New Post at The Avant Guardian

Another Friday, another popOp.

This week we're looking at the beef between Fahamu Pecou and Fabian "Occasional Superstar" Williams, and also the continuing palpating of spectaclist economics.

holla!

It Costs More To Be Poor

It's true: living costs poor people more than the not poor. I bring this up because I read this headline and the supporting report today:

"Study finds median wealth for single black women at $5"

(here's the report upon which the article is based)

Here's a report from the Washington Post that discusses this counter-intuitive truth "The High Cost of Poverty"

Also, here's a report from the Brookings Institutes, almost exactly a year before the WaPo article, discussing the financial costs of being poor, "Public Policies to Alter the Use of Alternative Financial Services among Low-Income Households"

The poor pay more to have access to their income:

• for example -- if you cannot pass a Chex Systems report, then you likely cannot get a bank account, which means you will pay someone to cash your check. If you're not familiar with this concept, the poor will pay somebody money to give them access to the money they earned.

The poor have to pay in terms of housing:

• if you are poor, you likely have a poor credit history, based on this you will not qualify for standard financing for your mortgage. You might be offered a subprime loan, and since about 2006 we've seen what that leads to: massive financial hemorrhaging that can only be stopped by giving the ultra wealthy of the world all the money they want.
• Some might say, "don't buy a house if you can't get good financing." But, of course, paying rent (as everyone who tries to sell housing initiatives to the public typically brings up), means not building wealth and again, loosing that money.

The poor have to pay more for transportation:

• Not unlike financing a home, if you are poor you will likely pay a more punitive interest rate for that car loan...
• ...Unless, of course, you don't buy a car and instead use public transportation. As a regular user of the bus and train services in Atlanta, I can assure you that although our system is very efficient (despite what most white people in the metro area suspect) - public transit's real cost must also include the time spent waiting for transfers and connecting service. This is really a drag now since it seems likely that half the bus routes in the city will be cut soon.

The poor have to pay more for health care:

• The poor tend to work in industries that do not provide things like health care, but they may qualify for limited assistance from programs like Medicaid (maybe)
• The leading reason people (62% of those who filed) filed bankruptcy in 2007 because of medical debts. 92% of those who listed this as their primary reason for filing had $5000 of medical debt or more, this representing more than 10% of their gross income (from the American Journal of Medicine)

But the real cost of being poor vis-a-vis health care is more subtle - because the Federal Poverty Rate as it is, being poor is likely also going to cause a life time of health problems such as diabetes and heart disease.

The Federal poverty rate is not determined by your income, the cost of your housing, the cost of transportation; it doesn't consider medical debt, nor student loan debt, and certainly not consumer debt (credit cards or pay day loans). The Federal poverty rate is a measure of how much it costs to get a certain number of calories (not nutrients, just calories). I've talked about this before, here.

To refresh you: the Federal poverty rate seeks to find the cheapest cost for the individual to get calories. This means that the individual is encouraged to consume the foods that would have the richest calorie pay-off - since you're only given a limited amount of money to spend, you'd better buy the most food at the cheapest cost.

This is why you will see in really poor neighborhoods signs at the (freaking) convenience stores and gas stations that state "Food Stamps Accepted Here."

What foods have the best pay-off? Foods that have been heavily-processed and contain high-fructose corn syrup. They are typically foods that also have really large amounts of fat and calories from fat.

Of course, poverty doesn't fall out of the sky and like lightning strike you: you're typically born into poverty or at the threshold of being lower-middle class. This likely means also that your recipe book (as it were) is filled with foods that made sense to eat two generations ago when your forebears were working the fields and mines - more likely to die from work injuries than live long enough to develop diabetes or heart disease.

More on this later....

Refund Anticipation Loans Are Killing Us

It's tax season in the U.S. again and I'm glad to be involved with a group offering VITA (Volunteer Income Tax Assistance) for low and moderate income households as a part of my internship with the International Rescue Committee. The VITA program is vital to the most successful poverty alleviation program the Fed has found so far: the Earned Income Tax Credit. When I was working with ACCIÓN USA I had the good fortune to be present at the first convening of the Atlanta Prosperity Campaign's Earned Income Tax Credit (EITC) task force and I'm glad to see that the campaign is in full swing a few years later.

You might recall that we've discussed the EITC a few times here on the blog.

It's been credited as very successful in assisting those of low and moderate incomes to develop assets, that is, wealth building.  

Started in 1975, the Earned Income Tax Credit is a refundable federal tax credit designed to reduce the tax burden on low- and moderate-income workers and encourage participation in the labor force. In 2006, EITC benefited 22.4 million people with an average credit of $1,951. Research has shown that the EITC is often used to pay off debt, but it can also present an opportunity for wealth building.

I copy + pasted the last three sentences from a study recently released from the Woodstock Institute, a Chicago-based research and policy organization. They go on to point out that the "primary consumers of Refund Anticipation Loans (RALs) are recipients of the Earned Income Tax Credit. According to the National Consumer Law Center, 63 percent of the 8.67 million people who received a refund anticipation loan in 2007 also received the EITC."

RALs are those loans that tax prep sites (like H&R Block, Liberty Tax, Jackson Hewitt, etc.) offer to folks that want their tax return refunds ASAP. As they state:

While RALs give borrowers rapid access to their tax return, they do so at a significant cost to borrowers. According to a February 2009 report on the RAL industry produced by the National Consumer Law Center and the Consumer Federation of America, fees for a RAL in 2007 ranged from $104 to $111 per loan, with an average fee of $107.50. Lenders charged additional fees to borrowers who wanted their loans processed in one day. These costs are substantial when considering the size of the loan. For a refund anticipation loan of $3,000, annual percentage rates (APRs) ranged from 77 to 140 percent. On top of these RAL fees, an estimated 20 percent of RALs included additional application fees which can add another $40 to the cost of the loan. In addition, borrowers pay tax preparation fees that average as much as $183 at one nationwide vendor.

They then quote the National Consumer Law Center study that states that, "EITC recipients generated $525 million in fees for refund anticipation loans in 2002." Then citing a Brookings Institute study stating, "the complexities of the EITC qualification and application process appear to drive low-income taxpayers to use paid tax preparers. The means by which tax preparers are compensated for generating RALs rewards steering. A tax preparer is compensated for each loan they generate, and in some cases receive additional bonuses for meeting the quotas of the lender."

The Woodstock researchers point out that there is evidence for a motivation toward tax fraud present in these Refund Anticipation Loans, "In 1994, the IRS estimated that 92 percent of fraudulent returns filed electronically involved refund anticipation loans. In an effort to reduce fraud, the IRS stopped providing tax preparers with information on outstanding tax debt, a function called the Debt Indicator. Both RAL volume and RAL fraud dramatically declined after the elimination of the Debt Indicator. However, the IRS reinstated the Debt Indicator in 1999, after which RAL fraud rates increased."

So who are the folks making these RALs possible? According to the National Consumer Law Center it's: JP Morgan Chase (with 13,000 independent tax preparers), HSBC (H&R Block's RAL provider), and Pacific Capital Bancorp - the parent company of Santa Barbara Bank & Trust. According to the NCLC's recent press release, "RALs drained the refunds of about 8.4 million American taxpayers in 2008, costing them in the neighborhood of $738 million in loan fees, plus over $68 million in other fees." It's obviously popular to complain about the Wall Street Bailouts, but here is an annual bilking of Main Street.


Weirdly, the IRS doesn't require any kind of regulation of tax preparers, until this year, as the NCLC reports this year, "On January 4, 2010, the Internal Revenue Service (IRS) announced its plans to finally regulate the tax preparation industry. Currently, most tax preparers are not subject to any sort of licensing, competency or minimum educational requirements, a fact long criticized by consumer advocates and others, such as the National Taxpayer Advocate."

While it would be great if the EITC was used to build assets among those that qualify, the reality is that the recipients are often on the business end of a host of predatory lending practices (such as RALs, Title Loans, Pay Day Loans, Check Cashing services, Rent-to-Own schemes, etc.) and so the monies that are allocated with EITC are usually spent servicing debts. As the National Consumer Law Center points out, if you're considering a debt repayment program, caveat emptor (buyer beware):

[D]ebt settlement companies usually take out all of their fees, ranging from 14 to 20 percent of the total debt, within the first half of the contract. For debts totaling $20,000, a consumer could pay fees of $2,800 to $4,000.

"Debt settlement companies usually collect most or all of their fees from consumers long before they have eliminated any of their debts, and consumers pay these high fees regardless of whether their debts are settled or not," said Susan Grant, Consumer Federation of America’s Director of Consumer Protection.

"There is no guarantee that your debts will be settled," said Gail Hillebrand, Financial Services Campaign Manager at Consumers Union. "The industry’s own statistics show that debt settlement doesn’t eliminate all of the debt for most consumers. The full fee can be deducted from your savings even if you are still stuck with your debts."

The drop-out rate for debt settlement services is very high; a study of one company’s customers revealed that 60 percent had cancelled within 5 to 6 months after starting debt settlement. Claims for success rates can be very misleading because they often don’t take into consideration the cost of the fees consumer pay or the size of those debts that are never settled.

The NCLC is an excellent source for those of us that don't have much money and don't know how the credit and financial systems are set-up (and how they're predisposed to bleed us).

Poverty in the Suburbs, Earned Income Tax Credit

According to the Institute for Financial Literacy, the average person filing for bankruptcy in 2006 was:
white, male, between the ages of 35 and 44, making less than $30,000 a year.

The official beginning of the recession was recorded in December, 2007 (although the feeling of being in recession was felt in 2006 by many); the Institute for Financial Literacy's follow-up on who filed bankruptcy in 2008 found the same group from 2006 was filing for bankruptcy - but that there has been a sharp shift into the middle class. Among the groups they found with the greatest rates of increase were the college educated, self-employed, making more than $40,000 a year.

Let's combine this with the Brookings Institute's study on the surge of poverty in the suburbs:

• 7.2 million jobs have been shed from the economy since December, 2007
• the majority of these job losses were in "decentralized" (not concentrated in industrial or city centers) i.e. real estate, construction, retail; and are part of a greater trend since the 1990s of the suburbanization of the poor
• low-density "exurbs" have been particularly hard hit because these communities don't have the same infrastructural safety nets that have become structural in the city. This can be seen in the use of food stamps: although there are more poor people living in the suburbs, only 32% of suburban families received food stamps vs. 39% in the primary cities they surround.

And, finally, lets briefly jextapose these micro-level economic indicators with what the ruling class had to say in Davos, Switzerland:

• Government debt has reached historical levels for peace time in a number of advanced economies.
• With a few exceptions, the larger advanced economies have been the most affected by fiscal crises. According to the IMF, by 2014, the average debt-to-GDP ratio of advanced economies that are members of the G20 is expected to climb from the 2007 pre-crisis level of 78% to 118%.
• According to the same IMF analysis, between 2007 and 2014 the average debt-to-GDP ratio of emerging countries that are members of the G20 will never exceed 40%.
• The U.S. will continue to experience plant foreclosures and the the bankruptcy of small and medium size enterprises, one legacy of this may be a legacy of underemployment in the U.S. as there are 9 million part-time workers today seeking full-time employment (myself included, y'all).

Since it is tax time again, I think it's appropriate to remind the readership that there is no reason to pay someone to help you prepare your taxes. This is particularly a problem for the most vulnerable section of the economy: the working poor. The Nation has a fine article discussing the problem of tax refund advance loans here.

If you are concerned that you won't be able to file your own taxes or are having a difficulty with your tax preparation, please consider using a VITA site, the Atlanta Prosperity Campaign helps working families find many sources of support.

I've discussed the Atlanta Prosperity Campaign before. A primary tool in their belt is the Earned Income Tax Credit (EITC), a refundable federal income tax credit for low to moderate income working individuals and families. The EITC is an effective tool for asset-building among the working poor:

[T]he Internal Revenue Service estimates the EITC participation rate for eligible individuals ranges from 75% to 80% Thus, increasing the EITC participation rate for Atlanta families by a mere 10% (7,934) could result in over $15 million in additional benefits.

Good luck.

Poverty Is Claiming the Suburbs

The image of the city as the place where the poor lives has to be changed because this masks the rapidly-growing poverty in the suburbs, where poverty will continue to become a pernicious problem. Over the past ten years I've said to myself that the nouveau-riche suburbs of Atlanta are going to be the Golden Ghettoes of the near future. If we're lucky we'll see more areas like the international sections of Buford Highway in Chamblee: alive with diversity (some of the best eating in the city is here), but clearly starved of critical infrastructure (this should be the most pedestrian-friendly area in the city, but it's a six-lane highway lined with apartments).

According to the new Brookings Institute report, suburban areas in the U.S. grew at a rate of 25% between 2000 and 2008, this is five times faster than the rate in primary cities. By 2008, one-third of the nation's poor lived in the suburbs.

We have to keep in mind that this is data as of 2008, we're still awaiting official unemployment data for 2009. I've written a bit about poverty in the U.S. here (a central concern for me).

Below I am embedding a video featuring David Shipler. I wanted to link to a Nightline episode (On the Edge: America's Working Poor, 2004) but I can't find a link. Their report was based on Shipler's work for the New York Times so it's like going to the source in some ways.

Poverty, Healthcare, & Agriculture

To somewhat flesh-out some of what I was saying yesterday about how the poverty level is determined, today I am sharing some great reads.

My friend from the AccionUSA days, Tina Valverde, pointed me to a great article asking, "Why are libertarian rightists defending a dysfunctional, state-engineered food system?"

While I'm not at all interested in Libertarian politics (I'm vehemently opposed often), it's a great article chock-full of excellent links to articles offering a history of food subsidies and pointing out the unintended harms of maintaining this corporate welfare.

An oldy, but goody, from the CATO Institute presents a case against Archer Daniels Midland (ack! two links to libertarian-aligned articles! what strange bedfellows).

Then there is this great article form the New Yorker from last year that discusses the intersections of health care policy and agricultural policy.

And to be fair, here's a public relations piece "a farmer in Missouri who will spend the next 6 weeks on a combine." But the piece reeks of lobbyist-talking points and slicker than subsidized-corn oil.

Responding to Thinking About Creativity

Thanks for reading, Matt.

If we're attached to the idea that everyone in a society should be able to voice their opinion, then it matters if they feel their voice is their own.

You ask, "if we want people to buy us...what's wrong with that; what does that really mean?" Now working with refugees I can assure you that millions of people are trafficked across the U.S. and the globe, as sex workers, as migrant workers. They are slaves by another name.

While you might be able to afford the idea that some people would want to be considered as simply a commodity to be purchased, no different from a sack of flour, I can assure you millions of people don't enjoy that luxury. Here I will quote the International Rescue Committee (where I am currently doing an internship):

Anywhere from 700,000 to 4 million persons worldwide are trafficked across or within national borders every year. Virtually every country is affected by trafficking, whether capitalized by traffickers as a source, transit or destination location. Generating roughly $7 billion to $10 billion annually, human trafficking is the fastest growing global criminal industry, with high profits, low risks, minimal capital investment, and a "commodity" that can be used over and over again.

If we're reduced to "just commodities sold in a market" then we are faced with conditions that would undermine the validity of democratic or republican representation.

And, let's face it, some sort of Libertarian utopia à la Ayn Rand would have to condone this burgeoning commodities market above described, and the existence of this market eats away at a notion of a commonwealth like an acid.

While it's true we might reduce all of life to quantiles of energy exchange, this would ignore and abnegate the other 98% of life that is qualified by how these exchanges occur. To reduce living to a quantifiable exchange is to literally live without meaning.

Why eat anything other than high-fructose corn syrup if the purpose of eating is simply to facilitate the exchange of electrons? By the way, what's been among the most subsidized industries in the U.S. for going into 40 years now? Corn. Guess how the Federal Poverty level is determined - by how much it costs to acquire calories. Guess what the poorest people eat in the U.S. That's right, food slathered in high-fructose corn syrup, because it's cheap.

This is what Marx stated; in Capital, vol. 1:
"As use-values, commodities are, above all, of different qualities, but as exchange-values they are merely different quantities, and consequently do not contain an atom of use-value. If we leave out of consideration the use-value of commodities, they have only one common property left, that of being products of labor."

Why would a capitalist ever want to eradicate protections if it were possible to ensure that some portion of the population was always willing to be sold on the marketplace so as to escape the wretchedness of life unprotected by the commonwealth?

Talkin' 'bout health care

What follows is a discussion on a friend's facebook page about universal health care. It's just what I wrote so it may seem a little disjointed:

As one of those that had no health care (going to school full time, paying for it outta pocket, and working full-time waiting tables, which of course doesn't offer health insurance) and then broke his elbow (meaning he couldn't work any more); I can assure you, those millions of us CANNOT afford the $30,000+ to pay for healthcare. I owe more in ... Read Moremedical bills than I've made in the last two years. Thankfully I went to Japan, where they do have universal healthcare, and I received great treatment at a fraction of the cost in the States (wisdom teeth pulled out and weekly treatments for a month all for less than $800). Now I'm back in the U.S. and I am shocked at the rhetoric against universal healthcare. How can we not afford to invest in those that make this country great, the people of this country?

Just saying: the #1 reason people over 40 years of age file bankruptcy is medical bills. A quick google search of bankruptcy and medical debt gets these:

1) American Journal of Medicine:
"Using a conservative definition, 62.1% of all bankruptcies in 2007 were medical; 92% of these
medical debtors had medical debts over $5000, or 10% of pretax family income."
2)Medical Debt Huge Bankruptcy Culprit:
3) Medical Bills Leading Cause of Bankruptcy, Harvard Study Finds

The U.S. spends more money on its military than EVERY OTHER COUNTRY COMBINED. Why can we afford to spend money blowing stuff up but can't spend money helping our own citizens live?

The real quality of health, ask any doctor, is measured in prevention. The most common thing doctors recommend for maintaining health is exercise and regular check-ups. On this account the U.S. health care system is hopelessly flawed.

What we have instead is a heroic model where we have the most expensive people and equipment to intervene when the... Read More intervention itself optimizes health the least.

Universal health care isn't about making sure everyone gets their own kidney dialysis machine, it's about making sure people don't need dialysis machines by encouraging people to do simple, cheap things, like visit a doctor one a year.

Going for regular check-ups isn't going to happen if parents have to choose between feeding their children for the next two months or sending themselves for an annual screening. In Okinawa we were required by law and by our employers to get an annual check-up. Karen was required to go more frequently because she has female parts. Had I been older I too would have had to go more frequently. Lesson: to change health culture you have to make access universal and create incentives for compliance.

As to eating bad foods:
You're going to think I've gone off the map but this is directly related to changing cultures.
Did you know that the Federal poverty rate is determined by a family's ability to ingest calories? It's true. What do you do, then? You get the most calorie-rich food you can find. What would that be? Yup, high fructrose corn syrup... Read More. It's ubiquitous, and thanks to three decades of gov't corn subsidies (by politicians touting the families first motto) it's not likely to go anywhere.
What's the result of 30 years of corn subsidies? A significant increase in "food" (if the development of Cheetos counts) production, yes, but a reduction in the nutrient distribution in the caloric intake of American families.
It's the most efficient thing in the world to feed families with bad-for-you food, and since we're defining poor as being able to get access to this food, no surprise that we have a positive feedback loop, like a snake eating its tail.

Readings for 16 December, 2008

I'm back. Many thanks to those of you that periodically drop by here and a thousand pardons, again, for not being able to offer more recently.

Secondary Education as Birth Control - Nature: I've mentioned earlier that children are viewed as social security in developing countries and that children are often abducted and forced into military service. Periodically the argument is put forward that education will solve, seemingly, all problems. One trend that seems pretty convincing is that the more educated women become the more likely these women are to delay the birth of their first child. Delaying this first birth is crucial in a number of ways; for one, there is a reduced strain on what are already, typically, strained health care systems. More importantly, there is less poverty when women delay the birth of their first child because these women are able to pursue careers (not necessarily Murphy Brown-type careers) with minimal damage to their society. Your typical first year Sociology or Anthropology student should be able to tell you about that one section of their primer where they learned that, in certain South American cultures at a certain moment in our recent history, teen mothers did not even name their child until the first year because that child was too likely to die before the first year was up. Why was this mortality rate so high? Because the mothers were leaving their children unattended at home while they went to work in factories (making products at everyday low prices, no doubt) so that the mother would not be out in the streets. They cannot afford day care and are likely to be without a social system that can provide for this child if they are one of the masses of people leaving the countryside to the cities where they perceive their lives will be better.

The Human Terrain System Doesn't Work - So Sayeth Nature: I agree with Nature here, but they make no case as to why. I will be posting on this topic in the not-too-distant future.

Let Me Use My Mind Enhancing Drugs, Man! - Nature: My ass twitches, just so, whenever I read a manifesto like this one from academics. It's unfair, I know, since I am an academic; but what can I say? These guys begin with a great statement and then miss the boat completely. One of the ways that you know to raise your hackles is when social scientists reference Francis Fukuyama, ADHD research, and make strong statements calling for policy change by using BOLD fonts. The argument begins by discussing a phenomenon they think they understand is occuring on college campuses: they hear that students are using methylphenidate and other amphetamines to enhance their performance in classes. "Good for them," seems to be the authors' argument, "because they are adult enough to realize they can maximize their abilities with these drugs." But, they don't really know that. They don't have evidence that this is what is meant when the students tell them they do this (as someone who recently graduated from college where plenty of kids with money were buying Ritalin and Adderal, I have my doubts about the authors' appreciation of their students' lived experience). They also don't know what the actual mechanism at work is here. ADHD research is the most widely published topic in psychology in the world and they don't know what the disease is. Period. They don't know how these drugs work, they don't know how to measure the effectiveness of the treatments, and they don't know how to collaborate (thus the field continues to churn out garbage where people publish minor modifications to existing work and state that they've developed a new method or scale). So, they call for evidence-based assessments of what might be the benefits of allowing people who don't get prescribed methylphenidate, etc. and what might be the long term problems associated with this usage. I agree that drug laws should be changed, but I disagree with the authors here. Where do they really miss the boat? They don't even address the nature and meaning of being educated. It is assumed that education means "this," and then they proceed to talk about education being enhanced by people feeling more organized or focused. I wouldn't disagree that focus and organization are the lynchpins in successful academic endeavors but I would not also consider you well-educated if all you were really skilled in was organizing and staying on task. But maybe that's beyond the scope of their argument.

I Voted (Absentee) and You Should Too

I voted this week, absentee ballot, for Obama because I served in the Americorps*VISTA program last year in my hometown of Atlanta and I realized that there are tremendous resources for making the world a better place already established, but most people won't give their time (which is money) to these amazing programs. Lyndon Johnson established the VISTA (Volunteers In Service To America) program as a domestic version of the PeaceCorps. The mission of VISTA is to eradicate poverty. The VISTA program is all about capacity-building: helping link nonprofits and government and community leaders so that the collective abilities and collective resources can overcome the challenges they face as individual entities. Isn't that why we even have a government, because infrastructure cannot happen without an entity the size of a government? Isn't that what community is about, coming together and adding our talents to make life a more rewarding experience? The Obama campaign has been the most effective in pointing that out and I suspect that this is probably an artifact from his work in Chicago.

The reason why Obama is going to win on the 4th is because he welcomed everyone to support him and he pointed out the truth: the more people invest themselves into this campaign, the more successful it will be. He has better policies than McCain and his campaign has done more to involve the marginalized in society than any other in my lifetime.

Standing back and poo-pooing the American electoral system and not offering any constructive community-building just doesn't change the world, I'm sorry. The past eight years have shown me that there is a wide disparity between those I've worked with in the anti-globalization/peace movement/social justice-type movements and those that are actually working with the local community leaders, nonprofits, and the State. And I'm really happy to say that working with the government entities and with local nonprofits and actually sitting down and working-out strategies for developing the world I want to see has been infinitely more rewarding than any of the marches where I was yelling with a bunch of other marchers, much more effective than helping set-up the Food Not Bombs fundraiser, and so on. Most of my friends from those more DIY-Social Justice movements simply don't see that getting into a group with a bunch of other yellers and then accosting neighbors is not capacity-building, it's yelling.

The VISTA program requires that you volunteer for one year, paid at the poverty level (yes you can get Food Stamps and all the other benefits that the poor have available to them), and that's what kept most of my peers from choosing to do this amazing and transformative work. It paid too little. That's why I think it's pitiful when I hear McCain and Nader complain about votes being bought. Serving that year with so little money was difficult, it was really hard because all of my adult life to that point I simply took a second job to give me a little fun money (go see a show, buy a cd, get some cigarettes) but in the VISTA program this isn't allowed. So, my income was made really artificially low because I couldn't even have a hustle. But once I got into my work and started understanding how my community works and listening to the needs of my fellow man, and knowing that we were both suffering the same, I realized that working in the community was priceless and that there are plenty of naysayers in my social life, but they simply won't put their money where their mouths are: they won't commit to one year in the Americorps*VISTA program to transform their community.

That's why I voted for the Obama campaign, because I know that it's really meaningful when you allow as many people as possible to give just a measley amount of time and money to a program. I supported the Obama campaign because I believe that the more people invest themselves into the political process, the better our civic life will be.

As far as I'm concerned, anyone that talks about how there's just one party with two names and being politically involved is useless because there's too much money being funneled into "the system" and so it's all pointless until it's all smashed is a parasite on their community and the real source of the evil in the world today. Yes, it's that banality of evil that Hannah Arendt pointed out. Put your money where your mouth is, give one year service in the VISTA program.

Privatized Cities

I got the heads-up about this from reading AngryBear, and so many thanks to SKG and AB.

I've called Atlanta my home for the longest part of my life and feel fortunate to have been involved in its transformation over the past 12 years.

Here's a video for you to consider:



here's the posting at AngryBear

In reading this I realize that I should probably write a bit more about what poverty looks like in Georgia and what poverty looks like in Atlanta (because the two are very different stories and they're both very interesting stories).

But, it's 10pm in Japan and I'm too tired to do it tonight, so mata ne (later, huh)?

Quick Question to All Y’all and Thoughts on Poverty Alleviation

Are you finding this stuff worth reading?
Is there a topic you'd rather I focus on?

I'm visiting my mom today in North Cackalackey (sorry, Ari, I am only here for the day) and we're talking about my year of service (we've not really talked about it all this year and I think my work may be a little confusing unless I give a more thorough explanation of what I do).

Anywho, we're talking today and I realized that one of the best poverty-reducing institutions I can think of is the bank account. 30 million Americans operate without bank accounts according to the Aspen Institute.

How would a bank account help alleviate poverty? A bank account is a neutral thirda party accounting tool. It simply says how much was spent, when, and where. But, having that statement shows you what your actual income is. It tells you what your cash flow really looks like. I get dozens of people across my desk who say their cash flow is great because they have a thousand dollars in their account. When I do a three month analysis, however, I see that the person actually had a large deposit (say a tax return) in one month and has generally been spending tow or three hundred dollars more than they earn every month. That means that although they may have money in the bank, they actually have negative cash flow.

A bank account teaches people at least two REALLY IMPORTANT lessons about being poor in America:
1) it costs more for a poor person to purchase things that middle- and upper-class families buy and need:
If you're poor, you probably have poor credit. That means your car payment interest is higher, your mortgage payment is higher, your car insurance is higher (that's right, they use your credit report to determine what your insurance will cost).
2) it costs money to have the money you earned by working:
If you're poor you probably don't realize the relative cost of banking fees are. I have a client that spends on average $55-75 a month just in fees for using the debit card. Why? ATM fees, fees for using your card to purchase groceries (a PIN-based transaction fee is usually how it's stated)

SORRY, I have to go now; I will post later

One Last Taxes Blog

Okay, well, maybe I'm doing you a favor as you go into tax season by talking about taxes in an election year.

Fact is, you're not going to get much more than rhetoric from the candidates (ever) and I feel that if you're going to have an opinion it should be based on reflection and deliberation with the facts as they lay.

Today I point you to Paul Krugman and AngryBear as they dove tail nicely around the question of how government intervention affects (I don't mean "effects") the economy.

Right now there is talk about the Federal Reserve cutting the lending rate, again, this time an anticipated .5%; but what does that mean? From Krugman's Post :

Monetary policy mainly exerts its influence through housing: high interest rates squeeze home construction, low rates encourage it. Interest rates have much less direct effect on business investment. The reason? Housing lasts much longer.

Suppose you take out a loan to buy a machine whose economic life is only 5 years — which is highly likely, given both physical wear and tear and technological obsolescence. How much difference does it make whether the interest rate on the loan is 4 percent or 6 percent? Not much: the monthly payment on a 5-year loan at 4% is less than 5% lower than the monthly payment on a loan at 6%. So interest rates don't have much effect on business investment.

On the other hand, suppose you buy a house with a 30-year mortgage. The monthly payment on a 4% mortgage is more than 20 percent lower than on a 6% mortgage. So interest rates make a lot of difference to housing.

So here's what normally happens in a recession: the Fed cuts rates, housing demand picks up, and the economy recovers.

Krugman goes on to point out that the problem with this strategy, this time, is that the source of recessionary pressure lies largely with the housing market, itself. This happened because accounting for banks changed (the following from Calculated Risk):

The accounting rule in question, Financial Accounting Standard 114, was adopted in 1993. Lynn E. Turner, a former chief accountant of the Securities and Exchange Commission, recalls that it was enacted because of abuses by financial institutions during the savings and loan debacle. Under the old rule, banks could avoid reporting losses so long as they expected to get the principal back eventually, even if the borrower did not have to pay interest on the restructured loan. The rule put an end to that.

Or at least it put an end to it for most types of loans. These banks live with F.A.S. 114 for their commercial mortgages and corporate loans, but according to Ms. Utermohlen, they don't have systems in place to do the calculations for large numbers of restructured residential mortgage loans.

The calculations, it turns out, are not that complicated. You could do them with a decent financial calculator, or an Excel spreadsheet. But the banks argue that would take too much effort, given the volume of loans likely to be restructured. "This would be extremely time-consuming and would likely involve additional staff dedicated to this purpose," Ms. Utermohlen said in a letter to the Financial Accounting Standards Board this week.

(emphasis added)
That's right, the banks are arguing that they're not responsible for the recession because EXCEL IS TOO HARD TO USE.

Well, it wouldn't be a big deal, I suppose, except for the fact that since this Bush came to office we've been fighting a recession by stimulating the generation of long term loans we call mortgages. Why do this instead of promote long term growth through paying down debt or promoting government spending on education and grants to scientists? I don't know why not. That's not what this administration and those within our government wanted to support.

Probably because those supporters of less government intervention (let the markets fix themselves, that's fair) believe that tax cuts (reducing the amounts of taxes individuals pay) have a stimulating effect on the ecnomy.

They say that instead of paying the government, those individuals will invest in the market (remember the dot-com crash?), or save (Americans now carry thousands more in debt than in savings), or create jobs (unemployment is expected to return to 6% because housing construction has ceased). Here are some graphs from AngryBear's blog:

Below is a graph showing the annual growth in real GDP per capita, by president starting with Ike, sorted from fastest growth to slowest growth. Data comes from the BEA's NIPA table 7.1. For each president, its calculated from the last year before the President took office to the last full year the President served. (Since JFK was killed and Nixon quit more than half-way through the year, I assumed JFK's "last full year" was 1963 and Nixon's was 1974.)


Now, another graph... This one shows the annual change in taxes as a percent of personal income. With the same color scheme. (I hope you've figured it out!!) This includes taxes on labor and capital gains. The data comes from the IRS.

That's right: the less you tax individuals (now remember, a corporation is by law an individual and given the same or more rights and protections as a human being), the less the economy has benefited.

This should be a no-brainer becuase if you ask someone who actually makes a lot of money they will tell you that paying more in taxes shows that you've made more money.

Why did Carnegie give away all that money? He knew, and stated that he knew, that he made his fortune by exploiting the conditions of his society. He felt he had to give back the largest portion of it so that society would benefit somewhat from his exploitation in the end.

Further, your taxes are there to support you, citizen. You like that road? Your taxes built it. You like that park? Your taxes paid for it. You like that there is less crime? Your taxes are used to alleviate the pressures that lead to crime.

And now, a final note about why you want to better understand taxes and what is unfair about the tax code today. I want to talk about the Earned Income Tax Credit (EITC). The following is from the Atlanta Prosperity Campaign:

The EITC is a tax benefit for low- to moderate-income working families. U.S. Census Data show that in 2003, the EITC lifted 4.4 million people out of poverty, including 2.4 million children – more than any other single program or category of programs. Without the EITC, the poverty rate among children would have been nearly one-fourth higher. For tax year 2005, 79,338 households in the city of Atlanta received $170,351,176 in Earned Income Tax Credits, resulting in an average EITC credit per household of $2,147. However, the Internal Revenue Service estimates the EITC participation rate for eligible individuals ranges from 75% to 80% Thus, increasing the EITC participation rate for Atlanta families by a mere 10% (7,934) could result in over $15 million in additional benefits.

If an individual qualifies for the EITC, he or she might also qualify for the Advance EITC, which allows workers to receive part of their refund in their paychecks during the year. It provides an opportunity for employers to effectively give their employees a raise without having to increase their salary. To increase enrollment in the Advance EITC, employers need only to be equipped with the knowledge and the tools to help their employees apply for the program.

(The emphases, obviously, are mine.)

What's unfair is that there are numerous opportunities for large corporations to avoid paying taxes and they have the financial resources to pay for accountants to find those opportunities. Those accountants, then, turn around (once the egg is on their faces) and make some hare-brained response like the one we have above.

Why Flat Taxers Are Nuts

It's an election year, you've seen the pick-up trucks and minivans with the flat tax stickers; you hear the rhetoric about the middle class being pinched. What does it all mean? What are we supposed to do? I was talking with a friend that I love to death and I usually think is a really smart, right-on kinda fellah. Then he started spewing that vitriol about flat taxes and I had to keep my jaw from falling off my face and onto the table and then rolling over to him and punching him in the penis.
That's when I realized that he was way too smart to be talking like one of those economic hacks; and so I am sharing with you some resources that will try to explain how taxes work and why flat taxes won't.
So, flat taxers tend to congregate around a constellation of beliefs, among the most humorous is that government intervention will only lead to botched efforts and unnecesary influence in the market. This is of course preposterous because if the market were allowed to run its course we may likely still have slaves, Irish wouldn't be allowed to vote and women would likely only have recourse to property rights.

Look to the real estate market right now for an example of how markets don't "correct" themselves naturally - people will hold onto the values they believe in until some other agent (by means of force, whether economic or military) enjoins them to shed that value in exchange for another. Another example of this would be to look at how quickly Americans were willing to shed their civil liberties (a long held value) in exchange for a new value called "security." But I digress....

So Flat Taxers (hereon, Flatheads) believe that consumption itself should be taxed, n'est-ce pas? The belief is that spending is universal and regular and the economy does not have phases, etc. Those Flatheads take the assumption that people will always by stuff and this is nearly a good observation, "Look to the Phillipines, the per capita income their is ridiculously low, yet, per capita cell phone use is through the roof! Even poor people will buy expensive stuff!" This is an example of how those who believe in the Flat Tax will support their argument. But it doesn't have any explanatory power.

The logical question to the above would be, "Well, how much does it cost relative to the income of those poor Filipinos to own a cell phone? Do they even own the phone? How much does it cost to use a cell phone and how does it compare to us?" Instead of explaining why it makes economic sense to have a cell phone in the Phillipines, the Flathead rather uses the above to make an emotional appeal, the flavor of which would be, "hey, taxes are unfair, poor people are poor 'cause they make dumb decisions and the rich can afford to not pay, so why should I?"

The Flat Tax, as sold to me, is usually not about economic justice (it doesn't address the fact that the CEOs of firms make 500-1000 times more than their base employees); it's usually sold with a punitive streak smeared a mile wide across the class line. The rich support the flat tax because they will pay less taxes, the lower-middle class support it 'cause they think poor people are directly benefiting from their own hardships, and no one cares how the poor fit in to all this.

What the flat tax proposes to do is tax people on how much they spend per month; those who make very little money would get a "pre-bate" each money to defray the cost of getting basic goods. What this doesn't address are serious are sad: what would the motivation to work be, then? Most importantly, the actual cost to those with little money would be MUCH GREATER THAN it is today. The rich would do exactly what they've always done - pay the minimal amount of taxes they feel comfortable with; those that are serially poor and unconcerned about "contributing to society" would continue to not work as they would still receive their "prebate" and the working-poor and those just barely able to be middle class would become permanently poor because the relative cost this consumption tax would be more like 50% of their actual income.

What if large groups of people cannot purchase a home, what does that do to tax generation?
http://calculatedrisk.blogspot.com/2007/04/housing-slump-reduces-state-tax-revenue.html
this is one of my favorite blogs, by the by.

Here's some (light) reading on taxes and are great for discussion and analysis of tax proposals and their real effects on the economy and perhaps on individuals

Also, understand what poverty really looks like in Georgia:

"1 in 3 counties in Georgia have been deemed 'Persistently Poor' meaning 20% or more of their population have lived in poverty over the past three decades."www.cviog.uga.edu/services/research/poverty/georgiacounties.pdf

Discussion of How Taxes Work:
http://bigpicture.typepad.com/comments/2007/04/some_thoughts_o.html

Analysis of Flat Tax Proposals:
http://economistsview.typepad.com/economistsview/2005/08/a_flat_tax_reci.html

Are We Paying Too Much in Taxes?
http://bigpicture.typepad.com/comments/2007/10/global-taxes-as.html

The Cult of Supply-side Economics
http://economistsview.typepad.com/economistsview/2007/09/how-the-supply-.html

How Do Tax Changes Effect the GDP?
http://www.econbrowser.com/archives/2007/04/new_estimates_o.html

Republicans and their corporate tax cuts:
http://angrybear.blogspot.com/2008/01/corporate-tax-rates.html

Understanding Capital Gains tax implications:
http://angrybear.blogspot.com/2007/08/luskin-thinks-that-eliminating-taxation.html

So You Want To Better Understand the American Economy?

You can start here - this site, itulip.com has become one of my favorite sources for analysis and irreverent background on economic issues.

The above link seeks to explain just what the nature of the American Economy really is: is it an industrial economy, a finance economy, or what?

I came across the above discussion while reading about the rapidly devaluing dollar. It seems that, like Warren Buffet, I am making a sound decision to receive my pay in the form of Yen rather than U.S. Dollars. When Karen went to present at Oxford this summer her dollar was worth half Pound Sterling (meaning she had half the purchasing ability). Contrast that with when I was in Ghana several years ago and my dollar was worth something on the order of 8,000 Cedis - I was living it up on about $250 for three months.

Why does any of this matter, Paul? Let's consider recent developments:

1) Bank of America reported losses of several billion dollars in the third quarter (that's the end of September)
2) Merril Lynch reported billions of dollars in losses and fired their CEO
3) today Citi announced they, too, lost billions of dollars

4) oil is being traded at nearly $100 a barrel (this will be the higest ever)
5) the housing market is collapsing

Number 4) first:

Oil is expected to be expensive during the Summer because more people

(read: Americans) are driving their cars for vaction spots and in the winter more people (meaning us, again) are supposed to be using oil to heat their homes. Thus, usually the spring and fall are times for cheaper oil because there is less demand on the supply. When oil trades high it means that ultimately gas prices are high and so the cost of goods rises (because the higher gas prices paid by companies to ship your groceries the average 500 miles they now travel has to be absorbed by someone - that someone is you and me). When the cost of goods rises we get something called inflation. So long as the cost of oil rises, expect that you will need to pay more to get your average needs met - unless the government prints more money (this is why the Weimar Republic was in such a bad way at the beginning of WWI - you literally paid for bread with wheelbarrows of money). What is really screwing the pooch for us right now are numbers 1-3 and 5, read below.

How did these firms lose billions and billions of dollars? They invested in real estate. More specifically, in the wake of the dot com bubble bursting (The Market Correction, as it was labeled by Bush & Co. and also one of the puns of Jonathon Franzen's fine novel, The Corrections) the U.S. government allowed for deregulation of how banks could structure debt.

It used to be, before the Great Depression, that a mortgage lasted 10 years and so the down payment had to be much, much harder to collect. If you didn't pay off the loan (mortgages are loans) in those 10 years, the bank repossessed your home. In the wake of the Great Depression the Fed initiated a number of sweeping changes to the banking industry. Among them the Fed made it possible for more Americans to have the ability to own a home by making 30 years the standard amount of time in which to settle the mortgage (it's a debt). For decades, then, the reigning opinion has been, "Homeownership is the best way for low-income families to generate wealth." How is that done, Paul? I thought these people were in debt?

You're absolutely right, these people are in debt, and here's the heart of where our financial woes begin as a nation. When the dotcom bubble burst (mid- to late-90's) there were a number of folks (call them investors) involved in making money in the stock market. Now the rule of the stock market is buy cheap stocks and sell them when there is a strong demand for them, that's when the price is high.

The executives and financial officers of many, many firms had invested their fellow employees' retirements into stocks that were sold as sure-fire quick money making machines, for some reason these hacks felt that every single tech company would be Google and Amazon.com. They weren't and all those retirements were lost when people realized that everyone was investing in the same stocks and the only value these stocks had were that everyone else thought they knew something no one else knew.

Here's a visual: there's a stream of happy-go-luck lemmings heading in a herd in a direction and slowly word started spreading that the lemmings up front were tumbling to their doom. Word got around on our 24 hours a day, gotta have a story media that the very same stocks that were being touted as sure-fire on the finance program earlier that week (hey, why not, finance can be newsy too!) were actually going to lead to massive poverty. So all the inverstors, the very ones that had driven the price up for so long, were now taking their money out as soon as they possibly could; hopefully before all the money was gone.

To avoid losing an election year, the mortgage industry was allowed to deregulate in such a way that banks and hedgefunds could take debts and sell portions of the debts to others. Basically what's being sold here is the promise that a debt will one day be collected and with interest. Two problems arose here:

1) If I lend you $100 and Roper sees this, he cannot say that there are now $200 present in the system. You have my $100 and I have the promise that you will give it back next year with an additional $15 (this is called interest, the amount you pay for the convenience of using my money now to be paid back later). People (read: Chief Financial Officers and other important financial analysts) nonetheless began investing into these hedgefunds with the belief that there was now $200 present to be shared among whomever was smart enough to invest in this great scheme. This is the fallacy of mistaking credit for money. Money is not the same thing as credit. Why not? If I lend you the $100 and you no longer value honoring this debt not only am I out $100 dollars, but you done spent the money too. Now there's no dollars. This is what happened with the subprime mortgage industry this summer.

Subprime means that the borrower cannot get credit extended to him at the prime rate (the rate that the Wall Street Journal prints each week). Why can't he? Because the credit reporting bureaus (Equifax, Experian, and TransUnion) came up with an algorhythm (that's your credit score) that is supposed to predict when a person will pay his debt on time. His score says he ain't paying on time no time soon.

It doesn't work, they announced this year. Turns out that people realized you could sell the ability to be an "authorized user" on someone's credit accounts and in so doing everyone's credit score rises. The higher your credit score the lower the interest you should pay to borrow money.

Because of deregulation, many people that should not have been extended credit were nonetheless extended a ludicrous amount of credit. How? The rules were changed so that a person that could only afford a $1,000 monthly mortgage payment was able to qualify for a mortgage payment of nearly three times that. How is that possible, Paul? The magic of deregulation allowed it so now you could qualify for this much too large mortgage based on this initially lower interest rate, a teaser rate. You pay the low, low interest rate for the first 2 years and then every year for the next 28 years your interest rate will vary - more than likely it will be significantly higher (this is a 2/28 mortgage).

Why would anyone encourage this practice? There are two immediate benificiaries: the people selling the mortgages ('cause they get a commission on these loans), and the people (banks and hedgefunds) that lost their money in the dotcom bust. Run from the frying pan into the fire. During this time there was a constant lowering of interest from the Federal Reserve Bank (my student loans were carrying, like, 1% interest I had too borrow at those terms!), remember? Why were the rates dropped? Because the dotcom bubble had just burst all over ouf faces and the freedom haters attacked us; we had to stimulate the economy. Bush, in his initial statements after 9/11 said what? He said, go out and buy, America. He said that specifically.

But how will we do that, W? We offer interest rates so low that no one feels afraid of the actual cost of borrowing. Now the chickens are coming home to roost. In October an estimated $30 billion dollars of adjustable rate mortgages (ARMs) were adjusted and every month for the next 12 months a further $1 bn will be adjusted. In Carroll County, west of Atlanta, one in 27 homes is in foreclosure as of this month. What's fueling this? HGTV and there exciting reality programs about flipping properties.

People were reading books about investing in real estate and this would be the way to secure a retirement. Buy a house cheap, use a second mortgage (a Home Equity Line of Credit) to cover the cost of fixing the property up and sell it for more than it's really worth. All of a sudden there is this spike in the Labor numbers - everyone's employed in housing, whether supplies or construction or whathaveyou. In Carroll County there has been 1 request for a building permit for an apartment complex this year, last year there had been a significantly larger number.

So: less people are employed, more people are facing foreclosure than since the Great Depression, the average American before last year was carrying an average credit card debt balance in excess of $8,000; the median student loan debt was $35,000; the war on terror continues to cost hundreds of billions of dollars (we're literally dropping billions of dollars onto our enemies, shooting bullets of excess capital into their bodies - we're that rich); and investors are artificially driving the cost of oil up because their real estate money's all gone (optimistically), or, we've reached the peak oil moment - where the cost of oil continues to rise until we are finally forced to innovate a new way to make groceries travel an average of 500 miles before it reaches your dinner table.

Eradicating Poverty and Racism

Part of being an Americorps*VISTA is being committed to mymission to eradicate poverty in our communities by providing capacity building for the organization to whom I am assigned. That means I help establish community partnerships and facilitate new ways in which these programs can benefit one another as they seek to benefit their communities, right?

That means part of my job must include pounding the pavement and meeting other groups doing similar work. I chose last week to visit a nonprofit in northwest Georgia, which is very rural and so far as I can tell our office in Atlanta has yet to identify the right partnerships way out there. I was on a mission to change that. I met with my contact and discussed our mission and asked about theirs and tried to identify ways in which my organization could lend value to theirs. After some talk about our services came the following comment, "Y'know, there are all these programs for the Latinos, and women, and African Americans... what about the white man, what's he s'posed to do?"

I didn't know what to say to that. On the one hand I thought maybe he was saying that it's frustrating for his constituency, but then again, wasn't he also making a racist comment?

Fast forward to tonight. I am at another speaking engagement and I am talking to some women outside of City Hall East. It's a couple of black ladies and we're talking about the fact that the services they are seeking are only being offered in English here and in their home county, Gwinnett, it's only offered en Espanol. And this middle-aged, black, woman was going into how it's not fair, "They need to be learning how to speak English, I don't mean to sound, that way, but you know what I mean?"

I did not. So I replied,

"Y'know, immigrants are 4 times more likely to being a small business owner than a person born here. These entrepreneurs are the primary economic engine driving the NYC economy, actually, since 9/11."

"Yeah, but, they need to speak English here, why can't I get this business training in my own community when they be havin' all the opportunity."

I cut her off, "It sounds to me like you're describing a need in your community for a service which you might be able to provide. Why isn't this your small business?" I gave her a second to process this.

"I bring it up because at the last meeting held by this organization I met two women who were having the same problem as me: getting the Douglas County Chamber of Commerce to return my emails and calls. I know they have small business owners that would love to know more about micro-finance options available to them. Why won't the Chamber call me back? These ladies knew exactly what I was talking about because they, too, were not able to get the Chamber to contact them."

What did these ladies in Douglas County do? They formed their own, informal, Chamber to address the needs of fellow business owners in their area that were not being served by the Chamber of Commerce. Now they are filing as a 501(c) and can begin another stream of revenue.

I looked at these ladies, in the City Hall tonight and said, "So, rather than talking about how these people should learn your language, you should try to start your own network, make that your business, you obviously can see there is a need for it. And you don't even have to know much about how to start a business, just call me up and my nonprofit, Accion USA, will come do financial literacy classes for you, for free. We can tell other financial literacy programs that you're looking for partnerships, and there you go - free services that you can capitalize on."

They were sold on the concept.

Georgia has a serious problem with racism. We try to mask it under the catch all immigration, but immigration isn't the real problem. Healthcare is the real problem, real services to communities - that's a problem, but it's easier to blame immigrants than it is to buck up and admit that it's the laziness of those born here that brings foreign entrepreneurs here. There's little native competition.

Pardon my frankness, but: if you've been here this long and still haven't taken advantage of the advantages you've got, don't complain about how it's not fair. Turn it to your advantage, reinvest in your community by identifying those who are working in your community.