Economy

The Truth about Student Debt

In 40 percent of cases where a student loan debtor sought forgiveness of their loans as part of a bankruptcy case, the judge granted at least some relief. Only 0.1 percent took the bait.

Flickr/Occupy Student Debt Campaign
There are a few ready talking points when discussing the student-loan crisis: the collective $1 trillion burden of debt, how student debt is now larger than credit card debt in this country, the fact that the 90-day delinquency rate spiked to 11 percent last year, meaning over one in ten borrowers are behind on their payments—all facts that don’t give much hope to those with loans, or those trying to resolve the financial crisis. Another widely repeated belief is that student loans are completely nondischargeable in bankruptcy, a statement that a quick fact-check proves to be rated “pants on fire” and one that is causing tens of thousands of borrowers to suffer for no reason, for years. A new empirical study of a nationwide sample of bankruptcy cases by Jason Iuliano, a Harvard Law School graduate and Princeton political science PhD student, shows that in 40 percent of cases where a student loan debtor sought forgiveness of their loans as part of a bankruptcy case, the judge granted...

The Truth about Student Debt

Flickr/Occupy Student Debt Campaign
There are a few ready talking points when discussing the student-loan crisis: the collective $1 trillion burden of debt, how student debt is now larger than credit card debt in this country, the fact that the 90-day delinquency rate spiked to 11 percent last year, meaning over one in ten borrowers are behind on their payments—all facts that don’t give much hope to those with loans, or those trying to resolve the financial crisis. Another widely repeated belief is that student loans are completely nondischargeable in bankruptcy, a statement that a quick fact-check proves to be rated “pants on fire” and one that is causing tens of thousands of borrowers to suffer for no reason, for years. A new empirical study of a nationwide sample of bankruptcy cases by Jason Iuliano, a Harvard Law School graduate and Princeton political science PhD student, shows that in 40 percent of cases where a student loan debtor sought forgiveness of their loans as part of a bankruptcy case, the judge granted...

Bobby Jindal to Poor Louisianans: Drop Dead

Gage Skidmore / Flickr
Last week, I wrote on how Louisiana Governor Bobby Jindal was transforming his state’s tax system, from a mixed collection of corporate, income and sales taxes, to one where corporate and income taxes have been eliminated, and sales taxes are hiked to make up for lost revenue. In other words, Jindal wants to turn Louisiana’s marginally progressive tax structure into a fully regressive one, which places its largest tax burden on its most vulnerable citizens. If Jindal were also proposing a large expansion of state services, this would make sense. Overall, the progressivity of the tax burden is less important than the level of redistribution. A state with regressive taxes but robust public benefits is better for lower-income people than one with progressive taxes but few benefits. Unfortunately, that doesn’t describe Jindal’s Louisiana. To wit, he has authorized elimination of the state’s hospice program for Medicaid recipients. According to a local New Orleans news station, Louisiana...

Movin' on Up

Google
Every Thursday, the federal government releases data on new jobless claims, and for the last several months, they’ve hovered between 350,000 and 400,000. For the sake of context, a number below the latter is evidence of an improving jobs landscape, and a number below the former is a sign that jobs are growing at a fast pace. Today, the Department of Labor announced there were only 335,000 new jobless claims for the previous week: New applications for U.S. unemployment benefits fell by 37,000 to a seasonally adjusted 335,000 in the week ended Jan. 12, the Labor Department said Thursday. Claims fell to the lowest level since January 2008, but the big drop likely stems from a seasonal-adjustment quirk whose effects could quickly fade and push the numbers back up in the next few weeks. Economists surveyed by MarketWatch expected claims to drop to 368,000 from last week’s slightly revised 372,000. When combined with increased housing activity , and firmer consumer spending , this is a sure...

How’s That Medicine Taste, Germany?

Oliver Lang/dapd
Germany, the powerhouse of Europe, experienced negative growth in the last three months of 2012, down from a positive growth rate of 3 percent in 2011. Chancellor Angela Merkel, who more than any other leader inflicted austerity on the rest of Europe, is finding that what goes around, comes around. All of the small nations that have bowed to Germany’s austerity demands—Greece, Ireland, Spain, Portugal—are stuck in an even deeper downward spiral. They cut spending, but their deficits increased. Why? Because the hit to employment, consumption, and then to government revenues leaves their economies in deeper distress. This is a path to permanent depression. It is economic madness, a fact recognized by no less than the chief economist of the International Monetary Fund (IMF), the organization that has been Germany’s partner in enforcing austerity. The IMF’s Olivier Blanchard, in a paper released January 1, warned that the negative effects of austerity far outweighed the positive ones. It...

Bobby Jindal's New Tax Plan Would Be a Huge Blow to Louisiana's Poorest Residents

Derek Bridges / Flickr
Derek Bridges / Flickr Louisiana Governor Bobby Jindal. Last week, I mentioned Louisiana Governor Bobby Jindal’s proposal to end all corporate and income taxes, in order to drive economic “investment.” There aren’t many details on the plan, but it’s safe to assume that Louisiana would make up that revenue with higher state and local sales taxes. To wit, here’s the Tax Policy Center , which found that if Louisiana wanted to maintain its current revenues without income and corporate taxes, it would have to double its sales taxes: Last year Louisiana collected $2.9 billion through the individual and corporate income taxes and another $2.6 billion through the general sales tax. Maintaining current revenues with Jindal’s plan would require that sales tax revenues more than double, which means that, absent a significant broadening of the tax base, the tax rate would also have to rise substantially. For households that don’t pay income taxes and save little or no income, this amounts to...

All the President's Resolve

AP Photo/Carolyn Kaster
AP Photo/Carolyn Kaster President Barack Obama listens to reporters' questions in the East Room of the White House. Three very good signs in the past few days suggest that President Obama has been reading Robert Caro’s latest volume on Lyndon Johnson. The president is handling the debt-ceiling fight very shrewdly, and making the Republicans look both reckless and childish for playing cute with the risk of another financial meltdown. Some of us have been waiting four years for Obama to sound like this: Republicans in Congress have two choices here: They can act responsibly, and pay America’s bills; or they can act irresponsibly, and put America through another economic crisis. But they will not collect a ransom in exchange for not crashing the American economy. The financial well-being of the American people is not leverage to be used. The full faith and credit of the United States of America is not a bargaining chip. Wow! Drew Westen didn’t say that, President Obama did. He’s also...

Republicans Are Creating Their Worst Nightmare

AP Photo/Jacquelyn Martin
Google Images Two years ago, when S&P downgraded the credit rating of the United States, they didn’t cite our debt or our spending. Instead, they knocked our political system, and in particular, the dysfunction and institutional creakiness that made a debt-ceiling stand-off possible: “The downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenge,” said the company in a statement released that summer. We’re just two weeks into 2013, but it’s already clear that the “effectiveness, stability, and predictability” of our institutions is in question. First, we came uncomfortably close to implementing a round of ruinous austerity that no one—even the deficit hawks—wanted, and now, we’re again fighting the GOP over raising the debt ceiling, and fulfilling our financial obligations to the world. Republicans insist that we can hit the ceiling and—...

Don't Count on a Sane GOP

AP Photo
A week before his inaugural, President Obama says he won’t negotiate with Republicans over raising the debt limit. At an unexpected news conference on Monday he said he won’t trade cuts in government spending in exchange for raising the borrowing limit. “If the goal is to make sure that we are being responsible about our debt and our deficit - if that’s the conversation we’re having, I’m happy to have that conversation,” Obama said. “What I will not do is to have that negotiation with a gun at the head of the American people.” Well and good. But what, exactly, is the President’s strategy when the debt ceiling has to be raised, if the GOP hasn’t relented? He’s ruled out an end-run around the GOP. The White House said over the weekend that the President won’t rely on the Fourteenth Amendment, which arguably gives him authority to raise the debt ceiling on his own. And his Treasury Department has nixed the idea of issuing a $1 trillion platinum coin that could be deposited with the Fed,...

Obama to Republicans: You Have No Choice but to Raise the Debt Ceiling

White House
Two years ago, President Obama welcomed the debt ceiling as an opportunity to negotiate deficit reduction with congressional Republicans. This backfired—rather than work in good faith with the president, Republicans used this as an opportunity to hold the economy hostage to a list of narrow demands: for a balanced budget amendment, for regressive changes to entitlements, for large cuts to the social safety net. The debt ceiling is again upon us, and Republicans have—again—promised to use it as a way to force concessions from the White House. But unlike last time, Obama does not see this as an opportunity for negotiations. Instead, he’s issued an ultimatum: Either Republicans agree to a “clean” debt ceiling increase—which was the norm until two years ago—or the United States defaults on its debt. By itself, this looks like another instance of Washington bickering, and so—to ensure that he has the public on his side—Obama has coupled this demand with an attempt to shift blame, which he...

Is Suze Orman's Advice Dangerous?

A conversation with Helaine Olen on her new book about personal-finance gurus

AP Photo/Matt Sayles
In Pound Foolish: Exposing the Dark Side of the Personal Finance Industry , Helaine Olen traces the roots of media advising us about money—a subject many find distasteful to discuss in polite company, but nonetheless spawns a billion-dollar industry of products promising guidance as we navigate the thorny territory of debt, need, and desire. Olen, a journalist who writes the “ Where Life Meets Money ” blog at Forbes, questions the “guru” model of personal-finance media, which focuses on changing the money habits of individuals with nearly no analyses of the social and economic reasons for why the gap between rich and poor is expanding beyond belief. She argues that personal-finance journalism can be revolutionary, but is often undercut by conflict-of-interest product sponsorships and simplistic solutions that are less empowering than they are appeasing. In our interview, Olen spoke about the myths perpetuated by personal-finance gurus like Suze Orman and Jim Cramer, why women are...

House Republicans Are Seriously Serious

Artist's rendering of the House Republican Caucus. (Flickr/Rafael Edwards)
As any parent knows, when your children are young, you have one distinct advantage over them: you're smarter than they are. It won't be that way forever, but if it comes down to an argument, using words, with a six-year-old, you're probably going to win. Faced with this disadvantage, children often resort to things like repeating the thing they've already said a hundred more times, or stomping their feet. Which brings us, of course, to the House Republicans. This morning, Politico has a classic Politico story about the struggle between the beleagured Speaker John Boehner, who would prefer that the country not default on its debts, and the maniacs who make up his caucus, many of whom seem to have been reduced to chanting "Burn it down! Burn it down!" whenever the subject of the United States government comes up. I say it's a classic Politico story because it contains a lot of anonymous quotes, on-the-record quotes the authors don't consider might be tactical and not sincere, and...

What the Economy Needs Is Growth (But Washington Isn't Talking About It)

AP Photo/Carolyn Kaster
If there’s anything frustrating about American politics at this moment, it’s the disappearance of mass unemployment as an area of elite concern. Now that joblessness is on the decline, Washington has moved away from efforts to further address the problem, despite the fact that unemployment isn’t expected to reach pre-recession levels for another four years. You can say the same for Washington’s attitude towards growth. Gross domestic product increased by 3.1 percent in the third quarter of 2012, up from 1.3 percent in the second quarter, and 1.9 percent in the first. Average GDP for the year will probably fall near 2 percent. Compared to the rest of the world, this is a solid recovery. But compared to what we need to close our output gap and begin to return to normalcy, it’s far from adequate. Despite this, neither Congress nor the White House seem interested in finding ways to generate more growth. Instead, both are preoccupied with austerity, with Republicans pressing for large...

How You Know Republicans Aren't So Serious on the Debt Ceiling

Wikipedia
If you’re looking for evidence that Republicans will—despite their rhetoric—eventually cave on the debt ceiling, it’s worth noting a recent statement from Rand Paul, to Business Insider , on how he thinks the GOP should approach the ceiling. Rather than force a shutdown, Paul thinks Republicans should pass a bill that would prioritize payments to bondholders if the limit is reached. This would, he says, “force us immediately to have a balanced budget.” “The only real way to have leverage with the debt ceiling is to convince people that we are not going to default on our debt,” Paul said. “We could actually direct the President to pay our interest, make Social Security payments, pay soldier salaries, the basic functions that could keep government going. That way we take default off the table.” […] “We have tax receipts to pay for about 70 percent of the government and we’re running deficits of about 30 percent, so what I would say is pay for the 70 percent we would all keep going and...

Bobby Jindal Decides Louisiana Isn't Doing Enough to Stick it to Poor People

Derek Bridges / Flickr
Derek Bridges / Flickr Louisiana Governor Bobby Jindal. Louisiana Governor Bobby Jindal wants to eliminate all income and corporate taxes in his state. No, really: Republican Governor Bobby Jindal said on Thursday he wants to eliminate all Louisiana personal and corporate income taxes to simplify the state’s tax code and make it more friendly to business. The governor did not release details of his proposal, but his office released a statement confirming that the taxes are targets of a broader tax reform plan. “Our goal is to eliminate all personal income tax and all corporate income tax in a revenue neutral manner,” Jindal said in the statement. He did not confirm reports that he will seek an increase in sales taxes in order to offset lost income tax revenue, but said: “We want to keep the sales tax as low and flat as possible.” If we assume that Louisiana wants to maintain its balanced budget and keep program funding at its current levels, taxes are going to have to go up on someone...

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