Mental Health Care Is an Overlooked Need in North Carolina Medicaid Expansion Debates

Mar 27, 2015Emily Cerciello

Medicaid expansion could bring relief to 190,000 uninsured North Carolinians with mental health conditions.

Advocates for Medicaid expansion in North Carolina have the opportunity to add a new and urgent argument to their already robust arsenal – that Medicaid expansion will create a newly affordable option for thousands of individuals with mental health needs who currently cannot afford treatment.

Medicaid expansion could bring relief to 190,000 uninsured North Carolinians with mental health conditions.

Advocates for Medicaid expansion in North Carolina have the opportunity to add a new and urgent argument to their already robust arsenal – that Medicaid expansion will create a newly affordable option for thousands of individuals with mental health needs who currently cannot afford treatment.

The North Carolina Medicaid Expansion Coalition – a collection of progressive groups including Planned Parenthood South Atlantic, the League of Women Voters of North Carolina, and the NAACP, among others – is fervently pushing back against a North Carolina legislature that has repeatedly declined expanding Medicaid to 500,000 would-be-eligible North Carolinians. Debates have focused on the high out-of-pocket prices required of uninsured patients for physical conditions like heart disease, asthma, musculoskeletal problems, or cancer, as well as the millions in federal money being turned away every year that North Carolina decides not to expand. In this high-profile role, coalitions also have the opportunity shed light on the devastating effects of untreated mental illness and the relief that Medicaid expansion could bring to 190,000 uninsured North Carolinians with mental health conditions.

In 2009, 75 percent of individuals with mental health needs in North Carolina were left untreated. Early intervention for mental illness can improve a patient’s physical and emotional wellbeing and can prevent destructive consequences for themselves, their families, and their communities in the future. Medicaid expansion will allow individuals to be secure in their access to primary mental health care and reduce their utilization of the emergency room when they experience an acute episode or when their chronic conditions become too debilitating.

Mental illness disproportionately affects individuals with lower family incomes, the same families who are most impacted by Medicaid expansion. States that have expanded Medicaid have seen pent up demand for mental health care, indicating a high need for mental health care among newly eligible Medicaid beneficiaries.

North Carolina has the capacity to accommodate newly eligible individuals who seek treatment for mental illnesses given that only 11 of North Carolina’s 100 counties are considered to have a shortage of mental health providers. While systems will need to expand to meet the demand from new patients, North Carolina can be an example for turning the challenge of Medicaid expansion into an asset for increased access to health care among its most vulnerable residents.

Advocates for Medicaid expansion in North Carolina have already made great strides in swaying reluctant legislators to consider the issue in 2015. In the most recent election debates, Republican Senator Thom Tillis agreed that the state of North Carolina is trending in a direction that warrants discussions about Medicaid expansion. In January, Governor Pat McCrory met with President Obama and several other Republican state leaders to discuss the adaptability of Health and Human Services waivers to state-developed Medicaid expansion plans. And just last week, thousands of North Carolina residents marched at the ninth annual Historic Thousands on Jones Street (HKonJ) Moral March in Raleigh, hoping to influence legislators to consider Medicaid expansion.

Legislators need to take significant steps to reform mental health care both in North Carolina and across the nation. The North Carolina Medicaid Expansion Coalition, mental health providers and advocacy groups, and others supporters can work together with the legislature to make affordable mental health care a reality for low-income individuals and families. North Carolina cannot wait until the system is perfect to implement changes that can improve the mental health of its residents and the economic wellbeing of the state.

Emily Cerciello is the Roosevelt Institute | Campus Network Senior Fellow for Health Care, and a senior at the University of North Carolina at Chapel Hill.

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While Congress Plays Politics, New York State Must Invest in Young People

Mar 26, 2015Kevin Stump

Last week, the House of Representatives and the U.S. Senate released budget proposals that include a slew of policy changes that would negatively impact young people’s ability to fully participate in the economy.  

Last week, the House of Representatives and the U.S. Senate released budget proposals that include a slew of policy changes that would negatively impact young people’s ability to fully participate in the economy.  

The proposals would, among many other bad ideas, freeze funding on Pell Grants for 10 years and eliminate mandatory funding for the program, leaving it vulnerable to the unstable political culture of Washington, D.C. Both budget proposals would charge students interest on all their loans while they’re still in school, costing the average borrower thousands of dollars more. Each budget also eliminates the Pay As You Earn student loan repayment program, which caps monthly payments based on borrower incomes to make payments more affordable for moderate- and low- income debt holders.

It’s concerning that Congress cares so little about an entire generation of young Americans — the very generation that will have to repair what today’s leaders have broken.

While Congress continues to play politics, states need to make investments so this generation isn’t subject to spiraling economic inequality and missed opportunities. As New York approaches its April 1 budget deadline, the governor and the state legislature need to prioritize policies that will help young people to fully realize their potential and participate in the economy.

As outlined in my critique of Governor Cuomo’s student loan program, New York State must: (1) inject resources into public higher education, (2) roll back tuition hikes, (3) reform the Tuition Assistance Program, and (4) require that economic develop initiatives include some type of student loan relief for employees.

But even those measures won’t be enough by themselves. In order for the state to forge ahead and truly invest in youth, it will also need to do the following:  

  1. Increase the minimum wage. With Millennials making up 71 percent of minimum wage workers, raising the wage would give young people a chance to pay down debt, invest in the economy, and start building their economic future. 
  2. Charge the governor’s 10 Regional Economic Development Councils with developing a serious comprehensive plan to integrate paid apprenticeship and internship programs into the criteria for doing business with the state. To help combat the double-digit unemployment rate for 16–24-year-olds across the country, New York State should take advantage of its economic development projects, like START UP NY and NY SUNY 2020, to (1) provide young people with income and (2) impart the skills necessary to compete in today’s economy.
  3. Pass the NY DREAM Act to give thousands of New York’s undocumented youth access to state financial aid so they too can fully participate in the economy.
  4. Expand Governor Cuomo’s proposal to double the Urban Youth Jobs Program. This will help reward businesses that hire and train inner-city youth. In addition, this will help give New Yorkers ages 16–24 the opportunity to learn professional skills while also getting paid.

Conservatives and progressives are both trying to shift the political pendulum in their direction as they gear up for the 2016 election, which will consequently shape the fabric of our political system for the next decade. But Republicans in Congress, as evidenced by their budget proposals, continue to forget about young people. It is now up to President Obama to reject these failed principles and for states to get serious about enacting the real policy changes we need to give young people a fighting chance.

As Roosevelt Institute | Campus Network National Director Joelle Gamble articulates so well, “the young people who are inheriting the effects of the decisions made at all levels of government today… want to see investments made in a more prosperous future.”

Kevin Stump is the Roosevelt Institute | Campus Network's Leadership Director.

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What John Oliver Can Tell Us about Foreclosure Fraud, Sweat Boxes and the Profit Motive

Mar 26, 2015Mike Konczal

John Oliver dedicated his main segment on last Sunday’s episode to the epidemic of municipal fees. He walks through several stories about tickets and citations that are overpriced and end up being more expensive for poor people because of a series of burdensome fees. This was one of the conclusions of the Justice Department’s report on Ferguson, which argued that “law enforcement practices are shaped by the City’s focus on revenue rather than by public safety needs.”

Oliver had a memorable phrase to describe how this system catches people and won’t let them go: he called it a “f*** barrel,” and started a NSFW hashtag on Twitter to draw attention to it.

But I had actually heard a similar (and safe-for-work) phrase for this years ago: the “sweat box.” Law professor Ronald Mann coined it in 2006 to describe how the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) would affect consumer debt, and it applies to the criminal justice system now. The problems with this system also sound like the problems in mortgage debt servicing, which has been a focus here. It turns out that these issues are generalizable, and they illustrate some of the real dilemmas with privatization and introducing the profit-motive into the public realm.

The Sweat Box

First, the barrel/box. Credit card companies and other creditors really wanted BAPCPA to become law. But why? Mann argued that the act wouldn’t reduce risky borrowing, reduce the number of bankruptcies, or increase the recoveries these companies got in bankruptcy.

But what it would do is make it harder to start a bankruptcy, thanks to a wide variety of delaying tactics. The act did this “by raising filing fees, but also by lengthening the period between permitted filings and by imposing administrative hurdles related to credit counseling, debt relief agencies, and attorney certifications.” This kept distressed debtors in a period where they faced high fees and high interest payments, which would allow the credit card companies to collect additional revenue. Instead of trying to alter bankruptcy on the front or back ends, what it really did was give consumers fewer options and more confusion in the middle. It trapped them in a box (or over a barrel, if you will).

Mortgage Servicing

But this also sounds familiar to those watching the scandals taking place in servicer fraud as the foreclosure crisis unfolded over the past seven years. Servicers are the delegated, third-party managers of debts, particularly mortgage securitizations but also student debt. They sound disturbingly similar to the companies Oliver describes as managing municipal fees.

As Adam Levitin and Tara Twomey have argued, third-party servicing introduces three major agency problems. The first is that servicers are incentivized to pad costs, as costs are their revenues, even at the expense of everyone else. The second is that they will often pursue their own goals and objectives as the expense of other options, especially when they don’t ultimately care about the overall goals of those who hire them. And a third problem is that when problems do occur, they are often incentivized to drag them out rather than resolve them the best way possible.

Among other heart-breaking stories, Oliver walks through the story of Harriet Cleveland, who had unpaid parking tickets with Montgomery, Alabama. Montgomery, however, outsourced the management of this debt to Judicial Correction Services (JCS). JCS followed this script perfectly.

JCS had every reason to increase its fees and keep them at a burdensome rate, as it was to be paid first. It was completely indifferent to public notions of the county that hired it, such as proportional justice or the cost-benefit ratio of incarceration, such that they threw Cleveland in jail once she couldn’t handle the box anymore. And it economically benefited from keeping Cleveland in the sweat box as long as possible, rather than trying to find some way to actually resolve the tickets.

For those watching the mortgage servicing industry during the foreclosure crisis, this is a very similar story. Mortgage servicers can pyramid nuisance fees knowing that, even if the loan goes into foreclosure when the debtor can’t handle the box, they will be paid first. They are ultimately indifferent to the private notion of maximizing the value of the loan for investors, so much so that, compared to traditional banks that hold loans directly, servicers are less likely to do modifications and do them in a way that will work out. And servicers will often refuse to make good modifications that would get the mortgage current, because doing so can reduce the principal that forms the basis of their fees.

The Perils of the Profit Motive

There are three elements to draw out here. The first is that these problems are significantly worse for vulnerable populations, particularly those whose exit options are limited by background economic institutions like backruptcy or legal defense. The second is that many of our favorite buzzword policy goals, be they privatization of public services or the market-mediation of credit, involve piling on more and more of these third-party agents whose interests and powers aren’t necessarily aligned with what those who originally hired them expected. Assuming good faith for a second, privatization of these carceral services by municipalities requires a level of control of third-party agents that even the geniuses on Wall Street haven’t been able to pull off.

But we see the sweat box when it comes to purely public mechanisms too, as we see in Ferguson. So the third takeaway is that this is what happens when the profit motive is introduced in places where it normally doesn’t exist. Introducing the profit motive requires delegation and coordination, and it can often cause far more chaos than whatever efficiencies it is meant to produce. Traditional banking serviced mortgage debts as part of the everyday functions within the firm. Putting that function outside the firm, where the profit-motive was meant to increase efficiency, also created profit-driven incentives to find ways to abuse that gap in accountability.

The same dynamics come into play with the profit motive is reintroduced into the municipal level. Our government ran under the profit motive through the 1800s, and it was a major political struggle to change that. Municipal fees are very much part of the reintroduction of the profit motive into city services. As libertarian scholar and Reason Foundation co-founder Robert Poole wrote in 1980 regarding municipal court costs, “Make the users (i.e., the criminals) pay the costs, wherever possible.” As Sarah Stillman found, this is what an “offender-funded” justice system, one that aims “to shift the financial burden of probation directly onto probationers,” looks like now as for-profit carceral service providers shift their businesses to probation and parole. Catherine Rampell reports this as a total shift away from taxes and towards fees for public revenues, and the data shows it.

This is the model of the state as a business providing services, one in which those who use or abuse its functions should fund it directly. And it’s a system that can’t shake the conflicts inherent whenever the profit motive appear.

Follow or contact the Rortybomb blog:
 
  

 

John Oliver dedicated his main segment on last Sunday’s episode to the epidemic of municipal fees. He walks through several stories about tickets and citations that are overpriced and end up being more expensive for poor people because of a series of burdensome fees. This was one of the conclusions of the Justice Department’s report on Ferguson, which argued that “law enforcement practices are shaped by the City’s focus on revenue rather than by public safety needs.”

Oliver had a memorable phrase to describe how this system catches people and won’t let them go: he called it a “f*** barrel,” and started a NSFW hashtag on Twitter to draw attention to it.

But I had actually heard a similar (and safe-for-work) phrase for this years ago: the “sweat box.” Law professor Ronald Mann coined it in 2006 to describe how the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) would affect consumer debt, and it applies to the criminal justice system now. The problems with this system also sound like the problems in mortgage debt servicing, which has been a focus here. It turns out that these issues are generalizable, and they illustrate some of the real dilemmas with privatization and introducing the profit-motive into the public realm.

The Sweat Box

First, the barrel/box. Credit card companies and other creditors really wanted BAPCPA to become law. But why? Mann argued that the act wouldn’t reduce risky borrowing, reduce the number of bankruptcies, or increase the recoveries these companies got in bankruptcy.

But what it would do is make it harder to start a bankruptcy, thanks to a wide variety of delaying tactics. The act did this “by raising filing fees, but also by lengthening the period between permitted filings and by imposing administrative hurdles related to credit counseling, debt relief agencies, and attorney certifications.” This kept distressed debtors in a period where they faced high fees and high interest payments, which would allow the credit card companies to collect additional revenue. Instead of trying to alter bankruptcy on the front or back ends, what it really did was give consumers fewer options and more confusion in the middle. It trapped them in a box (or over a barrel, if you will).

Mortgage Servicing

But this also sounds familiar to those watching the scandals taking place in servicer fraud as the foreclosure crisis unfolded over the past seven years. Servicers are the delegated, third-party managers of debts, particularly mortgage securitizations but also student debt. They sound disturbingly similar to the companies Oliver describes as managing municipal fees.

As Adam Levitin and Tara Twomey have argued, third-party servicing introduces three major agency problems. The first is that servicers are incentivized to pad costs, as costs are their revenues, even at the expense of everyone else. The second is that they will often pursue their own goals and objectives as the expense of other options, especially when they don’t ultimately care about the overall goals of those who hire them. And a third problem is that when problems do occur, they are often incentivized to drag them out rather than resolve them the best way possible.

Among other heart-breaking stories, Oliver walks through the story of Harriet Cleveland, who had unpaid parking tickets with Montgomery, Alabama. Montgomery, however, outsourced the management of this debt to Judicial Correction Services (JCS). JCS followed this script perfectly.

JCS had every reason to increase its fees and keep them at a burdensome rate, as it was to be paid first. It was completely indifferent to public notions of the county that hired it, such as proportional justice or the cost-benefit ratio of incarceration, such that they threw Cleveland in jail once she couldn’t handle the box anymore. And it economically benefited from keeping Cleveland in the sweat box as long as possible, rather than trying to find some way to actually resolve the tickets.

For those watching the mortgage servicing industry during the foreclosure crisis, this is a very similar story. Mortgage servicers can pyramid nuisance fees knowing that, even if the loan goes into foreclosure when the debtor can’t handle the box, they will be paid first. They are ultimately indifferent to the private notion of maximizing the value of the loan for investors, so much so that, compared to traditional banks that hold loans directly, servicers are less likely to do modifications and do them in a way that will work out. And servicers will often refuse to make good modifications that would get the mortgage current, because doing so can reduce the principal that forms the basis of their fees.

The Perils of the Profit Motive

There are three elements to draw out here. The first is that these problems are significantly worse for vulnerable populations, particularly those whose exit options are limited by background economic institutions like backruptcy or legal defense. The second is that many of our favorite buzzword policy goals, be they privatization of public services or the market-mediation of credit, involve piling on more and more of these third-party agents whose interests and powers aren’t necessarily aligned with what those who originally hired them expected. Assuming good faith for a second, privatization of these carceral services by municipalities requires a level of control of third-party agents that even the geniuses on Wall Street haven’t been able to pull off.

But we see the sweat box when it comes to purely public mechanisms too, as we see in Ferguson. So the third takeaway is that this is what happens when the profit motive is introduced in places where it normally doesn’t exist. Introducing the profit motive requires delegation and coordination, and it can often cause far more chaos than whatever efficiencies it is meant to produce. Traditional banking serviced mortgage debts as part of the everyday functions within the firm. Putting that function outside the firm, where the profit-motive was meant to increase efficiency, also created profit-driven incentives to find ways to abuse that gap in accountability.

The same dynamics come into play with the profit motive is reintroduced into the municipal level. Our government ran under the profit motive through the 1800s, and it was a major political struggle to change that. Municipal fees are very much part of the reintroduction of the profit motive into city services. As libertarian scholar and Reason Foundation co-founder Robert Poole wrote in 1980 regarding municipal court costs, “Make the users (i.e., the criminals) pay the costs, wherever possible.” As Sarah Stillman found, this is what an “offender-funded” justice system, one that aims “to shift the financial burden of probation directly onto probationers,” looks like now as for-profit carceral service providers shift their businesses to probation and parole. Catherine Rampell reports this as a total shift away from taxes and towards fees for public revenues, and the data shows it.

This is the model of the state as a business providing services, one in which those who use or abuse its functions should fund it directly. And it’s a system that can’t shake the conflicts inherent whenever the profit motive appear.

Follow or contact the Rortybomb blog:
 
  

 

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New The Nation: TPP and Bureaucrats

Mar 26, 2015Mike Konczal

Live at The Nation: Free Trade Isn’t about Trade. It’s About Bureaucrats—and Guns. Free trade agreements like the TPP have provisions that are designed less for trade, and more about replacing public bureaucrats with private, corporate ones. I think there's a lot out there about the corporate welfare elements about TPP, which are definitely true, but I think this element of who has the final say over how our economies are regulating is equally important. Check it out!

Follow or contact the Rortybomb blog:
 
  

 

Live at The Nation: Free Trade Isn’t about Trade. It’s About Bureaucrats—and Guns. Free trade agreements like the TPP have provisions that are designed less for trade, and more about replacing public bureaucrats with private, corporate ones. I think there's a lot out there about the corporate welfare elements about TPP, which are definitely true, but I think this element of who has the final say over how our economies are regulating is equally important. Check it out!

Follow or contact the Rortybomb blog:
 
  

 

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What Would You Do Today to Ensure a Good Economy 25 Years From Now?

Mar 24, 2015Laurie Ignacio

In January, the Roosevelt Institute gathered 30 experts and practitioners in technology, education, finance, and economics to discuss the next American economy. We asked them what they would do today to ensure a good economy 25 years from now.

Over the next few weeks, Roosevelt will be highlighting some key suggestions. Check out the experts in attendance and then explore their revolutionary ideas:

In January, the Roosevelt Institute gathered 30 experts and practitioners in technology, education, finance, and economics to discuss the next American economy. We asked them what they would do today to ensure a good economy 25 years from now.

Over the next few weeks, Roosevelt will be highlighting some key suggestions. Check out the experts in attendance and then explore their revolutionary ideas:

First up we have Michelle Miller, co-founder of Coworker.org, a digital platform that provides workers with campaigning tools and other digital organizing support.

Michelle recommends reimagining how we classify employees. As more and more people freelance and rely on alternatives to full-time employment, like selling crafts on Etsy or driving for Uber, Michelle says that we should rethink the current employment classification system in order to expand protections, like health care deductibility, that are currently available only to more traditional employees.

To read more about American workers’ changing roles and new challenges, check out the links below.

"The future of work: There's an app for that," The Economist

"Lawsuits facing Uber, Lyft could alter sharing economy," CNBC

"What Happens To Uber Drivers And Other Sharing Economy Workers Injured On The Job?," Forbes

Michelle Miller is the co-founder of Coworker.org, a digital platform that matches campaigning tools with organizing, media and legal support to help people change their working conditions. Since its founding in 2013, Coworker.org has catalyzed the growth of global, independent employee networks at major companies like Starbucks, Wells Fargo, Olive Garden and US Airways. Miller’s early work developing Coworker.org was supported by a 2012 Practitioner Fellowship at Georgetown University’s Kalmanovitz Initiative for Labor and the Working Poor. She is a 2014 Echoing Green Global Fellow.

Before co-founding Coworker.org, Miller spent a decade at the Service Employees International Union where she pioneered creative projects that advanced union campaigns. She is also a nationally recognized media artist and cultural organizer. Most recently, she directed the participatory media creation process for Hollow, a 2014 Peabody award-winning interactive documentary about her home state of West Virginia.

Learn more about Michelle Miller’s work by visiting coworker.org and her profile at EchoingGreen.org.

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Seven Ways Chicago Can Put Working Families Before Wall Street

Mar 24, 2015Saqib Bhatti

The ReFund America Project released a new report this morning, “Our Kind of Town: A Financial Plan that Puts Chicago’s Communities First.” The report lays out a plan for getting Chicago’s finances back on track without painful austerity measures, which exacerbate economic inequality by forcing working families to shoulder the cost.

The ReFund America Project released a new report this morning, “Our Kind of Town: A Financial Plan that Puts Chicago’s Communities First.” The report lays out a plan for getting Chicago’s finances back on track without painful austerity measures, which exacerbate economic inequality by forcing working families to shoulder the cost.

Over the last month, Moody’s Investors Service downgraded the credit ratings of the City of Chicago and Chicago Public Schools (CPS) to near junk level. Last week, Fitch Ratings followed by cutting CPS’s rating to just one notch above junk. Even though the major credit rating agencies are unreliable institutions, rife with conflicts of interest, a history of missed calls, and a reputation for using their ratings to push political agendas, these downgrades have put the issue of financial management front and center in Chicago's political debate. Questions about how best to manage the city’s money shine a spotlight on the competing interests of Chicago residents and the powerful Wall Street firms that have been profiting from the city’s financial problems.

In the developing world, the International Monetary Fund and World Bank require financially distressed governments to enact painful cuts in order to obtain financing. Moody’s and Fitch are similarly using these downgrades to push an austerity agenda in Chicago. These downgrades will benefit Wall Street firms because the city and CPS will be forced to take out more expensive products like credit enhancements and bond insurance to boost investor confidence in their bonds. Already, the city and CPS are on the hook for a combined $300 million in penalties connected to interest rate swaps as a result of these downgrades. But all of this is wholly unnecessary because none of Chicago’s governmental units are actually in any danger of defaulting on their bonds.

Moreover, this response will come at the expense of community services like education, mental health, and parks programs. Many politicians are already using the downgrades to call for austerity measures that would take a toll on Chicago’s most vulnerable residents and to justify slashing government workers’ pensions, in violation of the Illinois Constitution. State Representative Ron Sandack has even introduced a bill in the Illinois Legislature to allow municipalities to file bankruptcy in order to circumvent the state constitution’s protection of public pension funds.

The current discourse ignores the simple reality that the city is not spending too much on either public services or workers. The real problem with Chicago’s budget is that the city is hemorrhaging money on predatory financial deals with Wall Street banks and not properly taxing its wealthiest corporations and residents. Chicago needs a proactive agenda that puts the needs of communities first. In the short term, this includes measures like:

  • Recovering losses from predatory municipal finance deals. The City of Chicago, its related governmental units, and their pension funds should take all steps to recover taxpayer dollars when banks deal unfairly with them. This includes taking both legal and economic action to try get out of bad deals like interest rate swaps and recoup lost money.
  • Reducing financial fees by 20 percent across the board. The City of Chicago, its related governmental units, and their pension funds should press for negotiations demanding 20 percent reductions on all financial fees to force Wall Street firms to share in the sacrifices that Chicagoans are being forced to make every day.
  • Insourcing pension fund management. The City of Chicago and its related governmental units should bring investment management in-house for a significant portion of their pension funds’ investments, by hiring qualified staff with a proven record of effective management instead of paying Wall Street firms tens of millions of dollars each year to accomplish the same goal.
  • Ending corporate tax subsidies and tax breaks. The City of Chicago should end all corporate tax subsidies and tax breaks to major corporations, and claw back subsidies given to corporations in exchange for job creation if they did not live up to their goals of creating jobs for city residents. This includes tax subsidies from the city’s tax-increment financing (TIF) programs.

In the longer run, Chicago needs structural solutions. This includes:

  • Collective bargaining with Wall Street. The City of Chicago, its related governmental units, and their pension funds should identify financial fees that bear no reasonable relationship to the costs of providing the service and join with other cities in the region and across the country to create a new industry standard for fees and refuse to do business with any bank that does not abide by that standard.
  • Creating a public bank. The City of Chicago should establish a public bank that is owned by taxpayers and can deliver a range of services, including municipal finance, and provide capital for local economic development and affordable housing in Chicago’s neighborhoods.
  • Raising progressive revenue. The City of Chicago should work to raise progressive revenue by instituting measures like a graduated city income tax to force high earners to pay their fair share, a commuter tax on suburban residents who work in the city, and the LaSalle Street Tax on financial transactions at the Chicago Board of Trade and the Chicago Board Options Exchange. All of these likely require state approval, so the mayor would have to petition the state for authorization. California and Minnesota have both enacted progressive revenue measures in recent years that have helped solve their respective budget crises.

These steps will allow Chicago to reclaim power in its relationship with Wall Street and create a financial regime in the city that will put the interests of Chicago’s communities first.

Saqib Bhatti is a Fellow at the Roosevelt Institute and Director of the ReFund America Project.

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The Republican Budget Plan Looks to the Past, Not the Future

Mar 19, 2015Joelle Gamble

The Republican budget plans are causing quite a stir in the D.C. press and in Congress. However, the content of their proposals, if enacted, will ripple beyond the beltway and into states, cities, communities, and college campuses across the country – and the consequences should be of particular concern to young Americans.

The Republican budget plans are causing quite a stir in the D.C. press and in Congress. However, the content of their proposals, if enacted, will ripple beyond the beltway and into states, cities, communities, and college campuses across the country – and the consequences should be of particular concern to young Americans.

Rather than using their new platform in Congress to make investments in the future of this nation, Republicans have chosen to pack in a laundry list of complaints and repeals based in our past. Young organizers have already begun to push back against proposed slash in Pell grant funding.  Other backwards-looking choices, from repealing the Affordable Care Act to failing to invest in new energy technology, would also have a profound impact on young people.

The Campus Network believes in policy that is by and for people, not built at the expense of them. We’ve got a student-generated budget to prove it. As the young people who are inheriting the effects of the decisions made at all levels of government today, we want to see investments made in a more prosperous future. Investments in accessible and affordable education, critical infrastructure, green energy, and good jobs are what is going to help our generation succeed – not the renewal of old policies that have repeatedly proved ineffective.

Joelle Gamble is the National Director of the Roosevelt Institute | Campus Network.

 

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The House GOP Budget Ignores the Evidence That Combating Inequality is Good for Economic Growth

Mar 19, 2015Tim Price

The budget proposal put forth by House Republicans this week has been roundly criticized as yet another attempt to enact massive tax cuts that would redistribute money to the top at the expense of middle- and low-income families. Republicans contend these cuts would pay for themselves by producing rapid economic growth, which would create the proverbial rising tide that lifts all boats. But this is the GOP’s same old so-called trickle-down economics with a fresh coat of we-care-about-the-middle-class paint.

The budget proposal put forth by House Republicans this week has been roundly criticized as yet another attempt to enact massive tax cuts that would redistribute money to the top at the expense of middle- and low-income families. Republicans contend these cuts would pay for themselves by producing rapid economic growth, which would create the proverbial rising tide that lifts all boats. But this is the GOP’s same old so-called trickle-down economics with a fresh coat of we-care-about-the-middle-class paint. In reality, nonpartisan experts agree that policies that directly help low and middle-income families and reduce inequality are the real key to growth. Here are the facts:

  • Inequality is holding back economic growth. A Standard & Poor’s report found that extreme inequality in the U.S. is a drag on growth. Due to that rising inequality, S&P revised the 10-year growth forecast for the U.S. down from 2.8 percent to 2.5 percent annually.  
  • We don’t have to choose between equality and prosperity. Recent research thoroughly discredits Okun’s Law, the economic belief that there is a trade-off between equity and efficiency. In a 2014 report that analyzed historical data across multiple economies, the International Monetary Fund actually found that “the combined direct and indirect effects of redistribution – including the growth effects of lower inequality – are on average pro-growth.”  
  • Taxing the rich won’t hurt the economy. Wealthy interests often claim that taxing them will slow growth, but the same IMF report found that “the best available macroeconomic data do not support that conclusion.”

Despite Republicans’ desire to portray themselves as protectors of the free market and the middle class, even these market-oriented organizations recognize that progressive, middle-class-friendly tax policy is better for the overall economy. Roosevelt Institute Senior Fellow and Chief Economist Joseph Stiglitz has released a plan for reforming the tax code to promote equitable economic growth, and there will be more to come through the Roosevelt Institute’s Inequality Project as we continue to seek solutions to America’s growing inequality crisis.

Tim Price is Communications Manager for the Roosevelt Institute. Program Associate Eric Harris Bernstein contributed research to this post.

Click here to read the Roosevelt Institute | Campus Network's response to the Republican budget.

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The Sweet Briar Dilemma: Will Predatory Lending Take Down More Colleges?

Mar 16, 2015Alan Smith

After 114 years of educating young women in rural Virginia, Sweet Briar College recently announced that the 2015 academic year would be its last. It’s closing its doors, administrators say, because its model is no longer sustainable.

After 114 years of educating young women in rural Virginia, Sweet Briar College recently announced that the 2015 academic year would be its last. It’s closing its doors, administrators say, because its model is no longer sustainable.

There are plenty of people coming out of the woodwork to explain Sweet Briar's problems. Dr. James F. Jones, the school’s president, claims that there are simply not enough people who want to attend an all-women's rural liberal arts school (though application numbers and some pundits disagree); he blames the discount that the school was giving to low-income students for the institutional budget shortfall. Billionaire investor Mark Cuban says that Sweet Briar has fallen victim to the student loan bubble and that students are unwilling to commit the money to attend, which sounds a lot like the blame-the-homeowner narrative that came out of the 2008 financial crisis.  Others are wringing their hands that small colleges in general are doomed.   

These takes are varied and complex, but they are all missing an important point: that predatory banking practices and bad financial deals played an important and nearly invisible role in precipitating the school’s budget crisis.  

A quick look at Sweet Briar’s audited financial reports (easily available in public records) reveals enough confusing and obfuscating financial-speak to last a lifetime, but a few days of digging did manage to unearth a series of troubling things.  

A single swap on a bond issued in June 2008 cost Sweet Briar more then a million dollars in payments to Wachovia before the school exited the swap in September 2011. While it is unclear exactly why they chose 2011 to pay off the remainder of the bond early, they paid a $730,119 termination fee. For a school that was sorely strapped for cash, these fines and the fees that accrued around this deal (which are hard to definitively pick out from financial documents) couldn't have come at a worse time.  

Just how big a deal are these numbers? The school has a relatively small endowment even among small liberal arts colleges: currently valued at about $88 million, with less then a quarter of that total completely unrestricted and free to spend. But in 2014, the financial year that appears to have been the final straw for Sweet Briar, total operating revenues were $34.8 million and total operating expenditures were $35.4 million, which means that the deficit the school is running is actually smaller than the cost of any of the bad deals it’s gotten itself into with banks. 

All of this puts in a very stark light the fact that the early retirement of debt (in other words, the losses the school suffered on the overall value of the bonds it had taken out because it decided to pay them back early) cost the school over $9 million in 2011 and more than $13 million in 2012. Why did the school accrue these costs? We have no way of knowing if it was bad advice from bankers, negligent trustee members covering a mistake, or a well-intentioned plan that hit at the wrong time.  

What we can say, though, is that a million dollars here and a million dollars there adds up to real money that was desperately needed as Sweet Briar fought to stay afloat.  

We know that Wall Street collects higher fees on risky and complicated deals involving variable rate debt and hedging instruments, like the ones found in Sweet Briar's last few decades of financials, than from fixed rate debt deals. We know that they add on things like credit enhancements, further driving up the costs. We know that those higher fees mean that there is a clear financial incentive to sell schools, municipalities, and pension funds on these risky deals. And we know that it works in Wall Street's favor that someone like me can spend days digging into this stuff and still not be totally sure what the exact costs of these deals are.  

What we don't know is how all these things were allowed to happen at this particular school in this particular timeframe.  

Sweet Briar appears slated to close because it is a small organization without the resources to counter the huge information imbalance that has helped precipitate the financialization crisis. It is closing because it signed some terrible deals to get what must have felt like "needed" money at the time. You can see the reasons: a $14 million bond (with swaps) in 2001 for campus improvements. A $10 million bond in 2006 to pay off other bonds that had revealed their ugly side and were costing the school too much to be allowed to fully mature. But, as has so often been the case in everything from municipal finance to personal home loans, there was a problem in the small print. Like many other colleges, what appeared to be vital and even beneficial deals turned out to be nothing of the sort. Unlike many others, Sweet Briar was already close enough to the financial brink that these ongoing debts made the difference between staying open and closing its doors.  

There are, of course, other very real pressures on Sweet Briar. Lower enrollment numbers do really hurt a school, and there are real questions about how to keep small, rural liberal arts institutions competitive in a higher education economy. None of these issues, however, compare to the fees, fines, penalties, and other losses that are all over Sweet Briar’s books. 

Is Sweet Briar the canary in the coalmine? Banks are certainly making obscene profits on the backs of the swap deals in the UC system, at the University of Michigan, and at American University — and those are the places that we’ve found in our first month of looking. While those schools are solvent enough that these swaps are not pushing them to the brink of closing, they are exacerbating budget shortfalls and passing debt on to students through increased costs. These deals are also clearly making money for many school trustees whose day jobs happen to be with the giant banks. Here I find myself agreeing with Mark Cuban, at least in part: these trends are a part of a vicious cycle of borrowing that is wholly unsustainable, and will eventually lead to a crisis.  

This is why the Roosevelt Institute | Campus Network is working to track the ways in which financial institutions are extracting wealth from our colleges and universities, and make a clear case for demanding our money back. I hope that the storied institution of Sweet Briar can find a way to keep its doors open in 2016, but even if it fails, that failure should wake us up to predatory practices at colleges and universities around the country.   

Questions? Concerns? Interested in my math? Drop me a line.

Alan Smith is the Roosevelt Institute | Campus Network's Associate Director of Networked Initiatives.

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Interview with Eric Foner and his Reconstruction MOOC

Mar 11, 2015Mike Konczal

About a month ago, I interviewed the great historian Eric Foner about his Civil War and Reconstruction MOOC, the experience of teaching those time periods to students, and his work's relationship to the left now for The Nation. I forgot to post it here; I'm doing so now because the third and final part of the MOOC, The Unfinished Revolution: Reconstruction and After, 1865-1890, has just started and you can still sign up. (All the lectures will eventually end up on youtube. Here are links to the first class on the buildup to the Civil War and the second class on the Civil War itself.)

Foner is a great lecturer, and the lectures are his class, the final time he teaches it at Columbia, recorded and broken up into segments. It's especially awesome to get to sit in on Foner lecturing about Reconstruction, given that he wrote the book that still defines the period. I highly recommend checking it out.

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About a month ago, I interviewed the great historian Eric Foner about his Civil War and Reconstruction MOOC, the experience of teaching those time periods to students, and his work's relationship to the left now for The Nation. I forgot to post it here; I'm doing so now because the third and final part of the MOOC, The Unfinished Revolution: Reconstruction and After, 1865-1890, has just started and you can still sign up. (All the lectures will eventually end up on youtube. Here are links to the first class on the buildup to the Civil War and the second class on the Civil War itself.)

Foner is a great lecturer, and the lectures are his class, the final time he teaches it at Columbia, recorded and broken up into segments. It's especially awesome to get to sit in on Foner lecturing about Reconstruction, given that he wrote the book that still defines the period. I highly recommend checking it out.

Follow or contact the Rortybomb blog:
 
  

 

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