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Economic Growth and Productivity Archive
| Posted: September 22nd, 2014
This post originally appeared on Eugene Steuerle's blog The Government We Deserve.
When it comes to how we spend our money, we seldom dwell on what we’re not buying. But money spent in one place cannot be spent in another. With the release of Kids’ Share 2014, the eighth in an annual series, my fellow Urban Institute researchers and I assess what share of the federal budget goes for kids and what shares go to other priorities. The word “share” is chosen deliberately: it forces us to recognize that a larger piece of the pie for someone must mean a smaller piece for someone else.
One major conclusion: despite several years of modest economic recovery and some budgetary successes for kids in previous decades, our elected officials—Democrats and Republicans, conservatives and liberals alike—have decided that kids must take it on the chin for the foreseeable future. Meanwhile, the rest of us will continue to gain, mainly when we hit older ages. Our retirement and health benefits will continue to grow, and we will continue to keep our taxes too low to pay for these benefits and the rest of government, no matter how well the economy is doing. Not that we or our elected officials would ever say this directly: you’ll be lucky to hear any discussion of these choices in any 2014 campaign.
No one votes formally to cut the kids’ share of the pie. They simply allow other shares to increase, driven by laws set in motion years and decades ago. Our priorities mainly revolve around ever more money for health, retirement, and tax subsidies, along with taxes so low that our children also get left with those bills and the higher interest costs that accompany them.
Let’s be clear: this scheduled hit on the kids’ budget does not derive from living in an age of austerity, an idea vying for first place on the list of really stupid interpretations of our current circumstances. We live in an age of extraordinary opportunity, not austerity. Despite the Great Recession, our total GDP per household (over $140,000) has never been higher. Ditto for measures of our national wealth, though those are perhaps inflated by current monetary policy. And there’s more to come. Within a little over a decade, despite lower economic growth, the budget offices project an increase in GDP per household of another $25,000 or so and increases in total government spending and tax subsidies of more than $10,000 per household.
And the kids? Well, they get close to none of it. Actually, less than none if you count out their very modest sharing in the large growth in health care spending.
It doesn’t have to be that way. For over twenty years, a consensus of sorts has developed that early educational and similar interventions, if done well, are a solid investment in our future. Yet progress here has been extremely slow. Child advocates are told that even $20 billion a year is out of reach in our “time of austerity.” But $20 billion is only about 1/40th of the expected growth in annual spending on Social Security, Medicare, and Medicaid (excluding the children’s share) by 2024. There’s also a growing consensus on creating a budget more oriented toward mobility and opportunity, but it’s still mainly rhetoric.
The simple question I’d like to ask is whether the numbers below, taken from Kids Share 2014, represent the direction that you want the government to take with the total increase in spending scheduled by 2024, a large share of which is made possible by economic growth. You can up that total or reduce it, depending upon your view of the optimal size of government. But either way, consider how you would assign the shares over the next 10 years or so. My guess is that almost none of you would allocate them this way.
- See more at: http://blog.governmentwedeserve.org/#sthash.Q6YUzhWd.dpuf
Filed under: Adolescents and Youth, Aging, Child care, Child welfare, Children, Children's health and development, Economic well-being, Economic well-being, Economic well-being, Head Start and elementary education, Neighborhoods and youth, Public and private investment, Retirement/pensions, Social Security, Tracking the economy |Tags: children, Federal, investment, kids, retirement, social security, spending Add a Comment »
| Posted: September 18th, 2014
I’ve spent the past 30 years working on child and family policy. My work focuses on children, particularly those from low-income families, and “ways to improve children’s well-being and their opportunities for success later in life,” to quote from my bio. This has meant studying economic mobility differences between blacks and whites, the school readiness of poor children, the effects of the recession on children, and, most recently, the kids’ share of the federal budget.
Sometimes sitting at a desk doing policy analysis is not enough, and in the 1990s, my interest in improving children’s lives led me to become a foster parent.
My priorities were clear. Others could work on international affairs, or environmental policies, or other big problems of the day, but I was working for better opportunities for low-income children, at home and at work.
Back then, I was sometimes frustrated that “tree huggers” took time and money away from the social and economic justice issues that affected children in this country. I’d say to myself: “Yes, protecting the environment is a good thing, but couldn’t some of the money and attention spent on spotted owls and rare tree frogs go to caring for human children?”
I now see environmental concerns differently. Climate change is not just affecting polar bears in the Arctic, but also us humans worldwide. As we see more flooding and droughts, more intense hurricane and storms, poorer air quality, less available drinking water, and threats to agriculture, we’re facing serious risks to human health. Furthermore, research has shown that children are “particularly vulnerable to adverse health effects from environmental hazards” and “will disproportionately suffer from the effects of heat waves, air pollution, infectious illness, and trauma resulting from extreme weather events.”
The elderly and those with chronic conditions also face higher health risks, but it is our children who face the prospect of seeing the earth become an increasingly harder place to live over their lifetime. And judging from asthma rates—which are disproportionately high for poor, black children—and the hardships faced by poor communities of color during Hurricane Katrina, children from low-income families and children of color are at particular risk.
Of course, people are not the only ones affected by climate change, and climate change is much broader than a child policy issue. But I now realize that if I want to work to improve children's well-being and their opportunities for success later in life, I can't just work on improving Head Start and addressing child poverty. I also need to join with climate scientists and environmentalists in working on climate change. That's why I'm traveling to New York City this Sunday, to participate in the People's Climate March. Held on the eve of the UN Climate Summit, the march is expected to bring together diverse groups of people - including at least one child policy analyst.
Photo: Eric Cote /Shutterstock
Filed under: Adolescents and Youth, Aging, Child care, Child support, Child welfare, Children, Children's health and development, Cross-Center Initiatives, Economic Growth and Productivity, Economic well-being, Economic well-being, Families, Health and Health Policy, Kids in Context, Low-Income Working Families, Public health, Social determinants of health, Social Determinants of Health |Tags: child, children, climate change, social determinants of health 2 Comments »
Carlos Martín Juan Collazos
| Posted: September 16th, 2014
Mientras el país inicia la celebración del Mes de la Herencia Hispana, muchos de nosotros involucrados en investigaciónes sobre la vivienda y el desarrollo comunitario nos recordamos de la creciente presencia de hogares latinos en comunidades tanto grandes como pequeñas. En algunas regiones, la comunidad hispana está bien establecida y ha, por largo tiempo, ejercido fuerza política, económica, y cultural. En otras regiones, incluyendo zonas rurales y ciudades suburbanas, las comunidades latinas emergentes apenas están estableciéndose.
En todo caso, las demografías “implacables”—término acuñado por los politólogos Dr. Gary Segura y Dr. Matt Barreto—son reflejadas en los compradores y propietarios de vivienda. A pesar de la reciente crisis inmobiliaria, la porción de hogares encabezados por latinos y latinas propietarios de vivienda y compradores de vivienda continúa en crecimiento.
Pero, con el Día del Trabajo en nuestro pasado reciente, nos gustaría enfocarnos en el cambio de la composición demográfica de las ocupaciones que suministran la vivienda y los servicios de vivienda. Aún antes de la crisis, este cambio fue predicho por el ex secretario del Departamento de Vivienda y Desarrollo Urban, o HUD por sus siglas en inglés, (y actual fidecomicionario del Urban Institute) Henry Cisneros en su innovador libro escrito en el año 2006 con John Rosales, Casa y Comunidad: Latino Home and Neighborhood Design.
La mano de obra hispana de la vivienda
Comparado con su contribución de15.3 por ciento de toda la población laboral activa, los hispanos/latinos desproporcionadamente ocupan una más alta tasa de trabajos en la construcción y en el mantenimiento de edificios. Como una caminata cerca de un sitio de construcción residencial puede dar testimonio, las últimas tres décadas de trabajo en construcción de vivienda han sido dominadas por trabajadores latinos. El año pasado, 55 por ciento de los instaladores de paneles de yeso (o “drywallers”) eran hispanos. En algunas regiones con altas tasa de crecimiento, como Texas y California, esta población es casi universalmente latina y, frecuentemente, inmigrante. Los salarios y beneficios que reciben, y las precauciones de seguridad establecidas por sus empleadores varían.
Las tasas de gerentes y supervisores latinos de construcción residencial también están creciendo, aunque el grupo continúe siendo subrepresentado entre profesionales técnicos, como arquitectos e ingenieros. Muchas de estas tendencias pueden ser atribuidas a diferencias en edad, estatus migratorio, y logros académicos de los hispanos/latinos comparados con otros grupos—características que también están cambiando.
Pero también hemos visto un cambio interesante en otras ocupaciones vitales, en particular entre los profesionales intermediarios que sirven como la cara de la industria para los compradores y propietarios de vivienda: agentes y corredores de venta de inmobiliarios, tasadores inmobiliarios, profesionales de título, agentes hipotecarios, y prestamistas. Los hispanos/latinos continúan siendo subrepresentados en estas profesiones, pero sus números han variado ampliamente durante el “boom,” quiebra, y recuperación del mercado residencial.
Lo que significa para los compradores de vivienda y la industria de la vivienda
El crecimiento de los latinos profesionales de finca raíz y finanzas es una evolución vital, no sólo para la población latina, pero para el sector vivienda . La literatura sobre los compradores de vivienda hispanos sugiere que la etnicidad y raza de los profesionales puede desempeñar un papel en influenciar las decisiones de la población por medio de prácticas lingüísticas, culturales, y sociales compartidas.
Agentes de bienes y raíces y agentes hipotecarios en particular tienen un conjunto de comportamientos profesionales e interacciones con los clientes que son probablemente muy influenciados por la raza, cultura, y estatus social, económico, y migratorio, del profesional inmobiliario y del comprador de vivienda. Hay evidencia anecdótica que los profesionales latinos contribuyen a la tasa de hispanos compradores de vivienda por primera vez de forma positiva (e.g. dando recursos en español) y de forma negativa (tal como vendiendo préstamos abusivos).
La llegada de organizaciones profesionales étnicas tales como la Asociación Nacional de Profesionales Hispanos en Bienes Raíces (NAHREP por sus siglas en inglés), indica el surgimiento de los hispanos al igual que la probable realidad que los profesionales continúan enfrentándose a desafíos en el sector.
Así, al mismo tiempo que los hispanos han hecho parte de una creciente porción de la población compradora de hogares, es vital observar las tendencias de los hispanos/ latinos trabajadores en la industria de la vivienda—es decir, el lado suministrador de construcción, remodelación, diseño, préstamos, y mantenimiento del sector vivienda.
Para ambas trayectorias, habrá mucho por venir.
Filed under: Children, families, and communities, Demographics and trends, Economic Growth and Productivity, Homeownership, Housing and Housing Finance, Housing and the economy, Immigrants and Immigration, Job Market and Labor Force, Labor force, Low-wage workers, Metropolitan Housing and Communities Policy Center, Tracking the economy, Unemployment, Wages and nonwage compensation, Workers and the economy Add a Comment »
Carlos Martín Juan Collazos
| Posted: September 16th, 2014
As the nation kicks off Hispanic Heritage Month, many of us involved in housing and community development research are reminded of the growing presence of Latino households in communities both large and small. In some regions, Latino communities are well established and have long exerted political, economic, and cultural strength. In others, like rural and suburban cities, nascent communities are being established.
In all cases, the “relentless” demographics—as coined by political scientists Dr. Gary Segura and Dr. Matt Barreto—are reflected in our homebuying and homeowning. Even since the recent housing crisis, Latina- and Latino-headed households’ shares of the total homeowner population and of first-time homebuyers continue to rise.
But, with Labor Day in our recent past, let’s focus on the changing demographic composition of the occupations that supply housing and housing services. This change in workforce patterns was predicted by former HUD Secretary (and current Urban Institute trustee) Henry Cisneros in his 2006 groundbreaking book with John Rosales, Casa y Comunidad: Latino Home and Neighborhood Design.
The Hispanic housing workforce
Compared with their 15.3 percent share of the current overall working population, Latinos occupy a disproportionately higher share of construction and building maintenance jobs. As a walk near any home construction sites can attest, the last three decades of homebuilding work in this country have been dominated by Latino workers. Last year, 55 percent of drywall workers were Hispanic. In some high-growth states, like Texas and California, the residential construction workforce is almost universally Latino and, often, immigrant. The wages, benefits, and safety precautions they receive vary.
Latino residential construction managers and supervisors are also growing in numbers, though the group remains underrepresented among technical professionals, like architects and engineers. Many of these trends can be attributed to differences in age, immigration status, and educational attainment of Hispanics/Latinos compared with other groups—characteristics that are also changing.
We are also seeing an interesting shift in other critical occupations, especially among the professional intermediaries that serve as the face of the industry to homebuyers and homeowners: residential realtors, brokers, appraisers, title agents, and lenders. Hispanics/Latinos continue to be underrepresented in these professions, yet their numbers have varied wildly during the housing boom, bust, and recovery.
What these changes means for homebuyers and the housing industry
The growth of Latino real estate and financial professionals is a critical evolution not just for the Latino population, but also for the housing industry. The literature on Hispanic homebuyers suggests that the ethnicity of industry professionals may play a role in influencing that population’s decisions through shared linguistic, cultural, and social practices.
In particular, residential real estate sales agents and brokers have a unique set of professional behaviors and interactions with clients that are likely very influenced by the racial, cultural, social, economic, and immigration status of both the home professional and home buyer. There is anecdotal evidence that Latino professionals contribute to the rates of Hispanic first-time homebuyers in positive (e.g., providing language-appropriate resources) and negative (such as peddling predatory loans) ways.
The advent of ethnic-based professional organizations like the National Association of Hispanic Real Estate Professionals is an indicator both of the professional emergence of Hispanics and of the reality that the professionals likely continue to face challenges in the sector.
So, as Hispanics make up an increasing share of the general US household-forming population, it is critical to look at the trends of Hispanics/Latinos working in the housing industry—that is, the supply side of the homebuilding, remodeling, design, realty, lending, and building maintenance sectors.
For both trajectories, there is more to come.
Filed under: Children, families, and communities, Cross-Center Initiatives, Demographics and trends, Economic Growth and Productivity, Education and Training, Homeownership, Housing and Housing Finance, Housing and the economy, Immigrants and Immigration, Job Market and Labor Force, Job training and apprenticeships, Labor force, Low-Income Working Families, Low-wage workers, Metropolitan Housing and Communities Policy Center, Neighborhoods and Youth Development, Tracking the economy, Unemployment, Workers and the economy Add a Comment »
| Posted: September 16th, 2014
In a time when youth unemployment rates are soaring and postsecondary education is increasingly necessary for finding a good job, programs that guide high school students toward further education and employment are critical. But while programs exist for youth who are already safely on the path toward college and for those who have dropped out of high school, not many programs focus on youth who are neither excelling nor being left behind. These youth are still in school and earning average grades, but it’s not clear that they will further their education and attain gainful employment.
One organization that does reach out to these youth is Urban Alliance, headquartered in Washington, DC. Its high school internship program serves “C-level” high school seniors in distressed communities in DC, Baltimore, Northern Virginia, and Chicago. These youth face uncertain futures; they are likely to graduate high school, but after that, their paths are unclear. Urban Alliance intervenes in their lives at a critical time, offering them training, case management and mentoring, and a paid internship at one of the organization’s employer partners.
Through our process study and baseline findings from the six-year, randomized controlled trial impact study of the program, we’ve identified five promising ways youth employment programs can help disadvantaged youth transition to higher education and employment:
- Offer both classroom-based training and experiential learning. This combination teaches skills that will help youth navigate future workplaces, classrooms, and areas of their personal lives.
- Even if most of the program is devoted to work or job training, emphasize how important higher education is to opening up future employment opportunities and boosting earnings. This can be done through program messaging, one-on-one conversations, and time devoted to education planning.
- Consider offering mentoring in more than one context, for instance through both a mentor at an internship or job site and a case manager at the program site. Many believe that a key to success for at-risk youth is having a caring adult in their lives who can help guide them, long-term. Two caring adults may be even better.
- Take advantage of schools’ capability to conduct outreach and recruitment and employers’ capability to provide youth with a meaningful internship experience. By playing an intermediary role, programs can relieve schools of a task for which they may be ill-suited, while enabling employers to deal directly with a responsive organization that can provide interns with a beginning set of skills.
- Choose employers carefully. Employers should be willing to welcome disadvantaged youth and negotiate their issues with the program’s help, rather than dismissing youth with a “one strike and you’re out” policy. Further, finding corporate or nonprofit employers that can pay youth for their work will help the program become more sustainable.
Several nonprofits are now looking to link youth to work and postsecondary schooling. For an expanded look at how the Urban Alliance model in particular is helping youth, stay tuned for two future reports detailing findings about the program’s impacts.
Photo: A mentor and his protege in Georgia. (AP Photo/Gene Blythe)
Filed under: Adolescents and Youth, Baltimore, Center on Labor, Human Services, and Population, Chicago, Children's health and development, Economic well-being, Employment, Families, Job Market and Labor Force, Labor force, Metropolitan Housing and Communities Policy Center, Schooling, Unemployment, Washington, D.C, Work support strategies, Workforce development, training, and opportunity, Youth employment |Tags: achievement, education, intervention, kids, rct, youth Add a Comment »
| Posted: September 11th, 2014
Family stability is crucial for children's health development. That's why many people at the Urban Institute, like my colleagues Gina Adams and Margaret Simms, have been working on understanding the sources of instability, how that instability affects children, and what we can do about it.
In a newly released report, my colleague Elizabeth Peters and I have looked at what happens to families when a parent becomes unemployed. We focused on the year following a job loss for families with children under age 10. Our results suggest that families become more unstable when one parent loses a job.
Perhaps the most striking finding is for children with married parents: in such families, the risk of a divorce roughly doubles when a parent loses a job.
Job loss is also bad news for children of single mothers. These children are at a higher risk of not living with their mother during the year following her job loss compared with children with single mothers who are employed. This elevated risk seems to be concentrated among single mothers with no high school degree.
While our data cannot tell us why these instabilities arise, we know that losing a job is a very stressful event. It means less money, a potentially lengthy job search, and, often, diminished self-esteem. Such stress in turn can destabilize family bonds. An important question is what we can do to support parents who lose their jobs—and the answer might be to use creative solutions to augment existing work support policies.
Government programs, most notably Unemployment Insurance and Temporary Assistance for Needy Families, provide often crucial income support for young families hit by unemployment. However, based on our research, we think that there are policy options that could make these programs even more effective for such families. These include:
- Counselling services: Aside from providing cash benefits, the government also could provide funding to support programs offering psychological counselling to the unemployed parent and other family members, including children. Such counselling could help family members cope with the new situation and thereby reduce stress in the household.
- Expanded benefits: Part-time workers who become unemployed are often not eligible for Unemployment Insurance benefits. Allowing them to receive such benefits could be especially helpful for families with young children, where part-time work is prevalent. Although expanding unemployment insurance costs more money, the benefits of doing so—ensuring greater stability for children—could outweigh these costs.
- Modify work requirements: Both programs encourage non-working recipients to find employment. Such requirements can provide incentives to get out and find work, but they can also add to existing stress, especially if parents don’t have child care. Therefore, it might be more helpful to reduce such requirements for some beneficiary groups, like young families, and provide child care subsidies for those who continue to seek employment.
These options could help mitigate the stress of job loss on families and provide some stability for children during a difficult time.
Filed under: Adolescents and Youth, Child care, Child support, Child welfare, Children, Cross-Center Initiatives, Economic well-being, Economic well-being, Employment and income data, Families, Family and household data, Family structure, Income and Benefits Policy Center, Job Market and Labor Force, Kids in Context, Labor force, Parenting, Unemployment, Wages and nonwage compensation, Work-family balance |Tags: children, divorce, instability, job loss, parents, stability Add a Comment »
| Posted: September 10th, 2014
Suppose your aunt decides to start a business making pizza ovens. She will design and build the ovens, and her daughter will manage operations. A bank is ready to lend her $100,000 to get started, but it wants someone to cosign and be on the hook if she misses any payments. She offers to pay you $6,000 to do so.
A business-savvy friend tells you that missed payments on such a loan average $2,000, usually less, occasionally much more. He also reports that $7,000 is the going rate for cosigning.
Those insights spark lively family debate. Your aunt believes her proposal is a no-brainer. She would get to start her business, your niece would get a better job, and you would come out $4,000 ahead on average. It’s a win-win-win for the family.
Your spouse disagrees. Yes, you’d net $4,000 on average, but you would get $5,000 by cosigning a similar loan in the marketplace. Your aunt is asking you to bear the financial risk of her loan without fully compensating you. In a worst-case scenario, you might end up owing the bank $100,000. You deserve to be fairly compensated for taking that risk. Cosigning would help her and your niece and may be best for the family. But the deal is not a win all around. You would be bearing real financial risk, effectively giving your aunt $1,000, and everyone in the family should acknowledge that.
Cosigning the loan would thus make you $4,000, according to your aunt, or cost you $1,000, according to your spouse. But which is it? And should you cosign the loan?
Those questions are at center stage as Congress debates the fate of the Export-Import Bank, whose charter expires September 30. The details are more complex—imagine the Bank cosigning a loan to a restaurant in Ethiopia that wants to buy an oven from your aunt—but the issues are the same.
Like your aunt, Bank proponents argue that guaranteeing loans is a win-win-win. American exporters will sell more abroad, a win for shareholders and a win for their workers. Bank fees more than cover expected losses, so taxpayers win as well. Indeed, the Congressional Budget Office estimates the Bank will net $14 billion from new guarantees over the next decade.
Like your spouse, however, others reject the idea that the Bank is really a win for taxpayers. While it might generate $14 billion over the next decade, the Bank would gain even more—$16 billion—if taxpayers were fairly compensated for the risks they would be taking. By offering loan guarantees at below-market rates, the Bank will effectively lose $2 billion over the next decade, again according to CBO.
Your view of the Bank’s profitability thus depends on what you measure it against. Official budget accounting, which shows the gain, compares the Bank’s performance to a scenario in which it doesn’t exist. CBO’s alternative, which shows the loss, compares the Bank’s performance to a scenario in which it does exist but charges fair market rates.
Both comparisons are important. The $14 billion represents the expected fiscal gain if the Bank is reauthorized for another decade, while the $2 billion represents the subsidy that exporters get from taxpayers who aren’t fully compensated for bearing new financial risks. The Bank’s specific activities are costing taxpayers, but in purely monetary terms that is more than offset by the gains from being a commercial lender.
If the Bank’s purpose were solely to make money, we’d do better to replace it with a commercial venture that operates on market terms. But making money is not the Bank’s mission. Instead, its goal is to support American exporters, particularly in competition with foreign firms that also receive government backing.
Policymakers thus confront the same tradeoffs that arise for almost any policy. The Bank creates winners and losers. Just as you need to balance the personal cost of cosigning your aunt’s loan at below-market rates against the potential benefits to your family, so must Congress balance the costs and benefits of the Export-Import Bank. It might still be worthwhile, but it’s not a win-win-win.
Follow Donald Marron on Twitter.
Photo: Songquan Deng / Shutterstock.com
Filed under: Economic Growth and Productivity, Fiscal policy, International, Job Market and Labor Force, Monetary policy and the Federal Reserve, Public and private investment |Tags: ex-im bank, export-import bank, taxpayers, treasury Add a Comment »
| Posted: September 10th, 2014
In 2013, 156,000 individuals had their Social Security benefits garnished to collect $150 million in defaulted federal student loans. This is a tiny fraction of the 63.7 million Social Security recipients, but that average of about $1,000 a year could make a real difference for affected senior citizens or disabled adults surviving on Social Security.
For most beneficiaries, the average monthly payment of $1,200 is the primary source of income. Among elderly beneficiaries, 52 percent of married couples and 74 percent of unmarried individuals receive 50 percent or more of their income from Social Security. It is not easy to know the characteristics of the individuals actually affected, but it would not be surprising if many of those whose benefits are garnished are among the 22 percent of married couples and 47 percent of unmarried recipients who rely on the program for 90 percent or more of their income.
There is no statute of limitations on garnishing Social Security payments to collect on federal student loans, although there is a limit of 15 percent of the monthly benefit, which cannot drop below $750 as a result.
The practice of garnishing Social Security for student debt payments does raise a small amount of revenue, and perhaps fear of garnishment (if it were widely publicized) could encourage some people to pay off their debts when they are due. But it seems very likely that the practice does more harm than good.
Fundamentally, the federal government is correct to hold student loan borrowers responsible for their debts. Calls to forgive all or most student debt ignore many facts. When borrowers default on federal student loans, all taxpayers—including many who have never been to college and have more limited earning opportunities than most of those who have—are left holding the bag.
Paying off student loans is no more onerous than paying off equal amounts of loans for other important expenditures. We know that students who don’t complete degrees are disproportionately likely to default on their student loans, but there is no good evidence that shows how many people default because their education did not pay off in the labor market and they really can’t afford to pay, and how many have prioritized other spending and could pay if they really believed it was important.
But garnishing Social Security benefits? There may be a few older people who are living well and just not paying their debts. And we should be sure that we don’t automatically forgive the debt of people who borrow for school after they are 55 years old. But it’s pretty likely that most Social Security recipients who still have student debt and have struggled financially in the past don’t have much discretionary income.
There is a lot of discussion about how to ease the burden on people repaying student loans. Strengthening the income-dependent repayment plans now in place would help many people who are struggling because of circumstances beyond their control. Some other proposed solutions would provide large subsidies to people who really don’t need them, at least relative to the taxpayers who would pick up the tab. But Social Security recipients are an easy group to rally behind, and protecting them would not require a big hit to the federal budget.
Garnishing Social Security payments to collect on student loans really isn’t worth it. It doesn’t put much of a dent in the outstanding debt, but it can create serious problems for the individuals affected. We need to find better-targeted ways of addressing the problems of unmanageable debt and nonpayment.
Photo: 2013 college graduates. (AP Photo/Jessica Hill)
Filed under: Aging, Asset and debts, Economic Growth and Productivity, Economic well-being, Education and Training, Employment and income data, Financial capability, Higher education, Income and Benefits Policy Center, Income and Wealth, Retirement, Retirement/pensions, Social Security, Wages and nonwage compensation |Tags: aging, elderly, garnish, social security, student loan debt Add a Comment »
| Posted: September 8th, 2014
In a speech today at the Urban Institute, Treasury Secretary Jack Lew said the agency will decide “in the very very near future” how it will respond to the recent wave of tax-motivated corporate inversions. Lew strongly urged Congress to curb the practice on its own, but suggested Treasury might move administratively if lawmakers did not act. He gave few hints about what that response would be, however.
Lew said a legislative fix should be retroactive to last May and urged Congress to act quickly, as the White House has said throughout the summer. But, he added, “The administration is clear-eyed about the possibility that Congress may not move as quickly as necessary to respond to the growing wave of inversions. Given that, the Treasury Department is completing an evaluation of what we can do to make these deals less economically appealing.”
After his presentation, a panel of tax and regulatory experts debated whether Treasury has the authority to act administratively against inversions and, if so, whether it should take such a step. Not surprisingly, the panelists disagreed. Three– Harvard law professor Steve Shay, TPC’s Steve Rosenthal , and NYU law professor Sally Katzen– suggested Treasury does have broad power to act. “There is no doubt,” said Shay. “Of course, Treasury has the authority,” said Rosenthal.
John M. Samuels, Senior Counsel of Tax Policy & Planning at General Electric Co., disagreed. “I don’t think they have legislative authority,” Samuels said. He called such rules “a dangerous precedent” that could damage the integrity of the Treasury’s tax professionals—a point that Katzen strongly rejected.
Yet Samuels seemed to support claims that these deals are structured primarily to avoid tax. Asked whether firms moving their legal address overseas costs U.S. jobs, Samuels replied, “No jobs leave the U.S…, no capital leaves the U.S….management can still stay.”
The panelists agreed with Lew that even if Treasury has authority to curb inversions, it would be far better—and more effective—for Congress to limit the practice, even if that statute fell short of broad-based corporate reform.
Even Steve Shay, who has been an outspoken advocate of Treasury action, acknowledged that regulations could only limit—but not stop—inversions. “Some deals would still go forward,” he said, “to the extent they are good business deals.”
Katzen noted that agencies can interpret that law, but not rewrite it. And she added that it is much more difficult for Treasury to impose retroactive limits on an activity than it is for Congress to adopt curbs on past transactions.
The panelists also disagreed on the urgency of the problem. Shay said the recent wave of inversions has already pulled a substantial amount of money out of the corporate tax base: “We’re talking about real money.” But, he added, the real issue is about “protecting the integrity of the tax code.”
Samuels disagreed, insisting “the house is not on fire” and argued that, based on congressional Joint Tax Committee estimates of the revenue that could be generated by anti-inversion legislation, relatively few dollars are at stake.
The panelists also disagreed over what anti-inversion regs would mean for corporate tax reform. Samuels predicted Congress could approve such a measure within two years but argued that Treasury would slow the effort by aggressively imposing regulatory curbs on inversions. “Comity,” he said, “would be destroyed.” But Katzen suggested it was already hard to find comity on Capitol Hill. Samuels’ argument, she said, “is not very persuasive.”
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