by | ARTICLES, ECONOMY, FREEDOM, GOVERNMENT, OBAMA, POLITICS, TAXES
Obama issued an Executive Order today that brought extra relief to some student loan borrowers. A 2010 law allowed for repayment caps at 10% of a borrower’s income, though some loan holders were ineligible. This Executive Order expanded those who could qualify for the income repayment plan.
From the NYT: “Mr. Obama’s main action will be to expand on a 2010 law that capped borrowers’ repayments at 10 percent of their monthly income. The intent is to extend such relief to an estimated five million people with older loans who are currently ineligible — those who got loans before October 2007 or stopped borrowing by October 2011. But the relief would not be available until December 2015, officials said, given the time needed for the Education Department to propose and put new regulations into effect”.
Though this Executive Order — and its 2010 law counterpart — may sound well and good, financially it is a disaster. The 10% income repayment does not help any young person get off on a solid financial footing. Likewise, because some sectors allow for loan forgiveness after a period of time, that amount gets written off by the federal government, thereby substantially adding to the federal debt.
For example, if someone borrows $30,000 a year for 4 years for a degree, that is $120,000 of student loan debt. The debt carries an interest rate of at least 6%. The Obama repayment plans offer an option that allows borrowers to pay 10% (it used to be 15%) of what they earn, and if not fully paid back by the end of ten years, any balance is forgiven.. So for instance, if a new graduate lands a job that pays a generous $50,000/year, he/she would pay back $5,000/year. With interest of at least $7,200 ($120,000 x 6%) which likely does not even cover the interest on the original $120,000 loan.
There is almost no way a borrower can begin to pay back anything on their loan, and by the time they actually can make a dent, the additional interest accrued would have ballooned the total loan amount to at least $150,000. This is financially crippling for a young person.
The costs for the 10% repayment program since its implementation have ballooned from $1.7 billion in 2010 to $3.5 billion in 2013 to an estimated $7.6 billion for 2014.
This Executive Order seems to be a precursor to a bill being pushed by Senator Elizabeth Warren, which Obama has said to endorse. It “would allow borrowers to potentially save thousands of dollars by giving them a chance to effectively pay off their high-rate existing loans in exchange for new loans that carry substantially lower interest rates”.
How would this program be paid for? A new tax or increased taxes on the wealthy, of course.
The real impact of this higher education reform is that the government is now encouraging people to borrow substantially for their education, while simultaneously providing an avenue for students to avoid paying back much of their funds — leaving the taxpayer on the hook, a deficit in freefall, a tax increase for targeted high income earners, and an economy in stagnation.
by | ARTICLES, BLOG, ECONOMY, FREEDOM, GOVERNMENT, OBAMA, TAXES
From the Bureau of Labor Statistics (BLS):
Total nonfarm payroll employment rose by 217,000 in May, and the unemployment rate was unchanged at 6.3 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in professional and business services, health care and social assistance, food services and drinking places, and transportation and warehousing.
Household Survey Data
The unemployment rate held at 6.3 percent in May, following a decline of 0.4 percentage point in April. The number of unemployed persons was unchanged in May at 9.8 million. Over the year, the unemployment rate and the number of unemployed persons declined by 1.2 percentage points and 1.9 million, respectively.
Among the major worker groups, the unemployment rates for adult men (5.9 percent), adult women (5.7 percent), teenagers (19.2 percent), whites (5.4 percent), blacks (11.5 percent), and Hispanics (7.7 percent) showed little or no change in May. The jobless rate for Asians was 5.3 percent (not seasonally adjusted), little changed from a year earlier.
Among the unemployed, the number of job losers and persons who completed temporary jobs declined by 218,000 in May. The number of unemployed reentrants increased by 237,000 over the month, partially offsetting a large decrease in April. (Reentrants are persons who previously worked but were not in the labor force prior to beginning their current job search.)
The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 3.4 million in May. These individuals accounted for 34.6 percent of the unemployed. Over the past 12 months, the number of long-term unemployed has declined by 979,000.
The civilian labor force participation rate was unchanged in May, at 62.8 percent. The participation rate has shown no clear trend since this past October but is down by 0.6 percentage point over the year. The employment-population ratio, at 58.9 percent, was also unchanged in May and has changed little over the year.
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers), at 7.3 million, changed little in May. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.
In May, 2.1 million persons were marginally attached to the labor force, essentially unchanged from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.
Among the marginally attached, there were 697,000 discouraged workers in May, little different from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.4 million persons marginally attached to the labor force in May had not searched for work for reasons such as school attendance or family responsibilities.
by | ARTICLES, BUSINESS, ECONOMY, FREEDOM, GOVERNMENT, OBAMA, TAXES
This is a tad worrisome:
Nonfarm business sector labor productivity decreased at a 3.2 percent annual rate during the first quarter of 2014, the U.S. Bureau of Labor Statistics reported today, as hours increased 2.2 percent and output decreased 1.1 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) The decrease in productivity was the largest since the first quarter of 2008 (-3.9 percent).
And this:
In the first quarter of 2014, nonfarm business productivity fell 3.2 percent, a greater decline than was reported in the preliminary estimate. The revised figure reflects a 1.4 percentage point downward revision to output and a 0.2 percentage point upward revision to hours.
You can read the whole report here
No one else seems to be reporting on the revised numbers, which mirror that of the 1st quarter of 2008 (-3.9).
Couple this with the report last week that the “economy in the U.S. contracted for the first time in three years from January through March as companies added to inventories at a slower pace and curtailed investment”.
It will be interesting to see what the unemployment numbers show on Friday.
Friday update: Unemployment stays flat
by | ARTICLES, ECONOMY, FREEDOM, GOVERNMENT, OBAMA, POLITICS, TAXES
Diana Furchtgott-Roth wrote an article this past week outlining the economic impact of Obama’s newest regulations. Obama has decided through Executive Order to institute environmental regulations similar to those in the failed “cap-and-trade” legislation from a few years ago. But Obama will now go a step further than just the regulation of power plants; regulations will include regional emissions.
Regulation is stifling. It creates more barriers for American businesses which drives up costs for consumers. Businesses which are abroad are not subject to such regulation, which means they will often be able to charge less for products than American ones. With the economy at such a sluggish pace right now, of course consumers will purchase the lowest price. With higher costs to run the business, as well as drop in demand for product, employees will face the risk of losing jobs as a cost-saving measure for their employer.
Some lawmakers are waking up to the economic impact over-regulation has on our industries. Several legislators introduced a bipartisan in 2011 aiming to reduce regulatory burdens in particular agricultural endeavors. According to records, “this legislation passed the U.S. House of Representatives on March 31, 2011 as H.R. 872, The Reducing Regulatory Burdens Act of 2011. Additionally, it advanced out of the U.S. Senate Committee on Agriculture, Nutrition, and Forestry, but the full Senate failed to consider it during the last Congress”. It is now known as H.R.935, “The Reducing Regulatory Burdens Act of 2013”. Yesterday, on June 2, it was placed on the Union Calendar, which means it has not been defeated in Committee. Such legislation is a starting point for raising awareness of the destructive nature of burdensome regulation.
Back to Obama’s new Executive Order environmental rules. Furchtgott-Roth summed up her article nicely when she wrote,”For those concerned about economic growth, poverty, and inequality, cap-and-trade makes no sense, either nationally or regionally. Our air is getting cleaner, and will continue to do so for the foreseeable future as new capital replaces old. Cap-and-trade did not pass a Democratic Congress in 2010, and Mr. Obama should not impose it on a regional basis through regulation”.
by | ARTICLES, FREEDOM, GOVERNMENT, HYPOCRISY, OBAMA, OBAMACARE
Paul Krugman did it in 2011. Nicholas Kristof did in 2009. So did Ezra Klein. And Barack Obama did it in 2008. What did they do? They all praised the VA system as a model for health care.
Krugman: “Yes, this is ‘socialized medicine’…But it works, and suggests what it will take to solve the troubles of US health care more broadly.”
Kristof: It is fully government run, much more “socialized medicine” than is Canadian health care with its private doctors and hospitals. And the system for veterans is by all accounts one of the best-performing and most cost-effective elements in the American medical establishment.
Klein: the “VA is actually socialized medicine, where the government owns the hospitals and employs the doctors. If you ordered America’s different health systems worst-functioning to best, it would look like this: individual insurance market, employer-based insurance market, Medicare, Veterans Health Administration”
Obama: Make the VA a leader of national health care reform so that veterans get the best care possible.
We all now know how laughable these statements are. At least they did get one thing right: The VA is a model for healthcare — government-run health care.
Money is not the problem. From 2007 to 2012, enrollment in VA services has increased by 13% from 2007 to 2012. At the same time, the VA budget went from $82 million to $125 million — a 53% increase, and the biggest jump in budget history since records go back from 1940. Yet the VA could not deliver quality services to our Veterans.
We see the same scenario with the other major government -run health program: Medicare. It is currently insolvent; Medicare spends roughly 3 times what it takes in and it is only getting worse. There are no cost controls. Even Obama acknowledged this in 2010 when he said, “The major drivers of our long-term liabilities as everyone knows are Medicare and Medicaid, and health care spending.”
Government should not be handling our health systems. The fact that secret waiting lists existed shows just how far the government went to hide their incompetency in running a health system at the very time that Obamacare was being debated both in Congress and then in the public square. If Congress and Americans had known the truth of the condition of the VA health system, it is likely that Obamacare would never have been allowed to become law.
Obama issued an Executive Order today that brought extra relief to some student loan borrowers. A 2010 law allowed for repayment caps at 10% of a borrower’s income, though some loan holders were ineligible. This Executive Order expanded those who could qualify for the income repayment plan.
