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Republican Renegade Emulates Warren’s Student Loan Cancellation, but it’s Still Problematic

Today we have a commentary  by Student Loan Justice Organization Founder Alan Collinge with support from an Angry Bear editor.

Alan:

A key Republican Education Department official and Trump Appointee, A. Wayne Johnson, recently resigned his position at the Department and later made a radical call for student loan cancellation. Johnson noted the lending system was “fundamentally broken” and called for loan cancellation for all loan holders up to $50,000. He also called for a tax credit of the same amount for those who have already repaid their loans. Interestingly, Johnson’s plan sounds very similar- and even more generous- than what presidential candidate Elizabeth Warren is proposing.

The proposal is strong stuff coming from a Republican and his comments could indicate the problem is far worse than the Department of Education has said publicly on student loans. He noted that he came to this conclusion after having a “firsthand look” at defaults, which we already know are running at about 40% for 2004 borrowers, who had borrowed a third of what is being borrowed currently. One can only wonder how bad the internal projections are for more recent students.

Johnson is to be applauded for calling out this big-government lending monstrosity, and even, perhaps, for his call to get the government out of the lending business altogether. In the absence of both bankruptcy protections and statutes of limitations, the Department of Education has become one of the largest lenders on earth and a viciously predatory one at that. In his commentary, Johnson is correct in pointing out the various forgiveness programs run by the Department are failing badly.

Editor Comment:

Dependent upon which manner of accounting is used, student loans can be considered to be profitable or unprofitable. Using the Federal Credit Reform Act (FCRA) accounting methodology, student loans are profitable. Regardless, student loans have no escape unless one dies or becomes disabled. Student Loan Bankruptcy was effectively thwarted by Senator Joe Biden’s efforts since the nineties. If in default, the government will garnish wages, Social Security, and whatever else they can in order to get back their funds.

Others such as Jason Delisle of New America advocate using the Fair Market Value methodology of accounting to assess the risk of default for student loans. Delisle claims the interest rate of a student loan should be set at 12% as there is risk and yearly losses with making low interest rate student loans that do not cover risk of default which is not assessed in the beginning.

Disputing Jason Delisle’s commentary; Malcolm Harris pointed out on Twitter, it’s worth noting that the CBO’s fair-value accounting analysis finds no subsidy for PLUS loans and unsubsidized Stafford loans, but a big one for subsidized Stafford loans, where rates are rising. Overall, there’s a negative subsidy – profit. That’s a way the government could be making a profit even under other accounting specifications, though obviously skeptics like Delisle dispute that.

Outside of student loans, a student could walk into a car dealership, purchase a $30,000+ automobile, which is about the cost of an education, have little down payment and maybe a second signature, and both people could still escape through declaring bankruptcy. This is something major businesses and people such as President Trump have been doing for decades without having wages and benefits garnished for a lifetime.

Alan:

Some of the $50+ billion the Department books in profit every year is being used to fund unrelated social programs. In 1965, President Lyndon B. Johnson declared that these loans would be “free of interest.” The former should not be the case and the later has not happened.

However previously, there were problems with Warren’s plan of student loan relief and these have not gone away under Johnson’s current proposal.

For example: while it is clear that the default rate is screaming upwards and this is crushing many borrowers, many are doing fine, and there is no particularly good reason to cancel their debt. Conversely, there are many borrowers who owe far more than $50,000, who have seen their debt explode with penalties, fees, and interest, such that writing them down by $50,000 really wouldn’t make much of a dent. So this “one-size-fits-all” approach makes little sense. And at an estimated $925 billion, it’s expensive.

Editor Comment:

What is clear to me is people complaining “what about.” Those who paid their loans have little  idea of what has been happening in the student loan industry which is profit driven. There are any number of stories being told of hucksters signing up students into for profit schools which sadly go bankrupt or steer students into course curriculums which will not lead to employment in a job to which they were trained. The system protects the servicer and the loan originator until that loan is paid off.

Does it make sense for people to be entrapped in a loan which can not be paid off thereby keeping them as an economic burden rather than a productive, taxpaying member of society? What about-isms and false equivalencies offers no solution other than indenture.

Alan:

Also, any cancellation program would be administered by the Department of Education, which has a well-documented history of bungling such programs, as Johnson rightly points out. For example, of the roughly 40,000 people who thought they were getting cancellation this year through the Public Service Loan Forgiveness Program, fewer than 100 (less than 1%) actually will. Similarly, a whopping 57% of people in the Income Based Repayment Program (IBR) were disqualified for administrative reasons. So the borrowers are cruelly left owing far more than had they never tried!

The Department of Education cannot be trusted to administer yet another loan cancellation program. As they have done before, they will surely find ways to disqualify the vast majority of borrowers so that the agency captures the wealth rather than those who it was intended.

Editor Comment:

The Department of Education has always been troublesome in administering programs impacting students. The public service program has been haphazardly run and has left many who have paid back loans over ten years in service to the nation without forgiveness of part or the rest of their loan. The current Secretary of Education is a ditz who did not understand the training leading to gainful employment rule was for both nonprofit and for-profit schools and not just about for-profits as she claimed. I too would look for someone else to administer programs given the circumstance.

Alan:

A more efficient solution to this problem is simply returning standard bankruptcy protections to these loans. The Founders called for uniform bankruptcy laws ahead of the power to raise an army, and declare war, and this lending system proves their wisdom. Borrowers must have bankruptcy on their side in order for the lending system to be fair. It is only with this threat that the lenders will act with a modicum of good faith.

Bankruptcy is also a far less expensive solution. While there would be an unavoidable spike in filings initially, bankruptcy scholar Robert Lawless estimated that in the “steady-state,” annual discharges would come to less than $3 Billion per year. Even if it turned out to be double or triple this rate, that is still far less than the proposal in question. Not to mention, no tax hikes would be required. This could be achieved by simply repealing the one line of federal code that exempts student loans.

There is legislation in Congress that would achieve this: HR. 2648, a bipartisan bill, and its Senate companion, S. 1414. Alternatively, President Trump could simply direct the Department of Education to stop opposing student loan borrowers in court. Either way, we would get a much more efficient and well suited outcome.

And the Founders? They would agree with returning bankruptcy capability for student loans.

Alan Collinge is Founder of StudentLoanJustice.Org, and author of The Student Loan Scam (Beacon Press)

Angry Bear: Thank you Alan  .  .  .

Run75441 (Bill H)

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Former Senator Harry Reid on President Trump

David Axelrod interviewing former Senator Harry Reid on the Axe Files

There is too much going on with Trump and I believe he is purposely doing much of this as a distraction and also to antagonize Democrats. Abandoning the Kurds certainly draws a response from Democrats and most of the Republicans remain silent on things they know to be wrong. For some reason I believe he is setting the stage for something else to occur. If we as Democrats are wrong, all of our actions will reflect poorly on us and for sure he will make fun of our failures.

Reid — a savvy political operator whose moves reshaped Senate procedures such as the elimination of filibusters for most nominations by president, were criticized by Republicans during his time in Congress. Reid in the Axelrod interview acknowledged, Trump’s strategy in discrediting Democrats leading the impeachment inquiry into his actions with Ukraine.

Reid: I don’t think he is an intellectual powerhouse; but, he is basically a very, very smart man. Any argument he involves himself in and no matter what the subject, it is on his terms. You’re always arguing against him. He never, never, is willing to debate an issue on terms that aren’t his.

When asked how he would advise a candidate running against Trump, Reid warned,

Reid: Anyone that thinks Trump’s going to be beaten easily will have another thing coming.

The “evidence is very clear” that Trump was withholding foreign aid as leverage to pressure Ukraine, on a July phone call, to investigate former Vice President Joe Biden. Trump has denied any wrongdoing and has claimed the foreign aid was withheld so European allies could contribute their fair share. Democrats have accused Trump of a quid pro quo and abusing his power of office.

Reid: All you have to do is have a basic understanding of what the law in America: You can not do what he did and go unpunished.

Trump’s modus operandi has been to deflect on the accusations and make light of them publicly to his followers uses he stumbles into the truth in his words. There is no heart in the Republican party to denounce his transgressions even though they know he is wrong.

I see this in Michigan with the blaming of Democrats for issues with the state roads, schools, Detroit, etc. Except, an exception Michigan Republicans do not acknowledge, they the Republicans have had control of the state Senate since 1992, the state House 2/3rds of the time since 1992, the Governorship 2 of 3 times up till now, and a trifecta twice during the time period 1992 – 2018. Republicans control the legislature now. Typical argument:

“common sense doesn’t need to be documented. It’s very easy to blame everything on Democrats. Mainly because they’re guilty.”

“Sorry, your version of common sense can not alter the reality of what took place.”

It is a distortion of the facts on a national stage which has tickled down to the states and blathered on social media by Republican trolls.

And the politicians in Congress? The politicians are too interested in keeping their jobs as senators and congressional representatives to acknowledge the facts or tell the truth. And Democrats are too quick to jump on Trump’s transgressions and provide entertainment for Trump. He is playing the Democrats and laughing as he has the backing of his followers at the state level similar to the mini-conversation I had who denies reality, and those supporters in the Senate. He knows Democrats are toothless.

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Unsubstantiated Drug Price Increases

The ICER (Institute for Clinical and Economic Review)

Is an independent and non-partisan research organization. Its purpose is to evaluate the clinical and economic value of prescription drugs, medical tests, and health care and health care delivery innovations. ICER conducts rigorous analyses of all clinical data with key stakeholders to include patients, doctors, life science companies, private insurers, and the government and translate the evidence into policy decisions that lead to a more effective, efficient, and just health care system.

As explained by their site information, ICER is known as the nation’s independent watchdog on drug pricing. It’s drug assessment reports include a full analysis of how well each new drug works and the resulting “clinical value, quality of life, benefit to the health-care system and society” used to establish a price. Using the drug assessment report, a “value-based price benchmark” is established  reflecting how each drug should be priced addressing all four factors. Reports also evaluate the potential short-term budget impact of new drugs to alert policymakers to situations when short-term costs may strain health system budgets and lead to restrictions on patient access. Ensuring objectivity in its work, all ICER reports are produced with funding from non-profit foundations and other sources that are free of conflicts of interest from the life science industry or insurers.

What I have seen in the past is the ICER establishing pricing for new drugs taking into consideration these factors; “the patient’s quality of life, and the resulting benefits to the health-care system, and society.” This is the first time I am seeing the ICER looking at price increases and determining whether the value delivered substantiates a price increase. By the numbers: Here are the drugs (and manufacturers) highlighted in a recent ICER’s report, with the increase in net spending attributable to each drug’s price increase, and citing the increases could not be justified by the value delivered.

The figures reflect the dollars Americans spent on drug copays and other out-of-pocket costs in addition to the higher amounts people paid through health insurance premiums and taxes.

Past the leap is an explanation on how the ICER reached its conclusions for the nine drugs and the limitations to this findings.

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August JOLTS report: nearly all employment measures now neutral

August JOLTS report: nearly all employment measures now neutral

The JOLTS report for August showed a decline in all metrics m/m as well as a slowing trend overall.

To review, because this series is only 20 years old, we only have one full business cycle to compare. During the 2000s expansion:

  • Hires peaked first, from December 2004 through September 2005
  • Quits peaked next, in September 2005
  • Layoffs and Discharges peaked next, from October 2005 through September 2006
  • Openings peaked last, in April 2007

as shown in the below graph (quarterly, normed to 100 as of May 2018):

Here is the close-up on the past five years (monthly):

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The road to dictatorship is depressingly predictable. 

Interesting stuff from the One Handed Economist

“The road to dictatorship is depressingly predictable. Once power is stolen, the problem is to keep it. Anyone who might develop a separate power base must be struck down. Eradicate rivals, rule through force and fear. Trust no one, particularly family, friends and the army. Keep everyone on their toes with random executions, unpredictable policy changes and imaginative public tortures. So far, so historic. It could be a Shakespeare play. What distinguishes modern tyranny, Dikötter argues, is the cult of personality. Total control of the information space keeps the modern dictator in power.” Via New Statesman.

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Resurrected Protester

This is news: Jane Fonda Arrested While Protesting in D.C.

Not particularly a news outlet (Hollywood Reporter – Ryan Parker reporting) I would read but, they have it out front and center in reporting on Ms. Fonda protesting about “the industries that are destroying our planet for profit.”

“I will be on the Capitol every Friday, rain or shine, inspired and emboldened by the incredible movement our youth have created. I can no longer stand by and let our elected officials ignore – and even worse – empower – the industries that are destroying our planet for profit. We can not continue to stand for this,”

It is not the first time Ms. Fonda has been taken into custody. She did protest the Vietnam war and taken into custody. Today Ms. Fonda was arrested with 15 other people for protesting in front of The White House. The protest focused on the lack of action by this administration, big business, and the overall nation on the overall inaction to climate change. Claiming to be “emboldened by the incredible movement our youth have created,” She has moved to Washington to be near the epicenter of the fight for climate change.

Maybe others will follow . . .

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Trump’s Attack on Seniors and Medicare

It is a given, Trump’s new executive order  is calling for “market-based” pricing or whatever the market will bear pricing to replace Medicare set pricing. Trump sees a conflict between Medicare and the market. Well he is right; but, his solution ll only aggravate the problem of costs.  It will drive up costs for everyone in Medicare, destroy traditional Medicare as healthcare for the elderly, steer more people into costly commercial healthcare, reduce Medicare funds at a faster pace, and allow the already profitable healthcare industry to increase profits well beyond what it is today.

But, but are Medicare Advantage Plans ripping people and Medicare off? “Yes they are” a for-profit industry is profiteering by taking advantage of a system of healthcare for which they wanted to be a part. As Trump signed the EO, it is stunning to watch a bunch of seniors up on the stage clapping as el jefe was showing off his executive order allowing commercial healthcare to further pickpocket them, exploit healthcare, and destroy Medicare. All smiles there . . .

Medicare Advantage programs are managed differently than Fee for Service traditional Medicare. Besides providing a series of services not found in regular Medicare, the MA plans instituted a different form of physician/hospital payment called Capitation. Capitation Payments are theoretically used by managed care organizations to control health care costs. The VA is a good example of this type of managing costs. A capitation payment model  controls the use of health care resources by putting the physician at a financial risk if too many services are provided to patients or if quality decreases as witnessed by return patients for the same disorder or illness. To ensure patients do not receive suboptimal care through under-utilization of health care services, MAOs measure the rates of resource utilization in physician practices. These utilization reports are then made available to CMS to measure health care quality, utilization, costs, etc.. They are also linked to financial rewards such as withheld fees and bonuses.

Past the leap, I explain how the capitation model can be gamed by Advantage plans.

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Why Is Iraq Blowing Up Now?

Why Is Iraq Blowing Up Now?

Yes, Iraq.  It has not made front page headlines with so much else going on, but over the last several days there has been an escalating series of protests against corruption in various parts of Iraq and culminating yesterday in Baghdad with one being met by soldiers firing openly upon the demonstarters with the result being about 104 dead and 6,100 wounded.  The government of Adel Abdul al Mahdi appears in danger of facing a no confidence motion and falling as it has lost the support of fellow Shia leader al-Sadr, who has a large faction of supporters in the parliament and how apparently is supporting the demonstraters.

Corruption has become an increasingly widespread problem around the world, so much so that we increasingly take it for granted and remain unimpressed by it.  And we are tired of hearing about Iraq, a nation we made a mess of, are now mostly not much bothered with, and especially since it appears that ISIS has been largely defeated.  Indeed, opposition to the deep government corruption there laid low while the war against ISIS was on.  But now with its defeat, many want something done about it.

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Second Whistle Blower Emerges

2nd whistleblower comes forward after speaking with IG: Attorney

The appearance of a second whistleblower will muddy the waters for Herr Trump claiming the first whistleblower got his conversation all wrong.

The existence of a second whistleblower — particularly one who can speak directly about events involving the president related to conversations involving Ukraine — could undercut Trump’s repeated insistence that the original complaint, released on Sept. 26, was “totally inaccurate.”

Attorney Mark Zaid is also representing the 2nd whistleblower. It is said this whistleblower has first hand knowledge of some of the allegations made by the first whistle blower. The 2nd whistleblower has made what is called a “protected disclosure” and can not be retaliated against as the person is now protected by law.

Attorney Zaid tells ABC News’ Chief Anchor George Stephanopoulos the second person — also described as an intelligence official — has first-hand knowledge of some of the allegations outlined in the original complaint and has been interviewed by the head of the intelligence community’s internal watchdog office, Michael Atkinson.

The House and IG investigation is moving forward with what the Trump administration has criticized as 2nd-hand information by the first whistleblower and also the recently disclosed first-hand knowledge of what was said during the phone call by a 2nd whistleblower. The corners are being rounded on Herr Trump with little chance of escape from the accusations. It will be interesting to see how McConnell and Republicans handle the total package of disclosures by whistleblowers. Will they provide cover for a malfeasant president? McConnell already said he would block the impeachment once it gets to the Senate.

And Trump tweets “Keep them Coming.”

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Trump’s Executive Order, Backdoor Privatization of Medicare – Updated

Trump’s Executive Order is Backdoor Privatization of Medicare,” Social Security Works, Nancy Altman, October 3, 2019

Thursday and I had to search around for someone who is an expert on Medicare Advantage Plans and Original Medicare. Nancy is one of those experts. Friday and Andrew Sprung has his commentary Trump’s Bid To Destroy Medicare up on xpostfactoid blog.

Commercial Healthcare Insurance has been become more and more expensive over the years with copays increasing, deductibles increasing, and premiums going up. Todays commercial healthcare insurance costs a single person ~$7200 and a family ~$20,000 with the single person paying 18% of the premium and a family paying 31% of the premium. Approximately 36 million people make less than $25,000 annually (retail workers, personal care attendants, warehouse workers and others as well). In a crude calculation, xpostfactoid: “The past ten years of healthcare cost increase relative to wage increase might cost a full-time average wage earner with family coverage $3,000-$4,000 this year in added costs and decreased wages, or, say, 6-8% of income.”

Today’s Employer sponsored Healthcare Insurance is unsustainable. The same holds true for Medicare Advantage plans due to the Commercial healthcare Insurance offering it as well. There are few controls which can be applied on the commercial side of the healthcare industry which is why there is a big push for true single payer healthcare of which Medicare and Medicaid are. If you wish more detail on how commercial healthcare insurance has exploded in cost, my earlier post Health Benefits for 2019: Premiums Inch Higher, Employers Respond To Federal Policy offers more detail pictorially and in verbiage.

As I have written other times, Medicare and Medicaid have been instrumental in reducing excessive U.S. healthcare costs. Medicare and Medicaid set the prices paid to providers with provider input and commercial healthcare insurance uses those prices to set their payouts. Medicare hospital rates are an approximate half of those paid on average by commercial healthcare insurance. Rates paid to physicians average about 78% of commercial insurance rates. In high-demand specialties and in regions with fewer providers; commercial healthcare insurers often pay four, five and six times Medicare rates. If you remember from Kocher and Berwick’s article, they proposed setting commercial Healthcare (while it still exited in the interim) payouts at 120% of Medicare rates.

This action by Trump and Republicans is a huge giveaway to the commercial healthcare insurance sector and the healthcare industry. Right now Medicare Advantage uses Medicare rates. If they can beat Medicare Rates, they keep the difference. If they can not meet the rates, the consumer pays the difference. What Trump has done is reverse the format. Medicare Advantage Negotiated Rates will be used to set Medicare Fee For Service rates to providers.

Past the leap is the President of Social “Security Works” Nancy Altman’s statement on Trump’s Executive Order talking about Trump’s lies.

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