Browsing articles in "Articles"
Feb 18, 2013
boyce
Comments Off on The tilted playing field

The tilted playing field

For many Americans, Nobel laureate Joe Stiglitz writes, the dream of upward mobility is being subverted by the reality of unequal opportunity:

Probably the most important reason for lack of equality of opportunity is education: both its quantity and quality. After World War II, Europe made a major effort to democratize its education systems. We did, too, with the G.I. Bill, which extended higher education to Americans across the economic spectrum. But then we changed, in several ways. While racial segregation decreased, economic segregation increased. After 1980, the poor grew poorer, the middle stagnated, and the top did better and better. Disparities widened between those living in poor localities and those living in rich suburbs — or rich enough to send their kids to private schools. A result was a widening gap in educational performance…

In some cases it seems as if policy has actually been designed to reduce opportunity: government support for many state schools has been steadily gutted over the last few decades — and especially in the last few years. Meanwhile, students are crushed by giant student loan debts that are almost impossible to discharge, even in bankruptcy. This is happening at the same time that a college education is more important than ever for getting a good job.

A level playing field is a key element of Econ4’s vision of how an economy that works for people, the planet and the future.

Feb 18, 2013
boyce
Comments Off on Family values?

Family values?

Stephanie Coontz writes in the Times on family-unfriendly work-life policies:

We must stop seeing work-family policy as a women’s issue and start seeing it as a human rights issue.

Read more here.

Feb 10, 2013
boyce
Comments Off on Benefits without responsibilities: the American way?

Benefits without responsibilities: the American way?

U.S. Senator Bernie Sanders (Ind- VT) on corporate takers:

In 2010, Bank of America set up more than 200 subsidiaries in the Cayman Islands (which has a corporate tax rate of 0.0 percent) to avoid paying U.S. taxes. It worked. Not only did Bank of America pay nothing in federal income taxes, but it received a rebate from the IRS worth $1.9 billion that year. They are not alone. In 2010, JP Morgan Chase operated 83 subsidiaries incorporated in offshore tax havens to avoid paying some $4.9 billion in U.S. taxes. That same year Goldman Sachs operated 39 subsidiaries in offshore tax havens to avoid an estimated $3.3 billion in U.S. taxes. Citigroup has paid no federal income taxes for the last four years after receiving a total of $2.5 trillion in financial assistance from the Federal Reserve during the financial crisis.

On and on it goes. Wall Street banks and large companies love America when they need corporate welfare. But when it comes to paying American taxes or American wages, they want nothing to do with this country.

Read more here.

Feb 3, 2013
boyce
Comments Off on Rescuing banks, not borrowers

Rescuing banks, not borrowers

Gretchen Morgenson recounts Tim Geithner’s accomplishments as Treasury Secretary for Obama 1.0:

How did Treasury favor the banks? Consider its answer to the foreclosure mess. After promising to help four million borrowers, its Home Affordable Modification Program at last count had helped about one-quarter of that number.

One reason for this is that the program was flawed from the start.

First, the Treasury made the program voluntary, awarding funds to participating banks but failing to penalize those that did not. The program was all carrot, no stick.

Worse, the initial plan didn’t require the banks to write down second liens they may have held — like home equity lines — from borrowers whose original loans were modified. This let the banks put their interests ahead of both borrowers and those who held the first mortgages.

Read how HAMP was hampered here.

Jan 25, 2013
boyce
Comments Off on Take a joke

Take a joke

The Times reports free-market funnies from documents unearthed in a case now before the New York State Supreme Court:

On March 16, 2007, Morgan Stanley employees working on one of the toxic assets that helped blow up the world economy discussed what to name it. Among the team members’ suggestions: “Subprime Meltdown,” “Hitman,” “Nuclear Holocaust” and “Mike Tyson’s Punchout,” as well a simple yet direct reference to a bag of excrement.

Ha ha. Those hilarious investment bankers.

Then they gave it its real name and sold it to a Chinese bank.

Read here what they don’t teach about banking in B-school.

Jan 25, 2013
boyce
Comments Off on Opportunity cost

Opportunity cost

Quiz 4 the day: Who said this?

Every gun that is made, every warship launched, every rocket fired signifies in the final sense a theft from those who hunger and are not fed, those who are cold and not clothed.

 

Answer: President Dwight D. Eisenhower in 1953.

Bonus question: What was his political party?

Quoted in Jill Lepore’s short history of the military-industrial complex in this week’s New Yorker. Read it here.

Jan 20, 2013
boyce
Comments Off on The student debt trap and inequality in America

The student debt trap and inequality in America

Nobel laureate Joe Stiglitz writes:

In 2010, student debt, now $1 trillion, exceeded credit-card debt for the first time.

Student debt can almost never be wiped out, even in bankruptcy. A parent who co-signs a loan can’t necessarily have the debt discharged even if his child dies. The debt can’t be discharged even if the school — operated for profit and owned by exploitative financiers — provided an inadequate education, enticed the student with misleading promises, and failed to get her a decent job.

Instead of pouring money into the banks, we could have tried rebuilding the economy from the bottom up…. We could have recognized that when young people are jobless, their skills atrophy. We could have made sure that every young person was either in school, in a training program or on a job. Instead, we let youth unemployment rise to twice the national average. The children of the rich can stay in college or attend graduate school, without accumulating enormous debt, or take unpaid internships to beef up their résumés. Not so for those in the middle and bottom. We are sowing the seeds of ever more inequality in the coming years.

Read his dissection of how economic and political inequality are poisoning opportunity in America here.

Jan 11, 2013
boyce
Comments Off on Development: beyond aid and trade

Development: beyond aid and trade

Dani Rodrik explains how rich countries could promote development overseas:

First, a new global compact should focus more directly on rich countries’ responsibilities. Second, it should emphasize policies beyond aid and trade that have an equal, if not greater, impact on poor countries’ development prospects.

A short list of such policies would include:

  • carbon taxes and other measures to ameliorate climate change;
  • more work visas to allow larger temporary migration flows from poor countries;
  • strict controls on arms sales to developing nations;
  • reduced support for repressive regimes; and
  • improved sharing of financial information to reduce money laundering and tax avoidance.

Notice that most of these measures are actually aimed at reducing damage—for example, climate change, military conflict, and financial crime—that otherwise results from rich countries’ conduct. “Do no harm” is as good a principle here as it is in medicine.

Read his piece here.

Jan 9, 2013
boyce
Comments Off on Health care: where profits warp incentives

Health care: where profits warp incentives

Echoing our recent Econ4 statement, Eduardo Porter explains in the New York Times why our healthcare-for-profit system means that Americans pay too much and get too little:

From the high administrative costs incurred by health insurers to screen out sick patients to the array of expensive treatments prescribed by doctors who earn more money for every treatment they provide, our private health care industry provides perhaps the clearest illustration of how the profit motive can send incentives astray.

By many objective measures, the mostly private American system delivers worse value for money than every other in the developed world. We spend nearly 18 percent of the nation’s economic output on health care and still manage to leave tens of millions of Americans without adequate access to care.

Read his piece here.

Jan 7, 2013
boyce
Comments Off on The austerity fallacy

The austerity fallacy

Austerity policies are founded on a fallacy of composition: the mistaken notion that if something is true of the part (in this case, households), it must be true of the whole (in this case, the nation’s economy). Paul Krugman, writing in the Times, explains the difference:

An economy is not like a household. A family can decide to spend less and try to earn more. But in the economy as a whole, spending and earning go together: my spending is your income; your spending is my income. If everyone tries to slash spending at the same time, incomes will fall — and unemployment will soar….

The crisis in Greece [from 2010] was taken, wrongly, as a sign that all governments had better slash spending and deficits right away. Austerity became the order of the day, and supposed experts who should have known better cheered the process on, while the warnings of some (but not enough) economists that austerity would derail recovery were ignored. For example, the president of the European Central Bank confidently asserted that “the idea that austerity measures could trigger stagnation is incorrect.”

Well, someone was incorrect, all right.

Read his piece here.