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Why Student Debt Proposals in Congress are only a Band-Aid

Posted on June 21, 2013September 18, 2024 by The Progressive Policy Institute

The student debt debate is heating up just in time for summer. With less than a month to go before a key federal student loan interest rate is set to double, a multitude of legislation calling for more government intervention is popping up in Congress.

The cover on the various proposals may be different – some call for extending the low fixed interest rate on subsidized Stafford loans while others call for pegging all direct loan interest rates to borrowing costs – but the approach is the same: they all tackle the growing student debt burden through targeting interest rates. Proponents of lower interest rates point to the sizeable profit the government makes from student debt, arguing that the government can afford to cut costs for students.

However, an interest rate approach and the accompanying rationale miss the mark. As I recently pointed out, the issue of rising student debt is larger than interest rates. It is a complicated issue with multiple parts that require different responses. And it turns out student loans, especially at subsidized interest rates, may not be as profitable as we think over the long-term.

A new CBO report that proponents of increasing government support for student loans use shows the federal student loan portfolio will turn a $184 billion profit over the next decade. But this commonly cited method of cost accounting, based on the Federal Credit Reform Act, does not include the risk to taxpayers from economic volatility. Fair value accounting, the alternative measure CBO estimates, does. It turns out that under fair value accounting, the CBO estimates the government will incur a $95 billion loss over the next ten years at current interest rates. Moreover, under both accounting measures, the CBO study found that permanently extending the reduced interest rate on subsidized Stafford loans results in a net cost. It turns out the profitability of federal student loans is all in the accounting.

College access and affordability must continue to be the main priority to encourage investment in higher education. Going to college remains the best way to increase one’s economic prospects, and an educated workforce is necessary for a high-growth economy. But we must acknowledge that addressing the rising burden on students through interest rate reduction is only a temporary Band-Aid. Any long-term solution to the student debt burden must address the larger issues: a slow-growth economy and excessive increases in tuition.

First 2013 Golden Goose Award Recipient Announced

Posted on June 20, 2013September 18, 2024 by The Progressive Policy Institute

In partnership with the Association of American Universities, PPI is pleased to announce the first recipient of the 2013 Golden Goose Award is the late Wallace H. Coulter. Coulter invented the Coulter® Counter™, which is the standard technology used in blood testing.

As explained in the press release:

“The first Golden Goose Award of 2013 will be awarded to the late Wallace H. Coulter, a researcher and inventor who some fifty years ago turned research on paint for the Navy into the Coulter® Counter™, which remains today a standard machine for counting blood cells rapidly and efficiently. Coulter developed the technology for his invention while working on a grant from the Office of Naval Research (ONR) to improve the paint used on Navy ships.”

The Golden Goose Award was established in 2012 to recognize important scientific discoveries resulting from federally-funded research.

Read the entire release here.

White House Broadband Report Highlights PPI Research

Posted on June 18, 2013September 18, 2024 by The Progressive Policy Institute

I’m glad to see that the Progressive Policy Institute’s extensive research and policy program on the data-driven economy is getting some attention in the White House.

On June 14th the White House released a report entitled Four Years of Broadband Growth. The report prominently highlighted PPI’s July 2012 policy brief on Investment Heroes: Who’s Betting on America’s Future, noting that

just two of the largest U.S. telecommunications companies account for greater combined stateside investment than the top five oil/gas companies, and nearly four times more than the big three auto companies combined.

In addition, the WH report prominently featured our research on the number of jobs created by the App Economy. The White House noted that:

These devices have done more than connect Americans to one another more easily. The integration of mobile broadband, advanced operating systems and increasingly sophisticated hardware, along with low barriers to entry to an open network, have enabled an entire economy of mobile applications to develop in the United States. This “App Economy” is one of America’s most dynamic growing sectors, and one that industry studies have cited as creating more than 500,000 U.S. jobs since 2007.

A Test of Republican Loyalties

Posted on June 17, 2013September 18, 2024 by The Progressive Policy Institute

How much do congressional Republicans hate Obamacare? How determined are they to see it fail?

We may soon find out. For the first time, a constituency group to whom the GOP normally pays close attention—religious institutions—is asking for a legislative “fix” of the Affordable Care Act to make it work as intended. If the recent past is any indication, conservatives will resist any such effort on grounds that Obamacare must be repealed root and branch, not repaired or reformed.

Months of outreach to Republican Senate offices by religious leaders have yielded no official GOP support to an appeal from a broad coalition of religious denominations to ensure that church-sponsored health plans can participate in the ACA’s health insurance exchanges. Worse yet, from a partisan Republican point of view, two Democratic senators, Mark Pryor and Chris Coons, were the first responders to this call, introducing legislation late last week. Pryor is widely viewed as the GOP’s number one senatorial target in 2014.

Without the requested “fix,” as many as one million clergy members and church employees now enrolled in church-sponsored health plans could soon face the choice of leaving these plans (designed to meet their unique needs, such as the frequent reassignment of clergy across state lines) or losing access to the tax subsidies provided by the ACA to help lower-to-middle income Americans purchase insurance. Continue reading “A Test of Republican Loyalties” →

Critical Progress on Wireless Broadband

Posted on June 17, 2013September 18, 2024 by The Progressive Policy Institute

The wireless broadband revolution can only be fully realized if the government implements policies that encourage continued investment and innovation in mobile broadband. Happily, last week saw critical progress by the government in the right direction.

On Friday President Obama released a Memorandum, titled “Expanding America’s Leadership in Wireless Innovation,” which calls on federal agencies to free up or share unused spectrum for commercial purposes. This Presidential Memorandum comes on the one year anniversary of President Obama’s last broadband executive order, which focused on using federal land to increase national broadband access.

This latest memorandum is a big step forward for enabling wireless broadband providers to meet rapidly expanding consumer demand for spectrum, and for reaching the goals set out in the 2010 National Broadband Agenda. As the number of smartphone subscribers increased 99 percent in the last two years, now reaching over half of the U.S. population, mobile broadband providers are in danger of reaching capacity with their current spectrum allotments.

Continue reading “Critical Progress on Wireless Broadband” →

Immigration Reform and the Growing Asian-American Vote

Posted on June 14, 2013September 18, 2024 by The Progressive Policy Institute

The poor showing of the G.O.P. among Latino voters in 2012 is the political subtext for much of the immigration debate in Congress this week. But Republicans also consider the impact of their words and deeds on the nation’ s fastest growing demographic: Asian-American voters, who are at least as invested in the immigration issue as Latinos.

As recently as the early 1990s, many Republicans considered the Asian-American population to be a “natural constituency” for their party, given the traditionalist social views, entrepreneurial orientation, and relatively high socioeconomic status of many Asian Americans. At the time, this was borne out by vote tallies: in the three-way presidential race of 1992, George H.W. Bush received 38% of the national electorate but 55% of the Asian-American vote.

By 2012, however, Mitt Romney drew the support of just 28% of Asian Americans. In every category of age, citizenship, ethnicity, and nativity, Asian Americans (here taken to include people of Pacific Islander ancestry) now report a preference for the Democrats.

The two-decade long collapse in Republican support among Asian-American voters towards the Democrats has been ascribed to multiple causes, including the end of the Cold War, changes in the demographic composition of the Asian-American population, and broader shifts towards the Democratic party in the heavily-Asian West Coast states and Hawaii, where nearly half of Asian Americans reside. But the politics of immigration has also been key. Continue reading “Immigration Reform and the Growing Asian-American Vote” →

Young People Can’t Get a Summer Job – But Don’t Blame Immigration

Posted on June 13, 2013 by The Progressive Policy Institute

ABC News’ Emily Deruy quotes Diana Carew on immigration and unemployment:

According to the Department of Labor, just half of young people between 16 and 24 had jobs in July 2012, which is typically the peak for youth employment. That’s up just slightly from 2011.

Anti-immigration organizations like the Center for Immigration Studies allege that immigrants are partially to blame.

But it’s not that simple, according to the liberal Progressive Policy Institute.

Diana Carew, an economist with the think tank, thinks immigration is actually a good thing.

Immigration brings in the highly skilled tech workers that employers simply cannot find enough of in the United States right now. Middle-skill, middle-wage jobs have really “been hollowed out,” she said, and it’s actually American workers that used to occupy those positions who have transitioned into lower-skilled, lower-wage jobs that teens typically apply for each summer.

Immigrants, on the other hand, are more likely to apply for hotel cleaning jobs or agriculture jobs that American young people simply aren’t willing to take, she said.

Read the entire article here.

Teen Employment: Which Cities Have the Best Prospects?

Posted on June 13, 2013September 18, 2024 by The Progressive Policy Institute

The start of summer means it’s time for millions of teenagers to find seasonal jobs. But which major cities are showing the best chances for employment?

It turns out teenagers have seen sizable employment gains in cities like San Francisco and Phoenix, while experiencing large drops in cities like Philadelphia and Miami. Nationally, teenage employment has fallen by 5 percent since the recovery began.

I looked at changes in employment for teens age 16-19 across major cities – defined as having a teenage population greater than 200,000 – to see which cities were the biggest winners and losers. I calculated the employment average over May 2009-April 2010 and compared it to average employment for the year ending in April 2013. (Population remained relatively constant over this period.)

*Cities with Largest Teen Employment Gains Since the Recovery**
Rank	City	2009-13 Employment Change
1	San Francisco	30%
2	Phoenix	28%
3	Washington DC	22%
4	Atlanta	16%
5	Detroit	8%
National average		-5%
*Cities with teen population greater than 200,000
Source: Current Population Survey, PPI

*Cities with Biggest Teen Employment Losses Since the Recovery**
Rank	City	2009-13 Employment Change
1	Philadelphia	-32%
2	Miami	-23%
3	Boston	-13%
4	Los Angeles	-10%
5	Dallas-Ft. Worth	-10%
National average		-5%
*Cities with teen population greater than 200,000
Source: Current Population Survey, PPI

What could be behind these major gains and loses? Most likely the employment prospects for teenagers mirrors general economic conditions in these areas. The fact that some cities experienced large, positive employment gains for this group is welcome given that the national teen unemployment rate stands at 24.5 percent, more than three times total unemployment.

As for the cities experiencing large employment losses, teens are likely competing with more educated and experienced adults, even for low-skill jobs. In a recent USA Today article, I explained that in today’s slow labor market recovery teenagers are increasingly finding themselves squeezed down and out of the workforce as middle-skill jobs disappear. I call this phenomenon “The Great Squeeze.”

Are Fixed-Rate Government-Backed Mortgages Over?

Posted on June 12, 2013 by The Progressive Policy Institute

In an article for The Fiscal Times, National Correspondent Josh Boak quotes PPI’s senior fellow Jason Gold:

Congress has restarted its slog about the fate of Fannie Mae and Freddie Mac – and at stake could be the future of your standard issue 30-year fixed-rate mortgage.

The two mortgage giants became wards of the state in 2008, when the housing bust brought them to their knees and a government conservatorship kept the entire industry afloat.

“Government Sponsored Enterprises” – the bureaucratic name for Fannie and Freddie Mac – currently account for 75 percent of all mortgages that get bundled into securities. Between them, Fannie and Freddie control a portfolio of 31 million mortgages worth a combined $5 trillion.

No public official disputes the need for the government to play a smaller role in the housing market. But the basic disagreement is whether the government should still guarantee the principal and interest on your mortgages. Supporters say the guarantees make financing affordable, while opponents say it inflates prices and puts taxpayers on the hook.

“The GSEs’ existence is essential to a housing finance market Americans want, not need,” said Jason Gold, a senior fellow at the Progressive Policy Institute. “Fixed rate loans are the foundation on which the entire system is built. The necessary ingredients for fixed loans on a widespread affordable basis are securitization and a government guarantee. There are only two significant places that combination runs through – GSEs and the Federal Housing Administration.”

Read the entire article here.

Wanted (sorta): Summer jobs for teens

Posted on June 11, 2013 by The Progressive Policy Institute

USA Today‘s Brittany Hargrave quotes Diana Carew on the teen unemployment rate:

Teen unemployment was 24.5% last month, more than triple the national jobless rate of 7.6%, the Bureau of Labor Statistics reports.

Those unemployment rates reflect only those people who are actively looking for work, not those who have given up or never looked in the first place.

Joblessness among teens 6-19 traditionally is far greater than the national average, but their current unemployment rate is “really high,” said Diana Carew, an economist for the Progressive Policy Institute, a Washington, D.C.-based think tank.

Employment rates for teens “started to drop precipitously” in 2000, Carew said. “Then the recession exacerbated the trend,” she said.

Read the entire article here.

The History of Gubernatorial Senate Appointments

Posted on June 6, 2013September 18, 2024 by The Progressive Policy Institute

Including yesterday’s appointment of Jeffrey Chiesa, there have been 21 gubernatorial appointments to fill U.S. Senate seats since 1993 — nine resulting from deaths and 12 from resignations. So how does the New Jerseyan fit into the overall pattern?

In 18 of the 20 appointments before Chiesa, the newly named Senators were of the same party as their predecessors. So replacing an archliberal Democrat with a self-described conservative Republican, as is happening in New Jersey, is a real break in usual practice.

However, this is not particularly hard to explain. In only 3 of the 20 cases of vacancies were the Governor and the outgoing Senator of different parties, as with Chris Christie and Frank Lautenberg.

Chiesa fits more comfortably into another emerging pattern: he is a “placeholder” Senator who indicates that he will not run for the seat and who is not really a political figure in his own right. (Although Chiesa was the sitting state Attorney General, New Jersey is one of seven states that fills the AG job by means other than popular election.) Of the 20 other Senators appointed since 1993, seven broadly fit into the placeholder category, with six of these having been appointed just since 2009. Continue reading “The History of Gubernatorial Senate Appointments” →

Lautenberg’s Passing Highlights the Strangeness of Gubernatorial Appointments to the Senate

Posted on June 5, 2013September 18, 2024 by The Progressive Policy Institute

The latest vacancy in the U.S. Senate, created by the death of Senator Frank Lautenberg of New Jersey, is a reminder of a rather obscure centennial that took place last week: the enactment of the 17th Amendment on May 31, 1913 and the peculiar practice of a state-level executive appointing a federal legislator.

Until 1913, all U.S. Senators were appointed by state legislatures, which was part of the Founders’ plan for differentiating the House and the Senate. So whenever a vacancy arose in the Senate due to death or resignation, the state legislature would simply fill the position at its next session. Gubernatorial appointments to vacant seats took place from time to time, but were usually short-term affairs that lasted only until action by the state legislature.

Since enactment of the 17^th Amendment, gubernatorial appointments can last much longer – in some cases as long as two years. According to the National Conference of State Legislatures, thirty-six states allow governors to fill vacancies until the next regular election; most of the other 14 allow governors to make interim appointments until a special election. Continue reading “Lautenberg’s Passing Highlights the Strangeness of Gubernatorial Appointments to the Senate” →

Wireless Competition Under the Senate’s Microscope

Posted on June 4, 2013 by The Progressive Policy Institute

Today the Senate will convene a distinguished panel of experts to discuss the state of wireless competition in America. Although it is trendy among the cognoscenti to complain about the wireless industry, the reality is that wireless competition is vibrant here, and U.S. carriers are leaving their European counterparts in the dust.

A common refrain among those calling for regulators to “level the playing field” is that two carriers—AT&T and Verizon—are running away from the pack, due to their allegedly superior spectrum holdings. The resulting imbalance in competition can be remedied, they claim, by capping the spectrum holdings of the larger carriers and steering newly available spectrum to smaller carriers. Any relative improvement in the smaller carriers’ networks would attract more customers, which would reduce wireless concentration.

One problem with this story is that wireless concentration—a very fuzzy indicator of competition when it comes to wireless services—is not climbing as predicted. In fact, U.S. wireless concentration as measured by the FCC has held steady since 2008, indicating that Sprint and T-Mobile are not losing ground. Indeed, 2012 was a particularly good year for these carriers, as both enjoyed significant subscriber gains. T-Mobile recently completed its merger with MetroPCS, giving the combined company access to more subscribers and more spectrum.

Perhaps the best indicator of the smaller carriers’ prospects is the bidding war for Sprint that has erupted between Softbank and Dish Network. If Sprint stood no chance to compete with AT&T and Verizon due to its allegedly inferior spectrum, then these savvy investors would not be so bullish about Sprint’s future. Put differently, Sprint’s spectrum holdings are valued dearly in the marketplace despite their “high-frequency” nature.

Read the remainder of the article at Forbes.

Already, The Most Unproductive Congress Ever

Posted on May 31, 2013September 18, 2024 by The Progressive Policy Institute

At the end of 2012, the 112th Congress went down in history as the most unproductive ever. During 2011-2012, Congress passed a mere 283 laws – fewer than a third of the more than 900 laws passed by the “do-nothing Congress” derided by President Harry S Truman in 1948.

The current Congress, however, is already on track to shatter the dubious record set by its predecessor.

Sixty-six days into the current session (Congress is again in recess this week), Congress has passed a whopping … 10 laws. Count them.

And the most recent of these – Public Law 113-10 – was enacted to address this pressing priority: “To specify the size of the precious-metal blanks that will be used in the production of the National Baseball Hall of Fame commemorative coins.”

Even to catch up to last Congress’s legislative output, Congress would need to pass roughly one bill every other day (and with no more breaks for recess).

Continue reading “Already, The Most Unproductive Congress Ever” →

Recovering Housing Market Solves Principal Reduction Dilemma

Posted on May 31, 2013 by The Progressive Policy Institute

Senate Republicans are drawing a bead on Rep. Mel Watt (D-NC), President Obama’s pick to take over as Director of the Federal Housing Finance Agency(FHFA). A key reason is that Watt supports principal reduction, which is anathema to the GOP. It would be a shame, however, if Watt’s confirmation were scuttled over a dispute that has been overtaken by events. U.S. housing markets have come roaring back to life, and while that’s great news, it has probably closed the window for principal reduction.

During the depths of the housing crisis, many progressives called for reducing the mortgages of homeowners who are “underwater,” meaning they owe more than their house is worth. Conservatives bitterly opposed principal reduction, saying it would reward irresponsible borrowers and expropriate the property of legitimate lenders.

FHFA Director Ed DeMarco, the man Watt has been nominated to replace, resolutely resisted pressure from the Obama administration and Congressional Democrats to use principal reduction remedies on mortgages backed by the two Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac

Recently, the White House announced a two-year extension of their central housing modification program, Home Affordable Modification Program (HAMP). The program differs from the Administrations similarly titled refinancing initiative, Home Affordable Refinancing Program (HARP) in that it allows underwater homeowners structural changes to their loans whereas HARP just lowers the interest rate.

According to a memo circulated by Compass Point Research and Trading,” The extension of the HAMP gives the Obama Administration the necessary optionality to push for principal reduction on GSE-backed mortgages through the HAMP if there is a change in leadership at the Federal Housing Finance Agency (FHFA).”

Download the policy brief.