Republican Senate Nominee Who Thinks Government Shouldn’t Borrow Has Personal Debt

By Josh Israel on May 6, 2013 at 5:01 pm

Senate nominee Gabriel Gomez (R-MA)

Gabriel Gomez, the Republican nominee to fill John Kerry’s open Senate seat in Massachusetts, is running on a platform of Congressional reforms including a constitutional balanced budget amendment. But while he is using the recycled talking point that the federal government should model itself on businesses and families and stop spending more money than it takes in, a ThinkProgress examination of his own financial disclosure filings reveals that he has taken out debt of his own.

Gomez, a wealthy private equity investor who was paid more than $993,000 last year in salary and bonuses, won last Tuesday’s Republican primary and will face Rep. Ed Markey (D) in the June 25 Senate special election. The cornerstone of his campaign is his plan to “reboot Congress.”

In addition to proposing unconstitutional legislative measures including a line-item veto and a “No Budget No Pay” law, he suggests Congress should enact a dangerous Balanced Budget Amendment to the U.S. constitution.

He explains:

BALANCED BUDGET AMENDMENT: Massachusetts has to balance its budget, and so does every family and every business. The federal government should do the same.

Government is nothing like a business and cannot be run as one — its aim is to protect its citizens, not to turn a profit. But even businesses and individuals often borrow in the short term to make investments for the long term — mortgages, lines of credits, and other sorts of loans are facts of life for millions of Americans and businesses of all sizes. Start-up businesses rarely break even for the first several years and few people can afford to buy their first home outright or pay for their kids to go to college out of pocket.

None of this should come as news to Gomez, who himself has borrowed money. His financial disclosure form reveals that despite his massive holdings and income, he took out a student loan in 2010. The debt, currently between $50,001 and $100,000, is to be paid back over a 23-year term at a 3.5 percent interest rate.

And his former company? It’s website’s frequently asked questions section says:

Does Advent use external debt as well as equity to finance its investments?
Yes, we do use third party debt financing as well as equity to finance our investments. This is typical industry practice. However, we take a very prudent approach to the use of debt.

A 2011 study by the non-partisan Center for Budget and Policy Priorities found that a Balanced Budget Amendment could throw about 15 million more people out of work, double the unemployment rate from 9 percent to approximately 18 percent, and cause the economy to shrink by about 17 percent instead of growing by an expected 2 percent.

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Birth Control Prices Are Higher In Some Low-Income Areas

By Bryce Covert on May 6, 2013 at 3:30 pm

A new study has found something surprising: the price of contraception not only varies by zip code, but is more expensive in low-income areas. Researchers at the University of Tennessee analyzed cost data from a website that provides pricing information on common prescriptions for uninsured consumers without federal discounts or supplemental plans and found price variations by income level:

Researchers focused on the price of seven commonly-used contraceptives — including various forms of the pill as well as transvaginal options like the ring. They cross-referenced the price information across various counties with median household incomes from the 2010 census.

Nearly every prescription contraceptive was more expensive in low-income zip codes, the researchers found.

In most cases, price differed by just a few dollars. For two of the contraceptives, the cost was significantly less in the wealthiest zip codes.

The researchers weren’t able to conclude why prices would vary so much by the incomes of the residents in a particular area. One speculated that it may be due to a lack of large chain pharmacies that can offer lower prices.

The wide variation in birth control prices isn’t unique to Florida: A survey conducted in New York, New Jersey, and Connecticut found that the price of one popular birth control, Tri-Sprintec 28, cost anywhere from $9 to $63, and Yaz-28 ranged from $68 to $112, with some reaching as much as $1,000. Contraception can be extremely expensive for women without insurance, with the costs of birth control pills coming to $1,210 a year on average.

While these figures are only for women who don’t have insurance to help cover the costs, contraception can be expensive even for insured women. Women with private insurance pay about half the total costs of oral contraceptives, while typical out-of-pocket costs for all other drugs is only 33 percent. The Affordable Care Act includes a provision that would eliminate co-pays for contraception.

Yet even with the high price tag, contraception has a big impact on women’s economic outlook. In a recent survey, a majority of women said that birth control helps them support themselves financially, complete their education, and either keep or get a job. This has held true since 1970, when access to the pill encouraged women to pursue careers by ensuring that investments in education and careers wouldn’t be disrupted by pregnancy and lowering the cost of delaying marriage. And the entire economy has benefited: Thanks to women’s entrance to the workforce during those years, our economy is a quarter larger.

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Money Spent On Paying Back Student Loans Could Buy 155,000 New Homes

By Bryce Covert on May 6, 2013 at 2:15 pm

Total outstanding student loan debt has hit record levels, recently topping $1 trillion. This can translate into a heavy financial burden on young graduates, which in turn has a big impact on the economy. The Progressive Policy Institute calculates that people under the age of 30 are spending $43.5 billion every year paying back student loans, which is about 7 percent of their total annual income.

What else could that money go to besides student loans? PPI added up the numbers to find out:

The burden from student debt has been growing: the Federal Reserve found that the number of borrowers and the average amount of debt per borrower has risen by 70 percent since 2004.

The number of new homes that graduates could buy instead of paying back their loans is particularly striking given that homeownership rates have cratered for Americans under 40. This is partly due to the fact that their income has to go to paying down debt and therefore can’t be spent on buying a new house. It also means that they often have a high debt-to-income ratio and lack the money for a large down payment, excluding them from taking out many mortgages.

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Education

South Carolina Advances Legislation To Expand Preschool Access For Low-Income Children

By Travis Waldron on May 6, 2013 at 1:00 pm

Legislation that would expand access for low-income children to full-day pre-kindergarten classes advanced in the South Carolina state senate last week, as a subcommittee voted to send the legislation to the full Senate Education Committee.

The bill would expand a pilot pre-kindergarten program started in 2006, an effort Democrats and education advocates have pushed since it began. Republicans have opposed the expansion in the past but are now offering support, and Senate Finance Chairman Hugh Leatherman (R) could include it in his budget plan, NECN reports:

The powerful senator acknowledged he’s considering adding the first year of a phase-in to the 2013-14 Senate budget plan his committee is crafting this week. Sen. Wes Hayes, chairman of the education subcommittee, was more direct. Before the vote, he stressed that Leatherman is “extremely supportive” of the idea and is looking to put $20 million in the budget.

That would nearly double what the state currently spends on a program that benefits about 4,700 children in three dozen districts that sued the state 20 years ago over education funding. That limited program was the Legislature’s response to a December 2005 court order that the state do more in the early years to help overcome the effects of poverty.

The state’s superintendent of education still opposes the legislation because he contends that the benefits of early childhood education don’t last. But studies have shown that at-risk children who receive early childhood intervention are less likely to drop out of school, commit violent crimes, or become teen parents — and more likely to attend college — than at-risk children who don’t. And efforts to make preschool universal in states like Georgia and Oklahoma have produced significant economic benefits by reducing societal and government costs and boosting educational attainment.

While other states, like South Carolina, have pushed to expand existing programs or create new ones, President Obama took preschool to the national stage in April when he proposed $75 billion in funds to expand access to preschool nationwide. The United States currently enrolls fewer children and spends less on preschool than other developed countries, but Obama’s plan would allow the federal government to partner with states to expand access to low-income children in an effort to close those gaps. Though Republicans have led the push for expanded preschool in some states and finally joined that push in others, Republicans in Congress have thus far voiced little support for Obama’s proposal.

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LGBT

Harvard Historian Apologizes For Anti-Gay Slur After Controversy

By Zack Beauchamp posted from ThinkProgress LGBT on May 6, 2013 at 11:45 am

Niall Ferguson.

Prominent pundit and Harvard historian Niall Ferguson apologized this weekend for suggesting that gay people didn’t care about future generations because they couldn’t have children. Ferguson’s comments, intended as a psychohistorical explanation of famous economist John Maynard Keynes’ pro-deficit spending views, provoked a firestorm of criticism — and some defenses on the right, which has a long tradition of bashing Keynes’ economic views on basis of his sexual orientation.

Ferguson’s comments, first reported by Tom Kostigen, came as part of a critique of Keynes’ ideas about responding to economic recessions and depressions at a finance conference in Carlsbad, California. Keynes is the intellectual godfather of the idea that ramping up government spending, usually financed by borrowing, can ameliorate recessions, the theory behind both the New Deal and President Obama’s stimulus. Ferguson, who’s recently been a harsh critic of deficit spending, argued that Keynes could only countenance higher deficits and debt because his sexual orientation meant he had no reason to care about the children that might have to pay the borrowed money back. As Kostigen reports:

Speaking at the Tenth Annual Altegris Conference in Carlsbad, Calif., in front of a group of more than 500 financial advisors and investors, Ferguson responded to a question about Keynes’ famous philosophy of self-interest versus the economic philosophy of Edmund Burke, who believed there was a social contract among the living, as well as the dead. Ferguson asked the audience how many children Keynes had. He explained that Keynes had none because he was a homosexual and was married to a ballerina, with whom he likely talked of “poetry” rather than procreated. The audience went quiet at the remark. Some attendees later said they found the remarks offensive…

Ferguson, who is the Laurence A. Tisch Professor of History at Harvard University, and author of The Great Degeneration: How Institutions Decay and Economies Die, says it’s only logical that Keynes would take this selfish worldview because he was an “effete” member of society. Apparently, in Ferguson’s world, if you are gay or childless, you cannot care about future generations nor society.

Setting aside the utterly wrong, offensive character of Ferguson’s attack, it’s wrong on both biographical and economic grounds. Though it’s obviously hard to make these sorts of judgments about long-dead historical figures, Keynes appeared to be more accurately described as bisexual rather than gay: in a point that goes directly to Ferguson’s accusation, Keynes’ wife’s pregnancy ended in miscarriage.

Moreover, the idea that Keynesian economics is indifferent to future generations is based on one out-of-context quote and an elementary misreading of Keynes’ views about deficit spending. It’s true that Keynes supported borrowing money during recessions, but the point of borrowing was to finance spending that would stimulate a faster economic recovery, which would in the long run both reduce unemployment and deficits. Keynes also believed that, in good economic times, the government should save money so it could have a reserve to spend without needing to borrow too much during recessions. These are hardly the views of an advocate of untrammeled borrowing at the expense of people down the line.

Though Ferguson “deeply and unreservedly” apologized for his comments, it’s not the first time he’s bashed Keynes on the basis of his sexual orientation. His 1999 book The Pity of War suggested Keynes, who was an the time an important adviser for the British Treasury around World War I, let a crush on the German negotiator determine determine his position on the post-war settlement. In the same book, Ferguson cracked that Keynes’ “sex life went into decline” during the war, “perhaps because the boys he liked to pick up in London all joined up.”

Using Keynes’ orientation to dismiss his economic views is a pastime with a long pedigree on the right — a point that some modern conservatives made in defense of Ferguson’s statements. Economic historian Brad DeLong compiled a long list of them — see, for example, neoconservative doyenne Gertrude Himmelfarb’s claim that “Keynes’s famous remark, ‘In the long run we are all dead’, also has an obvious connection with his homosexuality.”

What’s particularly curious about Ferguson’s outburst is that he used to endorse Keynesian views about deficit spending. Though he’s penned many acerbic critiques of the Obama Administration’s stimulus, he used the same Keynesian arguments he now disparages to defend the Bush tax cuts in 2003.

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Education

Chicago School Officials Admit Shuttering Schools Won’t Save As Much Money As They Thought

By Aviva Shen on May 6, 2013 at 10:30 am

Students stage a sit-in at Williams Elementary (Credit: OccupyCPS)

As Chicago Public Schools plan to close 54 schools and fire staff at 6 more, middle and high school students all over the city have protested the cuts by walking out of class en masse, sitting in hallways, and marching on City Hall. Still, the city has maintained that the closures are necessary to cut costs.

Except, as it turns out, CPS officials vastly overstated the savings they expected from closing the schools. When the plan was announced, CPS projected it would save $560 million in capital expenses over the next 10 years. Last week, they revised that estimate down by $122 million.

Now that some of the targeted schools are receiving their first reviews in years, CPS is discovering that the cost of repairing and upgrading the schools is much lower than expected. Initial estimates put one school’s upgrade cost at $16.3 million, overshooting the new estimate by $5 million. As the local alderman noted last month, “Clearly, if you wanted to make it top of the line, $16 million would be a nice investment. But if you just wish to maintain the school and keep it open, you’re more in the area of $4 or $5 (million).”

Schools have erupted into protests over the cuts. On Friday, about a hundred students staged a sit-in at Williams Elementary on Chicago’s south side. A few weeks earlier, more than 300 students from 25 schools boycotted state standardized tests. Test scores are one of the criteria CPS is using to identify which schools to close.

The closings disproportionately affect African American kids in low-income neighborhoods; 88 percent of the students being diverted to a new school are black, compared with .7 percent of white children who will be affected. Parents protest that the school closures will force their kids to walk through dangerous gang territories, exposing them to the gun violence that has taken the lives of hundreds of other children and teenagers in the city. Many parents demanded Mayor Rahm Emanuel (D-IL) to “walk the walk” that their children will have to take to get to their new schools.

In response, schools chief Barbara Byrd-Bennett “walked the walk” on Friday, flanked by Chicago’s police superintendent Garry McCarthy. After seeing the abandoned buildings, vacant lots and heavy traffic along one of these routes, Byrd-Bennett and McCarthy announced a “safe passage” plan to beef up police patrols at all the schools, clean up vacant lots, and tear down empty buildings. The city will spend $7 million to staff the routes.

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Sequestration Cuts Strapped Domestic Violence Services Amid Increased Need

By Bryce Covert on May 6, 2013 at 9:17 am

After Republicans stalled the reauthorization of the Violence Against Women Act (VAWA) for months, it was finally signed back into law in March. Yet another act of Congress, the automatic budget cuts known as sequestration, could undo VAWA’s impact.

Programs that serve the victims of domestic violence have already suffered decreased funding from tight state budgets and previous federal cuts, and now they are grappling with a big blow from sequestration, Tim Murphy of Mother Jones reports:

[T]he Justice Department’s Office on Violence Against Women sent an email to the hundreds of non-profits and government agencies around the country that rely on its annual grants. The message was grim: Due to cuts mandated by the 2011 Budget Control Act, better known as sequestration, programs that fight domestic violence and sexual assault would see a $20 million drop in funding over the next year. […]

The projections are bleak. Sen. Tom Harkin’s (D-Iowa) office estimates that 70,120 fewer domestic violence victims will have access to recovery programs and shelters; 35,900 fewer people will get help obtaining non-shelter services such as restraining orders and sexual assault treatment. Cuts to programs related to the Victims Against Crime Act will hurt another 310,574 people.

Murphy outlines many of the impacts that have already gone through: the Department of Defense will put recruitment on hold for the planned hiring of 829 sexual assault response coordinators to combat rape in the military; a program of nurses who make house calls to collect rape evidence may close for good in Shreveport, Louisiana; the Rhode Island Coalition Against Domestic Violence will cut back advocacy services to four days a week, serving 1,600 fewer people; the Kentucky Domestic Violence Association is eliminating one staff member and asking another to go part time and may have to close shelters next year; and many other programs are feeling the cuts in various ways.

Domestic violence programs had been struggling financially long before sequestration hit. Nearly 80 percent of service providers surveyed by the Mary Kay Foundation reported receiving decreased funding from government sources. Many have also seen reductions in individual donations, foundations, and corporate funding, possibly related to budget tightening across all areas in the down economy. That has led 43 percent of providers to decrease the services they offer.

Yet demand has been on the rise. The survey found a huge increase in demand for the fourth year in a row, with eight out of ten shelters reporting an increase in women seeking help. While the recession isn’t a direct cause of violence, financial problems can act as a trigger, and 70 percent of victims reported that financial issues were a factor in their abuse. Nearly half pointed to job loss. A majority of shelters also report that the abuse has become more violent than before the crisis.

Meanwhile, the economy also makes it difficult for women to leave abusive situations. About three-quarters of the victims surveyed had stayed with their abuser longer for financial reasons.

Congress rushed to fix sequestration-related flight delays and has passed some fixes to other programs, but domestic violence services are among the programs that have yet to be considered for a fix, along with Head Start, Meals on Wheels, and other important services.

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Economy

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