As a growing number of Americans slip out of the middle-class into economic insecurity, they are increasingly vulnerable to predatory lending schemes like the payday loan. Each year, about 12 million Americans incur long-term debt by taking out a short-term loan that’s intended to cover a borrowers’ expenses until they receive their next paycheck. Payday lending takes “unfair advantage of lower-income borrowers,” with most taking out nine repeat loans per year with an interest rate as high as 400 percent. Forty-four percent of borrowers ultimately default, even after paying back their loans several times over, and thus are pushed ever closer to poverty.

But, as a new National People’s Action report shows, one borrower’s poverty is a payday lender’s profit. The report finds that lenders “take at the very least $3.4 billion” from low-income communities every year in fees alone. Titled “Profiting Off Poverty,” the report describes how payday lending companies open in areas isolated from traditional banking options to ensure they are the only available line of credit. Faith and Public Life reports:

While payday lenders prey on the most vulnerable and drive the poor into never ending cycles of indebtedness, the lending institutions reap huge profits by borrowing from big banks like Wells Fargo, JPMorgan Chase, US Bank and Bank of America at extremely low interest rates, “which they in turn lend out as payday loans charging between 260% and 570% APR”.

As the “Profiting off Poverty” report details, these companies continue to make record-breaking profits by setting up in neighborhoods isolated from traditional banking options. With more payday lending locations than McDonald’s restaurants in the U.S., these companies gladly admit that they are often the only available line of credit for people in poverty.

Major banks like Bank of America, JPMorgan Chase, and Wells Fargo finance about 42 percent of the entire payday loan industry in the U.S. Those loans strip $3.1 billion in wealth from low-income, working poor who are literally trying to pay bills from paycheck to paycheck. This kind of scheme exemplifies the need for an agency like the Consumer Financial Protection Bureau, and indeed is the subject of the bureau’s first public hearing today in Alabama.

Newly-appointed bureau head Richard Cordray intends to research the industry and its enforcement actions that pose “immediate risk to consumers and are clearly illegal.” Endeavoring to answer whether regulation of the industry is necessary or whether the practice should be “explicitly restricted,” Cordray said that the goal will be “to develop a more vibrant, competitive market for small consumer loans.”

Kansas Gov. Sam Brownback (R) has a new tax plan that he is touting as “fairer, flatter, and simpler.” “My plan will lower individual income tax rates for all Kansans,” Brownback claims.

While it’s true on paper that all rates would go down under Brownback’s proposed tax overhaul, it’s certainly not true that all Kansans would be paying lower taxes. Because Brownback’s plan eliminates a variety of credits and deductions upon which lower and middle income taxpayers depend, it would actually increase taxes on low- and middle-income families, while still cutting them for Kansas’ richest one percent. According to the Institute on Taxation and Economic Police, under the plan:

– The poorest 20 percent of Kansas taxpayers would pay 2.2 percent more of their income in taxes each year, or an average increase of $242.

– The middle 20 percent of Kansas taxpayers would pay 0.3 percent more of their income in taxes each year, or an average increase of $146.

— Upper-income families, by contrast, reap the greatest benefit with the richest one percent of Kansans, those with an average income of over a million dollars, saving an average of $16,933 a year.

As ITEP put it, “Governor Brownback’s tax reform proposal would actually make the Kansas tax structure more unfair and ensure that low and middle income families pay more, while dramatically decreasing state taxes owed by the wealthiest Kansans.”

Kansas’ own Department of Treasury came to the same conclusions, finding that low-income Kansans would see their taxes go up under the plan, sending Brownback’s administration into damage control. And so far, state lawmakers aren’t lining up to lend the plan their support.

“It’s been Robin Hood in reverse,” said state Senate Minority Leader Anthony Hensley (D). “What we are doing is stealing from the poor to give to the rich.” “It’s a significant problem in the eyes of many legislators because it appears to be increasing taxes for the poor and decreasing taxes for the rich,” added state Sen. John Vratil (R).

It may seem intuitive that states that invest more in public services are better places for children to grow up, but the Foundation for Child Development now has the numbers to prove it. The foundation is out with a new study that confirms the “strong relationship” between higher state taxes and children’s health.

The study used a comprehensive Child Well-Being Index (CWI) to assess children’s quality-of-life in each state. Some of the key findings include:

Higher State Taxes Are Better for Children: States that have higher tax rates generate higher revenues and have higher CWI values than states with lower tax rates.

Public Investments in Children Matter: The amount of public investments in programs is strongly related to CWI values among states. Specifically, higher per-pupil spending on education, higher Medicaid child-eligibility thresholds, and higher levels of Temporary Assistance for Needy Families (TANF) benefits show a substantial correlation with child well-being across states.

A Child’s Well-Being Is Strongly Related to the State Where He or She Lives: Child well-being varies tremendously from state to state, ranging from a 0.85 index value for New Jersey, the highest ranked state, to a negative 0.96 index value for New Mexico, the lowest-ranked state.

Ruby Takanishi, the president of the organization, explains that state spending has a particularly large impact on children “because less than 10 percent of the federal budget is invested in children’s programs.” “With this new measure, we can see proof of the direct impact of state policies: when states invest in children, children do better,” she said.

Last year was a tough one for public sector workers. Lawmakers in Wisconsin passed a controversial bill stripping collective bargaining rights from most state employees. Ohio approved similar legislation (although Ohio voters soundly rejected it in a referendum). Other officeholders, like Indiana Gov. Mitch Daniels, claimed that government workers are better paid than private-sector employees, despite all the evidence to the contrary. Meanwhile, 600,000 government workers have lost their jobs since the beginning of the recession.

But things have not always been this way. In fact, 50 years ago this week, President John F. Kennedy signed Executive Order 10988, which allowed most federal workers to bargain collectively for the first time. As Prof. Joseph McCartin writes in the Los Angeles Times, the effects of Kennedy’s order were much more extensive than that, and, at the time, more popular:

At the time Kennedy acted, very few workers at any level of government had won the right to bargain collectively with their employers. Federal action helped inspire many states and localities to follow suit, allowing their own workers to organize. This triggered a huge wave of unionization in the public sector that saw firefighters, teachers, sanitation workers, social workers and many others form unions in the 1960s and ’70s.

For 20 years after Kennedy’s order, public sector union rights were not controversial. To the contrary, they enjoyed bipartisan support — even from conservatism’s leading light, Ronald Reagan. Reagan, as governor of California, presided over the extension of collective bargaining rights to state and local workers in 1968.

So how have we ended up here, with unions a favorite target of conservatives? McCartin argues that much of the decline in public support for bargaining came from Reagan breaking the Professional Air Traffic Controllers Organization strike in 1981. This event was cited by Wisconsin Gov. Scott Walker (R) when he went on his union-busting rampage.

Blaming public sector workers for government’s fiscal woes may be popular, but the facts don’t support that thesis. As McCartin notes, North Carolina (a state without collective bargaining) is projected to have a 10 percent budget deficit for the 2013 fiscal year, compared to 3.5 percent for New York (more densely unionized than any other). In the case of the federal deficit, studies show that the lion’s share of the increase has come from Bush-era policies like the wars and tax cuts, as well as the effects of the recession. Pay for federal workers does not come close to registering.

One topic that rarely gets discussed is how much unions have actually done to benefit everyone — such as giving us the weekend and ending child labor. Nor do we hear much about the correlation between union membership rates and middle-class incomes, nor how a drop in union membership has exacerbated income inequality in the U.S.

– Zachary Bernstein

The Great Recession has steadily eaten away at the economic security of many Americans. Facing stagnant wages, growing unemployment, and rising health care costs, nearly 50 percent of Americans are slipping from the shrinking middle-class into low-income status or even poverty. In 2009, President Obama signed the American Recovery and Reinvestment Act (ARRA) in order to bolster job creation and fend off an even more severe downturn. The ARRA passed without a single House Republican vote, with House Budget Committee Chairman Paul Ryan (R-WI) calling it a “woefully inadequate” response.

However, a new report from the National Alliance to End Homelessness reveals that the Recovery Act was vital in keeping Americans off the street. An estimated $1.5 billion of Recovery Act funds were directed towards “rental assistance and programs steering recently evicted people toward new housing.” According to Alliance President Nan Roman, those funds were instrumental in keeping the number of homeless down “even as the U.S. economy saw its worst downturn since the 1930s”:

The Homelessness Research Institute, the educational arm of Roman’s organization, put the number of Americans living on the streets or in shelters at just over 636,000 in 2011. That’s down about 6,000 from the group’s 2009 estimate. The figure is based on reports and street counts from state and local agencies that receive federal housing funds.

Roman said the stimulus money, coupled with pre-recession federal programs aimed at veterans and the chronically ill, have kept that figure down even as the U.S. economy saw its worst downturn since the 1930s. But that money is drying up now that the Obama administration, Congress and the states are grappling with budget issues fueled by the recession.

In fact, the Homelessness Prevention Rapid Re-housing Program (HPRP) program alone, which was directly funded by the Recovery Act, helped 94 percent of the program’s participants who were homeless or a step away from homelessness find permanent housing. The Recovery Act also kept 6 million Americans out of poverty and created at least 3.3 million jobs.

But ARRA funds are running out and, as the report notes, the number of Americans facing the prospect of homelessness is continuing to rise. More than 4 million homes were foreclosed upon since 2007 and the New York Federal Reserve estimates that 3.6 million more will be lost to foreclosure in the next two years. If Republicans continue to slash these housing programs, thousands of vulnerable Americans will face the exact situation the Recovery Act helped successfully prevent.

Rick Santorum, who following a recount may very well have been the winner of the Iowa caucus, has released a tax plan that, like those of all his competitors, would overwhelmingly aid the wealthy while doing next to nothing for the middle class. In fact, 40 percent of the benefit of his plan would go to the richest 1 percent of the country.

Not only that, but as the Tax Policy Center found, Santorum’s plan would blow a $1.3 trillion hole in the budget, gutting federal revenue by about 40 percent:

The Santorum plan would reduce federal tax revenues substantially. TPC estimates that on a static basis, the Santorum plan would lower federal tax liability by about $1.3 trillion in calendar year 2015 compared with current law, roughly a 40 percent cut in total projected revenue. Relative to a current policy baseline, the reduction in liability would be about $900 billion in calendar year 2015.

“I was surprised at how large the revenue losses were,” said TPC’s Roberton Williams. “It’s a lot of rate cuts and doesn’t get rid of anything to help pay for that.”

The average tax cut for a millionaire under Santorum’s plan would be nearly $448,000. For the richest 0.1 percent of the country, the tax cut would be worth $1.3 million annually. Santorum often complains that the deficit “is exploding,” but his plan would do nothing to turn around the nation’s budget woes, instead spending trillions to cut taxes for those at the very top of the income scale.

As 2011 progressed, Americans overall saw a slowly decreasing unemployment rate, ticking down from 9.1 percent in January to 8.5 percent in December. However, a new report from UC Berkeley reveals that the unemployment rate for African Americans stayed almost exactly the same. In January of 2011, the unemployment rate for African Americans stood at 15.7 percent. In December, it stood at 15.8 percent.

Even as the underlying factors affecting the overall unemployment rate (employment level, unemployment level, and number of people not in the labor force) changed, African-Americans saw “virtually no movement” in their official rate. The report compares the unemployment rate change by race:

Many factors are contributing to the stubbornly high unemployment rate of African-Americans. Since the recession began, at least 600,000 public sector jobs have been sacrificed for budget cuts. These layoffs fall heaviest on African-Americans, as “about one in five black workers have public sector jobs, and African-American workers are one-third more likely than white ones to be employed in the public sector.” Economists also note that the younger age of the African-American workforce, the lower number of college graduates, and the larger number living in low-income areas that were harder hit by the recession are all keeping the rate as high as it is.

Whatever the reasons, the trend is certainly disturbing. As the report notes, “Black male unemployment rates have fallen slightly and Black female unemployment rates have risen. In contrast, unemployment rates for white men and white women have fallen over the same time period.”