10 years ago tomorrow, the first of the Bush tax cuts was enacted. That 2001 tax cut was followed up by a second tax cut in 2003, passed after Vice-President Dick Cheney reportedly asserted that “deficits don’t matter.” The tax cuts were sold as necessary economic stimulus that would boost job creation and a moribund economy. “Tax relief will create new jobs, tax relief will generate new wealth, and tax relief will open new opportunities,” Bush said on April 16, 2001 as he was pushing for the passage of the first tax cut. Two years later he said, “These tax reductions will bring real and immediate benefits to middle-income Americans…By speeding up the income tax cuts, we will speed up economic recovery and the pace of job creation.”
Bush called the 2001 tax cut, “a victory for fairness and a vote for economic growth.” Then-Speaker of the House Dennis Hastert (R-IL) said that the cuts were necessary to “spur the economy on.” And up through 2008, Bush was still convinced that his tax cuts had been good for the economy. “I think when people take a look back at this moment in our economic history, they’ll recognize tax cuts work. They have made a difference,” Bush said. However, the record of the Bush tax cuts is undeniable: their enactment coincided with the weakest economic expansion of the post-war period, blowing up the national deficit and debt, while not bringing any of the promised gains.
Our guest blogger is Julie Morgan, a Policy Analyst with the Postsecondary Education Program at the Center for American Progress Action Fund.
Last week, the Department of Education released a rule called “gainful employment” that requires career education programs to account for their students’ outcomes upon graduation. The final regulation was significantly different from the draft rule proposed last July, a response to the intense lobbying effort on behalf of for-profit colleges whose soaring profits were put in jeopardy by the strong draft rule.
The basic premise behind the rule remained the same: it conditions access to federal financial aid on a programs’ student loan repayment rate and its graduates’ debt-to-income ratio. The most significant changes in the final rule are in the timeline of its enforcement and the method of calculating the debt burden and repayment rate metrics. Here is a run-down of the most significant differences between the rule proposed in July 2010 and the final regulation:
Sanctions begin in 2012.
Sanctions begin in 2015.
Programs with high debt burdens and low student loan repayment rates lose eligibility for aid after one year.
Programs with high debt burdens and low loan repayment rates can receive federal aid for three years before losing eligibility.
Programs with fairly high (but not highest) debt burdens and mid-to-low (but not lowest) loan repayment rates must restrict enrollment growth and warn students of the potential for high student loan debt.
No restrictions on programs other than those with the highest debt and lowest repayment rates.
Calculation of students’ debt burden includes all the education-related debt a student took on.
Calculation of student debt burden includes only the debt used to pay tuition and fees
Students are considered to be repaying their loans only if they are paying down the principal on their loans.
Students are considered to be in repayment even if they are only paying interest on their loans.
5 percent of the programs affected by the rule are likely to lose their financial aid.
Only 2 percent of the programs affected are likely to lose financial aid.
It’s clear that the new rule gives colleges much more time to come into compliance and makes it easier to meet the individual metrics. In short, it’s weaker. So besides wondering how special interest groups that represents a tiny group of colleges could come to control a debate that should have been about low-income students and the taxpayers who help them go to college, the question that comes to mind is: What we should do now? Read more
Last week, Florida Gov. Rick Scott (R) — buoyed by legislators who received hundreds of thousands of dollars of special interest cash — signed into law legislation that would dramatically expand access to school vouchers, which funnel taxpayer dollars into private schools. Scott is doing this despite proposing nearly $3 billion in cuts to public education, meaning that he is essentially transfering money from public education to private education.
On the same day that Scott signed into law his latest attack on public education, Gus Garcia-Roberts of the Miami New Times published a story looking at the case of InterAmerican Christian Academy, a private school located in Doral, Florida. Garcia-Roberts amazingly enrolled at the school and earned a diploma after only eight days of schoolwork and $399:
It began with a poster on a streetlight in downtown Miami: “High School Diploma. (305) 716-0909.” I dialed, and a chipper female voice answered, “Hello. High school.” Eight days and $399 in cash later, at the school’s Doral “campus” — a cramped third-floor office next door to US Lubricant LLC and across the hall from a hair extensions company — I was grinning widely, accepting a framed diploma and an official transcript sporting a 3.41 GPA.
The diplomas that the school is offering are actually getting students admitted to local colleges. The paper found that at “least 88 graduates have used its diplomas and bogus transcripts to gain admittance to Miami Dade College, according to that institution’s registrar.” Remarkably, the state’s Departmenf of Education (DOE), when asked about the school, said that it is powerless to stop it from rewarding diplomas. “If a school like that exists,” said Cherry Etters of the Florida Doe, “we might know about it, but we can’t really do anything.”
As Garcia-Roberts concludes, “There’s no telling how many of Florida’s 1,713 private schools — which educate a third of a million students — are run like InterAmerican. Even as Gov. Rick Scott leads a charge to privatize education on a historic scale, our state’s private schools are among the least regulated in the nation.” Indeed, Florida currently leads the country in “school choice” programs that include tax credits for private schools, voucher programs, and privately managed charter schools. The case of InterAmerican Christian Academy provides a cautionary tale about some of the pitfalls of the proliferation of lightly-regulated or unregulated private schools.
ThinkProgress filed this report from the Faith and Freedom Conference in Washington, DC.
As the debt ceiling fight drags on, many Republicans are dismissingconcerns about the effect a default could have on our national economy. ThinkProgress spoke with one such GOPer, Rep. Ron Paul (R-TX), over the weekend to get his thoughts about what would happen if we pass the August 2nd deadline without raising the debt ceiling.
Paul, who is running for president, claimed we are already in default but that the government was mitigating the effects through inflation. He downplayed concerns that not raising the debt ceiling by August 2nd would lead to financial collapse, arguing instead that it might be a “positive thing” because it would allow us to symbolically show we’re “serious”:
KEYES: Congressman, there’s been a lot of heated rhetoric about this upcoming debt ceiling fight. Do you think it’s really going to be that bad if a default were to happen come August 2nd?
PAUL: Well, they’re not going to let it happen. They’re going to do it. But I try to tell people, a default is already occurring, it’s just how they do it. Governments always default, but most of the time, they don’t quit paying their bills because they’ll just print the money. They default by giving you money back that doesn’t have as much value and that’s when prices go up. So that’s how they’re defaulting and since there’s inflation back and hurting us, there’s plenty of default going on right now.
KEYES: Do you think though if we avert this August 2nd deadline by passing an increase in the debt ceiling, we’re missing an opportunity to perhaps teach a lesson like you’ve been talking about?
PAUL: No, I think if you didn’t raise it, people say it would be the end of the whole system, but maybe people will say, “hey, maybe they’re serious!” And maybe it would be a positive. That’s what we should do because if we continue to do this, we’ll destroy the dollar.
KEYES: It could be a positive thing though?
PAUL: I think it’s possible, but it’s not predictable.
When Rep. Michele Bachmann (R-MN) proposed a similar idea in April, Washington Post writer Ezra Klein called it “The scariest thing I’ve ever heard on television.” The result would be an “economic death spiral” of skyrocketing interest rates and the end of the dollar “as the world’s reserve currency.”
Sen. Lindsey Graham (R-SC), a leading voice on the right, told CNN that failing to raise the debt ceiling would result in “financial collapse and calamity throughout the world.” Even House Majority Leader Eric Cantor (R-VA) told ABC News today that he doesn’t “question the Secretary of the Treasury” on his August 2nd deadline to raise the debt ceiling in order to prevent catastrophic economic consequences.
An analysis by Michael Ettlinger at the Center for American Progress found that “failing to raise the debt limit for two months could cause a bigger GDP drop than that experienced during the Great Recession of 2008.” Last week, the rating agency Moody’s threatened to downgrade the United States’ credit rating if the debt limit isn’t increased.
Yet for Republicans like Paul and Bachmann, such dire warnings fall on deaf ears.
On May 27, tens of thousands of protestors once again took to Egypt’s Tahrir Square for what was billed as a “Second Day of Rage”: protests aimed at criticizing the slow pace of reform in the country and the lack of clarity regarding the fate of former President Hosni Mubarak. (A few days before the protest, the military announced it would try Mubarak.)
Even though it is no longer ruled by Mubarak, Egypt still has several huge problems, not the least of which is its moribund economy. Youth unemployment in the country is running at 30 percent, and the official overall unemployment rate is 11.9 percent (and there’s good reason to believe that number is too low). The growth outlook is poor and there’s little clue as to where the country’s economic policies will go under whatever government comes in next.
Independent labor movements, though, are trying to set things off in a new direction. Under the Mubarak regime, independent trade unions were outlawed, and the only legal unions were overseen by the state. But that has now changed. ThinkProgress spoke with Kamal Abbas, general coordinator of the independent and now legal Egyptian Centre for Trade Unions and Workers Services (CTUWS), who said that the independent labor movement is still getting its feet under it, and European and American unions can help the nascent independent Egyptian movement wield its new-found set of rights:
We can’t really say that there’s a role for [independent labor] quite yet, because the unions are still in the process of formation…Independent unions are going to create the basis for the negotiation between the businessmen and the workers. The two sides of the productive process. […] Unions in Europe and the United states [can play] two roles [in helping Egyptian independent unions.] Helping them in establishing their unions here. Training union workers about the management of the unions, empowering them, training them in negotiations.
As Sabina Dewan, the Director of Globalization and International Employment at the Center for American Progress, wrote, there are several ways the international community can help the burgeoning Egyptian labor movement:
The international community must ensure that the right to freedom of association and collective bargaining are written into law as Egypt establishes a new constitution and government…The international community must help equip the newly formed independent federation with the tools and training it needs to represent and coordinate newly formed trade unions to secure a unified labor movement that protects and promotes the rights of workers through public policy and with employers.
Finally, any support that the international community provides the Egyptian labor movement must include an effort to strengthen the representation of women, and the active role that women play in the labor movement as Egypt undergoes democratic reform. Empowering Egyptian women in the labor force and in politics is crucial to the country’s economic modernization.
Pawlenty Has Significant Money Ties To Mega-Bank Morgan Stanley |
The Center for Public Integrity notes that, “in the last election cycle, Morgan Stanley executives donated $79,500 to [2012 GOP hopeful Tim] Pawlenty’s Freedom First PAC, more than any other company’s executives except for Federated Insurance, according to the Center for Responsive Politics…Morgan Stanley executive Bill Strong, co-chair of Pawlenty’s GOP presidential campaign, has been spearheading much of the fundraising.” Pawlenty, like most of the financial industry’s biggest players, has been a skeptic of the Dodd-Frank financial reform law.
In the course of his announcement speech this morning, former Senator Rick Santorum (R-PA) engaged with the important debate over monetary policy in a curious way, ranting that President Obama “has devalued our currency and devalued our culture, debased our dollars and our moral currency.” This was followed by something about abortion. The connection between exchange rates and reproductive rights isn’t immediately apparent, and thinking about the issue in those terms is likely to lead to bad public policy.
As you can see, the George W Bush administration was associated with a large and persistent fall in the value of the dollar. Then the global financial crisis led to a sharp increase in the value of the dollar, and since that time we’ve returned to the late-Bush level. It would be interesting to know what abortion policies or general devaluation of our culture Santorum thinks is responsible for this. What’s more, we may be continuing the general Bush-era trend. That’s because several large developing countries—most notably China, India, and Brazil—are growing quite rapidly. An increase in the value of their currencies is a natural response to increased production and increased wealth, and it mandates a fall in the value of other major global currencies.
The truth of the matter is that what America needs right now in economic terms is further increases in the price of foreign money, especially Chinese money. The People’s Republic of China pursues a policy of deliberately undervaluing Chinese money in order to make Chinese-made manufactured goods artificially cheap. This gives America some cheap manufactured goods, but it exacerbates manufacturing unemployment and reduces living standards in China.
2012 Republican hopeful Mitt Romney is banking on his economic credentials as a former businessman to bolster his presidential prospects. “I believe it’s time for someone who’s had a job do the job of getting jobs for the American people,” Romney said over the weekend.
However, Romney’s supposed business acumen doesn’t come through when it comes to discussing the federal budget. Romney has decided, like so many other conservatives from both sides of the aisle, to hang his hat on a federal spending cap in order to balance the budget. As he said in his announcement speech last week:
I will cap federal spending at 20 percent or less of the GDP and finally, finally balance the budget.
But Romney the businessman should know that attempting to balance the budget without paying attention to both sides of the federal ledger — spending and revenue — doesn’t work. After all, when he was working on business, would he have tried to budget without taking into account how much money his business was bringing in?
Romney’s proposal is similar to the CAP act proposed by Sens. Bob Corker (R-TN) and Claire McCaskill (D-MO), which would cap federal expenditures at 20.6 percent of GDP. As I pointed out here, even if a cap were strictly adhered to, the deficit could still be huge, depending on how much revenue the government brings in. After all, capping spending at 20 percent of GDP wouldn’t come close to balancing the budget if revenue were consistently 16 percent of GDP.
By ignoring revenue — which is at a 60 year low — Romney is proving that he doesn’t really care about the deficit. He just cares about getting government spending down to an arbitrary level, whether or not doing so is good for the economy, prevents the government from making important investments, or results in a balanced budget.
Lori Montgomery’s reporting in the Washington Post makes clear, though it doesn’t explicitly come out and say, that if you oppose reductions in federal spending in the United States then today you have no more influential friend than Grover Norquist. Right now you have a debate on Capitol Hill in which the pivotal players, moderate Democratic Party legislators and the Obama White House, want to reduce spending. But the deal’s not getting done since conservative Republicans aren’t taking yes for an answer.
And it’s Norquist who’s playing the biggest part in feeding rejectionism:
On Capitol Hill, Norquist has admonished Coburn (Okla.), Crapo (Idaho) and Chambliss (Ga.) for suggesting a tax option for tackling the debt: reducing credits and deductions worth an estimated $1 trillion a year. Although most of the cash would be used to lower tax rates for everyone, a portion would be dedicated to restoring national solvency.
No good, says Norquist’s group, Americans for Tax Reform. Under the pledge, raising revenue in any way requires an equal tax cut elsewhere to avoid expanding the size of government. And, yes, that sometimes means protecting tax breaks that Republicans view as bad public policy, Norquist and his supporters say.
Follow the logic here. According to the Norquistian theology, a good small-government conservative can’t agree to close a tax loophole that’s bad public policy in order to entice Democrats into agreeing to spending cuts. You can’t achieve efficiency enhancing reforms to the tax code by using the prospect of enhanced revenue as a sweetener, and you can’t broaden the coalition for spending cuts by using enhanced revenue as a sweetener. So the tax code stays inefficient and the spending level stays high, all so the members of the True Faith can be unsullied in the purity of their complaints about the inefficiency of the tax code and the high level of spending.
Former Senator Rick Santorum (R-PA), who in 2006 was trounced by Sen. Bob Casey (D-PA), is officially launching his presidential campaign today. Santorum has been makingtherounds in Iowa, South Carolina and New Hampshire in preparation for his bid, laying out a radical right-wing platform.
Santorum appeared this morning on ABC’s Good Morning America, before making his official announcement speech. When asked what makes him a viable candidate, considering the way his last campaign ended, Santorum replied that it is his principled conservatism, including his stalwart support of President Bush’s push to privatize Social Security:
What people are looking for is someone who has stood by their principles in good times and in bad. In 2006, I think by everybody’s estimation, was a pretty bad time for a Republican, and particularly for a conservative in states like Pennsylvania. And I stood up and I didn’t back away. I didn’t back down on trying to reform the Social Security system. President Bush, you know, went out after the 2004 election, said ‘we’ve gotta do something because Social Security’s unsustainable.’ In an election year, I went out on the floor of the United States Senate with Jim DeMint and started arguing for reforming Social Security. Not even Paul Ryan in his budget now, in the face of trillions of dollars of deficits currently, had the temerity to step forward and say we have to do Social Security.
When Santorum continually says “reform” Social Security, he means privatize. After all, in a 2005 op-ed, he wrote:
Personal retirement accounts provide individuals—not the government—with control and ownership. And they hold the promise of a greater return for future generations than what they are promised by today’s Social Security system. If we act now, we can establish personal retirement accounts and lessen the need for painful alternatives down the road.
“We have the opportunity to take a system that we know — we know — is going to need either benefit cuts or tax increases to remain solvent and at least give the opportunity to have little to no tax increases and little to no benefit cuts to solve the problem. That, to me, is the great hope that personal accounts, you know — come with personal accounts,” Santorum has also said. In addition, he has endorsed raising the retirement age to 70.
Santorum endorsed personal accounts in August 2010 during an appearance on Fox Business, even though the 2008 financial crisis showed what a folly those sort of accounts would be. But Santorum is not cowed, using his first interview on his official launch day to remind everyone that this is a policy that he wholeheartedly supports.
[W]e should all worry about how distorted the confirmation process has become, and how little understanding of monetary policy there is among some of those responsible for its Congressional oversight. We need to preserve the independence of the Fed from efforts to politicize monetary policy and to limit the Fed’s ability to regulate financial firms.
Concern about the (seemingly low) current risk of future inflation should not erase concern about the large costs of continuing high unemployment. Concern about the distant risk of a genuine inability to handle our national debt should not erase concern about the risk to the economy from too much short-run fiscal tightening. [...]
Skilled analytical thinking should not be drowned out by mistaken, ideologically driven views that more is always better or less is always better. I had hoped to bring some of my own expertise and experience to the Fed. Now I hope someone else can.
Diamond is correct to worry about an oversight process where key players possess neither the knowledge to do their job nor the humility to get out of the way of people who do. Shelby’s absurd claim that a man who was recently recognized as one of the world’s leading economists is unqualified to sit on the Fed does nothing more than reveal Shelby’s lack of seriousness. And, on the House side, monetary policy oversight is even worse. Rep. Ron Paul (R-TX), who chairs the subcommittee overseeing monetary policy, has claimed that paper money is “nothing short of counterfeiting,” and has even called the U.S. dollar unconstitutional.
This is a recipe for disaster. If Senate Republicans want to actually take the time to learn something about the matters they oversee, than they have a duty to bring their expertise to bear in judging nominations. So long as they insist upon valuing ideology over knowledge, however, they should keep their ignorant hands away from things that they clearly do not understand.
Welcome to ThinkProgress Economy’s morning link roundup. This is what we’re reading. Have you seen any interesting news? Let us know in the comments section. You can also follow ThinkProgress Economy on Twitter.
The New York Times notes the “mismatch” between federal foreclosure prevention programs and the reality that most foreclosures are now driven by unemployment.
GOP candidates find energy subsidies hard to quit, notes Politico.
More than one-third of likely voters “expect to be worse off [economically] when they go to the polls a year from this November,” according to a new survey from The Hill.
Goldman Sachs plans to respond to a Senate subcommittee investigations into its practices before the financial crisis by accusing the subcommittee “of drastically overstating Goldman’s bets against the housing market in 2007.”
Swing states continue to struggle with the housing bust, the Washington Post reports.
“Extra capital requirements for super-large financial firms should be bigger for those that pose the greatest risk of destabilizing the financial system,” Fed governor Daniel Tarullo explained.