Category: Uncategorized

San Bernardino County Strikes Measure to Use Eminent Domain

Posted on by The Progressive Policy Institute

Earlier today the Joint Power Authority, municipal body constructed by the county of San Bernardino, California voted not to consider using the power of eminent domain to seize residential mortgages held in private label securitizations (PLS).

The proposed move, authored by “Mortgage Resolution Partners”, a private firm out of San Francisco, had long been a controversial measure strongly opposed by private investors. The concept would have used the local “takings” power to write down principal on underwater mortgages and refinance the new loans onto the books at The Federal Housing Administration (FHA).

In a policy brief titled “Can Eminent Domain Help Underwater Homeowners” published on  July, 2012, when this plan first began to surface, I argued that eminent domain deserved credit for being creative, but was not in the best interest of homeowners. Please see the memo here.

Is the Labor Market for Colleges Grads Looking Up?

Posted on by The Progressive Policy Institute

Young educated Americans are finally rejoining the workforce. According to BLS statistics, the labor force participation of Americans age 18-34 with a Bachelor’s or Associate’s degree is rising again. By comparison, young people without higher education are still dropping out of the labor force.

The chart below shows the divergence in labor force participation between young people with and without a degree. Having a degree makes a big difference in who shares in the labor market recovery and who is increasingly left behind. Interestingly, young people with a vocational Associates degree are having the best recovery in labor force participation, even better than those with a Bachelor’s degree.

To be sure, the news is not all good. College students are well aware of the challenges awaiting them, like rising average student debt and falling real earnings. Most young grads say their biggest ambition has come to finding a job that pays enough to cover rent.

Continue reading “Is the Labor Market for Colleges Grads Looking Up?” →

New ‘Ability to Repay’ Rules Highlight Need for Affordable Housing

Posted on by The Progressive Policy Institute

This week, the Consumer Financial Protection Bureau (CFPB) released long-awaited new mortgage rules aimed at protecting consumers from abusive loans.

The new rules, when they take effect next January, will effectively shut down some of the worst practices leading up to the 2007-2008 housing crash: “interest-only” loans, predatory fees, and “teaser rates” that trapped people into mortgages they couldn’t afford once the low initial rates expired. Mortgages with these features are now excluded from what the CFPB defines as “qualified mortgages” shielded from consumer lawsuits.

Most significantly, the new rules will also require lenders to ensure that borrowers can pay back their loans. Among the new requirements, a borrower’s monthly debt payments (including the mortgage) can’t exceed 43 percent of pre-tax income.

Without doubt, the mortgage lending landscape will now be much safer for homebuyers, who once faced a confusing and potentially toxic array of “exotic” products. These rules will also provide much needed certainty to the mortgage finance industry, which has had a rocky few years. Continue reading “New ‘Ability to Repay’ Rules Highlight Need for Affordable Housing” →

Make the Cabinet More Effective

Posted on by The Progressive Policy Institute

Writing for the New York Times, PPI Senior Fellow Raymond A. Smith argues for strengthening the role of the president’s cabinet.

EVERY four years the cabinet briefly becomes the focus of national attention in December and January — only to fade from view again after Inauguration Day. True, individual cabinet secretaries will be in the news from time to time, but the cabinet as an institution will be all but forgotten. Yet the United States could benefit greatly by strengthening its scope and role.

Although the cabinet is not established in the Constitution, presidents since George Washington have convened a collective body of the heads of the executive departments. Washington used these meetings to tap into the wisdom of Secretary of State Thomas Jefferson and Treasury Secretary Alexander Hamilton. Abraham Lincoln assembled a strong “team of rivals” in his cabinet to gird the nation at its time of greatest peril. Franklin D. Roosevelt convened his cabinet the day after the Pearl Harbor attacks, while John F. Kennedy relied on a subset of his cabinet during the Cuban missile crisis.

Over the past half-century, however, the expansion of the White House staff has centralized deliberation and decision making increasingly within the confines of 1600 Pennsylvania Avenue NW. This reliance on professional staffers, political advisers and media spinmeisters within a constrictive White House “security bubble” deprives presidents not only of the deep substantive policy expertise of top civil servants but also of the political judgment of cabinet members who are often successful politicians.

Read the complete piece at the New York Times.

What Americans Didn’t Get from the Fiscal Cliff Tax Deal

Posted on by The Progressive Policy Institute

By all accounts, the recently passed tax deal averting the “fiscal cliff” was a big win for the American people.

Among other things, the agreement preserves the full package of Bush-era tax cuts for the middle class and raises rates only on the wealthiest Americans. It also permanently patches the Alternative Minimum Tax so it wouldn’t affect middle-class households.

Moreover, it extends for five more years an expansion of three major tax benefits for lower-income households: the earned income tax credit for low-income wage-earners, the child tax credit and the “American Opportunity Tax Credit,” aimed at helping families defray college costs.

But Americans may end up losing more than they’ve gained if this agreement is all that passes as “tax reform” this Congress. If so, Americans will have been robbed of an opportunity to rebuild a tax code that’s truly in their favor.

This means a tax code that’s not just less complex but whose benefits, as well as its burdens, are distributed more fairly. In particular, middle-and lower-income Americans deserve far more help than they’re getting to save and invest in their economic security. Continue reading “What Americans Didn’t Get from the Fiscal Cliff Tax Deal” →

The Google Way: How Washington Can Regulate Without Killing Growth

Posted on by The Progressive Policy Institute

In the Atlantic, Michael Mandel explains how the Federal Trade Commission’s looming antitrust settlement with the search giant shows that regulators can do their job without stifling innovation:

The Federal Trade Commission seems ready to announce a settlement with Google today, bringing to a close a 20-month antitrust investigation. The settlement reportedly would avoid antitrust charges against the search giant, while requiring Google to agreeing to change some of the practices that other companies have complained about.

On its own, the settlement is good news for consumers, workers, and the whole U.S. economy. Objectionable conduct would be moderated without dampening the incentive for Google to innovate and provide new services. It’s also true that it never made much sense to attack one of America’s prime innovative companies at a time when competitiveness, growth, and job creation are at the top of the economic agenda.

More importantly, the FTC’s approach to the Google investigation shows that regulatory agencies can be thoughtful about adopting pro-innovation, pro-growth policies without abandoning their core missions. A critical question facing the U.S. economy–and indeed, the European economy as well–is whether the existing regulatory structure is flexible enough to deal with the fast changing world of technology. If regulators apply old rules too strictly, they run the risk of squashing the very innovation needed to drive growth, job creation, and competitiveness.

Read the complete piece at the Atlantic.

Fiscal Cliff Deal Could Show the Way Toward a Grand Bargain

Posted on by The Progressive Policy Institute

Writing for the Daily Beast, Will Marshall argues that Obama is in a strong position to challenge the new Congress to pass a fiscal grand bargain early in 2013:

The fiscal cliff deal finally passed by the House Tuesday night isn’t likely to lift the public’s rock-bottom esteem for the nation’s elected leaders. It took too long and delivered too little, and the spectacle of a Congress that can’t conduct the nation’s business except under extreme duress from self-imposed deadlines and penalties is infuriating.

Still the outcome wasn’t terrible—and it shows that a grand fiscal bargain is still in reach, as our deeply polarized political class seems to be relearning the art of compromise.

The deal is best understood as ratifying the 2012 election result. President Obama campaigned and won on explicit promises to raise tax rates on the rich. That mandate, plus the automatic expiration of the Bush tax cuts, left Republicans with no choice but to negotiate with the White House over narrowing the scope of the coming tax hike.

Read the entire piece at the Daily Beast.

Why the Housing Market Can’t Move On Without More First-Time Homebuyers

Posted on by The Progressive Policy Institute

Writing for U.S. News & World Report, Jason Gold argues why the housing market needs more first-time homebuyers:

Home values are now increasing nationwide. While that’s certainly better than the alternative, a deeper dive into the data reveals a serious crack in the foundation: too few first-time homebuyers.

First-time homebuyers are the vital first rung on the home ownership ladder. They are usually buying from a seller who is “trading up” to a more expensive home or building a new one. When potential new buyers sit on the sidelines, existing homeowners are stuck, unable to move out and up.

In October, the first-time buyer’s share of the purchase market stood at about 35 percent according to the Campbell/Inside Mortgage Finance HousingPulse Survey. That’s down from 37 percent as recently as June and it’s the lowest percentage recorded in the survey’s history. Typically, a healthy housing market sees first-time homebuyers occupy around 40 percent of the purchase market.

The survey results also revealed that first-time homebuyers heavily relied on the Federal Housing Administration for financing, thanks to its low down-payment requirement of 3.5 percent. With the FHA’s recent announcement that it will tighten credit standards, first-time homebuyers will see the barrier to homeownership grow even more.

Read the entire piece at U.S. News & World Report.

How a Wireless Tax Bill Can Spread Holiday Cheer

Posted on by The Progressive Policy Institute

Most of us would be lost without our cell phones, tablets, and other wireless devices.  We rely on them so much it’s hard to imagine how we could function without 24 hour access to Twitter, Facebook, and email. That means we are willing to pay up each month – for the service connection charge, one-size-fits-all data access plan, and all the taxes and fees that go with it.

And all of the wireless taxes and fees that go with it certainly add up – to about 17.2 percent of our monthly bill according to a new report by Scott Mackey. That’s up from 16.3 percent in 2010, a 5.5 percent increase in just two years.  Not a very festive thought during the holiday season.

But there is one tax bill currently in Congress that may spread some holiday cheer just yet. The Wireless Tax Fairness Act, if passed, would provide a five-year reprieve on any tax increases for our wireless service.  That means no new state or local government wireless taxes through 2018.

A five-year reprieve on wireless taxes would of let us keep more of our money to spend on other things, like an increase in income and payroll taxes after the fiscal cliff. Or on the next iPhone, since it will be obsolete by the time our eligible discount-for-contract-renewal-once-every-two-years comes up (and who wants to wait that long?). Continue reading “How a Wireless Tax Bill Can Spread Holiday Cheer” →

Funding Cuts Hit College Students Harder Than Faculty

Posted on by The Progressive Policy Institute

Fiscal cliff or not, the coming years are certain to bring cuts in public spending on higher education. The looming sequestration threatens to cut $500 billion in federal discretionary spending starting next year, leaving a multi-billion dollar hole in R&D funding at public universities. State governments have already begun higher education funding cutbacks. So as policymakers pledge austerity and deficit reduction, colleges and universities will be left in a financial pinch.

Students and university faculty and staff are the obvious targets to fill these budget holes. But who actually pays the price for cuts in university funding?

New PPI research suggests college students will bear the brunt of additional austerity imposed on colleges and universities. Looking at previous cuts in public funding, we found college students were unquestionably worse off relative to faculty and staff when it came to making up the difference. And the impact of this uneven allocation could be serious. If college students continue to pay the biggest price for austerity, the next generation of young people may think twice about the value of going to college.

That’s because college students paid a high price for cuts in university funding over the last decade, while faculty and staff were relatively unaffected.  As shown in this first graph, total tuition at four-year universities rose a staggering 35% over the last decade (in constant dollars). These rising prices are certainly behind the rising real average debt per graduate, up almost 30% over the same time.

Continue reading “Funding Cuts Hit College Students Harder Than Faculty” →

Why Obama Dropped His $250,000 Tax Target

Posted on by The Progressive Policy Institute

Writing for The Wall Street Journal, PPI President Will Marshall explains why Obama should show some flexibility now and set the stage for a more comprehensive tax overhaul in 2013:

Barack Obama is under pressure from his left flank to break House Republicans on the wheel of higher marginal tax rates, but he is showing flexibility in negotiations with Speaker John Boehner. This is wise. By settling for something less than unconditional surrender, the president could get a deal that will avoid plunging the U.S. economy into austerity and set the stage for a historic tax overhaul next year.

So how do we get there from here? The first step is to resolve the dispute that has snagged the fiscal-cliff talks—how to raise taxes on the rich. To the horror of tea party purists, Mr. Boehner has acceded to higher tax rates on millionaires. Obama countered on Monday by proposing higher rates on households making $400,000 or more, and he lowered his overall revenue goal to $1.2 trillion from $1.6 trillion.

The president has the edge here. If Republicans refuse to accept higher rates for any wealthy taxpayers, there will be no deal. Then tax rates will rise for all Americans, and Republicans will be blamed for driving the economy off the cliff.

Read the piece at The Wall Street Journal.

Fannie and Freddie’s Fate

Posted on by The Progressive Policy Institute

In a Letter to the Editor of The New York Times, Jason Gold argues that the Times’ editorial gets it wrong and the Obama administration should act now on Fannie Mae and Freddie Mac:

Your Dec. 2 editorial “The Mortgage Challenge” drew welcome attention to a problem that neither party has done enough to fix. But it misses the mark by urging the Obama administration not to get “sidetracked” by discussions about reprivatizing Fannie Mae and Freddie Mac. That’s bad advice.

It’s been four years since Fannie and Freddie were taken into conservatorship. Until their fate is decided, we won’t see private capital get off the sidelines and back into mortgage lending. We need more first-time homebuyers participating in the market, not just investors snapping up bargain-basement homes.

The essential precondition for graduating Fannie and Freddie from conservatorship was stopping the decline in home prices. Mission accomplished. This should make it easier for Congress to pass long overdue measures for helping underwater homeowners, and to begin reducing Washington’s huge footprint in our housing markets.

Read the letter at The New York Times.

Will Marshall on Obama’s Fiscal Cliff Policy

Posted on by The Progressive Policy Institute

Writing for Politico‘s Arena , PPI President Will Marshall discuses Obama’s fiscal cliff policy:

President Obama holds the whip hand on taxes.

He campaigned and won on the explicit promise of raising tax rates on the wealthiest two percent of Americans. It’s the closet thing to a mandate the 2012 elections produced. And polls make it clear that the public will blame Republicans if there’s no deal and we go off the cliff.

Deal or no deal, tax rates on the rich are going up. Unless they have a political death wish, Republicans can no longer hold the Norquist line.  So they’d be wise to negotiate with the president, angling for a top rate lower than the default rate of 39.6, in return for a promise to revisit the issue next year in the context of comprehensive tax reform. The more lawmakers succeed next year in broadening the tax base – by closing tax loopholes and preferences – the stronger argument they can make for lowering tax rates.

Read it at Politico.

 

 

Fiscal Cliff Shouldn’t Scare Homeowners, But 2013 Should

Posted on by The Progressive Policy Institute

Writing for U.S. News & World Report, Jason Gold  explains the impact of the fiscal cliff on homeowners.

With the clock ticking, the nation is engrossed in Washington’s horse wrangling over the fiscal cliff, a nasty double whammy of spending cuts and tax hikes that experts predict could usher in another crippling recession.

But while Democrats defend entitlements and Republicans defend against tax increases, no bigger constituency seems to be more in the cross-hairs than homeowners. The popular mortgage-interest deduction (MID), long thought to have hands-off status, is now on the table as lawmakers try to steer the country away from plunging headlong over the fiscal cliff.

To what degree eliminating or reducing the MID, which costs the government an estimated $98 billion annually, impacts the housing market is debatable. While a potential change in the MID has caused a great deal of coverage in the news—and no doubt great anxiety for the average homeowner—most can sit back and take a deep breath … for now. The MID won’t be part of the fiscal cliff fix.

Read the entire article here.

 

Washington Insiders Tackle ‘Fiscal Cliff’ Policy Solutions

Posted on by The Progressive Policy Institute

Will Marshall was a panelist at the Fix The Debt policy conference on Tuesday, Dec. 4, discussing two of the biggest issues surrounding federal budget deficits and the national debt – tax reform and healthcare

The panel called on Pres. Obama and Congress to tackle the nation’s budget problems.  The group proposed fiscal policies for entitlements, discretionary spending and raising additional revenues.

Maya MacGuineas, head of the Washington-based Committee for a Responsible Federal Budget, provided introductory remarks and then Peter Cook, Bloomberg News, moderated discussions with leading corporate CEOs, top federal and state politicians along with advocacy groups and former World Bank President Robert Zoellick.

Watch the panel here.