay off up to a year of back mortgage payments, plus up to two years of regular payments. All Goldring had to do was pay 31 percent of her current gross income, or the full mortgage payment if she got a new job close to her original salary.

And so on a sweltering June day, Goldring stood before a podium in her freshly mulched back yard, flanked by a congressman, the mayor, the lieutenant governor, and other officials. The sound of chirping birds filled the air. Cameras rolled as the dignitaries told Goldring's story, using her as an example to spread word of the Emergency Mortgage Program to other struggling homeowners.

"I want to thank you for your courage," said the lieutenant governor, Anthony Brown.

"I know you did everything right," Brown said. "You worked hard, you saved diligently, but challenges never overtaking our will sometimes overtake our wallets."

Goldring stood in front of the microphone and exhaled.

"After this," she said, "the only good thing would be to be employed, once again."

Copyright 2011 The Associated Press

http://www.usatoday.com/money/economy/2011-07-09-black-unemployment-recession_n.htm [with comments]


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How the bubble destroyed the middle class
Commentary: Sluggish growth is no mystery: No one has any money



July 8, 2011
http://www.marketwatch.com/story/how-the-bubble-destroyed-the-middle-class-2011-07-08 [with comments]


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The next, worse financial crisis
Commentary: Ten reasons we are doomed to repeat 2008
July 6, 2011
http://www.marketwatch.com/story/the-next-worse-financial-crisis-2011-07-06


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http://www.calculatedriskblog.com/2011/07/summary-for-week-ending-july-8th.html


http://www.calculatedriskblog.com/2011/07/june-employment-report-18000-jobs-92.html

[F6]

Maher 7-9-11

http://www.youtube.com/watch?v=TEY1wXjC0S0

[F6]

An Addition to the List of Tax Loopholes


President Obama at his news briefing on Monday on the nation’s deficit. Mr. Obama has called for ending a variety of tax loopholes.
Pablo Martinez Monsivais/Associated Press

By ANDREW ROSS SORKIN
July 11, 2011, 8:51 pm

As the White House and Congress wrangle over raising the debt ceiling and reducing the federal deficit, tax loopholes would seem to be an easy target for compromise.

President Obama has talked about eliminating breaks for partners at hedge funds and private equity firms — along with corporate jet owners, oil companies and others taking advantage of quirks in the tax codes.

Here’s another little-known group of tax code beneficiaries that he might want to add to the list: day traders and speculators who buy and sell futures contracts.

For years, futures contracts, which are essentially bets on the price of commodities, stock indexes and the like, have received a more favorable tax treatment than stocks. A trader who buys and sells an oil contract in less than a year — even in a matter of minutes — pays no more than a 23 percent tax on the profits.

Compare that with the bill for flipping shares of Google, General Electric or even a diversified mutual fund in the same time period. Those short-term investment gains are treated like ordinary income, meaning the rate can run as high as 35 percent.

“There are so many ways to attack the logic of it,” Warren E. Buffett, the chairman of Berkshire Hathaway, said in an interview on Monday about of the futures tax break. “It doesn’t make sense.”

What does the tax loophole cost the federal government? Each year, the United States gives up roughly $2 billion in lost revenue, according to the Congressional Research Service, a federal agency.

That number may seem insignificant against the backdrop of the country’s $55 trillion total debt, which includes federal, state, local and other sources of debt. But tax inequities like this start to add up when considered collectively. Based on data from the Office of Management and Budget, the United States could put another $20 billion in its coffers over 10 years if it taxed the investment gains of hedge funds and private equity executives as ordinary income. The so-called carried interest is treated like capital gains, which is taxed at a much lower rate. The corporate jet break amounts to about $2 billion to $3 billion in a decade.

Perhaps the tax break on futures contracts wouldn’t be so irksome if it simply helped farmers protecting the value of their corn crops, airlines dealing with the rising cost of oil or even individuals hedging the risks in their portfolio.

But the biggest beneficiaries seem to be day traders and speculators. Long-term investors account for only 20 percent of the activity in the commodities future market, according to a report published last week by the Commodity Futures Trading Commission, the industry regulator.

When I called Robert Green, a tax specialist whose clients include traders on the Chicago Mercantile Exchange, the hub of commodities futures contracts, he seemed genuinely taken aback.

“I’ve been dreading getting a call like this,” he said, apparently worried that any publicity of the tax break could put pressure on lawmakers to revisit the rule. “No one has shot something across the bow.”

Still, he acknowledged that it would be hard for President Obama to justify lower tax rates “to benefit futures traders and commodities exchanges in his home state, while pushing hard to raise taxes on securities hedge fund managers — often in Connecticut and New York City.”

The genesis of the tax break on futures goes back to 1981, when the government tried to close another tax loophole. At the time, some big investors were using the contracts to skirt taxes by creating what was called a straddle transaction, which allowed investors to roll over their profits into the next year. So a rule was written that forced traders to mark their positions to market and pay taxes on unrealized gains.

In an effort to appease the investment community, a break was offered by Dan Rostenkowski, a Democrat from Chicago who was then the chairman of the House Ways and Means Committee and later went to prison for corruption. In part, the break was meant to offset the risks associated with paying taxes on paper profits. He persuaded Congress that traders should pay a blended rate, paying 60 percent of the long-term capital gains rate and 40 percent of the ordinary income rate. Today, the combination amounts to about 23 percent, assuming the top tax bracket for ordinary income is 35 percent and the long-term capital gains rate is 15 percent.

The break has been on the chopping block in recent years. In his budget proposals for 2010 and 2011, President Obama recommended ending the special tax treatment for dealers of futures contracts, although not for all investors. But the plans lost momentum and neither was incorporated into the final budgets.

Eric J. Toder, an economist at the Tax Policy Center, a research organization, said that the tax break might have made sense a generation ago when the market was mainly investors protecting their long-term profits. But with speculators betting on short-term price movements, the loophole is just that — a loophole.

“It seemed like a reasonable compromise at the time to stop the straddle transactions,” Mr. Toder said. “In retrospect, if the trading is so short term, it seems a little silly to give them preferential treatment.”

Copyright 2011 The New York Times Company

http://dealbook.nytimes.com/2011/07/11/an-addition-to-the-list-of-tax-loopholes/ [with comments]

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from earlier/elsewhere this string, (linked in) http://investorshub.advfn.com/boards/read_msg.aspx?message_id=64989175

[F6]

Our Broken Escalator

By NICHOLAS D. KRISTOF
Published: July 16, 2011

YAMHILL, Ore.

THE United States supports schools in Afghanistan because we know that education is one of the cheapest and most effective ways to build a country.

Alas, we’ve forgotten that lesson at home. All across America, school budgets are being cut, teachers laid off and education programs dismantled.

My beloved old high school in Yamhill, Ore. — a plain brick building that was my rocket ship — is emblematic of that trend. There were only 167 school days in the last school year here (180 was typical until the recession hit), and the staff has been reduced by 9 percent over five years.

This school was where I embraced sports, became a journalist, encountered intellectual worlds, and got in trouble. These days, the 430 students still have opportunities to get into trouble, but the rest is harder.

For the next school year, freshman and junior varsity sports teams are at risk, and all students will have to pay $125 to participate on a team. The school newspaper, which once doubled as a biweekly newspaper for the entire town, has been terminated.

Business classes are gone. A music teacher has been eliminated. Class size is growing, with more than 40 students in freshman Spanish. “It’s like a long, slow bleed, watching things disappear,” says the school district’s business manager, Michelle Morrison.

The school still has good teachers, but is that sustainable with a starting salary of $33,676?

In a rural, blue-collar area like Yamhill, traditionally dependent on farming and forestry, school has always been an escalator to opportunity. One of my buddies was Loren, a house painter’s son, who graduated as salutatorian and became a lawyer. That’s the role that education historically has played — but the escalator is now breaking down.

“Every year we say: ‘What can we cut? What can we reduce?’ ” said Steve Chiovaro, superintendent of Yamhill-Carlton schools. “We’ve gotten to the point where we can no longer ‘do no harm.’ We’re starting to eviscerate education.”

Yamhill is far from alone. The Center on Education Policy reports [ http://www.cep-dc.org/ ( http://www.cep-dc.org/cfcontent_file.cfm?Attachment=KoberRentner%5FReport%5FStrainedSchools%5F063011%2Epdf ; http://www.cep-dc.org/cfcontent_file.cfm?Attachment=Appendices%5FStrainedSchools%5F062911%2Epdf ; http://www.cep-dc.org/cfcontent_file.cfm?Attachment=PressRelease%5FStrainedSchools%5F062911%2Epdf )] that 70 percent of school districts nationwide endured budget cuts in the school year that just ended, and 84 percent anticipate cuts this year.

In higher education, the same drama is unfolding. California’s superb public university system is being undermined by the biggest budget cuts in the state’s history. Tuition is set to rise [ http://www.nytimes.com/2011/07/09/us/09uc.html ] about 20 percent this year, on top of a 26 percent increase last year, which means that college will become unaffordable for some.

The immediate losers are the students. In the long run, the loser is our country.

Claudia Goldin and Lawrence Katz, two Harvard economists, argue in their book “The Race Between Education and Technology [ http://www.nytimes.com/2008/10/05/business/05shelf.html ]” that a prime factor in America’s rise over the last two centuries was its leadership in educating the masses.

On the eve of World War I, only 1 percent of Britain’s young people graduated from high school, compared with 9 percent of Americans. By 1950, a majority of American youths were graduating from high school, compared with only 10 percent of British youths.

American pre-eminence in mass education has eroded since the 1970s, and now a number of countries have leapfrogged us in high school graduation rates, in student performance, in college attendance. If you look for the classic American faith in the value of broad education to spread opportunity, you can still find it — in Asia.

When I report on poverty in Africa and poverty in America, the differences are vast. But there is a common thread: chipping away at poverty is difficult and uncertain work, but perhaps the anti-poverty program with the very best record is education — and that’s as true in New York as it is in Nigeria.

Granted, budget shortfalls are real, and schools need reforms as well as dollars. Pouring money into a broken system isn’t a solution, and we need more accountability. But it’s also true that blindly slashing budgets is making the problems worse. As Derek Bok, the former Harvard president, once observed, “If you think education is expensive, try ignorance.”

Still, we nation-build in Afghanistan and scrimp at home. How is it that we can afford to double our military budget since 9/11, can afford the carried-interest tax loophole for billionaires, can afford billions of dollars in givebacks to oil and gas companies, yet can’t afford to invest in our kids’ futures?

Sometimes I hear people endorse education cuts by arguing that “school isn’t for everybody,” which usually means something like “education isn’t for other people’s children” — or that farm kids in places like Yamhill really don’t need schools that double as rocket ships. I can’t think of any view that is more un-American.

© 2011 The New York Times Company

http://www.nytimes.com/2011/07/17/opinion/sunday/17kristof.html


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Charter School Battle Shifts to Affluent Suburbs


Founders of a proposed Mandarin-immersion charter school meeting in a South Orange, N.J., home. From left, Jutta Gassner-Snyder, Nancy Chu, Tom Piskula and Tiffany Boyd Hodgson.
Fred R. Conrad/The New York Times

By WINNIE HU
Published: July 16, 2011

MILLBURN, N.J. — Matthew Stewart believes there is a place for charter schools [ http://topics.nytimes.com/top/reference/timestopics/subjects/c/charter_schools/index.html ]. Just not in his schoolyard.

Mr. Stewart, a stay-at-home father of three boys, moved to this wealthy township, about 20 miles from Midtown Manhattan, three years ago, filling his life with class activities and soccer practices. But in recent months, he has traded play dates for protests, enlisting more than 200 families in a campaign to block two Mandarin-immersion charter schools from opening in the area.

The group, Millburn Parents Against Charter Schools [ http://millburnparentsagainstcharters.blogspot.com/ ], argues that the schools would siphon money from its children’s education for unnecessarily specialized programs. The schools, to be based in nearby Maplewood and Livingston, would draw students and resources from Millburn and other area districts.

“I’m in favor of a quality education for everyone,” Mr. Stewart said. “In suburban areas like Millburn, there’s no evidence whatsoever that the local school district is not doing its job. So what’s the rationale for a charter school?”

Suburbs like Millburn, renowned for educational excellence, have become hotbeds in the nation’s charter school battles, raising fundamental questions about the goals of a movement that began 20 years ago in Minnesota.

Charter schools, which are publicly financed but independently operated, have mostly been promoted as a way to give poor children an alternative to underperforming urban schools — to provide options akin to what those who can afford them have in the suburbs or in private schools.

Now, educators and entrepreneurs are trying to bring the same principles of choice to places where schools generally succeed, typically by creating programs, called “boutique charters” by detractors like Mr. Stewart, with intensive instruction in a particular area.

In Montgomery County, Md., north of Washington, the school board [ http://www.montgomeryschoolsmd.org/ ] is moving toward its first charter, a Montessori elementary school, after initially rejecting it and two others with global and environmental themes because, as one official said, “we have a very high bar in terms of performance.”

Imagine Schools [ http://www.imagineschools.com/ ], a large charter school operator, has held meetings in Loudoun County [ http://www.loudoun.k12.va.us/loudoun/pages/static_district_homepage.asp ], Va., west of Washington, to gauge parental interest in charters marketed partly as an alternative to overcrowded schools.

In Illinois, where 103 of the current 116 charter schools are in Chicago, an Evanston school board [ http://www.district65.net/ ] committee is considering opening the district’s first charter school.

More than half of Americans live in suburbs, and about 1 in 5 of the 4,951 existing charter schools were located there in 2010, federal statistics show. Advocates say many proposed suburban charters have struggled because of a double standard that suggests charters are fine for poor urban areas, but are not needed in well-off neighborhoods.

“I think it has to do with comfort level and assumptions based on real estate and not reality,” said Jeanne Allen, president of the Center for Education Reform [ http://www.edreform.com/Home/ ] in Washington, which studies and supports charter schools. “The houses are nice, people have money, and therefore the schools must be good.”

Ashley Del Sole, a founding member of one of the rejected charters in Montgomery County, said that regardless of how well a district performed, children benefited from choice because not everyone learned the same way. She added that competitive pressure would invigorate schools that had grown complacent.

“There’s sort of this notion that if it’s not broken, why fix it,” Ms. Del Sole said. “But there are people who are not being served.”

With high test scores and graduation rates to flash around, suburban school officials have had an easier time than their urban counterparts arguing that charters are an unnecessary drain on their budgets. In some states, including Virginia, where only local school boards authorize charters, suburban boards have all but kept them out.

“It’s like you’re Burger King and you have to go to McDonald’s to get a license — in most cases you won’t get a friendly reception,” said Roy Gamse, executive vice president of Imagine Schools.

District school boards in Georgia have rejected so many charters that lawmakers created a commission that approved 16 schools over local objections. But after several boards sued, the law was overturned in May, leaving in question the fate of some of those schools.

In New Jersey, where the State Education Department approves charters, school boards and parents have been fighting a proposed school [ http://www.questacademynow.us/ ] in another suburb, Montclair, north of Millburn, and another Mandarin-immersion school in the Princeton area [ http://www.piacs.org/learnmore.php ] that was approved last year but has yet to open. Statewide, 15 of 73 charter schools are in the suburbs.

The latest battle, over Hua Mei and Hanyu International [ http://www.hanyuschool.org/ ] — which would start in 2012 with 200 kindergarten through second-grade students drawn from Millburn, Maplewood, Livingston, South Orange, West Orange and Union — has divided neighbors and has spurred calls for legislation to require voter approval to open charters.

Jutta Gassner-Snyder, Hua Mei’s lead applicant, said some of the school’s 12 founders had received threatening e-mails.

“This is not just about the education of my child,” said Ms. Gassner-Snyder, who sends her daughter, Kayla, 4, to a private Mandarin-immersion preschool. “If we just sit back and let school districts decide what they want to do without taking into account global economic trends, as a nation, we all lose.”

Millburn’s superintendent [ http://www.millburn.org/ ], James Crisfield, said he was caught off guard by the plan for charters because “most of us thought of it as another idea to help students in districts where achievement is not what it should be.” He said the district could lose $270,000 — or $13,500 for each of 20 charter students — and that would most likely increase as the schools added a grade each year.

“We don’t have enough money to run the schools as it is,” Mr. Crisfield said, adding that the district eliminated 18 positions and reduced bus services this year.

Millburn offers Mandarin only in high school, fueling the arguments of those seeking the new charters. “Kids are like sponges,” said Yanbin Ma, a Hanyu founder. “There are so many things they can absorb and become good at, and I feel that our public schools haven’t done enough to take advantage of that.”

But to Mr. Stewart, a leader in a growing opposition that includes Livingston mothers who have helped collect more than 800 petition signatures [ http://www.ipetitions.com/petition/nocharterschool/signatures?page=1 ], this sounds “selfish.”

“Public education is basically a social contract — we all pool our money, so I don’t think I should be able to custom-design it to my needs,” he said, noting that he pays $15,000 a year in property taxes. “With these charter schools, people are trying to say, ‘I want a custom-tailored education for my children, and I want you, as my neighbor, to pay for it.’ ”

© 2011 The New York Times Company

http://www.nytimes.com/2011/07/17/education/17charters.html [ http://www.nytimes.com/2011/07/17/education/17charters.html?pagewanted=all ] [comments at http://community.nytimes.com/comments/www.nytimes.com/2011/07/17/education/17charters.html ]

[SilverSurfer]

I am in a group (unrelated) which happens to include 3 long time school teachers. The stress they are under is greater than ever but when the discussion turned to what could be different / better, they all three agreed that a lot of hope and change is needed. They teach many of the same classes they took when they were in high school but rather than concentrating on the student's grasp of the subject, they teach "for the test". It's all about scores on the Federal (Bush) "No child left behind" minimums. Instead of NCLB it should be called "Mediocrity for every child". My 15 year old straight A student works hard, but can't tell you what she took last year, what pertinence the subjects may ever have or even basic concepts about them. The teachers wonder, in today's world of software for everything, who is going to use Algebra? Why not update our schools instead of what has been tried and did not produce good results. The answer to every problem the gov offers. More bureaucracy and throw other people's money. How about more reading and history. That skill and knowledge would be usefull coming up. More Trade Schools to work towards getting our mfg base back and for those who don't want to go to college. imho SS