Relevant and even prescient commentary on news, politics and the economy.

“Have It Your Way”

Remember that old jingle Burger King used in it’s advertisements? Well it looks like Burger King is determined to have it “their” way by merging with Canada’s Tim Hortons in a take over of the company. Not that Canadians will be happy with this merger as they were not according to rumor the last time Tim Hortons was taken over by Wendys.

MSN Money News Center Euan Rocha writes: “The companies, whose market values are comparable in size, confirmed late on Sunday that they were discussing a takeover of Tim Hortons by Burger King. They said the new entity would be based in Canada, which has a lower corporate tax rate than the United States, especially for entities with large amounts of earnings from overseas.”

There is a question as to whether it is for lower corporate taxes or other reasons corporations are attempting to avoid the US corporate income tax. As DealBook Blog founder Andrew Sorkin questions the takeover and quotes Southern California Gould School of Law Prof. and former JCT chief of staff Edward D. Kleinbard in his paper ‘Competitiveness’ Has Nothing To Do With It.

“‘Despite the claims of corporate apologists, international business ‘competitiveness’ has nothing to do with the reasons for these deals,’” Edward D. Kleinbard writes. ‘Whether one measures effective marginal or overall tax rates, sophisticated U.S. multinational firms are burdened by tax rates that are the envy of their international peers.’”

Sorkin counters; “What? We’ve been told repeatedly that the United States has the highest corporate tax rate in the developed world — 35 percent — which is higher than the nominal tax rates in places like Ireland (12.5 percent), Britain (21 percent) and the Netherlands (25 percent) and the 24.1 percent average rate of all countries that are part of the Organization for Economic Cooperation and Development.”

Sorkin goes on with Kleinbard’s points. “All that is true,” contends Professor Kleinbard; however, “most United States multinational companies do not pay anywhere near 35 percent. Companies paid an average 12.6 percent, according to the Government Accountability Office, which last measured it in 2010 and avoid taxes by deliberately stashing piles of cash abroad.”

So what is the deal? Are corporations being taxed too high and deliberately keep money out of the US to avoid taxes? The argument by Kleinbard is “lower tax rates are not driving companies to inversions; instead, he contends it is all the money that companies have overseas — some $2 trillion — and don’t want to bring back to the United States despite protestations by many chief executives that they wish they could.”

Companies have become adept at avoiding corporate taxes and take advantage of the US tax code, are more competitive than their foreign counterparts, and do not face the same “anti-abuse” rules which non-US companies face in stricter territorial tax systems. Inside of accepted accounting rules, US firms take full advantage in operations in lower tax jurisdictions in a cash tax matter and also through the U.S GAAP measurement of a company’s performance.

Is the excess $2 trillion in profits trapped overseas due to high US corporate taxes? Kleinbard thinks not and points to one company in particular which has used it to their advantage. In 2013, Apple was borrowing in the US and using its offshore foreign earnings to pay the incurred interest. The burdensome US tax code allows interest earned on offshore cash to be included in the US company’s income offsetting the tax deduction on interest expense from US borrowing. In effect, no harm is done to company’s economic stance from borrowing.

While there is agreement the US tax code is inefficient; Kleinbard states, “one of the few deficiencies it has avoided is imposing an unfair international business tax competitive burden on sophisticated U.S. multinationals.”

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“No Tattoos, Go Home” Dreamer

Two illegal immigrants Erika Andiola and Cesar Vargas engage Republican Representative Steve King on staying in the US. Watch tough guy Rand Paul scamper away after Erika announces she is a “Dreamer.”

She appears to challenge Steve King to get rid of her and offers he business card. In answer to her challenge, Steve King announces this is not what he does. Of course he doesn’t, he leaves that up to others to get rid of people after he points the finger.

Back to the two Dreamers: Cesar volunteered to enlist and defend the US. Erika talks about earning her degree at ASU, about her mother being beaten by her father and coming to the US years ago to protect her. The only things Steve King can say is apply for asylum in Mexico, did you come from a lawless country, I am sorry you lived in a lawless country, and you are importing lawlessness to the US. what he doses

In the background all you can hear from the moronic supporters of Steve King is “Go Home.” At the very end, you hear “No Tatoos, Go Home.”

Looks like two good citizens to me and a great economic addition to the US. Of course by 2050 when Hispanics are ~50% of the population, there may not be room for the Kings and Rands of the world in the US anymore.

It appears Rand Paul had another interview. After one bite of his burger, he left to go to his interview leaving Steve King to hold the bag with the “Dreamer?”

“‘The Kentucky Republican (Rand Paul) on Tuesday evening said that just minutes before that video began, a reporter asked him for an interview while he was eating. ‘And I said, I need to take a couple more bites and we’ll do an interview,” Paul said on Fox News. ‘And then I was told we had to leave and I had to do the interview, so actually, I stood 10 feet from the people who were doing sort of a kamikaze interview, and I stood 10 feet from them and did another interview.’

‘I’ve always done an interview on immigration,” he added later. ‘I’m very open to discussing that I think there should be some kind of immigration reform,” he said, before pivoting to criticize President Barack Obama for taking executive action on immigration reform.'”

Yea right wuss!

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“Are Jobs Obsolete?”

Sandwichman has a history of writing on the topic of “Lump of Labor” at Econospeak. “Are Jobs Obsolete” is another in a long series working less due to technological achievement minimizing the need for Labor in Manufacturing and/or Services processes. Speaking as a “throughput analyst” who has done brownfield and Lean” analysis, the need for Labor will lessen even more going into the future.

Citing Rushkoff’s 2011 CNN.com article “Are Jobs Obsolete?”, CEO co-Founder Larry Page also brings up the topic of the need of potentially working less. This is nothing new given Sandwichman’s plethora of posts over the years of fewer hours required in the work week.

While Rushkoff hesitates in saying the obvious, I am not afraid to sign up to it: “but since when is unemployment really a problem? I understand we all want paychecks — or at least money. We want food, shelter, clothing, and all the things that money buys us. But do we all really want jobs?

We’re living in an economy where productivity is no longer the goal, employment is. That is because, on a very fundamental level, we have pretty much everything we need. America is productive enough that it could probably shelter, feed, educate, and even provide health care for its entire population with just a fraction of us actually working.

According to the U.N. Food and Agriculture Organization, there is enough food produced to provide everyone in the world with 2,720 kilocalories per person per day. And that’s even after America disposes of thousands of tons of crop and dairy just to keep market prices high. Meanwhile, American banks overloaded with foreclosed properties are demolishing vacant dwellings Video to get the empty houses off their books.”

So why is food, clothing, housing even a problem given our present ability to manufacture with greater efficiency and throughput the needs of this nation and globally for that matter with a fraction of the Labor which was needed even as late as the sixties (Drucker/Ingersoll Engineers)? We are held to some artificial standard which demands 40+ hours of week of every person, able bodied or not, to the age of 67 before enjoying the ability to retire at a lesser percentage of the wages earned while laboring called Social Security and hopefully a 401k. The increase in wages for Labor has not kept up with the increase in productivity and neither have the hours worked been offset by productivity gains thereby allowing more Labor into the work force. Instead, productivity gains have been heavily skewed to Capital and a few while Labor has been set aside dormant and used as a control factor to any increase in Labor wages.

In a WSJ interview, Douglas Rushkoff talks with Dennis Berman: “Does America Really Need More Jobs? Hat Tip to Sandwichman at Econospeak. Worth a listen.

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Odds and Ends

Hat Tip Digsby and Kos Cartoons “Supreme Court Chooses Religion Over Science

In a footnote, Justice Alito concedes that Hobby Lobby’s religious-based assertions are contradicted by science-based federal regulations: “The owners of the companies involved in these cases and others who believe that life begins at conception regard these four methods as causing abortions, but federal regulations, which define pregnancy as beginning at implantation, do not so classify them.” In Hobby Lobby Case, the Supreme Court Chooses Religion Over Science . The four contraceptive methods brought up in the Hobby Lobby case? IUDs, ella, and Plan B.

Lady Parts Justice

New woman’s “Group Lady Parts Justice” forming as authored by Lizz Winstead — comedian, writer, and co-creator of The Daily Show.

Lady Parts Justice is the first not safe for work, rapid response reproductive rights messaging hub that uses comedy, culture and digital media to “get people off their asses and reclaim their rights.” Lady Parts Justice, click on your state to see their pitch. Hat Tip: Crooks and Liars

Highway Construction

“total public spending on construction, adjusted for the price level (GDP deflator) and population growth 2007IV=100,”

“if no deal is made on the federal highway fund, it will soon plunge even further.

It’s important here not to get caught up too much in the details. Yes, it’s absurd that the federal gasoline tax has been flat in nominal terms since 1993, which means that in real terms it has fallen 40 percent. But highways don’t have to be paid for with gas taxes — the fund could be (and has been) topped up with transfers from general revenue.“Paul Krugman

PPACA

View image on Twitter

~20M people gained coverage under ACA. @nejm @commonwealthfnd Health Care Coverage under the Affordable Care Act — A Progress Report Here’s the breakdown, Atu Gawande:

Taking all existing coverage expansions together, we estimate that 20 million Americans have gained coverage as of May 1 under the ACA . We do not know yet exactly how many of these people were previously uninsured, but it seems certain that many were. Recent national surveys seem to confirm this presumption. The CBO projects that the law will decrease the number of uninsured people by 12 million this year and by 26 million by 2017.  Hat Tip: Digsby, “That’s A lot of People”

Executive Orders

To date, “the only presidents who used fewer executive orders than Obama were one term presidents.” Digsby

International Confidence in US Presidents. Bush vs Obama

 PEW Hat Tip Digsby

 

Having written several times about the cost of the elusive college education, this book seems interesting. They give away the topic and again it is money, even for poorer students.

Hold Fast to Dreams: A College Guidance Counselor, His Students, and the Vision of a Life Beyond Poverty by Joshua Steckel and Beth Zasloff New Press, 320 pp.

‘It sometimes feels like low-income students are to our K-12 education system what cadavers are to hospitals. Often teachers secure their first jobs in challenging schools in poorer districts, where the turnover rate is high. Here, they hone their teaching skills, and in a few years they trade up to districts with higher salaries and better working conditions. Poor students are left behind to train the next crop of educators.

Joshua Steckel, coauthor of Hold Fast to Dreams: A College Guidance Counselor, His Students, and the Vision of a Life Beyond Poverty, intentionally went the other way. After four years at Birch Wathen Lenox, an expensive private school on Manhattan’s Upper East Side, Steckel became a college counselor (and sometime teacher) at an overwhelmingly poor, black, and Latino public school in Brooklyn, the Secondary School for Research (now called Park Slope Collegiate). Once there, he used the skills and connections he had developed at Lenox to help get his new charges admitted to some of the country’s more selective colleges.

“Along with his wife and coauthor, Beth Zasloff, Steckel chronicles his relationship with ten of his students, from their senior year of high school into young adulthood. The stories are invaluable both to educators who deal with children from similar backgrounds and to non-educators, who often don’t appreciate the overwhelming odds stacked against poor children.”  Hat Tip Elias Vlanton, Washington Monthly

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“The Big Lie at the Core of Pete Peterson’s Attack on the Baby Boomers”

William Black has an interesting commentary on a seminar being offered by Bank of America in conjunction with Kahn Academy to educate Millennials. Millennials took a big hit in financial fraud, The Great Recession, and are still taking that hit with a lack of jobs. As a result of the economic hard times brought on by The Great Recession, there is no love lost for financial firms and banks which are being ranked amongst the “least favorable brands as measured by Viacom.

”Not only did banks make up four of their top 10 most hated brands; but, Millennials increasingly viewed these financial institutions as irrelevant.

An in-house unit of Viacom, Scratch did a three-year study finding that a third of Millennials believed they’ll be able to live a bank-free existence in the future. In the age of Simple, Square, and Bitcoin; Millennials (defined as those born between 1981 and 2000) overwhelmingly believed that the way they access money and pay for things will be completely different in five years.”

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– 33% of Millennials say they will not need a bank.
– 53% of Millennials do not believe their bank offers anything different than other banks.
– 68% of Millennials say in 5 years, the way we access money will be different.
– 70% of Millennials say in 5 years, the way we pay for things will be different.
– 71% of Millennials would rather go to the dentist than listen to what their banks are saying

“The Millennials cohort is larger than the Baby Boomers and when it comes to wealth transfer they are expected to inherit more than $30 Trillion in the future. One thing that makes banks, financial advisors and brokerage firms very nervous is money changing hands because it usually doesn’t stay. A disconnect with Millennials puts financial brands at a great disadvantage and potentially missing the boat.”

According to William Black, “most of the $30 Trillion is coming directly or indirectly from Baby Boomers. In his never ending quest to privatize Social Security and make Wall Street even wealthier, Pete Peterson is sending groups to campuses trying to convince college students that their parents are the enemy, that austerity and privatization are their only means of staving off poverty,” and also gain access to the Middle and Upper classes.

A Makovsky Financial PR Rep was quick to note the disdain for banks and finance which was the opposite result of what Pete Peterson and Druckenmiller were attempting to achieve as I wrote about here: “Ripping Off College Students’ Economic Future

“The news media has been pandering to students promoting a generational war by advocating the theft of student’s futures with such programs as Social Security, Medicare, Medicaid, etc. The Tom Friedmans, James Freemans, and others suggest baby boomers are ripping-off the X, Y, and Z generations with these programs.  From the well-heeled segment and do not have to work anymore 1-percenter population, we find Stan Druckenmiller, Pete Peterson, the Koch brothers, etc. spending portions of their $billions advocating the discontinuance of Social Security to save the country, students, and themselves.”

To combat the negative perception by Millennials, Bank of America has teamed up with Kahn Academy to create “a new approach to educating Millennials and money, credit, lending and investing” in a positive manner. Just, maybe our kids and grand kids will avenge us?

William Black: “Yes, a ‘new approach to educating’ Millennials about finance is being shaped by the Bank of America and it is just what the world needs.  I trust that they call their course ‘The Big Kahn’ (funded by Bank of America).”

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Alan Collinge (Student Loan Justice Org.) briefly points out some of the Issues with the Brookings Institution Study as Written by Beth Akers and Matt Chingos

There are what I perceived as problems with the Brookings Study.

Just one example: they base much of their analyses upon “lifetime earnings associated with earning a bachelor’s degree”. The average lifetimes earnings of degree holders is certainly skewed significantly upwards by the top 10% of earners (who account for over 40% of all earnings, and whose earnings have accelerated much faster than the rest of the population since 1989). Remove this group from the data, and average earnings increase is much smaller.

There are many similar instances of cherry picking data too numerous to mention here; but in general terms, the study appears to be doing everything to show that borrowers are not having problems. Yet, the study completely and totally ignores what are probably the best indicators of the borrower’s ability to manage their student loans: the default rates, and the deferment/forbearance statistics. The most recent data (which the lenders go to great lengths to decrease through various “default management” techniques during these temporary windows) show a 3- year default rate of almost 15% (the two-year rate is 10%). The lifetime default rate, which was certainly over 20% for people leaving school in 1995, is certainly well over 30% currently, and could easily surpass 50% for people leaving school more recently. Regarding deferment/forbearance over 40% of all loans are either in default, deferment, or forbearance.

It is very disappointing to see the Brookings people turn into cheerleaders for this structurally predatory lending system. They are not serving the public interest with studies like this, they are actively working against it.

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Hypocrisy ??? – Updated

Update to the Hobby Lobby decision comes as a result of a SCOTUS injunction the day before the 4th of July 2014

The nonprofit Wheaton College filed a petition to keep it from having to a file self-certification document certifying it is a religious organization and should be exempt from having to provide contraceptives. Sotomayer writes:

“Let me be absolutely clear: I do not doubt that Wheaton genuinely believes that signing the self-certification form is contrary to its religious beliefs; but, thinking one’s religious beliefs are substantially burdened … does not make it so.” She adds, “Not every sincerely felt ‘burden’ is a ‘substantial’ one, and it is for courts, not litigants, to identify which are.”

The court granted the emergency injunction from Wheaton College.

What the plaintiffs in the nonprofit cases are seeking is to be treated like churches – no contraception for anyone. But the majority claims that “nothing in this interim order affects the ability of the applicant’s employees and students to obtain, without cost, the full range of FDA approved contraceptives,” because the government already knows about their objection from the lawsuit and can tell the insurer itself. But without the form, Sotomayor argues, how could the administration “ever identify the organizations eligible for the accommodation and perform the administrative tasks necessary to make the accommodation work?”

Hat Tip: Karoli, Crooks and Liars

***************************************

Hobby Lobby won its case at SCOTUS and is now exempt from having to pay for contraceptive devices or pharma for its female employees. At one commenter pointed out at a different blog, this did not include any pharma for men they may need to father a child or just for fun. This is not the Hobby Lobby hypocrisy I am pointing to although it is fair game in critiquing the company’s viewpoint.

While Hobby Lobby does not want to foot the bill for contraception, it has no problem in investing retirement funds in companies which manufacture emergency birth control measures which is something Hobby Lobby exhausted itself in explaining to the court. David at Crooks and Liars reports on a recent CNN broadcast concerning Hobby Lobby. Given its erroneous reporting on the VA recently, CNN has not been high on my list of reputable sources for news.

“While CNN host Ashleigh Banfield on Wednesday highlighted the “hypocrisy” of Hobby Lobby for investing in companies that made the same birth control products that it refused to provide to female employees,” CNN Business Correspondent Alison Kosik gives Hobby Lobby the benefit of the doubt by suggesting Hobby Lobby may have overlooked where its retirement funds may be going. Yea right and one word, “baloney!” and I could have used two words but AB is kind of a family-type-of-blog :). These are religious fanatics who wear their religion on their sleeve and will not hesitate a second to cram it down your throat to gain an advantage. They convinced the world they were being put-upon by the PPACA, President Obama, and the US government until it comes to making a buck.

Maybe SCOTUS will do a “do-over” and rethink their decision which will have some far reaching consequences going into the future as detailed in a recent LA Times Op-Ed The broad reach of the narrow Hobby Lobby ruling by Erwin Chemerinsky. As taken from the Op-Ed:

– “Christian Scientists could claim that they do not have to provide any health insurance to their employees.”
– “a family-owned business ‘could’ require as a condition of employment that no money paid as salary will be used to buy contraceptives, or other things that violate the employers’ religious beliefs?”
– Justice Samuel A. Alito, “it might apply to racial discrimination by saying, ‘The government has a compelling interest in providing equal opportunity to participate in the workforce without regard to race, and prohibitions on racial discrimination are precisely tailored to achieve that critical goal.'”
– “what of employers who have a religious belief that women with children should not work outside their homes, or businesses that claim a religious basis for sexual-orientation discrimination?”
– etc.

And of a reconsideration by the court? Doubtful with this crop of activist conservative judges as JackD pointed in the comments . . . and the door is open for other exemptions for those fictional entities called corporations.

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“Does Chief Justice John Roberts show a certain casualness about the truth?”

Each week I get an email from Slate telling me what the latest articles are there, this one caught my attention; Richard Posner on Roberts” For those of you who may not know, Richard Posner writes articles on the economy; but, he is also an 7th District Appeals Court Justice. The 7th District is the same district handling Scott Walker’s election snafu except the justice in that appeal is Frank Easterbrook.

What I find interesting about this article is Justice Posner is talking about SCOTUS Chief Justice Roberts and seemingly questioning McCutcheon v. Federal Election Commission. Here is an abbreviated take on what is being said by Justice Posner:

“Which brings me to Chief Justice Roberts’ opinion in McCutcheon v. Federal Election Commission, the decision in April that, in the name of free speech, further diminished Congress’ power to limit spending on political campaigns. The opinion states that Congress may target only a specific type of corruption—quid pro quo corruption—that is, an agreement between donor and candidate that in exchange for the donation the candidate will support policies that will provide financial or other benefits to the donor. If there is no agreement, the opinion states, the donation must be allowed because ‘constituents have the right to support candidates who share their views and concerns. Representatives are not to follow constituent orders, but can be expected to be cognizant of and respon­sive to those concerns. Such responsiveness is key to the very concept of self-governance through elected officials.

Can so naive-seeming a conception of the political process reflect the actual beliefs of the intellectually sophisticated chief justice? Maybe so, but one is entitled to be skeptical. Obviously, wealthy businessmen and large corporations often make substantial political contributions in the hope (often fulfilled) that by doing so they will be buying the support of politicians for policies that yield financial benefits to the donors. The legislator who does not honor the implicit deal is unlikely to receive similar donations in the future. By honoring the deal he is not just being ‘responsive’ to the political ‘views and concerns’ of constituents; he is buying their financial support with currency consisting of votes for legislation valuable to his benefactors. Isn’t this obviously a form of corruption?'”

Mind you, I have not see a lower level judge question a higher level judge’s viewpoint and legal opinion. So this is rather unusual for me having been through all of the court levels. This comes outside of the realm of an appeal which would change a lower court’s ruling if a justice found a lower court’s ruling in error or not to their interpretation. Maybe other readers such as JackD and Bev can offer a better opinion than mine.

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NY Fed’s Bogus Estimate of Return on College and Brookings Institute Misses the Student Loan Crisis

Yves at Naked Capitalism writes “NY Fed’s Bogus Estimate of Return on College and the Neglect of the Intellectual Commons”

Yesterday, the New York Fed released a new report by Jaison R. Abel and Richard Dietz, Do the Benefits of College Still Outweigh the Costs? which is getting good coverage in the mainstream media. Its major finding is that despite the fall in wages to college graduates due to the crappy economy, a college degree is still worth the expense because wages of high-school graduates have fallen too, keeping the wage premium of a college education high while reducing the opportunity cost of staying in school.

The assumption is college educated students with student debt are still coming out ahead over the long term. In an earlier post on Angry Bear using graphs as taken from Student Debt is Challenging the Reason for Getting that Long Sought After College Degree I was able to show those without student loan debt appear to come out financially better over the years.

“Based on its projections, the indebted household will suffer a lifetime wealth loss of nearly $208,000, compared to “baseline” of the debt-free household. Nearly two-thirds of this loss ($134,000) comes from the lower retirement savings of the indebted household, while more than one-third ($70,000) comes from lower accumulated home equity; because of the two withdrawals from savings later in their lives, the liquid savings gap is just $4,000. The gap in retirement savings is particularly large because the household with student debt was forced to save significantly less for retirement early in their working lives while paying back their student loans, a gap which was exacerbated because of the significant compound interest that would have been earned had they been able to save the same amount as the household without student loan debt.”

Simply stated, Abels and Dietz assumptions do not appear to be true.

Yves takes on their analysis and the use of IRR as opposed to NPV. “Instead of performing a proper NPV analysis, the authors used internal rate of return. We’ve debunked that at length in a previous post, and even McKinsey hectored CFOs for relying on it precisely because it tends to overstate investment returns. Emphasis ours:

Maybe finance managers just enjoy living on the edge. What else would explain their weakness for using the internal rate of return (IRR) to assess capital projects? For decades, finance textbooks and academics have warned that typical IRR calculations build in reinvestment assumptions that make bad projects look better and good ones look great…the most dangerous problems with IRR are neither isolated nor immaterial, and they can have serious implications for capital budget managers. When managers decide to finance only the projects with the highest IRRs, they may be looking at the most distorted calculations — and thereby destroying shareholder value by selecting the wrong projects altogether.

But let me turn briefly to a much more important issue, which is the perverse nature of thinking about education as an investment. This is yet another manifestation of the degree to which citizens are inculcated to view the social order through the lens of markets.” There are reasons not to use Fair Market Valuation of student loans which I will get into later.

Coincidentally, the NYT ran an article by David Leonhardt featuring a Beth Akers and Matthew Chingos Paper, Is a Student Loan Crisis on the Horizon?. Suprisingly, the dynamic conservative dual used 2010 Fed data as opposed to the more current 2012 data as caught by News Busters Tom Blumer

“the study’s authors, directly contradicts the sunshine they’re trying blow up our keisters. What’s even worse is that you don’t even need to dig into the detail once you learn which year’s data they used — 2010. For heaven’s sake, guys, total student loan debt has grown by between 50 percent and 60 percent since then. and to $1.2 trillion rather than the ~$770 billion used by Akers and Chingos. It gets more interesting as you read Yves Smith article, the Fed study, Akers and Chingos authored study, and my comment on Yves article. TheFed, Akers and Chingos grossly underestimate the impact of student loans on the economy and on students.

In my reply on Yves thread, I attempt to bring to light some of the concerns I have:

I just finished reading both Beths and Matt’s paper “Is a Student Loan Crisis on the Horizon?” and as before they make light of the issue with student loans. Toss in with them Jason Delisle of The New America Foundation and we have the three amigos of conservative origin telling main stream America there is no problem with student loans. I have problems with their origins and we are not just talking attending a conservative university. Their backgrounds reads like an up and coming who is who of conservatism who are getting their experience at more liberal orgs only to join AEI or Heritage down the road.

– Ms. Akers spent 2007/8 as “Staff Economist, White House Council of Economic Advisers (2007-2008).” How does she fit into this other than being a closet conservative?

– Mr. Chingos has been the recipient of support from the “Smith Richardson Foundation, the American Enterprise Institute, and the Lumina Foundation, where three former Sallie Mae directors are board members.”

– Mr. Delisile was “a senior analyst on the Republican staff of the U.S. Senate Budget Committee, where he played a key role in developing education legislation. From 2000 to 2006 he was a legislative aide in the office of Rep. Thomas Petri (R-WI).”

Yet the three of them write for organizations which I would term as centrist (am I wrong on this?) organizations. What am I missing here???

This is nonsense:

“The basis for this theory is that, unlike physical capital, human capital—or the skills that one obtains through education—cannot effectively serve as collateral for a loan. This makes student lending inherently risky, because a lender cannot foreclose on a student’s education the same way it can foreclose on a borrower’s home if he goes into default. More generally, the federal loan program ensures that all students have access to higher education, regardless of their ability to pay.

as well as this too:

“Unlike the loans offered in the federal lending programs, private lenders offer loans with interest rates that reflect a borrower’s likelihood of default. This means that borrowers from low-income households or borrowers attending colleges with lower completion rates are likely to face the highest rates. In addition, private student loans carry less generous repayment terms than federal loans, an important distinction given that both federal and private student loans are more difficult to discharge in bankruptcy than other types of consumer debt.”

What Beth and Matt leave out is the inability of students to discharge student loans in bankruptcy. Students with a simple signature on a piece of paper, check into a proverbial ‘roach motel” to which there is no escape except by death or disability, portions can be done away with through public service, or wait 20-25 years on an Income Based Plan to escape the balance of the loan only to have it appear as income from the IRS. There is no default and neither can it be discharged through bankruptcy. The government with either Federal Direct Loans or with the equivalent Sallie Mae, etc. will garnish your payroll wages, your Social Security, your disability income to secure the money loaned to you. These outcomes are conveniently left out by the three of them.

When you look at Student Loans in this manner, what risk whether determined by NPV or IRR are we talking about here? The Department of Education has decades of history on student loan returns. Student loans make more money when the students quit paying on them and as Alan Collinge pointed out for every $1 loaned an unpaid loan through default makes $1.20, far greater than what Geithner let banks and investment firms off the hook. Why do student loans have to be measured according to risk when there is no escape from them and they make a return when paid back or in a technical default status. CBO Director Elmendorf would change to Fair Market Valuation in the blink of an eye except he is tied to other methodology by law. In the past, he has done the calculation both ways and has reported on it. Nothing new there and again the CBO Director has shown his partisanship.

Yes, people with college degrees make more money when compared to high school graduates who have increasing household income due to the over abundance of them and a lack of jobs requiring just a high school degree. At the same time, entry level jobs for first time college grads have experienced similar declines just not to the same extent as high school grads. Over the life time of those who did not have student loan debt compared to those who did have student loans, the ones without loans accumulated more wealth and income.

“Based on its projections, the indebted household will suffer a lifetime wealth loss of nearly $208,000, compared to “baseline” of the debt-free household. Nearly two-thirds of this loss ($134,000) comes from the lower retirement savings of the indebted household, while more than one-third ($70,000) comes from lower accumulated home equity; because of the two withdrawals from savings later in their lives, the liquid savings gap is just $4,000. The gap in retirement savings is particularly large because the household with student debt was forced to save significantly less for retirement early in their working lives while paying back their student loans, a gap which was exacerbated because of the significant compound interest that would have been earned had they been able to save the same amount as the household without student loan debt. Some of this gap in net assets also comes from the higher lifetime income of the household without student loan debt; though the indebted household begins their careers earning more, their income falls behind that of the debt-free household by its early 40s, and earns significantly less during the peak earning years of the mid-50s.“How Student Debt Reduces Lifetime Wealth”

And you might wonder why I have concerns about students and student loans?

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The VA, Still The “Best Care Anywhere”

Today, “Economist’s View showcased Paul Krugman’s latest NYT article“Veterans and Zombies”. Paul discusses how the hyped-up VA issues are being used as an example of under performing government healthcare to emphasize how bad the much larger PPACA healthcare reform could be if allowed to proceed. Of course this is not true; but both Mark and Paul missed the data found by the most recent VA audit. The results of the audit were released June 9th. I left a long reply on the thread detailing the findings of the recent VA audit.

There is no comparison to be made of the VA healthcare to private healthcare. The VA is ahead of private healthcare and where private healthcare should be if it were going to improve. In a nutshell, the VA is well beyond the typical private healthcare system in providing “evidence-based protocols of care — not inadvertently ordering up dangerous combinations of drugs, or performing unnecessary surgeries and tests just to make a buck and treating the whole patient and not just one part at a time.” The services for fees cost model does not exist in VA healthcare for veterans.

If you remember, I had recently written “Wait Times at the VA” detailing what the recent Inspector General had discovered in the audit of the VA as reported June 9th “U.S. Department of Veterans Affairs VA Access Audit & Wait Times Fact Sheet System-Wide Overview”. Phillip Longman the author of the “Best Care Anywhere” featured the Inspector General’s report on the Washington Monthly “Just How Long Is The Wait”

“The nationwide Access Audit covered a total of 731 separate points of access, and involved over 3,772 interviews of clinical and administrative staff involved in the scheduling process at VA Medical Centers (VAMC), large Community Based Outpatient Clinics (CBOC) serving at least 10,000 Veterans and a sampling of smaller clinics.” Included in the finding were these issues:

– A complicated scheduling process resulted in confusion among scheduling clerks and front-line supervisors.
– A 14 day wait-time performance target for new appointments was not only inconsistently deployed throughout the health care system but was not
attainable given growing demand for services and lack of planning for resource requirements.
– Overall, 13% of scheduling staff interviewed indicated they received instruction (from supervisors or others) to enter a date different than what
the Veteran had requested.
– 8% of scheduling staff indicated they used alternatives to the official Electronic Wait List (EWL). In some cases, pressures were placed on
schedulers to utilize unofficial lists or engage in inappropriate practices.

Immediate Actions to Be taken as a result of the Audit:

– VA has accelerated care for Veterans currently waiting for health care services. VHA is in the process of contacting in excess of 90,000 Veterans
during the first phase of VA’s “Accelerating Access to Care Initiative.” The first phase is the first appointment.
– VHA will provide Veterans who do not currently have an appointment, or are waiting for additional care or services longer than 30 days the option
to be rescheduled sooner if VA capacity exists, keep their scheduled appointment, or be referred to non-VA providers in the community.
– VA has suspended all VHA Senior Executive Performance Awards for FY14
– VHA will remove 14-day performance goal from employee performance plans
– VHA will revise, enhance and deploy Scheduling Training
– VHA will implement a site inspection process.

What is so different about this if one were to compare the VA to private healthcare is, if the issue occurred in private healthcare nothing would have happened or reported to correct the issue. The VA had set up guidelines for scheduling people, a 14 day window, and a procedure to report on it. People created work-a-rounds to the procedures and processes to surpass the reporting and they got caught. The issue went public. Little if any of this reporting occurs in private healthcare, much less public reporting. Yet Congress and critics think that closing down the VA and turning veterans over to the private healthcare system is a benefit to veterans. It is not a benefit to veterans and is a detriment

Audit Findings: Long Term and Other Actions:

– VHA will overhaul the scheduling and access management directive.
– VHA will roll out near-term changes to the legacy scheduling system.
– VHA will acquire and deploy long-term scheduling software solutions.
– VHA will reassess and establish access timeliness goals.
– VHA will strengthen accountability for integrity in scheduling and access management.

The VA is implementing change to again take on scheduling of Veterans for appointments. That the VA even had a 14 day goal for appointments is far beyond what can be see in private healthcare except if one goes to the ER.

Wait Time Information

On May 15th, the VA had ~ 6 million appointments scheduled across its system. ~57,000 Veterans are waiting to be scheduled for care. ~ 63,000 veterans over the past ten years have enrolled in the VA healthcare system and have not been seen for an appointment. The VA is making contact with those who need scheduling and the new enrollees to clear up the backlog.

– Of the 6,004,350 total appointments scheduled, 96% of them or 5,763,291 appointment were made in 30 days or less.

– Conversely, 242,059 veterans or 4% of the 6,004,350 scheduled appointments were made after 30 days.

– The audit shows that even appointments at the Phoenix, AZ VA (the ground zero of the VA scandal), 89 percent of people enrolled in the system
received an appointment in less than 30 days. The average wait for established patients to see a primary care doc coming to just over 14 days.

– Most everywhere else in the VA system, average wait times for established patients to see a primary care doc are in the range of 2 to 4 days, as
are waiting times to receive specialty care.

Mind you, three months for a doctor’s visit is too long; but, it is not so out of the ordinary as what is being experienced in private healthcare today. The audit did reveal there are ~ 57,000 veterans who have waited for a doctor’s visit longer than 90 days and representing ~ 1% of the 6 million vets taken care of by the VA. Furthermore, there are ~ 63,000 veterans who are more-than-likely not the newly arrived veterans from Iraq/Afghanistan as claimed by CNN and the rest of the media. Much of this numeric can probably be explained by the relaxing of VA regulations on admission into VA care. Many Vietnam Veterans have reapplied to the VA with the idea we may be accepted. I would urge any veteran to apply as the regs do change as well as your income and you can be grandfathered even if the next president tightens the regulations as Bush did.

The VA is not flawless as many of veterans today know and I surely do. Of the 57,000 veterans waiting for an appointment, some veterans may have been forgotten by the VA, some may have moved to another city and missed the appointment, some may have gotten group insurance, and many may have enrolled immediately upon discharge to insure grandfathering and not need an appointment. This was the broad base upon which CNN made up its news story along with other media outlets and politicians with unsubstantiated data which is proving to be more hyperbole than fact.

Sending veterans to private healthcare after breaking up the VA is what CNN, the media, and the politician’s call a “benefit” bestowed upon Veterans. It is not a benefit and will only make healthcare treatment worse for veterans.

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