Policy Shop

Policy as if people mattered

What Drives Credit Card Debt?

Americans cumulatively have $854 billion in revolving loan (mostly credit card) debt, according to the Federal Reserve. The amount has actually declined since the Great Recession, as credit card issuers tightened their lending standards, borrowers became more cautious, and strong and effective consumer protection laws went into effect, producing substantial savings for households. Still, $854 billion is no small matter, and its source is worth considering. Why do some people stagger under a mountain of credit card debt, paying high interest rates on their outstanding balances and never seeming to come out ahead, while others rarely if ever carry debt for long, despite pulling out their plastic on a regular basis? That’s the question I set out to answer in a new study , which compares two groups of low- and middle-income households with working age adults. The households are statistically indistinguishable in terms of income, racial and ethnic background, age, marital status and rate...

The Single Mother, Child Poverty Myth

I see it often claimed that the high rate of child poverty in the U.S. is a function of family composition. According to this view, the reason childhood poverty is so high is that there are too many unmarried parents and single mothers, and those kinds of families face higher rates of poverty. The usual upshot of this claim is that we can't really do much about high rates of childhood poverty, at least insofar as we can't force people to marry and cohabitate and such. One big problem with this claim is that family composition in the U.S. is not that much different from family composition in the famed low-poverty social democracies of Northern Europe, but they don't have anywhere near the rates of child poverty we have. A number of studies have tested this family composition theory using cross-country income data and found, again and again, that family composition differences account for very little of the child poverty differences between the US and other countries. Testing this...

Food Stamps Don’t Keep Wal-Mart’s Prices Low, They Keep Its Profits High

“ The same company that brings in the most food stamp dollars in revenue —an estimated $13 billion last year—also likely has the most employees using food stamps.” The name of the mammoth food stamp-reliant company is no secret: Wal-Mart. As journalist Krissy Clark notes in Marketplace’s valuable new series “ The Secret Life of the Food Stamp ,” Wal-Mart benefits from food stamps in multiple ways, as taxpayers both underwrite the company’s food sales and also subsidize its payroll costs. There is no doubt that food stamps (and a host of other public subsidies from Medicaid to home heating assistance to the Earned Income Tax Credit and beyond) reduce Wal-Mart’s employment costs substantially. A study released last year by staff of the U.S. House Committee on Education and the Workforce found that a single 300-employee Wal-Mart Supercenter may cost taxpayers anywhere from $904,542 to nearly $1.75 million per year. Consider that the working people who turn to food stamps to supplement...

America's Class System Across The Life Cycle

I am not usually one for a long charticle, but occasionally it's worthwhile to step back and summarize what we know. Here, I tackle America's class system, across the life cycle. 1. Poverty Spikes Stress in Children It starts in the womb . It never lets up . 2. Income Inequality Means Enrichment Inequality More money, more activities. 3. Rapid Schooling Divergence Although there is essentially no observed class-based difference in the cognitive abilities of children in their first year of life, that ends quickly . 4. Logical Consequence of Divergence: Drop Outs Little to no enrichment activities, cognitive abilities stunted by poverty-related stress, and years of falling behind does what you would think it does . 5. Further Behind Than Ever Come College Time These figures probably understate the severity of the gap as well because those on the low end who’d score the worst probably never bother to take the SAT anyways. 6. Traditional College Students: Rich Kids The richer your parents...

Why Paul Ryan Is Wrong to Blame Black Culture for Poverty

Watching Paul Ryan try to figure out the poverty question has been a fascinating spectacle. It began with his secret poverty tour, a tour so secretive that it was covered in the major national newspapers. The next event was the release of his big report on the condition of the welfare state, a report so riddled with inaccuracies that even the economists he cites favorably claim he has misrepresented their work . And now today, we are treated to a sneak peak at what all of this political theater has led him to conclude about the causes of poverty : black culture is making people lazy. Of course, he doesn't use "black," opting instead for its friendlier synonym "inner city": We have got this tailspin of culture, in our inner cities in particular, of men not working and just generations of men not even thinking about working or learning the value and the culture of work, and so there is a real culture problem here that has to be dealt with. As an initial matter, it is still kind of...

The War Against Early Voting Heats Up

The ink is barely dry on the report from President Obama’s election administration commission and states are already disregarding its blue-ribbon recommendations, namely around early voting. The endorsement of expanding the voting period before Election Day was one of the strongest components of the bipartisan commission’s report. But yesterday Ohio Secretary of State Jon Husted released a new voting schedule that deletes both pre-Election Day Sundays from the early voting formula. Under the new rules, people can vote in the four weeks before Election Day, Monday through Friday from 8:00 a.m. to 5:00 p.m., and on the final two Saturdays before Election Day. The Sunday erasures come in conflict with the “souls to the polls” black church-led campaigns to take their congregants to vote after worship services. When Husted dropped Sunday from the early voting period in 2012 it landed him in court, where a federal judge ultimately forced him to reinstate Sunday voting. In 2008, over 77...

Responsible Contractors Only

For hundreds of thousands of low-paid employees of federal contractors, the executive order President Obama announced in his State of the Union address will make a important difference in their incomes and lives. While the president cannot unilaterally raise the minimum wage for all working Americans (only Congress can take that action—and they should) he is exercising the executive power he has to mandate that federal contractors pay employees doing the public’s business at least $10.10 an hour as new contracts are negotiated and old ones come up for renewal. As Demos has consistently argued, the executive order is a major victory for low-wage workers , especially the contract and concession employees organizing with Good Jobs Nation who repeatedly went on strike for higher pay. Now as the executive order is finalized, it will be important to see that the new minimum wage for contract workers is not just proclaimed on paper but enforced. Enforcement is a particularly serious concern...

A California Study Gets Same Day Registration Wrong

In response to a declining voter turnout rate, California recently implemented big reforms to help boost the turnout rate: online registration, same day registration (SDR), and relaxing the vote-by-mail deadline. A recent report by the Public Policy Institute of California analyzed the impact of the changes and claims that while online registration and the relaxed vote by mail deadline were worthwhile reforms, SDR might not be. The SDR analysis in the PPIC report, however, is flawed in fundamental ways that negate its conclusions about SDR. For starters, there are serious issues with the methodology of the report. As Barry Burden , a leading academic on SDR, wrote to me in an email about the PPIC report: Skeptical readers of the report should ask more questions about the methodology. The appendix does not provide sufficient detail about how the analysis was done. It's not even clear which states are categorized as having SDR. Table B3 has only 12 observations (6 states across 2 years...

Our Enormous Retirement Subsidies for the Rich

In the State of the Union address, Obama revealed that he will be implementing a myRA plan , which is basically an Individual Retirement Account administered by the government. Savers will put the money in after-tax (like a Roth IRA), the accounts will be small (capped at $15,000), and the returns will be modest but guaranteed. David Callahan had some preliminary coverage of the myRA idea and retirement security in general yesterday. The Economic Policy Institute also wrote on the plan , largely panning it as being inadequate. Indeed, it is hard to see how such a small account is meant to accomplish much or what this is supposed to do for low-income people who simply do not have any real money to put aside. But before people start rattling off alternative account proposals that are much better, it behooves us to collectively recall just how much money the federal government is already devoting to subsidizing private retirement accounts. Those in policy circles tend to be aware of this...

President Obama Takes Action to Raise the Pay of Low-Wage Federal Contract Workers

Sometimes in America, when low-paid workers stand up and speak out, even the President of the United States takes notice. This is one of those moments. This morning, the White House announced that President Obama will sign a “Good Jobs” Executive Order requiring government contractors to raise the minimum wage for their lowest-paid workers to $10.10 for all new and renegotiated contracts. The president will include this announcement in his State of the Union Address tonight. Tonight President Obama will use his executive authority to give a boost to hundreds of thousands of hard-working Americans. The nation as a whole benefits from an economy where all workers earn a decent living. While it’s unfortunate that the order cannot apply to existing workers until their contracts are renegotiated, the president’s action adds momentum to the fight for a federal minimum wage increase that would benefit all Americans. In signing this order, the president has taken action. Now it is up to...

Why Obama Must Announce a Good Jobs Executive Order in the State of the Union

I fear that John Boehner is not going to raise the minimum wage. It doesn’t matter that 76 percent of Americans support a wage hike , or that studies indicate that the minimum wage reduces poverty and that raising it would boost our economy and create jobs . And I’m worried that if, in his State of the Union Address next week, President Obama again calls on Congress to raise the minimum wage, even in the most powerful and evocative terms, that won’t move Boehner to act either. But there is a glimmer of hope: when it comes to at least one group of low-paid workers—the more than 500,000 low-wage employees of federal contractors—President Obama doesn’t have to wait for Congress in order to take action and improve jobs. The President can act himself, through an executive order similar to the one President Johnson signed in 1965 to ban employment discrimination by contractors. According to the Washington Post , the President is considering announcing a “Good Jobs” executive order in his...

1950s Capitalist Propaganda and Opportunistic Egalitarians

In yesterday's post, I wrote about the broad history of inequality under capitalism . In many countries that have undergone capitalist development, inequality has moved in three stages. First, inequality rapidly escalates. Second, the rise in inequality slows down and actually reverses. Third, inequality shoots up once again. Interestingly, when the United States was in stage two, some advocates of capitalism became very fond of egalitarian arguments. Whereas Marx predicted that capitalism would cause inequality to increase inexorably, the second stage seemed to show that wasn't true: As you can see, the market incomes of the bottom 90 percent (blue) actually grew faster than the market incomes of the top 10 percent (red) for quite some time, with the 1950s and 1960s being right on the crest of that trend. From this, Simon Kuznets, writing in the 1950s and 1960s, developed a whole theory of two-stage capitalist development , with the latter stage being a march towards egalitarianism...

It's Not Just New York: The New Era of Progressive Urban Politics

Staging imaginary competitions between cities and their elected leaders certainly makes for catchy headlines: “ Step Aside, New York City. Los Angeles's Populism Is for Real ” asserts the title of Nancy L. Cohen’s recent piece in The New Republic . “Later this month,” Cohen explains, “two [Los Angeles] City Council members will introduce a motion to raise the minimum wage to a nation-leading $15.37 an hour for hotel workers—nearly double the California minimum wage of $8.” Very welcome—but that’s just hotel workers. In Seattle, meanwhile, Mayor Ed Murray is vowing to start paying all municipal employees at least $15 an hour, and told Salon ’s Josh Eidelson that “I think that we are gonna get to $15” for all of Seattle’s private sector workers as well. The headline of that Salon article? “Move over, de Blasio: Meet the big-city mayor vowing to get his city a $15 minimum wage.” It appears that New York City, with its much-heralded progressive mayor (and the less-recognized but...

Marriage and Poverty

Oddly enough, there is a gang of Republicans who have recently taken up the mantle of poverty . With the exception of Mike Lee, who has proposed to increase the Child Tax Credit, none of the people in this gang has come out with anything remotely interesting or worthwhile. Gang member Marco Rubio recently stepped out of his study, revealing that he had determined the old conservative marriage arguments are still the way to go : The truth is, the greatest tool to lift children and families from poverty is one that decreases the probability of child poverty by 82 percent. But it isn’t a government spending program. It’s called marriage. I have three things to say. Piling poor people into houses together misses the point. Matt Yglesias has a good response to Rubio, in which he explains that this marriage point is really about economies of scale and the way we measure poverty in this country . In a one person family, the amount of money it takes to be above the official poverty line is...

The Circle of Scam

Step right up! (Wikimedia Commons/ZioDave)
I've long held that what William Goldman said about Hollywood—"Nobody knows anything"—is equally true of Washington. At the same time though, people in politics are particularly adept at finding those who know even less than they do, and scamming them into giving over their political support or their money, or both. I thought of this when reading the long investigation The Washington Post published the other day on the byzantine network of organizations the Koch brothers have established or funded to funnel their ample resources into politics. There are dozens of groups involved, and money moves back and forth between them in intricate ways. The Post was able to trace $400 million they spent in the last election, but since there were a number of organizations whose money they weren't able to track, the real number is almost certainly higher. As a tax law expert quoted in the article says, "It is a very sophisticated and complicated structure ... It's designed to make it opaque as to...

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