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

60 Minutes does what? Social Security Disability

From the Los Angelos Times comes this article on Social Security Disability and reporting:

Is it possible for a major news organization to produce a story about the Social Security disability program without interviewing a single disabled person or disability advocate?

That’s the experiment “60 Minutes” conducted Sunday. The result was predictably ghastly.

The news program’s theme was that disability recipients are ripping off the taxpayer. Anchor Steve Kroft called the program “a secret welfare system… ravaged by waste and fraud.” His chief source was Sen. Tom Coburn, an Oklahoma Republican with a documented hostility to Social Security. Coburn has a report on the disability program’s purported flaws due out Monday. Good of “60 Minutes” to give him some free publicity.

Together Kroft and Coburn displayed a rank ignorance about the disability program: how it works, who the beneficiaries are, why it has grown. This is especially shocking because after a similarly overwrought and inaccurate “investigation” of disability aired on National Public Radio in March, numerous experts came forth to set the record straight. They included eight former Social Security commissioners, experienced analysts of the program, even the Social Security Administration’s chief actuary, Steve Goss.

“60 Minutes” apparently talked to none of them.

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Fair Market Valuation; CBO, Student Loans, Food Stamps, Etc.

Earlier in 2013, CBO’s Douglas Elmendorf’s forecasted return on Student Loan’s resulting in a positive return for the Government. Later Elmendorf reversed the forecast claiming student loans would cost the government and the taxpayers by generating a negative return. Using one cost model (FCRA) to estimate the return, the government will make $184 billion on student loans in the next 10 years. Using another cost model (Fair Market Valuation ) to estimate return, the government will lose $95 billion over the same period. So why the difference? Utilizing the Fair Market Valuation methodology would necessitate additional compensation for investors to accept the risk that losses may exceed those already reflected in the cash flows. A premium for the possibility that debtors will default in large numbers is added into the calculation. Wait a minute, these are students locked in by signature to these loans which can not be discharged through bankruptcy. So why?

I happened upon a New America Foundation article by a former senior analyst in the Republican staff of the U.S. Senate Budget Committee Jason Delisle, who proclaims much the same as the CBO’s Douglas Elmendorf positing the Fair Market Valuation methodology being a fairer and more accurate way to assign risk to student loans. Beneath Jason’s article and within the comments section associated with the article by Jason were comments by Alan Collinge of the Student Loan Justice Org disputing Jason’s assumptions on Fair Market Valuation (The New America Foundation agreed to a discussion with Alan and reneged. Alan has gone unanswered by Jason and The New America Foundation).  Alan’s argument is the Fair Market Valuation methodology uses the less abundant commercial data to evaluate the return on student loans as opposed to the more readily available and abundant Department of Education student loan data (which has been used in the past by the CBO). The difference between the two databases is the Fair Market Valuation uses commercial loan data reflecting riskier loans than what occurs from the Federal Direct Loans program. While there exists a level of default within the student loan program administered by the Federal Direct Loans program; remember too, Federal Direct Loans can not be discharged through bankruptcy proceedings. Additionally, the collection percentage on Federal Direct Loans is much higher than commercial credit collections which can be disposed of via bankruptcy proceedings. Griffith and Caperton of the Center for American Progress add to the criticism of using Fair Market Valuation stating government loans of all types has cost taxpayers 94 cents for every $100 loaned over the last 20 years. While the FHA took a huge hit when Wall Street crashed, it still performed better than the commercial counterparts. Government programs appear to be on pretty stable ground in their projections yet The New America Foundation and the CBO arbitrarily claim otherwise. Reviewing the history of government lending over the last 20 years shows it has overestimated the total costs to government by $3 billion. For those who may not know, Federal Student loans are like a Roach Motel, checking in by loan signature is near to impossible to negate or check out except to die, become disabled, or pay it off . . . a bankers dream. CBO’s Douglas Elmendorf is showing a partisan preference for the Fair Market Valuation of Student Loan which in the end favors commercial interests over students and the Direct Loan program.

Most recently, another supporter of the Fair Market Valuation methodology of loans, Jason Richwine formerly of the Heritage Foundation and the AEI, wrote an article at the National Review on Farm Subsidies. Myself, I am not a big fan of farm subsidies; but if it comes to eating, I would prefer my food to be homegrown rather than controlled by an out-of-country food cartel the way oil is today. ~ 50% of the US food base is imported today, so why more? There is a need to control subsidies to food manufacturing farms which differ from the family farms as many know them; but to throw the baby out with the wash, I am not sure is necessary. The SNAP program has been heavily contested in Congress with the Repubs looking to balance the budget on the back of the poor. One comment by Jason Richwine within his Farm Subsidy article challenges the ~$4.50/day food stamp recipients get daily and its correlation to health:

“Henry Olsen criticized House Republicans for seeking to cut food stamps but not crop-insurance subsidies in the recently passed ‘farm bill.’ Point taken. But personally I think he is being too hard on conservative activists. To say that cutting the food-stamp budget by a small percentage is ‘the taking of food from the mouths of the genuinely hungry’ and will ‘cut back on your dinner’ is a bit overblown. In fact, I would guess that a randomized controlled study, were it done, would show that food stamp recipients are no healthier than non-food stamp recipients in the long run.”

Well Jason Richwine is correct on one thing, the Food Stamp recipients would be no healthier than the poor non Food Stamp recipients not on SNAP. Consider the SNAP ~$4.50/ day could not buy a one time saltier and higher fat content Quarter pounder meal (soda + fries) at McDonalds. So why quibble over 5 or 10 cents? The true issue is ~$4.50 per day does not go far in many sections of town or in the suburbs and at the store as it now stands. If health is truly the issue here, maybe the program should be expanded to include others and increased in daily dollars? Health is not so much the issue as being hungry or hungrier and then being expected to work while hungry in order to gain the Food Stamps as expected by many states. Or perhaps they can eat cake?

Jason Richwine claims the Fair Market Valuation methodology (based upon commercial data) will give a more accurate picture for the farm subsidies which he also asserts are also less risky than the Food Stamp and the Student Loan Programs. Jason may have a point here since the economic growth of recent has been driven by wild swings on Wall Street and Repubs always look to the poor to make up the difference. I would want to look to past projects to determine what the historical difference has been before making radical changes resulting in phantom deficits. This seems to have been throw to the side with the push to use Fair Market Valuation for relatively stable programs with good returns.  The Food Stamp program is but one area for Fair Market Valuation to come from Jason Richwine.

“Right now, the cost of almost every government credit or insurance program – from crop insurance, to student loans, to public pensions – is underestimated. The movement for ‘fair value’ accounting is intended to fix that problem.”

What Alan Collinge points out does makes sense. Jasons Delisle and Richwine and CBO Director Douglas Elmendorf scrapped decades of data on student loans and other programs which show a return even after historical cost. In place they assume higher risk as taken from commercial loan data, a riskier environment which is not reflective of degree of risk within these programs. We are not talking MBS or CDOs here and the end game are students locked into these loans whether they default or not. The long arm of the government extends much further for students than it does for AIG, Lehman, or Goldman’s Executives to the extent it will garnish Social Security or Disability benefits and future wages. The risk of default Delisle and Richwine, which is so prevalent in commercial loans, is mitigated substantially in Student Loans.  The wild swing seen in the CBO’s projection of Student Loan Return was caused by using the riskier data of FMV and assuming the interest rate charged no longer covers the cost of the Student Loan program. Commercial Investors would demand a higher interest rate to cover losses in case Wall Street blows up the economy again or risk as taken from commercial data (Fair Market Value) rather than the historical data (FRCA) of the US Department of Education. In the end, this will drive interest rates higher for student loans and other loan programs to cover projected potential phantom deficits or costs. This makes sense on Wall Street and for TBTF who failed to mark down investments when they defaulted; but, it does not make much sense for student loan borrowers who are locked into it. there are other things to consider.

An Invitation to Jason Delisle of The New America Foundation by email on September 25, 2013:

from: run75441 aka Bill H
To: delisle@newamerica.net

Good morning Jason:

I write on Angry Bear Blog and I have also helped many soon-to-be college students apply for grants and loans.

I have been reading and watching the discussion going back and forth on Fair Market Valuation of student loans and the resulting change in return as projected by Douglas Elmendorf’s CBO. This change in valuation establishes a basis for a dramatic change in how student loans rates are calculated for risk and return which in most cases does not exist in the same manner as what exists for commercial loans when using commercial loan data. There is no bankruptcy for student loans which would mitigate the risk factor and is also reflected by the collection rate as opposed to lets say credit cards?

Allan Collinge has rasied several points challenging Douglas Elmendorf and your conclusions on the utilization of Fair Market Valuation in determining the return on student loans. Reviewing all of the posts, I have not come across a response to Allan’s points arise from The New America Foundation. His points go unchallenged and I would offer you an opportunity to respond in dilogue to Allan on Angry Bear Blog in your own and unaltered words. Is this a possibility?

Please let me know. Thank you for your time and consideration.

Regards,

Bill

 

1. Deseret News; August 14, 2013 “Making a Killing or Getting Fleeced?”

2. The New America Foundation; March 23, 2012, “Fair Values Accounting Shows Switch to Guaranteed Student Loans Costs $102 Billion”

3.  Student Loan Justice Org

4. Forbes, July 11, 2013 “Interview with Student Loan Activist Alan Collinge – Fair Value In An Unfair System?”

5. The Center for American Progress, May 2012 , “Managing Taxpayer Risk”

6  National Review, September 23, 2013;  “Farm Subsidies, Even Worst Than You Think”

7. The Center for American Progress, April 26, 2006,  “Understanding Mobility in America

8. The Heritage Foundation; May, 2012 “The Real Cost of Pensions”

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The Myth of the “Free Market”

The Myth of the “Free Market” and How to Make the Economy Work for Us

MONDAY, SEPTEMBER 16, 2013

by Robert Reich

One of the most deceptive ideas continuously sounded by the Right (and its fathomless think tanks and media outlets) is that the “free market” is natural and inevitable, existing outside and beyond government. So whatever inequality or insecurity it generates is beyond our control. And whatever ways we might seek to reduce inequality or insecurity — to make the economy work for us — are unwarranted constraints on the market’s freedom, and will inevitably go wrong.

By this view, if some people aren’t paid enough to live on, the market has determined they aren’t worth enough. If others rake in billions, they must be worth it. If millions of Americans remain unemployed or their paychecks are shrinking or they work two or three part-time jobs with no idea what they’ll earn next month or next week, that’s too bad; it’s just the outcome of the market.

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Hastert rule

Dennis Hastert just said that there is not and never has been a Hastert rule.  He insists that he never had a rule that only bills supported by a majority of House Republicans would be brought to a vote.  Hastert is very hard on Boehner.  He also noted that he never brought a bill to the floor then had to withdraw it to prevent it from being voted down and that he never passed a continuing resolution, because he passed appropriation bills.

A rational Democrat who hoped to help the party would leave it at that.  If that’s what you want, you are at the wrong blog. I assume almost no one reads this so I can look a gift horse in the mouth.  Hastert adds some Ballance here ” “I didn’t have to deal with Barack Obama. I dealt with Bill Clinton, and he came to the table and negotiated.”

He told a little anecdote

Clinton asked, “What can I do for you?” “A haircut across the board,” Hastert replied. “I would suggest a 1 percent cut.” Can’t take that, Clinton said, offering all the reasons why that wouldn’t work. “What do you suggest?” Hastert asked him. A quarter of 1 percent, Clinton replied. “We dickered back and forth and settled on .86 percent, not because it was a magic number,” said Hastert. “But the moral of the story is Clinton would come to the table. . I’m not going to go into the science of negotiating, but you can put one thing on the table and end up with something entirely different, but you’ve got to talk.”

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Will Boehner Prevent Extremists from Causing US Debt Default?

by Linda Beale

Will Boehner Prevent Extremists from Causing US Debt Default?

As the shutdown continues, Republican Speaker Boehner still refuses to bring a clean budget resolution to a vote.  It is most likely that a clean resolution would pass, ending the charade of the extremist Tea Party faction in the House willing to cause individual suffering for hundreds of thousands of workers and communities, while also damaging the US government with the huge incremental costs of transitioning into and out of shutdown.   Instead, word is that Republicans are planning a series of small bills so they can claim they are funding the “good” stuff in the government.  Again,  a perfect example of hostage-taking–letting those the hostage-takers like get out, but holding whatever the hostage-taker doesn’t like hostage.  The Dems would be wise to say no to all of these special interest bills.

The media tend to present this as a “he said, she said” type situation where both sides are at fault.  It isn’t.  This is a case of a desperate minority attempting to enforce their will on the majority of this country through whatever means they can find, including destroying the economy and causing individual suffering.  The Tea Party efforts are even causing problems for Republican congressional staffers, many of whom receive fairly low salaries (as little as $28,000 a year), who would be denied any federal subsidy for insurance under one of the Tea Party proposals, even though both parties had agreed that they should be eligible.  See Joan McCarter, GOP staff: Our bosses ‘threw staff under the bus’, Daily Kos (Sept. 30, 2013).

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Congressional Republicans’ Approval Ratings in Freefall. Dems Hold Steady.

I couldn’t resist following up on yesterday’s post with another polling outfit. Quinnipiac just came out with fresh numbers.

Here’s net approval over the last five months:

Screen shot 2013-10-05 at 7.57.08 AM

Currently: Negative 57% for the Pubs, compared to the Dems’ (still less than impressive) -28.

Here’s the breakout:

Screen shot 2013-10-05 at 8.09.07 AM

Highlight number: As of October 1, 74% of Americans disapprove of the Congressional Republicans. Only 17% approve.

Congressional Democrats’ approval, disapproval, and net approval have all held steady or improved slightly.

That is all.

Cross-posted at Asymptosis.

 

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Subsidies and the 4th District Of Iowa (Rep. Steve King) Summary Information

4th District and the shutdown, this article describes the predominant sentiment in the 4th district, and certainly Rep. King’s loudly proclaimed views, on the “shutdown” and even “default” as being not so bad. Mr. King gets a solid vote from its voters.

From this site comes information on the 4th district. I did look for Mr. King’s words on volunteering to stop payments to his district but could not find any. Anyone??

4th District Of Iowa (Rep. Steve King) Summary Information

  • $9.17 billion in subsidies 1995-2012.
  • $8.06 billion in commodity subsidies.
  • $897 million in conservation subsidies.
  • $211 million in disaster subsidies.
  • Iowa ranking: 2 of 50 States
  • 19 percent of farms in Iowa did not collect subsidy payments – according to USDA.
  • Ten percent collected 57 percent of all subsidies in 2006.
  • Amounting to $5.18 billion over 18 years.
  • Top 10%: $37,371 average per year between 1995 and 2012.
  • Bottom 80%: $1,845 average per year between 1995 and 2012.
USDA subsidies in 4th District of Iowa (Rep. Steve King) totaled $304 million in 2012

Much of it in corn subsidies, and a growing business in using the upgraded crop insurance program.

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It’s Working: Pubs’ Polls Plummeting

Give the Republicans enough rope and they’ll hang themselves? It seems to be working.

Screen shot 2013-10-04 at 12.44.00 PM

Yeah, it looks like Dems have taken a hit from this whole business, as Republicans hoped they would. But like the debate in general, it’s very much not symmetrical.

Combine this with the Pubs’ internal discord: are they reaching the point that the Whigs came to in 1852, where they couldn’t even nominate their own incumbent president as their candidate?

This is is just one polling outfit; I don’t have the time to compile or compare others. But given the magnitude of the move, I’d be surprised to see polls that directly contradict this trend.

Cross-posted at Asymptosis.com.

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John Boehner Demands Fairness to Arkansan Butch Matthews and His Wife, and Offers to Give Up His Own Healthcare Insurance, Just to Start the Fairness Thing Rolling.

WASHINGTON — House Republicans emerged from a closed-door meeting on Friday with no new strategy to end the budget standoff and an angry plea to President Obama to negotiate over his health care law.

“This isn’t some damned game,” said Speaker John A. Boehner, his voice rising in anger. “The American people don’t want their government shut down, and neither do I. All we’re asking for is to sit down and have a discussion, reopen the government and bring fairness to the American people under Obamacare.”

With No New Plan, Boehner Makes Angry Plea on Shutdown, Jonathan Wiesmann and Ashley Parker, New York Times, today

I totally agree that we need fairness to the American people under Obamacare.  But which, presumably, Boehner means that Obamacare should be amended to ensure that everyone has medical insurance with full benefits (the “gold” policy) without struggling to pay the premiums.

No more having to pay $13,000 per year for a married couple with $10,000/yr., $150-per-office-visit, deductibles.  Even if, like Arkansan Butch Matthews and his wife, you’re a lifelong solid Republican.

No more being rejected for healthcare coverage because of a preexisting condition.

No more fear of bankruptcy or the loss of your home, or both.

No more being asked the status of your mortgage payments and car payments in a hospital emergency room, as a prerequisite to non-lifesaving but necessary emergency treatment.

No more not being treated like citizen of any advanced nation in the world except the United States, when you need medical care.  Which you probably aren’t. Or like you’re not a member of Congress or the spouse or child of one.  Also which you probably aren’t.  No, sir.  No, ma’am.

Oh, but wait.  I think I misunderstood Boehner’s comment about fairness to the American people—a comment he has made, repeatedly, this week.  Apparently, he didn’t mean that the multitudes of American people who now have no access to healthcare insurance, or have huge deductibles and struggle to pay the premiums and those deductibles because they have lower incomes than John Boehner and his colleagues, and who now will have medical coverage without struggling financially to pay for it while still worrying about the huge costs if they do need major medical treatment, will now have access to affordable and comprehensive medical insurance.

What he actually meant is that the Republicans are demanding that they and their congressional colleagues and their families henceforth be denied healthcare benefits for preexisting conditions; that those who have no persisting conditions and therefore can get medical insurance have huge deductibles and pay premiums that they can afford or instead have comprehensive insurance and pay their utility bills only every other month in order to be able to afford the premiums; and that they take pay cuts sufficient to make the payment of those difficult financially.

It is, after all, fairness that they’re demanding.  Parity.  And since they now say that they’d settle for just a one-year delay in Obamacare in order to pass a short-term budge and a debt-ceiling increase, they are demanding only a one-year removal of their own healthcare benefits.  At least until next year, when they renew their demand, for another year.

I suggest that Boehner contact Mr. Matthews and his wife directly and tell them the good news. They’re sure to welcome the fairness.

 

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Rand Paul* Says That If He Becomes President, He Will Give In To Dem Demands To Dictate Union and Tax Law. Oh, and the Farm Bill and Environmental Law. Really.

Hot Mic Catches Mitch McConnell and Rand Paul Scheming

Here’s the transcript, notice the focus on principle:

PAUL: I just did CNN, and I just go over and over again: “We’re willing to compromise! We’re willing to negotiate.!” I don’t think they poll tested “we won’t negotiate.” I think it’s awful for [Democrats] to say that over and over again.

MCCONNELL: Yeah, I do too and I, and I just came back from that two hour meeting with them and that, and that was basically the same view privately as it was publicly.

PAUL: I think if we keep saying, “We wanted to defund it. We fought for that and that we’re willing to compromise on this,” I think they can’t, we’re gonna, I think… well, I know we don’t want to be here, but we’re gonna win this, I think.

Economic Policy Journal, yesterday

As a liberal Democrat, I say: AWESOME! I can’t wait to vote for Paul for president in 2016!

Okay, okay, he’s really just saying that he’ll give in on only a few of those laws, not on all of them.  But still!

CORRECTION: Originally, the title of this post said “Ron Paul,” rather than “Rand Paul.”  (Arrrgggh. Talk about stepping on your own punch line!)

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