Weekly Audit: After Health Care, the Economy

By Zach Carter, Media Consortium blogger

Now that health care reform has finally been enacted, a host of critical economic issues are taking center stage, including financial reform, unemployment and deeply rooted economic inequality. But it’s important to note that with its health care vote, the U.S. House of Representatives actually approved a very important, and often overlooked financial reform: Student lending.

Pedro de la Torre III of Campus Progress explains the current student loan nightmare in an interview with The American Prospect’s Rebecca Delaney. For years, the U.S. government has paid massive subsidies to some of the worst-run companies in the country.

Thanks a lot, Sallie Mae

As de la Torre notes, instead of directly making loans to students, the government spent years funneling money to firms like Sallie Mae to actually make the loans. When things went sour, taxpayers covered the lender’s losses from student loans that ultimately went bad.

Taxpayers were also footing the bill for the loans and taking on the risk, while private companies and their executives enjoyed the benefits. The executives made quite a haul. In 2008 alone, Sallie Mae CEO Albert Lord took home an astonishing $46 million. Even among CEOs, that’s a princely sum—more than double what Halliburton CEO David Lesar made the same year. All of that money could have financed a lot of college educations.

Fortunately, the student loan landscape is almost certain to change as a result of the health care vote. The House bill included a provision to end student loan subsidies and boost funding for direct grants from the government to students.

Since the student loan reform and health care were both eligible for reconciliation in the Senate (meaning only 51 votes are needed for passage instead of the 60 to clear a filibuster), House Democrats decided to move on both at the same time. It’s a significant reform, and one that will soon become law with President Barack Obama’s signature.

What would an overhaul of the consumer finance industry entail?

The student loan system is just one aspect of the consumer finance industry that needs a major overhaul. On mortgages, credit cards, overdrafts, and payday loans, the banking status quo is one of outright predation. As Heather McGhee of Demos explains to The Nation’s Christopher Hayes, there’s a reason why federal agencies do a lousy job regulating consumer banking abuses.

Right now there is no agency responsible for consumer protection alone. Every regulator also focuses on making sure banks don’t fail, which generally means that regulators support anything that increases short-term profits. Egregiously predatory practices generally lead to big short-term gains in banking.

A new consumer financial protection bureau

Last week, Senate Banking Committee Chairman Chris Dodd (D-CT) introduced a bill that would create a new bureau of consumer financial protection, with no constraints from bank profitability. It’s a step in the right direction, but as McGhee notes, there are plenty of problems with Dodd’s proposal. Most problematically, the bill gives existing agencies a veto power over any new consumer protection rules. That’s a terrible loophole. Existing regulators have actively opposed consumer protections in the past, and there is every reason to expect that practice to continue.

Rapid tax refunds scam the poor

It’s late March, which means tax season is getting into full swing. All over the country, mascots from Liberty Tax are spilling into the streets wearing goofy costumes, trying to win your business. But millions of Americans don’t realize that Liberty, along with H&R Block, Jackson-Hewitt and hundreds of smaller businesses are engaged in a monstrous scam disguised as a complicated accounting service.

As Alexander Zaitchik emphasizes for AlterNet, these tax preparers have used deceptive advertising and slick salesmanship to con people into taking out “refund anticipation loans,” also known as “rapid refunds” and a handful of other pleasant euphemisms. It’s a simple gimmick: H&R Block does your taxes, and then presents you with your tax refund, right away, no waiting. But the check you receive is not actually your tax refund—it’s your tax refund minus a truckload of fees that you didn’t realize were being deducted. This is the tax-time equivalent of payday lending.

When the government sends in your actual, larger tax refund one-to-two weeks later, you won’t see it—it goes straight to H&R Block’s bank partner. Those banks are making big money taking from your tax returns. Here’s Zaitchik:

“In 2008, more than eight million Americans spent nearly a billion dollars paying interest and fees on RALs—often based on misleading or incomplete information—swelling the profits of tax preparers and their partner banks.”

The one break low-income people get under the U.S. tax code is the Earned Income Tax Credit (EITC), the nation’s largest anti-poverty program. Only about 16% of taxpayers qualify for the EITC, but as Zaitchik notes, nearly two-thirds of the people who take out refund anticipation loans receive the credit. Tax preparers are making a concerted effort to prey on the poor, making the EITC program more expensive and less efficient for all taxpayers—not just those who go to H&R Block or Liberty Tax.

More action needed on jobs

Beyond finance, the U.S. economy has a serious jobs problem. Last week, Congress approved an $18 billion jobs package that is simply far too small to make a serious dent in the nearly double-digit unemployment rate. As Art Levine explains for Working In These Times, the package will create 250,000 jobs at best. That number shouldn’t be acceptable to anyone watching the U.S. economy, which has shed about 7 million jobs since the recession began.

There are much stronger options available than the $18 million bill the Senate approved. Rep. George Miller (D-CA) has introduced a bill in the House that would quickly save or create one million jobs, and the House has already passed a separate $154 billion jobs package that would prevent 900,000 lay-offs. If the Senate moved on either one, the result would be a major economic boost.

The link between poor economies and poor health

All of these problems—unemployment, student loan scamming, refund anticipation loan sharking and other forms of financial predation—reinforce economic inequality in the United States, which is at levels unseen since before the Great Depression. That inequality is ultimately actively damaging to public health, as epidemiologist Richard Wilkinson explains in an interview with Brooke Jarvis for Yes! Magazine. Rampant economic inequality in the United States is literally making us sick.

“We looked at life expectancy, mental illness, teen birthrates, violence, the percent of populations in prison, and drug use,” Wilkinson says. “They were all not just a little bit worse, but much worse, in more unequal countries.”

With health care finally finished, Congress and the administration have an opportunity to make serious headway on the economy. They’ve got plenty of work to do.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.




Weekly Audit: Doomsday for the CFPA?

By Alison Hamm, Media Consortium Blogger

Just when the Democrats need to be tougher than ever on financial reform, Senate Banking Committee Chair Sen. Chris Dodd (D-CT), seems to have given up completely and put the proposed Consumer Financial Protection Agency (CFPA) at risk.

Last fall, Dodd called the Federal Reserve’s regulatory efforts an “abysmal failure.” And yet, on March 1, he proposed housing a consumer protection agency within the Fed instead of establishing the CFPA as its own independent entity. This drastic change in strategy has left many Democrats shaking their heads. WTF, Senator Dodd?

A change in focus

As Andy Kroll reports for Mother Jones:

“Dodd appears to have switched his focus from out-reforming the White House to out-compromising just about everyone. As the Senate banking committee prepares to release a draft of a comprehensive reform bill as early as this week, Dodd has repeatedly conceded to his Republican counterparts on key issues, almost guaranteeing that the Senate’s measure will be far more lenient on the banking industry than the legislation the House passed in December… Dodd’s willingness to appease Republicans like Sen. Bob Corker (R-Tenn.), the main GOP negotiating partner, and Sen. Richard Shelby (R-Ala.), the banking committee’s ranking member, has disappointed Dodd’s fellow Democrats and reform advocates who urge a tougher crackdown.”

Whither the CFPA?

Dodd’s latest GOP compromise is part of a bigger problem: The Democrats have mishandled financial reform. As Nomi Prins writes for AlterNet, “Dodd’s latest effort at creating a new Consumer Financial Protection Agency would render the regulator utterly powerless, but it’s not the only issue Democrats appear willing to sacrifice to Wall Street campaign contributions. Right now, just about every other major element of the so-called Wall Street overhaul seems headed for disaster.”

Although the establishment of the CFPA has been fiercely opposed by the banks and Republicans, it has widespread approval among progressives and the general public. So why has Dodd apparently abandoned it through compromise? Maybe because he’s following the lead of his fellow Democrats. Prins notes: “Since June, we’ve been waiting to see whether Democrats had the spine to make sure the final agency would actually do something, or quietly gut reform with a barrage of loopholes.”

There’s still time for Dodd to push real reform before he retires. Or, like Prin says, he could “continue to wimp out for Wall Street, pull a Robert Rubin and secure a cushy job in banking come 2011. The next few months will indicate whether Dodd cares more about his legacy than his wallet.”

Solis a ‘bright spot’

But maybe there is hope. Department of Labor Secretary Hilda Solis has made considerable progress, as Mark Engler emphasizes for Yes! magazine. Engler calls Obama’s Labor appointment a “bright spot” in the administration’s first year—a move “that illustrate[s] the difference that a progressive-minded administration can make when it stands up to corporate interests and is unafraid to act in the public good.”

Engler writes:

“Under the Bush administration’s Department of Labor, the crisis of wage theft was summarily ignored. In March 2009, the Government Accountability Office issued a report saying that the department’s Wage and Hour Division had for years ‘left thousands of actual victims of wage theft who sought federal government assistance with nowhere to turn.’ Secretary Solis made reversing this trend a defining initiative of her department. Even before the report had been released, she had commenced the hiring of 150 new field investigators to enforce wage and child labor laws, as well as 100 more to police government contractors working on stimulus programs.”

As Engler argues, officials would do well to follow the lead of Secretary Solis and demonstrate “what can be accomplished when regulators are encouraged to actually do their jobs—to fight for the interests of workers, for example—vigorously and creatively.”

Buffet on banking

Finally, GRITtv’s Laura Flanders reviews Warren Buffet’s annual letter to shareholders, in which Buffet warns his clients that their financial advisers’ advice is skewed by the financial system. As Flanders notes:

“Ironically, just as Buffett’s letter was being published, the man it’ll take to make any agency happen — Christopher Dodd — is agreeing to defang the agency, strip it of independence and most prosecution power.”

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.




Chris Dodd Repeating Max Baucus' Mistakes

Folks who were hoping that a lame duck Dodd would be more inclined to push for more aggressive financial regulatory reform should be disappointed to hear that Dodd, who chairs the Senate Banking Committee, is now considering negotiating away creation of a Consumer Financial Protection Agency in an attempt to win over Republican senators.  Actually, all of us should be disappointed.  What's as discouraging as the move is the motivation: Dodd is saying he wants a financial regulatory reform that Richard Shelby, the ranking Republican on the committee, can support.  He's created a team of four Democratic senators and four Republicans to try to hash out a deal.

Does this sound familiar to anyone?  Dodd and Shelby seem to be reading from the Max Baucus - Charles Grassley script that consumed the healthcare process in the Senate for long enough that now a special election result in January has the chance to blow up the bill again.  What did they get to show for it?  Olympia Snowe voted the bill out of the Finance Committee but then voted with every other Senate GOPer to declare it unconstitutional.

What's most frustrating about this is that it's just bad negotiating.  Chris Dodd only weakens his position by giving Richard Shelby (and thus Mitch McConnell) a veto over financial regulatory reform.  Republicans have no motivation to help Democrats pass a strong bill regulating the banks - first, because Republicans are in bed with the banks, and second, because Republicans want to keep bashing the Democrats for being in bed with the banks (a strategy which is paying off, judging by the polls in Massachusetts).

Even if the Democrats are desperate for Republican votes (whether to give moderate Democrats cover, to make up for Democratic defections, or to earn a bipartisan aura), the best way to get them is to show you're ready to pass a bill without them.  Then there's a shot a Republican offers to support a weaker version.  The worst strategy to win Republican votes is to try to show how reasonable you are by offering them veto power in exchange for being willing to talk to you.  We call that negotiating against yourself.

And as Matt Yglesias observes, there are worse things that could happen than a Republican filibuster of financial regulatory reform.



Now Who'll Run Against Joe in '12? Chris Dodd?

As of this afternoon, Connecticut Attorney General Dick Blumenthal is officially running for Senate. Folks who've spent time in Connecticut may remember that Blumenthal was famous until today for almost running for higher office every cycle but never pulling the trigger. For comparison's sake, Elliot Spitzer used to be mentioned in the same breath as Blumenthal as a rising star Attorney General destined for bigger things. In the time Blumenthal's been Attorney General, Elliot Spitzer went from government attorney to private attorney to Attorney General to Governor to Slate Columnist. It's good to see Blumenthal step in to run for Chris Dodd's now-open seat. It does raise the question though of who will run against Joe Lieberman if Joementum tries to test his luck again in 2012 (there was a rumor Blumenthal would run against Lieberman in '12, although then again they said the same thing in '06). I suspect Ned Lamont will take another go at it, assuming he doesn't become the Governor of Connecticut first. That would be fun. More outlandish: A restless Chris Dodd, figuring the sheen of scandal has faded, unretires himself to run for the other Nutmeg State Senate seat. After all, Joe Lieberman makes most anybody look good. Even if Joe ran as an Indy and not a GOPer, I think he'd pull more GOP than Dem votes. An outlandish scenario I guess, but a fun one to ponder.

Weekly Pulse: Dodd and Dorgan to Retire

By Lindsay Beyerstein, Media Consortium Blogger

Two Democratic senators unexpectedly announced their resignations on Tuesday. Sens. Byron Dorgan (D-ND) and Chris Dodd (D-CT) announced that they would not seek reelection when their terms expire in 2010. Hopefully, health care reform will already have passed by then, but the departure of these senators will have implications for health care policy.

As far as the Democratic majority in the Senate is concerned, the two resignations probably cancel each other out. As a relatively conservative 30-year incumbent, Dorgan was thought to be the only Democrat who could win a seat in conservative North Dakota. Dodd, on the other hand, is deeply unpopular for his role in the financial crisis, but hails from a deep blue state, so it should be easy to replace him with another Democrat. In fact, as Eric Kleefeld reports for Talking Points Memo, Dodd’s resignation improves the Democrats’ chances of holding that seat.

As Jodi Jacobson explains in RH Reality Check, losing Dorgan would be a setback for reproductive rights. While Dorgan has a mixed record on choice, “Given his state, Dorgan’s voting record is pretty progressive on at least some issues otherwise driven completely by ideology,” Jacobson writes.

Dodd is reliably pro-choice, but the pro-choice credentials of the candidate favored to take his place, Connecticut Attorney General Richard Blumenthal, are even more distinguished.

Last year, Blumenthal sued the Bush administration over so-called “conscience clauses” for the Department of Health and Human Services which would have given employees more latitude to refuse to provide medical care that they disapproved of on religious grounds. (The Obama administration later reversed the rule.) In 1995, Blumenthal and the U.S. Department of Justice filed suit against two anti-abortion protesters under the Freedom of Access to Clinic Entrances (FACE) Act. “Our goal was to defuse a volatile situation before it escalated into a bloodbath, such as the fatal shootings in Brookline, Massachusetts,” Blumenthal explained at the time. Blumenthal and DOJ prevailed in court in 1997.

In other health care news, an unnamed Senate aide told the Wall Street Journal’s Washington Wire blog that the Democrats are planning to streamline the passage of the health care reform bill by skipping the conference committee. Normally, the House and Senate versions of a bill are combined in conference. This time, Democrats may skip that step by hammering out a deal that is acceptable to the Senate, having the House pass that bill, and then having the Senate pass the same legislation. That way, Democrats can circumvent some procedural hurdles in the Senate.

According to Kevin Drum of Mother Jones, skipping conference has become routine for big Democratic bills. These days, thanks to stricter rules about what can be added in conference, the House and the Senate are more likely to reconcile big bills through the aforementioned “ping pong” process.

John Nichols of The Nation argues that skipping conference will leave progressives out in the cold. Until now, a lot of progressive energy has been focused on strengthening certain provisions of the Senate bill in conference. If the Democrats decide to skip conference, that means that all the power will be in the hands of Senate Majority Leader Harry Reid (D-NV), Speaker Nancy Pelosi (D-CA) and a handful of their closest allies.

Finally, Monica Potts of TAPPED discusses a new study that purports to show that the so-called “g-spot” doesn’t exist. Headlines are proclaiming that the g-spot is a myth. The results of the study have been misinterpreted in the general rush to proclaim that science has proven women wrong about their bodies. What the study really showed is that genes have little to do with whether a woman thinks she has one.

These results suggest that the g-spot isn’t a unique organ encoded in our genetic plan, like a spleen or a kidney, but that there’s no doubt that the front wall of the vagina exists, nor that some women report orgasms from stimulating that area. What other anatomical questions are investigated with surveys? Do you have a pancreas? Chances are you’ve never directly observed your pancreas. Whether you say “yes” depends whether you’ve read that humans have them.

Whether women agreed that they had g-spots had more to do with their age. Younger women, raised in an era where women’s magazines assert that g-spots are a standard part of female anatomy, were more likely to believe they had them. What this study was really measuring was a general belief in the existence of g-spots, which has no genetic component. Belief in the pancreas has no genetic component either, but it doesn’t follow that these organs are mythical.

This post features links to the best independent, progressive reporting about health care by members of The Media Consortium. It is free to reprint. Visit the Pulse for a complete list of articles on health care reform, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Audit, The Mulch, and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.


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