Marshall for Medium: “Trump’s Biggest Broken Promise”

Unlike such polarizing issues as health care, immigration and climate change, repairing and updating our economic infrastructure is something both parties say they are for. Yet somehow our political leaders can’t get the job done.

President Trump often complains about the shabby state of America’s airports, highways and railways. “The only one to fix the infrastructure of our country is me — roads, airports, bridges,” he tweeted just before launching his 2016 presidential bid. “I know how to build, pols only know how to talk!”

Yet Trump’s lack of focus and discipline, along with his clownish political antics, keep sabotaging bipartisan progress on infrastructure. In a meeting with House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer in April, Trump proposed to spend $2 trillion on infrastructure. But the deal quickly unraveled as Republican Senators made clear they wouldn’t support gas or other tax increases to pay for it.

 

Read the full piece on Medium by clicking here. 

Kim for Medium: “The Dismal State of America’s Working Class”

President Donald Trump staked his successful claim to the U.S. presidency with his appeal to the discontents of blue-collar America — i.e., non-college-educated Americans who have perhaps been the hardest hit by globalization and technological change.

The same voters are the target of some of Trump’s Democratic 2020 challengers, most notably former Vice President Joe Biden. Biden, for instance, launched his campaign in a Pennsylvania union hall, declaring himself to be “a union man, period.”

Both Biden and Trump are right to focus their attentions on this group of Americans, whose fortunes have not risen with the overall economy but stagnated or even fallen. Without the benefit of higher education, working class Americans have been unable to compete for jobs demanding specialized technical skills, while the places they live have been hollowed out by shifts in global supply chains and the death of low-skilled manufacturing. So long as these workers feel left out of the economic mainstream, they will remain a potent political force, including in the upcoming 2020 election.

Read the full piece on Medium by clicking here. 

Kim for Medium: “Being a moderate in Congress is expensive”

Few jobs in politics might be tougher than to be a moderate member of Congress. Moderates typically hail from competitive districts, which means they enter office with targets on their backs from an opposition eager to wrest away their seats. And unlike their colleagues in safely blue or red seats, they must juggle the concerns of a diverse constituency, meaning less room to embrace the kinds of ideas that appeal to an activist base.

Moderates’ vulnerability also inevitably means a greater burden when it comes to campaign fundraising. In 2018, for instance, moderate Democratic candidates who won their campaigns spent twice as much as winning candidates from more liberal, comfortably blue districts. Moderates, in other words, literally paid the price for Democrats’ majority — a fact the progressive left should keep in mind as the 2020 election approaches.

Read the full piece on Medium by clicking here.

Stangler for Medium: “What is the Future of Flexible Federalism?”

Both Republicans and Democrats praise states as “laboratories of democracy” when they don’t hold the White House or Congress. Once in power in Washington, they rediscover their affinity for centralization and federal mandates.

Now, though, in an era of New Localism and widespread local and regional efforts to address persistent national challenges, a renewed approach to flexible federalism is needed. The next and future presidents need a framework for flexible federalism that permits them to encourage local innovation, empower regional leaders, and help share and spread lessons.

So, the president can’t do it all in terms of opening up more space for local innovation. But perhaps the federal government can lead the way, setting an example for the states. What might a framework for flexible federalism look like and how might it be applied?

Read the full piece on Medium by clicking here.

New Ideas for a Do-Something Congress No. 11: Encourage Employers to Help with Student Debt

More than anything else, a higher education remains the ticket to the proverbial American Dream. It offers the skills prized by employers in an increasingly global marketplace, and puts graduates on a path to higher wages over a lifetime of work. But for too many Americans, it comes at the price of student loans that can saddle them with debt just as they’re launching their careers and stunt their financial wellbeing for years to come.

New thinking can address the challenge. One promising solution is gaining traction in the private sector. A small but growing number of U.S. employers have begun offering student loan repayment benefits to their employees—helping them erase student debt faster and, not incidentally, earning the loyalty of employees in a competition for the best workforce talent. Though these programs are still uncommon, they are in high demand, leading some to dub student loan assistance “the hottest employee benefit” today (1).

Congress can help spur widespread adoption of this solution by encouraging more employers to offer this benefit to their workers, such as through the tax code. While current law gives employers a tax break for offering tuition assistance benefits to their employees, student loan assistance doesn’t get the same favorable treatment. Lawmakers should take up bipartisan legislation in this session to equalize the tax treatment of student loan assistance benefits.

THE CHALLENGE: Student Loan Debt is Skyrocketing For Generations of American Workers

American college graduates collectively face a student loan debt crisis of eye-popping proportions. As of December 2018, more than 44.7 million borrowers owed $1.5 trillion in student loans(2)—a sum that exceeds the gross domestic product of all but a dozen countries around the globe.

While this student debt burden impacts Americans of all ages and socioeconomic groups, it hits younger workers the hardest. An estimated 65 percent of the total is owed by people under 40—no surprise, considering that more than two-thirds of college seniors graduating in recent years have left campus with student loan debt, averaging $28,650 as of 2017.(3)

Now, there’s evidence that this mounting IOU has consequences for financial wellbeing more broadly. Indebted graduates enter the workforce with less money available to save, and this constraint soon catches up with them. By age 30, those with student debt have accrued only about half as much in retirement assets as those without debt, according to the Center for Retirement Research at Boston College.(4) Other studies suggest that student loan debt also makes it harder for young people to pursue graduate studies, buy their first home (5) and achieve other important life milestones—including, anecdotally, even starting a family.

In recent weeks, the issue has drawn the attention of candidates on the Presidential campaign trail. With an eye toward the coveted youth vote, several Democratic contenders have made college affordability a rallying cry and unveiled proposals to address the crushing debt burden. The most ambitious plan to date would “cancel” up to $50,000 in student debt for every borrower with a household income under $100,000—helping an estimated 42 million Americans.(6) This plan, however, would be immensely expensive for U.S. taxpayers and potentially create perverse incentives for borrowers. Workers need better and more cost-effective help.

THE GOAL: Encourage Employers to Help Ease Workers’ Student Debt Burdens

In the search for solutions to the student debt crisis, America’s employers are an important part of the answer. Today’s historically tight labor market and demand for young workers with the right skills presents big challenges—and a big opportunity. In particular, more employers are finding that offering student loan assistance benefits is an effective way to attract and retain workers.

Under this approach, employers can choose to make monthly contributions against an employee’s student loan balance—either directly to the employee, or to the employee’s lender—and speed up pay-off of the loan. This benefit is actually something that Congress and most federal agencies have offered to eligible staff members for more than a decade. In both cases, the repayment programs were implemented as a way to recruit highly skilled young employees to government service. The specifics vary, but broadly speaking, Senate staffers can qualify for up to $500 per month to pay down their student loans, and House staffers can receive as much as $10,000 yearly in assistance, up to a total $60,000. Similarly, all federal agencies are permitted to make payments of up to $10,000 annually against federal student loans for qualifying employees who agree to remain on the job for at least three years. Most recently through this program, 34 agencies assisted nearly 10,000 federal employees with more than $72 million in student loan repayment benefits.(7)

From the perspective of today’s workforce, there’s unmistakable demand for this “perk” in the private sector, too. Recent surveys have found that student debt is a primary source of stress, distraction, and impaired productivity for young workers. More than half worry “all the time” or “often” about repaying their loans, and many say this anxiety has impacted their health.(8) Moreover, big majorities would welcome proactive solutions from their employers.

• Fully 92 percent say they’d take advantage of an employer match for their student loan payments if one were offered.(9)

• 58 percent would even prefer that their company make payments against their student debt over contributions to a retirement fund.(10)

• And—most importantly for companies—offering help with student loans would earn major points for participating employers. In one survey, 90 percent of employees said that having a loan repayment benefit would positively influence their decision to accept a job offer,(11) while in another, 86 percent said they’d commit to a company for five years if it helped pay off their student debt.(12)

Some forward-thinking employers have responded to this growing market demand and launched student loan repayment plans. Among the early adopters:

• Fidelity. Through its Step Ahead student loan assistance program, the investment company has helped more than 9,000 employees by offering a monthly subsidy—totaling up to $10,000 per borrower—toward student loans.(13)

• Abbott. The pharmaceutical company encourages employees to repay student debt and save for retirement simultaneously through a 5 percent employer “match” in its Freedom 2 Save Plan.(14)

• Others ranging from PricewaterhouseCoopers to Peloton, the fitness cycling company, have partnered with Gradifi, an employee benefits platform, to offer monthly contributions to eligible associates, helping them whittle their student debt.

Notwithstanding these models, employer-provided student loan assistance remains rare. According to an annual Employee Benefits Survey by the Society for Human Resource Management (SHRM), just 4 percent of U.S. companies offered this benefit last year.(15) Far more commonplace, found SHRM, are traditional tuition assistance programs: 51 percent of employers provided tuition support for their associates attending undergraduate studies, and 49 percent offered assistance for graduate school.

THE PLAN: Equalize Tax Treatment of Employer Student Loan Assistance Benefits

There’s a simple reason why so few employers currently offer student loan repayment assistance—current tax law discourages them for doing so. Currently under Section 127 of the Internal Revenue Code, businesses receive a tax break for subsidizing their qualified employees’ postsecondary tuition. (Indeed, that’s been the case for 40 years, when the tuition deduction was first enacted by Congress as a pilot.) But there’s no tax incentive to support employees who have already incurred student loan debt in college or grad school. If student loan repayments were treated the same way tuition assistance is today under federal law, many more employers would be eager to adopt such programs.

Congress could jumpstart private-sector engagement on this pressing issue by passing the Employer Participation in Repayment Act. Introduced by Reps. Scott Peters (D-CA) and Rodney Davis (R-IL) in the House and Sens. Mark Warner (D-VA) and John Thune (R-SD) in the Senate, the legislation would build on the current educational assistance program by allowing employers to contribute up to $5,250 a year, tax-free, toward any employee’s student loan repayments. The contribution would be tax-exempt for the employee, and could be made against qualified education loans to the employee directly, or through a payroll deduction to the employee’s lender.

At this writing, the measure has broad, bipartisan support, with 128 cosponsors in the House and 21 in the Senate—reflecting much wider interest than in the previous session of Congress. The legislation also enjoys the support of leading education organizations, such as the National Education Association and the National Association of Independent Colleges and Universities, as well as the Democratic House leadership and key figures from the Trump Administration, according to the bill’s sponsors. There’s no official score, but the Joint Committee on Taxation has estimated the measure would cost $3.6 billion over 10 years—far less than the price tag for having the federal government “cancel” all outstanding student debt. The bill’s lead Democrats are pushing to get it attached to an appropriate vehicle—perhaps a tax extenders package—in the current session.

Student debt has saddled millions of Americans and can remain a lifelong drag on their families’ financial health. Employers can help provide much-needed relief, and many seem eager to do so. With a straightforward change in the tax code, Congress could provide a powerful incentive for more companies to help—delivering benefits for workers, their families, and the 21st-century workforce.

Sources:

  1. Zack Friedman, Forbes Magazine, October 18, 2018. https://www.forbes.com/sites/zackfriedman/2018/10/18/student-loan-repayment-employee-benefits/#3481b84a566f

  2. Federal Reserve Bank and Federal Reserve Bank of New York, February 2019. https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/hhdc_2018q4.pdf

  3. Institute for College Access & Success, Project on Student Debt, https://ticas.org/posd/home

  4. Center for Retirement Research, June 2018. https://crr.bc.edu/briefs/do-young-adults-with-student-debt-save-less-for-retirement/

  5. Center for Retirement Research, 2018.

  6. Senator Elizabeth Warren, Medium.com: Election 2020 Coverage, April 22, 2019.

  7. U.S. Office of Personnel Management, Federal Student Loan Repayment Program (2016), February 2018. https://www.opm.gov/policy-data-oversight/pay-leave/student-loan-repayment/

  8. American Student Assistance, February 2017. https://www.asa.org/innovation/

  9. American Student Assistance, 2017.

  10. Oliver Wyman, 2017. https://files.acrobat.com/a/preview/c52b032b-4e17-458f-8c66-bc25d7daf01f

  11. Oliver Wyman, 2017.

  12. American Student Assistance, 2017.

  13. https://www.fidelity.com/about-fidelity/who-we-serve/easing-the-pressures-of-student-debt

  14. https://www.abbott.com/corpnewsroom/leadership/tackling-student-debt-for-our-employees.html

2018 Employee Benefits Survey, Society for Human Resource Management, June 2018. https://www.shrm.org/hr-today/trends-and-forecasting/research-and-surveys/pages/2018-employee-benefits.aspx

Stangler for Medium: “What does Flexible Federalism actually mean and look like?”

Despite decades of steadily expanding federal authority, there is still a fairly well-defined division of labor among national, state and local governments. The latter, for example are chiefly responsible for law enforcement and criminal justice, land use, education (mostly), and so on.

In recent years, moreover, local government has been lauded for its effectiveness and responsiveness. Mayors have been told that they should run the world (maybe that’s why so many are running for president). In their excellent book, The New Localism, Bruce Katz and the late Jeremy Nowak declared that “power increasingly belongs to … the local level” because of regional collections of assets, institutions, and networks.

 

Read the full piece on Medium by clicking here. 

Stangler for Medium: “Democratic candidates should talk flexible federalism”

Only Washington can solve our problems. That, evidently, is what any voter or casual follower of American politics might forgivably conclude after listening to the Democrats who are vying to take on President Trump next year.

Myriad proposals are being thrown around for the federal government to provide health care for all, free education for all, and guarantee everyone jobs. Meanwhile, Democrats in Congress have proposed the Green New Deal, which would essentially have the federal government take on the task of reinventing the energy industry and, well, the entire economy.

At this moment, however, what the United States does not need is further centralization in Washington. As PPI president Will Marshall has written, we have a “mismatch of scale” in terms of problem-solving. Washington is too big to deal effectively with life’s everyday problems yet too small to cope alone with things that spill over national borders: trade, climate, and action to contain pandemics, for example. That’s why we need more distributed problem-solving. And with Washington today mired in political dysfunction, we especially need more empowerment of state and, especially, local government.

 

Read the full piece on Medium by clicking here. 

Goldberg, Pincus Testify on Value of Pre-Dispute Arbitration Agreements

The U.S. House Committee on the Judiciary’s Subcommittee on Antitrust, Commercial, and Administrative Law held a hearing on pre-dispute arbitration clauses on Thursday, May 16, 2019.  PPI Center for Civil Justice Director, Phil Goldberg, and Andy Pincus, who served as general counsel of the Commerce Department under President Clinton, testified in support of pre-dispute arbitration clauses because of the value they provide to consumers, employees and businesses in avoiding prolonged litigation and resolving disputes.

The other participants in the hearing included Gretchen Carlson, formerly of Fox News, and Lt. Commander Kevin Ziober, each of which discussed their experiences with pre-dispute arbitration.  Deepak Gupta of Gutpa Wessler and Prof. Myriam Gilles of the Cardozo School of Law advocated for legislation that would ban the use of these agreements.

Mr. Goldberg, who was testifying on his own behalf, explained that progressives agree that the civil justice system is a public good and a keystone of American economic and political liberty because it facilitates the peaceful resolution of disputes.  But, we also know that it has its limitations and is subject to abuse. The major reason that pre-dispute arbitration is being increasingly common is because it achieves these goals of peaceful, quick and conclusive dispute resolution often better than the civil justice system for many claims.

In particular, Mr. Goldberg continued, pre-dispute arbitration agreements can be critical for consumers, employees and businesses to have access to justice in cases that are of modest value and where there is a premium on maintaining relationships after the dispute is resolved.  In litigation, plaintiffs’ firms often will not take cases valued at under $100,000 – $200,000, and the adversarial nature of litigation generally poisons the sides against each other.

In contrast to the litigation system, as Mr. Pincus explained on behalf of the U.S. Chamber Institute for Legal Reform, pre-dispute arbitration is a fair, less-complex, and lower cost alternative to our overburdened court system.  Also, empirical studies show that consumers and employees do as well or better in arbitration as in litigation: they prevail on their claims at the same rate or more frequently, and they recover as much or more when they do prevail.

Mr. Goldberg’s written testimony is here and a video of the House hearing is here.

Do-Something Congress No. 10: Fighting Inequality by Reinventing America’s Schools

Progressives are rightly concerned about inequality, but some overlook the crucial role that underperforming public schools play in perpetuating poverty and inequality in America. The poor quality of many school systems is a serious impediment to social mobility for children from low-income and minority families, who can’t easily pick up and move to communities with good schools. The number of students taking college remediation classes has soared, and too many students graduate high school underprepared to enter either college or the workforce.

First-rate schools are key to delivering on America’s core promise of equal opportunity. That’s true for U.S. students everywhere – not just for kids trapped in poor schools in poor communities. In international comparisons, even students from America’s best suburban school districts consistently score below students from other advanced countries in Asia and Europe.

America’s public education system was designed for the Industrial Era. The centralized, bureaucratic approach that we inherited from the 20th century no longer works for the majority of America’s students. We need a new model, and fortunately one is emerging from cities that have embraced profound systems change, including New Orleans, Denver, Washington, D.C., and Camden, N.J. All have experienced rapidly improving student outcomes as a result.

These four cities are building 21st century school systems, founded upon the four pillars of school autonomy, accountability for performance, diversity of school designs, and parental choice. Essentially, 21st century school systems treat many of their public schools like charter schools, even if they call them “innovation schools,” “partnership schools,” or “Renaissance schools.”

Although transforming our K-12 education system to meet the needs of the modern era is primarily the responsibility of state and local governments, Washington can play an important catalytic role by creating incentives for change. In particular, Congress can create financial incentives for states that strengthen charter authorizing and for districts that create autonomous schools, hold schools accountable for performance, and replace failing schools.

 

THE CHALLENGE: AMERICA’S K12 PUBLIC EDUCATION SYSTEM IS DESIGNED FOR THE INDUSTRIAL ERA

For a century, our public education system was the backbone of our success as a nation. By creating one of the world’s first mass education systems, free to all children, we forged the most educated workforce in the world – a key pillar of our economic strength. But all institutions must change with the times, and since the 1960s, the times have changed. The Information Age economy has radically raised the bar students must meet to secure jobs that support a middle-class lifestyle. Meanwhile, America’s public school population has grown more diverse, necessitating differentiated approaches to education. Yet our 20th century school districts too often produce cookie-cutter schools that fail to motivate or meet the needs of different students.

Traditional Public Schools are Failing Too Many Students

Overall, our traditional public schools “work” for less than half of our students. Of those who attend public schools, 17 percent fail to graduate on time. Even more graduate but lack the skills necessary to succeed in today’s job market. Almost a quarter of those who apply to the U.S. Army fail its admissions tests, more than a third of those who go on to college are not prepared for first-year courses, and half of college students never graduate. A large portion of middle- and high-schoolers are bored by their public schools; only one in three rate their school culture positively. And among developed nations, the United States ranks 18th or worse in high school graduation rates and in the bottom half in math, science, and reading proficiency (1).

Traditional School Structures are Bureaucratic, Inflexible, and Discourage Innovation

Our traditional public schools struggle to respond to the challenges of today’s world, held back by their traditional district structures, rules, and union contracts. After all, 20th century bureaucracies were built to foster stability, not innovation.

By continuing to assign students to schools based on their neighborhoods, we not only reinforce racial and economic segregation – creating a system with schools of concentrated poverty and concentrated wealth – but we also limit our ability to create innovative schools with diverse and specialized learning models.

Moreover, by clinging to the hierarchal organizational model of a centralized system, we remove decision-making authority from those educating the students. Principals and teachers best understand the needs of their students, but they lack control over school-level decisions that affect student learning. Principals often do not control their staffs, budgets, curricula, or learning models: those decisions are made at district headquarters. They cannot adapt their schools to meet the specific needs of their students, because the centralized system has been designed to treat all students the same.

Since 1983, the U.S. has seen wave after wave of school reforms. Unfortunately, most have been of the “more-longer-harder” variety: more required courses and tests, longer school days, higher standards, and harder exams. Few have reimagined how school districts and schools might function.

 

THE GOAL: CREATE 21ST CENTURY SCHOOL SYSTEMS IN DISTRICTS ACROSS URBAN AMERICA

By embracing a 21st century school model based on accountability for performance, school autonomy, choice, and a diversity of learning models, we can create public school systems that meet the needs of all students. This model has created the fastest improvement in urban America, in cities like New Orleans, Washington, D.C., and Denver.

In such systems, the central office no longer runs all schools directly; instead, it is responsible for overall policy, oversight, enforcement of compliance, evaluation of schools, and matching school supply to demand. Most 21st century school systems are made up, at least in part, of public schools operated by independent organizations, usually nonprofits. They are freed from many of the top-down mandates that constrain district-operated schools, so school leaders can craft unique programs and make school-level decisions. In exchange for increased autonomy, these schools are held accountable for their performance by a district or authorizer, who closes or replaces them if their students are falling too far behind.

Many of the public schools in these systems are schools of choice, but they are not allowed to select their students. If too many students apply, a school holds a lottery to see who gets in—ensuring that all families have an equal shot at quality schools. Districts that have embraced this approach have created computerized enrollment systems that give all families a chance to select their top choices—a kind of lottery for all students.

 

THE PLAN: INCENTIVIZE STATES TO CREATE 21ST CENTURY SCHOOL SYSTEMS

Although most education legislation occurs at the state level, Congress can incentivize states to create 21st century school systems.

Congress should offer financial incentives for those states that improve their charter laws. One approach would be to expand or revise the U.S. Department of Education’s existing Grants to State Entities, awarded for the preparation, opening, replication, or expansion of high quality charters and for the improvement of state agencies that oversee charters.

The State Entities Program, one of six distinct grant programs included under the Department of Education’s Charter Schools Program, replaced the State Education Agencies program in FY 2017. The State Entities Program expanded grant eligibility from state education agencies to governors, statewide charter authorizing boards, and nonprofit charter support organizations (2). In FY 2017, the program distributed $144.7 million in grants of varying amounts to nine states (3).

Two proposed changes could improve this program. First, no state should qualify for a grant if it caps the number of charter schools it authorizes. Adding this requirement would direct more aid to states that are expanding their use of charters.

Second, in addition to the principal eligibility criteria, the application has six weighted priority preferences, through which a candidate can earn extra points in the selection process. The sixth preference, “best practices for charter school authorizing,” should be worth double its current weight, and, to receive these points, a state entity should have to demonstrate that its authorizers close failing charter schools, rather than merely implement authorizer training. Currently, the state entity must only demonstrate the extent to which it has taken steps to ensure all authorized public chartering agencies implement best practices for charter school authorizing.

In order to be eligible for these preference points, states with multiple authorizers should also have to develop a clear guideline for authorizer accountability. In particular, it should require that authorizers close any charter school with student scores for academic growth that fall in the bottom 10 percent of public schools in the state for three years in a row. Applicants should also be required to have a strong process in place for preventing authorizers with a large portfolio of failing charter schools under their oversight from authorizing new schools. Similarly, applicants should have a procedure in place for revoking authorizing status from authorizers who fail to shutter consistently failing schools.

In addition to modifying the existing State Entities Program, Congress should create a separate program that awards grants to school districts that partner with nonprofit organizations to take over and redesign district schools, with new staffs. The Texas Education Agency has implemented incentives for districts to create such “partnership schools,” and it is working well. In Texas, the nonprofits selected as partners must have acceptable academic performance and financial ratings for the last three years. When they enter the partnership, they get access to district facilities and better financial deals (4).

Many urban districts have some form of the partnership model, including Denver, Indianapolis, Philadelphia, Atlanta, San Antonio, Tulsa, New Orleans, Camden, N.J., and Springfield, Massachusetts. The schools in the partnerships are given autonomy to control their budgets, staffing, schedules, and learning models. In return, they are held accountable through multiyear performance agreements and replaced if they fail.

A federal grant program could encourage districts to enter partnerships with nonprofits, awarding $2 million per school for each of the first three years. The first year would be a planning year for the takeover and redesign, followed by two years of operation. Deciding which schools would become partnership schools would be left to the districts.

These grant programs alone would not be as effective as districts redesigning their systems to operate on the pillars of autonomy, accountability, family choice, and diversity of school designs. But they would encourage states and districts to implement strategies that have proven to improve student outcomes more rapidly than any other methods used at scale.

 

[gview file=”https://www.progressivepolicy.org/wp-content/uploads/2019/05/EdDoSomething_Final10.pdf”]

 

  1. David Osborne, Reinventing America’s Schools: Creating a 21st Century Education System (New York, NY: Bloomsbury, 2017), 1-2.
  2. “Federal Charter Schools Program (CPS) and Authorizers,” National Association of Charter School Authorizers, at https://www.qualitycharters.org/research-policies/archive/federal-charter-schools-program/
  3. “Awards,” Office of Innovation & Improvement, U.S. Department of Education, at https://innovation.ed.gov/what-we-do/charter-schools/state-entities/awards/.
  4. David Osborne and Emily Langhorne, “Texas has Ambitious Plans to Transform Urban Schools,” U.S. News & World Report, Apr. 13, 2018, at https://www.usnews.com/news/best-states/articles/2018-04-13/commentary-texas-has-ambitious-plans-to-transform-urban- schools.

Repairing Credit: The Right Way to Fix a Broken System

If you think your credit report is accurate, there is a good chance you are wrong. According to the Federal Trade Commission (FTC), one in five Americans has a potentially material error in their credit file, and one of the biggest contributors is medical bills—with half of all medical bills containing an error.

In fact, mistakes on credit reports have become so pervasive that around a third of all complaints filed annually to the Consumer Financial Protection Bureau (CFPB) resulted from problems with consumer credit reports.

Credit report errors are a serious threat to the financial well-being of American families. As Senator Elizabeth Warren has noted, “credit reports regularly contain errors that can make it harder for families to access credit, find jobs, and get housing.” And as many consumers know all too well, it’s very difficult to get those errors corrected.” (1)

Under the Fair Credit Reporting Act, the company that furnished the information to the credit bureau must conduct an investigation to verify the information and correct a mistake, if they find one. Unfortunately, consumers who want to try to fix mistakes on their credit report face three daunting obstacles.

First, the system put into place by the credit reporting agencies heavily favors creditors and other data furnishers. Credit bureaus almost exclusively depend on lenders (such as banks, credit unions, credit card providers, and mortgage underwriters).

Consumers contacted the credit reporting agencies approximately eight million times in 2011 to initiate a credit dispute. But only a small fraction of those disputes was resolved internally by credit bureau staff. According to the CFPB, 85 percent of credit report disputes are passed on to data furnishers (the lenders) to investigate and resolve. (2) Unfortunately, in most cases the disputes are then shelved unless the consumer perseveres.

Second, the credit report agencies earn their profits by providing services such as credit checks to the very entities that provide the data used to create the credit reports – banks, mortgage lenders, credit card companies, retailers, and other businesses that provide credit. This creates a serious conflict of interest.

Third, despite several notable efforts to try to empower consumers, trying to correct errors on your credit report is still tedious, confusing, and time consuming.

CREDIT REPAIR ORGANIZATIONS AND COMPANIES

Because the system is rigged against them, many consumers turn to credit counseling agencies or credit repair companies. The dispute system designed to help consumers fix the problem favors the position of the debt collector over the consumer. Specifically, the credit bureau is only legally required to check with the creditor or debt collector and ask them whether they stand by their claim. As long as the creditor says you owe money, the dispute is resolved in their favor. As the National Consumer Law Center concludes: “Credit bureaus have little economic incentive to conduct proper disputes or improve their investigations.” (3)

Credit counseling agencies are typically a free resource from nonprofit financial education organizations that review your finances, debt and credit reports with the goal of teaching you to improve and manage your financial situation.

A credit repair company is a firm that offers to improve your credit in exchange for a fee. Unfortunately, the quality of these firms varies greatly. Some credit repair firms are highly reputable and follow best practices. Unfortunately, a significant cohort of credit repair firms are not good actors and, in some cases, have committed outright fraud. In 2016 the Consumer Financial Protection Bureau (CFPB) stated that “more than half of people who submitted complaints with the CFPB about credit repair chose the issue ‘fraud or scam’ to describe their complaints.”

There are some telltale signs for consumers trying to separate the bad actors from legitimate credit repair firms. Companies should be avoided that:

  • Demand an upfront payment.
  • Don’t provide a written agreement that includes cancellation rights for consumers.
  • Guarantee they’ll raise your credit score or fix an error.
  • Have multiple complaints against them with the Consumer Financial Protection Bureau or the attorney general’s office in the state where they operate.
  • Suggest they can remove legitimate negative information.
  • Offer to create a new credit profile based on a new employer identification number, rather than your Social Security number.

In contrast, responsible credit repair companies not only follow federal and state law but also:

  • Offer a free consultation
  • Have a track record and consistently solid reviews from past clients.
  • Have an attorney on staff.
  • Are licensed, bonded and insured.

WHAT NEEDS TO CHANGE?

To protect consumers, some policymakers have suggested new regulations to further police the credit repair industry. They note that credit repair firms don’t do anything someone with a bad credit report couldn’t do on their own. Anyone can dispute credit errors on their own behalf. But the Do-It-Yourself approach can be dauntingly complicated and time-consuming for harried families.

In essense, paying for credit repair assistance is really no different than paying an accountant or purchasing software to do your taxes – something 90 percent of Americans do according to the Internal Revenue Service.

It is important to note that there is already existing legislation to regulate the credit repair system. The Credit Repair Organizations Act (CROA) was signed into law in 1996 to protect consumers from the unscrupulous practices commonly used by several credit scammers.

Because of CROA, credit repair organizations are not permitted to misrepresent the services they provide, including guaranteeing the removal of negative credit listings. Credit repair organizations are also not permitted to attempt to create a “new” credit file or advise you to lie about your credit history. The Act also bars companies offering credit repair services from demanding advance payment, gives consumers certain contract cancellation rights as well as the right to sue a credit repair organization that violates CROA. (4)

CROA is a sensible law, and despite criticisms that it does not go far enough in regulating the credit repair industry, the law does provide consumers with protections against bad actors in the credit repair sector without eliminating legitimate credit repair firms. CROA needs strengthening, not in the form of new regulations but rather more effective enforcement.

Under CROA, the Federal Trade Commission (FTC) is the primary enforcement body at the federal level. The problem is the FTC is severely underfunded and understaffed. In a Senate hearing last year Commissioner Rebecca Slaughter said the FTC’s staff level is 50 percent below its level at the beginning of the Reagan administration in 1981. Senators Jerry Moran (R-Kan.) and Catherine Cortez Masto (D-Nev.) agreed the FTC needs more resources and is “understaffed.” (5)

As Table 1 confirms, FTC staffing levels dropped dramatically during the 1980s and have never really recovered. Yet, over the same time, the responsibilities of the agency have dramatically changed and expanded. Today the FTC has to address some 2.7 million complaints a year in areas from debt collection, to identify theft, to imposter scams. (6)

Better enforcement of CROA would obviate the need to pile on new rules. Unfortunately, in fact, Congress has added to the FTC’s workload even as its workforce has shrunk. The simplest solution is to provide the FTC with additional resources dedicated to enforcing CROA and protecting consumers from those credit repair companies that have acted fraudulently or in bad faith.

To pay for this increase in supervisors, a small annual fee could be placed on the credit reporting agencies (Equifax, TransUnion, and Experian). To create an incentive for these agencies to be more responsive to consumer complaints about credit reporting agencies, the fee could be lowered or raised in synchronization with the number of consumer complaints about their credit reports.

OTHER REMEDIES

Another approach to fixing the current system is to go to the source of the problem, eliminating some of the causes for the extraordinary amount of errors made by the credit reporting industry. As Aaron Klein of the Brookings Institution has noted, there are three major reasons why credit scores are so inaccurate: “size, speed, and economic incentives of the system.”

One way to change the incentive structure would be to create some consequences for credit rating companies that frequently give lenders inaccurate data about borrowers. Lawmakers could consider legislation that would penalize credit reporting agency error rates above a certain level. Klein’s approach would use a random sample method (5 to 10 percent of complaints) to review credit rating firms’ performance. Another approach would be to grade the credit bureaus on their error and response rates.

CONCLUSION

While it is tempting to lump all credit repair firms into the same basket, many of these firms act in good faith and follow CROA to the letter of the law. Yet there is no doubt that a significant number of these companies are misleading consumers and sometimes acting fraudulently. If lawmakers really want to crack down on these bad actors, however, the first step should be strengthening enforcement of existing law.

Otherwise, spawning new laws and regulations would likely enmesh all credit repair firms in new layers of regulatory complexity and compliance burdens, making it even harder for consumers to detect and correct errors on their credit reports. In CROA we have the consumer protection law we need, now it’s time to focus on oversight and enforcement.

[gview file=”https://www.progressivepolicy.org/wp-content/uploads/2019/05/CreditFinal.pdf”]

(1)  Brian Schatz Press Release: “Following Equifax Breach, Schatz, Warren, McCaskill, Colleagues Reintroduce Legislation to Help Consumers Catch And Correct Credit Report Errors,” September 11, 2017

(2)  Kelly Dilworth, “Consumer watchdog report details credit bureaus’ work,” Creditcard.com, December 13, 2013

(3)  Aaron Klein, “The Real Problem with Credit Reports is the Astounding Number of Errors,” Brookings Institution, September 28, 2017

(4) 15 USC Chapter 41, Subchapter II-A: Credit Repair Organizations

(5) Kate Patrick, “FTC Asks for More Control Over Big Tech, Privacy Issues,” Insidesources.com, November 30, 2018

(6)  Federal Trade Commission, “FTC Releases Annual Summary of Complaints Reported by Consumers,” March 1, 2018

(7)  Aaron Klein, “The Real Problem with Credit Reports is the Astounding Number of Errors,” Brookings Institution, September 28, 2017

(8)  Ibid

Kim for Medium: “How to get more companies to put people over profits”

Corporate profits are soaring. Yet Americans’ paychecks are inching upward by comparison. It’s no wonder many Americans feel anxious despite an economy that, by the numbers, is booming.

This disconnect between shareholders’ prosperity and workers’ precarity has led many on the progressive left to question the very future of capitalism. Some 2020 presidential candidates, such as Sens. Elizabeth Warren and Bernie Sanders, now routinely paint Big Business as the enemy of middle-class mobility and have called for drastic measures to rein in corporate power and mandate better behavior.

It might be too soon, however, to write off U.S. companies as a force for good.

 

Read the full piece on Medium by clicking here. 

Kane for Medium: “How Medicare-For-All Would Politicize Health Coverage”

Last week the Trump administration announced that it would give health care workers greater leeway to refuse, on religious grounds, to provide services that enable birth control use, abortion, sterilization, or assisted suicide. Specifically, the rule bars employers from requiring their employees to participate in delivering health care services they believe their religion proscribes. Such services could include scheduling a vasectomy, prepping a room for a sex change surgery or billing for an abortion.

Democrats slammed the move, which they described as a political plum tossed to religious conservatives who form an important part of President Donald Trump’s base. If they take back the White House in 2020, it won’t take them long to reverse the rule issued by the Department of Health and Human Services (HHS) Office for Civil Rights (OCR).

 

Read the full piece on Medium by clicking here. 

Long for Medium: “Under Legislation, Policymakers Would Micromanage Freight Rail Employment”

Republicans despise federal micromanagement, but that hasn’t kept Rep. Don Young of Alaska from hopping aboard the Washington-Knows-Best Express. He recently introduced a bill mandating that freight trains have a minimum of two crew members on board trains at all times.

While Young justifies his bill on safety grounds, the bill also appears to reflect pressure from rail workers’ unions fearful that automation is putting their members out of jobs.

Here’s the backstory: Following the fatal 2008 Chatsworth train collision in Los Angeles, President Bush signed the Rail Safety Improvement Act into law. The law required freight railroads, by the end of 2020, to integrate Positive Train Control (PTC) — a nationwide system of technologies that constantly process thousands of data points to stop a train before human error-caused accidents occur. One of the benefits of PTC was that it was a win-win for consumers and the railroads, enhancing safety and allowing railroads to boost productivity by moving to one-person crews somewhere down the road.

 

Read the full piece on Medium by clicking here. 

Do-Something Congress No. 9: Reserve corporate tax cuts for the companies that deserve it

Americans are fed up seeing corporate profits soaring even as their paychecks inch upward by comparison. Companies need stronger incentives to share their prosperity with workers – something the 2017 GOP tax package should have included.

Though President Donald Trump promised higher wages as one result of his corporate tax cuts, the biggest winners were executives and shareholders, not workers. Nevertheless, a growing number of firms are doing right by their workers, taking the high road as “triple-bottom line” concerns committed to worker welfare, environmental stewardship and responsible corporate governance. Many of these are so-called “benefit corporations,” legally chartered to pursue goals beyond maximizing profits and often “certified” as living up to their multiple missions. Congress should encourage more companies to follow this example. One way is to offer tax breaks only for high-road companies with a proven track record of good corporate citizenship, including better wages and benefits for their workers.

THE CHALLENGE:  Good corporate citizenship is punished, not rewarded, in a market that puts profits first.

The pressure to return profits to shareholders – the tyranny of so-called “shareholder primacy” – is one reason companies have been disinvesting in their workers. As Brookings Institution scholars Bill Galston and Elaine Kamarck have noted, many companies are increasingly reverting to “short-termist” behavior to avoid missing the quarterly earnings targets promised to shareholders (1). For instance, one notable survey of more than 400 CFOs found that 80 percent would “decrease discretionary spending on R&D, advertising and maintenance … to meet an earnings target” and 55 percent would “delay starting a new project” even if it meant sacrificing long-term value (2).

Companies also don’t seem to be raising wages or investing in worker training. Even as many firms have been reporting some of their best profits in years during this recovery (3), companies are cutting back on benefits like health insurance and offering less on-the-job training than they once did. And despite their recent uptick, workers’ wages haven’t caught up to where they should be. According to a Brookings Institution analysis, real wages for the middle quintile of workers grew by just 3.41 percent between 1979 and 2016, and actually fell slightly for the bottom fifth.

Corporate short-termism is bad for workers, who don’t get the wages and training they deserve. It’s also bad for companies, which are shortchanging their long-term health to satisfy short-term shareholder demands. But as long as current corporate culture remains fixated on companies’ stock prices, firms will feel tremendous pressure to put short-term profits above all other priorities – and often at workers’ expense.

 

THE GOAL:  ENCOURAGE MORE BUSINESS TO BE “TRIPLE-BOTTOM LINE” CONCERNS THAT PUT PEOPLE ON PAR WITH PROFITS

A small but growing number of firms have begun to reject the hold of “shareholder primacy” and have organized themselves as “triple-bottom line” companies committed equally to social and environmental good as well as profit. Among these is the growing number of “benefit corporations” specially organized under state law with the purpose of “creating general public benefit.” Since 2010, 34 states and the District of Columbia have passed legislation legally recognizing benefit corporations and protecting them from shareholder lawsuits for decisions that don’t maximize profits. Notably these states include Delaware, which is the leading “domicile” – or legal home – for most of America’s major companies. A significant number of benefit corporations have also won third-party certification from the nonprofit B Lab as “Certified B Corps” – essentially a Good Housekeeping seal of approval for benefit companies that have met strict standards for worker treatment, environmental stewardship and social responsibility. Among the many factors considered for certification are the share of workers who get formal training; rates of employee retention and internal promotion; the share of workers receiving tuition reimbursement or similar benefits for training and education; the extent to which “worker voice” plays a role in the company’s governance; pay equity; and company practices to reduce its environmental footprint.

According to the nonprofit B Lab, more than 2,500 businesses globally are certified B Corps. While the vast majority of these businesses are small, certified B Corps include such well-known U.S. and global brands as outdoor clothing maker Patagonia, Cabot Creamery, Ben and Jerry’s Ice Cream, and New Belgium Brewery, the makers of Fat Tire beer.  A small but growing number of B Corps are now publicly traded, including cosmetics company Natura; Sundial Brands, a subsidiary of Unilever; and Silver Chef, a company that finances commercial kitchen equipment purchases for restaurateurs.  These firms are proof that companies with an avowed social mission can in fact succeed in a cutthroat capital market. If more companies follow suit, the result could be a dramatic and beneficial shift away from the stranglehold of shareholder primacy and toward better corporate practices.

 

THE SOLUTION: OFFER TAX BREAKS TO “BENEFIT CORPORATIONS” AND HIGH-ROAD FIRMS THAT DEMONSTRATE SOCIAL RESPONSIBILITY

Many companies may feel they can’t “afford” to invest in their workers if it affects the bottom line for their shareholders. Targeted tax cuts to reward high road companies such as certified benefit corporations could, however, change the calculus for some companies and encourage them to change their behavior. These tax benefits could be structured in one of two ways:

  • Option One: Preferential tax rate.

As PPI has previously proposed, one option is to modify the new corporate tax rate to establish a preferential “public benefit corporation” rate for businesses that meet “high-road” requirements. Only the most deserving companies should qualify for the new 21 percent corporate tax rate; all others should pay a rate that is two to three percentage points higher.

To be entitled to these benefits, companies would meet one of two requirements: (1) that they be legally organized as “public benefit corporations” in their state and can provide good evidence of how they are fulfilling that mission; or (2) they must meet a minimum set of standards for worker treatment and investment, to be promulgated by a new standards-setting body authorized by Congress (effectively behaving like benefit corporations without the formality of legal status). To set the required standards, Congress could establish an inter-agency “workers’ council,” including representatives from labor and business, to establish guidelines for public benefit corporation rate eligibility (though enforcement would be left to the IRS). Companies would apply for a discounted tax rate in the same way that charities and nonprofits apply to the IRS for tax-exempt status, with the proviso that companies must also report annually on their performance, either in their public filings or in separate submissions to the IRS.

  • Option two: Benefit corporation tax credit.

A second option for structuring a high road company tax incentive is to create a tax credit for benefit corporations like the “sustainable business tax credit” offered by the city of Philadelphia. Under this benefit, first launched in 2012, Philadelphia businesses that are either certified B Corps or that can show they meet similar standards of social and environmental responsibility can qualify for a tax credit of up to $8,000 against their revenues. Up to 75 firms can apply for the credit on a first-come, first-served basis.

This structure might be especially beneficial for small and medium-sized benefit corporations structured as “pass-through” entities not subject to the corporate tax rate. As Jenn Nicholas, co-founder of the Philadelphia-based graphic design firm Pixel Parlor told Governing magazine, the credit has helped her afford higher wages and other benefits for her 10 workers. “It’s a challenge to be profitable and provide benefits to our employees,” Nicholas said. “Every tiny bit helps, and it feels like somebody is looking out for us when the general climate [for small businesses] is the opposite” (10).

While some policymakers have proposed requiring companies to treat their workers more fairly, tax incentives for high-road businesses are a better approach. Top-down mandates tend to invite resistance or evasion and will not succeed in changing the overall spirit of corporate culture in favor of shareholders over workers. Encouraging companies to reform themselves will ultimately prove the more enduring tactic. As more businesses see that they can indeed “do good and do well,” the grip of shareholder primacy will weaken, and workers will benefit.

 

Sources: 

1) Galston, William A., and Elaine C. Kamarck. More builders and fewer traders: a growth strategy for the American economy. Washington, DC: Brookings Institution, 2015.

2) Graham, John R., Campbell R. Harvey, and Shiva Rajgopa. The Economic Implications of Corporate Financial Reporting. N.p., 2005.

3) Bureau of Economic Analysis. “Gross Domestic Product, Third Quarter 2018 (Second Estimate); Corporate Profits, Third Quarter 2018 (Preliminary Estimate).” News release. November 28, 2018. Accessed March 28, 2019. https://www.bea.gov/news/2018/gross-domestic-product-third-quarter-2018-second-estimate-corporate-profits-third-quarter.

4) Kim, Anne. Tax Cuts for the Companies That Deserve It. Washington, DC: Progressive Policy Institute, 2018.

5) Shambaugh, Jay, Ryan Nunn, Patrick Liu, and Greg Nantz. Thirteen Facts About Wage Growith. Washington, DC: Brookings Institution, 2017.

6) B Lab. “State by State Status of Legislation.” benefitcorp.net. Accessed March 28, 2019. https://benefitcorp.net/policymakers/state-by-state-status.

7) Title 8: Corporations, Delaware Code §§ CHAPTER 1. GENERAL CORPORATION LAW; Subchapter XV. Public Benefit Corporations-361-386 (2017).

8) B Lab. “Certified B Corporation: About B Corps.” Benefitcorp.net. Accessed March 28, 2019. https://bcorporation.net/about-b-corps

9) Id.

10) Kim, Anne. “The Rise of Do-Gooder Corporations.” Governing, Jan 2019.

PPI’s Ben Ritz Discusses Social Security Trustees Report on C-SPAN

PPI’s Ben Ritz joined an expert panel on Capitol Hill last week to discuss the recently published report by Social Security’s trustees. The annual report projected that the program’s trust funds face insolvency within the next 16 years, after which point beneficiaries face the prospect of an across-the-board cut of 23 percent. All panelists encouraged policymakers to close the gap between Social Security’s revenues and spending sooner rather than later, which Ben noted is critical for ensuring the changes are fair to younger and older Americans alike.
Watch the full panel here on CSPAN.

In Win-Win Decision, FDA Approves Innovative Harm Reduction Technology

The Food and Drug Administration (FDA) should be complimented for following a data-based approach to innovation and clearing the sale of heat sticks. These are new electrically heated tobacco systems that slowly heat tobacco, rather than burning it, with much fewer harmful chemical byproducts. The agency took almost two years to rigorously analyze the health impact of the innovative product, with the trade name IQOS, including the effect on the young. The goal: To give current smokers a safer alternative to health-destroying cigarettes—a “harm reduction” strategy.

A harms-reduction approach is appropriate. In 2017, the Centers for Disease Control and Prevention estimated 34.3 million adults smoke in the United States, with a public health cost of approximately $300 billion annually.

As PPI has written in the past, a harms-based regulatory approach, like the FDA took on heat sticks, is imperative to achieving advancements in both public health and economic growth. By contrast, a regulatory approach based on precaution inherently fails to maximize economic and social benefits.

Indeed, we also applaud the FDA for paying attention to social benefits and costs. For example, with recent concern over rising youth smoking in the U.S., the FDA rightfully placed restrictions on how heat sticks are marketed to youth. The restrictions limit how heat sticks are marketed via websites and on social media by requiring advertising to be targeted to adults. Heat stick manufacturers must also notify the FDA about how they plan to restrict youth access and limit youth exposure to the products’ marketing.