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

There is a debt problem

Yves Smith writes:

So bad economic times increase income disparity even among the young, and that will also make it even harder for them to contend with debt.

I’ll return to this topic, because I think this recitation isn’t adequate to convey how the pieces are being put in place to put bigger and bigger swathes of the public under the debt yoke. And officials act as if this sort of thing is desirable as long as they can pretend it’s “affordable”. This cheery statement comes from that Department of Education release:

“The growing number of students who have defaulted on their federal student loans is troubling,” U.S. Secretary of Education Arne Duncan said. “The Department will continue to work with institutions and borrowers to ensure that student debt is affordable. We remain committed to building a shared partnership with states, local governments, institutions, and students—as well as the business, labor, and philanthropic leaders—to improve college affordability for millions of students and families.”

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The Young, the Shutdown, Austerity, and Wealth

I can not help but wonder if Friedman takes delight in the predicament of the Young and Baby Boomers as he writes about Druckenmiller excursions on to college campuses . I envision  a bit of Schadenfreude as evidenced by his choice of titles for his latest column. October 15, 2013, Tom Friedman writes in the NYT about the young being screwed by the baby boomer generation and trumpets  for rebellion against the kicking of the can down the road of higher costs and taxes due to Social Security, Medicare, Medicaid, and entitlements. Tom Friedman’s NYT article “Sorry Kids, We Ate It All” masks the real threat to student and their productivity going into the future.

“as our politicians run for the hills the minute someone accuses them of ‘fixing the deficit on the backs of the elderly’ or creating ‘death panels’ to sensibly allocate end-of-life health care. Could this time be different? Short of an economic meltdown, there is only one thing that might produce meaningful change: a mass movement for tax, spending and entitlement reform led by the cohort that is the least organized but will be the most affected if we don’t think long term — today’s young people.” “Sorry Kids, We Ate It All”

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“Kill Grandma” ? Appeal to young people

by Dale Coberly



You see, the Wolf (his friends call him Tom) had no reason to
disguise himself as Grandmother. He had already met Little Red
Riding Hood and talked to her like a friend. She saw him as the nice
man in the very nice suit who told her he would help her become wise
and rich like him.

So when he met her outside Grandmother’s house and handed her an axe
and said, “Grandmother is really a big, bad, wolf, and she is going
to eat you up if you don’t take this axe and kill her,” he didn’t
need a disguise, and she believed him.

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The shutdown is over, but the austerity fight continues

One thing that several people have requested (including Mrs. Rdan) is more easily read material more accessible to non-finance readers, or with our AB audience also people well versed in finance and macro, without dumbing down the issues into ideas that have no context nor links to what actually happens in the world.   We are very used to slogans from our politicians, handy to have in comments perhaps, but no way to actually think.

Yves Smith writes an opening salvo in anticipation of the coming ‘budget talks’, concessions and demands as part of the continuing craziness, and does NOT remain quiet about involving the Dems in the carving up of money sources for political self-interests, which tends to lack national interests even as claimed. What to watch for?? Beware more of the same Grand Bargains and the coming media campaigns. The article she points to is worth reading.

Lifted from Naked Capitalism:

I hope Naked Capitalism readers will check out our new article at Aljazeera, The shutdown is over, but the austerity fight continues. I’ve been writing exclusively at Naked Capitalism for the last two years (the one exception was an article at The New Republic) and as much as it’s extremely difficult for me to find time to do anything additional, I thought Aljazeera could be an attractive venue, since its readership does not overlap much with ours.

One of the good things about Aljazeera is they did not attempt to dumb the argument down (which I’ve had happen at certain publications that will go unnamed) and when some issues needed unpacking to make them more accessible to non-finance readers, they increased the word budget beyond the original limit.

The opening paragraphs:

The bruising battle on Capitol Hill over the debt ceiling is not over. It has simply been postponed until a longer-term budget negotiation. Congress has agreed to fund the government through Jan. 15 and extend its borrowing authority through Feb. 7, at which point the turmoil of the past few weeks might recur.

Although the immediate goal of tea party Republicans in Congress was to defund President Barack Obama’s health care law, it is important not to lose sight of their larger purpose. The recent drama is only the latest battle in a decades-long war by radical conservatives, joined by pro-business interests in both parties, to gut the governmental supports for the middle and lower classes responsible for America’s postwar prosperity. The mystery is why politicians and pundits tout austerity policies despite ample evidence that they are damaging and counterproductive.

The article continues here. Hope you enjoy it!


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Damon Silvers Smackdown of CNBCs Kelly Evans and Simon Hobbs on Social Security

Damon Silvers appears to have his wheels on correctly answering two CNN talking heads on their version of Social Security.

Kelly Evans: “Of course people want to make sure that our citizens are taken care of. But that’s almost not the point.” (It’s not?) Evans proceeds to assail Silvers and the AFL-CIO for refusing to “negotiate” over seniors’ well-being.”

Simon Hobbs: “Are you as clear on the reality that if you don’t cut entitlement benefits this country may well go bankrupt.”

Damon Silvers answers: “‘That’s frankly not true,’ he says. ‘That’s a lie put forward by billionaires who don’t want to pay higher taxes. The only people who believe what you just said,’ he added, ‘are people who are worried that their very large incomes will be taxed.'”

Damon Silvers promises: “We’re not embarrassed about that whatsoever,” he replies. “If you cut Social Security benefits or Medicare benefits to our seniors, to our most vulnerable people in the country, you are going to get no support on it.”

It is time for people to hold Democrats feet to the fire in a similar manner that Teabaggers held their representatives accountable.

Hat Tip to Crooks and Liars

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Median wealth increases, but U.S. still stuck at #27 in world

The new Global Wealth Report and Global Wealth Databook from Credit Suisse were released last week. According to the Report (p. 3),

Global wealth has reached a new all-time high of USD 241 trillion, up 4.9% since last year and 68% since 2003, with the USA accounting for 72% of the latest increase. Average [mean] wealth per adult reached a new all-time high of USD 51,600, with wealth per adult in Switzerland returning to above USD 500,000.

For the United States, this represents an increase in mean wealth per adult of 11.4% from mid-2012 to mid-2013 (Databook, p. 92). Median wealth per adult increased even faster, from $38,786 to $44,911, or 15.8%, although we should recall that measurement of median wealth is less reliable than that for mean wealth.

Nonetheless, while these data represent improvement for the typical American, there was no change in our ranking relative to the rest of the world. While Kuwait and Cyprus fell below the U.S., Slovenia and, more surprisingly, Greece now have higher median wealth per adult. Thus, the United States remains only 27th in the world.

These data are significant for at least two reasons. First, they highlight the fact that while the United States has a higher gross domestic product per capita than all but four of the 26 countries ahead of it in median wealth per adult (Qatar, Luxembourg, Singapore, and Norway), the long-term trend of economic policies has clearly hurt the middle class. Inequality is a big part of the explanation here: mean wealth per adult in the U.S. is 6.7 times median wealth per adult, the highest ratio in the top 27. By contrast, in #1 Australia the mean-to-median ratio is only 1.8:1. In fact, this ratio is less than 3:1 for 19 of the 26 countries with higher median wealth per adult. In Slovenia, mean wealth per adult is less than 1.5 times median wealth per adult! (All figures calculated from Databook, Table 3-1.)

Second, these low levels of wealth contribute to the coming retirement crisis of the middle class. Americans have low levels of saving, while Social Security still looks vulnerable to the chopping block despite our already high level of elder poverty.

Here are the top 27 countries by median wealth per adult.


Country                                                      Median Wealth Per Adult


1.  Australia                                                    $219,505

2.  Luxembourg                                               $182,768

3.  Belgium                                                     $148,141

4.  France                                                        $141,850

5.  Italy                                                           $138,653

6.  United Kingdom                                      $111,524

7.  Japan                                                         $110,294

8.  Iceland                                                      $104,733

9.  Switzerland                                               $  95,916

10. Finland                                                     $  95,095

11. Norway                                                    $  92,859

12. Singapore                                                 $  90,466

13. Canada                                                     $  90,252

14. Netherlands                                              $  83,631

15. New Zealand                                            $  76,607

16. Ireland                                                      $  75,573

17. Spain                                                        $  63,306

18. Qatar                                                        $  58,237

19. Denmark                                                  $  57,675

20. Austria                                                     $  57,450

21. Greece                                                      $  53,937

22. Taiwan                                                      $  53,336

23. Sweden                                                     $  52,677

24. United Arab Emirates                              $  51,882

25. Germany                                                   $  49,370

26. Slovenia                                                    $  44,932

27. United States                                            $  44,911


Source: Credit Suisse Global Wealth Databook, Table 3-1

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Health Wonk Review – Rich and Varied Offerings

Maggie Mahar reviews other blogs on healthcare within the blogosphere


Joe Paduda has hosted the newest edition of Health Wonk Review, a bi-weekly roundup of some of the best healthcare posts in the blogosphere. You will find it at Joe’s blog, Managed Care Matters.:

Here are just a few highlights:

  • Over at HealthBusinessBlog David E Williams responds to a relative’s question : Why are Obamacare’s opponents so vehement?The bottom line, says David, is that “some opponents have whipped themselves into a lather over their revulsion to all things Obama and are living in an echo chamber where these views seem rational. It would be better for everyone if they went back to the Birther madness.”

    I agree. This is not about healthcare, and it is not about money. The Congressional Budget Office has told us that the ACA will not add to the deficit.. As David points out many of the ideas in the Affordable Care Act were originally Republican ideas. It is not a radical plan for health care reform; it is a moderate plan. And Obama himself is a moderate. Why then do they hate him with such a passion? I’ll leave it to you to answer that question.

  • In a post titledWe’re all in this together” Louise Norris confides that under the Affordable Care Act, her family’s insurance premiums will rise sharply. (They had a high deductible plan with low premiums. The ACA outlaws such high deductibles because in too many cases, insurers sell them to low-income and lower-middle income families who then cannot afford to use them. So they put off getting healthcare until they are very, very sick.)Meanwhile, Louise and her husband earn too much to qualify for premiums. But they’re not angry. “We support [reform]” she explains, “because something like this isn’t supposed to be all about us. In the case of healthcare reform, our higher premiums will help ensure that our friends and neighbors and fellow citizens have access to affordable health insurance.” Joe writes: “Thanks for the reminder, Louise!” I agree wholeheartedly. (btw Louise is a health insurance broker.)

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More on Schuette v. Coalition to Defend Affirmative Action–this time from a reader who is a U-Mich. undergraduate alum and currently a Ph.D. candidate there in Sociology*

Reader Dan Hirschman, a U-Mich. undergraduate alum and currently a Ph.D. candidate in Sociology there, wrote the following comment to my post here yesterday titled “What I agree with Richard Kahlenberg about on Schuette v. Coalition to Defend Affirmative Action.  And what I don’t.”:

Dear Beverly,

Thank you for the fantastic analysis of this case over the past few days! The discussion of Scalia’s shifting invocations of the 14th Amendment have particularly useful for me as someone without a law degree trying to follow the ins and outs of the case.

I had one thought about the changing composition of UM’s campus. I’m a current PhD student, and a former undergrad, and I’ve also done some research with two other sociologists on the history of admissions and affirmative action here at UM. The big shift that, I think, explains the change in class make-up at UM is not the changing emphasis on race, but the combination of the (semi) privatization of the university (that is, the massive cutback in state support) and the simultaneous push to become a more elite university as judged by standards like the USNWR. For example, as far back as the 1980s, Michigan did very well in the USNWR, but was criticized for its relatively low SAT/ACT scores in comparison to other top 20/25 universities. Together, these goals called for a strategy of recruiting an ever-growing number of high achieving out-of-state students able to pay the Ivy-like out-of-state tuition and simultaneously bump up the average SAT/ACT score of the undergrad body.

These goals are then in explicit conflict with any strong form of class-based diversity. UM’s admissions policies – from the points-system of the mid-90s through the post-Gratz holistic assessment – included some attempt to account for economic diversity. For example, under the points system, students from the upper peninsula and Detroit both received extra points for being from underrepresented parts of the state. But these measures have always been seemingly weak against the larger forces pushing towards recruiting wealthier and higher achieving (in the sense of measurable achievements) students. This is not to excuse Michigan’s actions, but just to try to place them in the broader field of American higher ed in the past 30 years.

Berkeley and UCLA, in comparison, have maintained much stronger ties to the California educational system (through the stronger community college transfer programs, for example), and (until quite recently) much lower tuition supported by higher levels of state funding.

Also, and somewhat relatedly, if you haven’t seen it, Anna Kirkland and Ben Hansen have a fascinating paper analyzing Michigan’s undergraduate admissions diversity essay question, and how students interpret and respond to the questions by race and class.

To which I say: Thanks so much, Dan. Your comment is awesome.  And not just because of the first line in it!

And your point about the semi-privatization of U-M–a fact that has gone unmentioned in anything else I’ve read about the situation–is so, so important.

Again, thanks.


*Title typo-corrected, 10/17.


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Scalia Changes His Mind … About the Purpose of the Equal Protection Clause.

Wow.  It looks, from SCOTUSblog’s Lyle Denniston’s report on the argument this afternoon in Schuette v. Coalition to Defend Affirmative Action, that I was, um … right in saying yesterday and again earlier today that this case is not, at heart, an affirmative action case.  The case is really about when a voter referendum can amend the state constitution to remove a particular issue from the normal political process.

This issue has a name–or, rather, the legal theory that challenges the constitutionality of such state constitutional amendments does.  It’s called the “political process theory,” which was developed in two old Supreme Court cases concerning voter-referendum amendments to a state’s constitution.  (I should have used the name in my earlier two posts, just so that I could now use it as shorthand in this post, but I didn’t.)

In Schuette, the voter referendum amended the state constitution to remove from the normal political process–lobbying legislators, local government officials university regents–the policy issue of race-conscious affirmative action in public university admissions processes.  So the case is about whether a voter initiative–in this case, one heavily funded by an out-of-state rightwing group–can amend the state constitution to remove access to the normal political process by people with a particular viewpoint on a particular issue.  This is the “political process theory” issue.  And according to Lyle Denniston’s report, it’s the issue on which Justice Kennedy–clearly the swing vote in this case–focused almost all of his very extensive questioning at the argument today.

But here’s something else in Denniston’s report that caught my interest:

[A.C.L.U. lawyer Mark] Rosenbaum’s time in argument was difficult enough, especially in the exchanges with Justices Alito and Scalia, but it turned out to be less challenging than the barrage that confronted the other lawyer opposing ”Proposal 2,” Detroit attorney Shanta Driver (who was a last-minute substitute for another lawyer scheduled to be in the argument).

Driver’s opening comments got her immediately into trouble.  She asked the Court to return the Fourteenth Amendment’s guarantee of legal equality “back to its original purpose,” which was to protect minorities.  Justice Scalia took strong offense to that, saying he thought the aim of the Amendment was to guarantee equality to all people.

The lawyer tried to hold her ground, but Scalia kept testing her thesis.   Had the Supreme Court ever issued an opinion saying that the Amendment was only to protect minorities? he asked. Driver conceded that there was no such case.

Okay.  As I mentioned in my post yesterday about Schuette, Scalia, in the argument last spring on the constitutionality of the Defense of Marriage Act, said the purpose of the equal protection clause was to protect the rights of former slaves and their descendents, and therefore does not grant equal protection of the laws to non-African Americans.  He has made that statement elsewhere, I believe, in speeches or interviews.  And he has said that because the purpose of the clause was to confer rights upon former slaves and their descendents, the clause does not apply to prohibit gender discrimination. The clause’s use of the word “people” to state whom its protections covered, notwithstanding.

But that view of his in the past, I see. At least until the next gay marriage case comes to the court.

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What I agree with Richard Kahlenberg about on Schuette v. Coalition to Defend Affirmative Action. And what I don’t.

As Dan Crawford posted below, SCOTUSblog linked in its daily Round-up feature this morning to my AB post yesterday about Schuette v. Coalition to Defend Affirmative Action, which is being argued at the Supreme Court this afternoon. Dan posted the Round-up paragraph in which the reference appears.  It says:

Commentary on Schuette comes from Richard Kahlenberg, who in an op-ed for The Wall Street Journal argues that “[a] ruling in Schuette that promotes race-neutral strategies to boost minority admissions would reinforce the message the court tried to deliver last term in Fisher v. University of Texas but has largely fallen on deaf ears.” And at Angry Bear, Beverly Mann explains why she “expect[s] that the chief justice will vote to affirm a lower federal appellate court’s ruling in the high-profile affirmative action case that the Court will hear argument on tomorrow.”

I posted the following comment to Dan’s post:

Yikes. In reading that sentence that Amy Howe [of SCOTUSblog] quoted, I guess I better say that the rest of my post makes clear (I hope) that that sentence is facetious.

Facetious, it definitely is.  The chief justice will use, or try to use, this case to kill affirmative action in public higher education.

But after reading Dan’s quote of the SCOTUSblog paragraph, I decided to read the Kahlenberg op-ed in the Wall Street Journal.  Kahlenberg, the op-ed says, is a senior fellow at the Century Foundation, is author of “The Remedy: Class, Race and Affirmative Action,” published in 1996.

His op-ed is titled “A Fresh Chance to Rein In Racial Preferences.” And most of the article uses the University of Michigan/Ann Arbor as an example of why racial preferences per se as a state university admissions criterion are bad policy.  He argues instead for socioeconomic criteria, and identifies several major state universities that have used various tools to achieve some semblance of socioeconomic, and not-coincidendally racial, diversity.  U-M/Ann Arbor is not among them and has not even tried to be.

I couldn’t agree more.  On all points.  Anyone who spends so much as a couple of hours on or near campus on a weekday during the fall or winter semester would be struck by how almost-thoroughly white and upper-middle and upper-class the undergraduate, non-Asian student body is.  Denizens of Ann Arbor itself are not much into current-model upscale foreign-import cars–old Volvo station wagons and Detroit-made small and midsize cars are far more common–but walk through a student parking lot and you’ll probably see several of the he high end import variety.

And I can attest that this was so during the 2006-2007 school year, the last admissions year before the constitutional amendment at issue in Schuette became effective. Indeed, I recall a longtime U-M professor, then nearing retirement, lament how much the nature of the student body had changed since his early years teaching there in 1970s.  He said that back then, there was a feeling of real connection between the university and the Big Three automakers whose headquarters were only 40 miles or so away and whose manufacturing and design plants dotted the metro area, and the central part of the state, because so many of the students had parents or other family members who worked there.  Now, he said, the student body is almost all upscale. Macbooks outnumbered Windows-based laptops by, I’d guess, three to one.  And most of them were recent models.

Kahlenberg mentions the University of Florida/Gainesville as one of the public universities that has made a successful effort at socioeconomic and thus racial diversity in its undergraduate body. That is clear just from walking through the campus during the school year, as I did not long ago on a visit to North Central Florida. He also mentions UCLA, UC-Berkeley, the University of Georgia/Athens and the University of Texas/Austin. But he also could have mentioned Michigan State University, The University of Illinois.Champaign/Urbana, I believe, and the University of Wisconsin, I also believe.

What I suspect happened at U-M, although it’s just my speculation, is that in the wake of the Supreme Court’s two 2003 racial affirmative action programs, one case about U-M freshman admissions policies, the other about U-M law school admissions policies–both opinions which focused heavily on the legitimate state interest in racial diversity among its student body the university–the university began to focus almost entirely on racial diversity, but, as it happens, without a lot of success. Had the school ditched its alumni-legacy preferences, which Kahlberg points out, UCLA and UC-Berkeley did but U-M did not–and instead focused more on socioeconomic diversity, it probably would have been more successful at achieving racial diversity as part of the broader socioeconomic diversity.

But, for the reasons I explained (or tried to) in my post yesterday on Schuette, that case is not, in essence, an affirmative action case.  Kahlberg sort of acknowledges that.  He says:

At issue is whether voters can amend a state constitution to ban racial preferences by referendum, as Michigan voters did by 58%-42% in 2006. The Sixth Circuit Court of Appeals struck the measure down by an 8-7 vote in 2012, arguing that the amendment introduces an extra political hurdle for minorities. Whereas alumni can lobby the University of Michigan to strengthen legacy preferences for their children, the Sixth Circuit said, minority parents would need to amend the constitution to get racial preferences reinstated. “Such a comparative structural burden undermines the Equal Protection Clause’s guarantee that all citizens ought to have equal access to the tools of political change,” the court said.

This case is about whether a voter referendum can amend a state constitution in a manner that removes a particular type of group, or removes groups with a particular type of cause, from access to the normal democratic methods of lobbying elected or appointed officials–the legislature, a local governing body, the University’s Board of Regents.  That is what this case is about, and Kahlberg, unlike (surprisingly) Emily Bazelon in Slate yesterday, does not miss that point.  But he both says that he thinks the court will nonetheless use the case to kill affirmative action in public universities and urges the court to do that.  His justification:

Although minority voters cannot easily lobby to reinstate racial preferences in Michigan, they remain free to lobby for race-neutral programs that assist many minority students. These would include programs that help low-income students of all races—programs for more generous financial aid; for more community college transfers to the main campus of the University of Michigan in Ann Arbor; for an end to legacy preferences that disproportionately benefit white students; and for admitting students in the top of every high school class in the state.

Hey! They remain free to lobby for race-neutral programs that assist many minority students! Well, aren’t they lucky!  For now, anyway.

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