The Progressive Ensign – Page 14 – insights and analytics to build an economy that works for all

Teachers Protest Lack of Financial Support

On May 16, 2018

In Education, School Funding, Teacher Wages

Photo: the74million.org

North Carolina teachers protest today asking for school funding increases to be used for school nurses and an increase in per student funding now just 39th nationally, following their colleagues in West Virginia. In West Virginia teachers were successful at achieving a 5 % raise. Other teachers in Kentucky, Oklahoma, Colorado and Arizona have gone on strike for raises or more school funding.

Sources: National Education Association, Vox – 3/18/18

Teachers have actually been losing income since the Great Recession when inflation is considered, it is little wonder that they are fed up with districts not paying them a fair wage to live at a middle class standard of living.

The Department of Education reports that 94 % of all teachers have to purchase their own supplies for their classrooms at an average of $479, adding insult to their lack of pay. Today, it is a 24 hour 7 day a week job, answering emails from students and parents, and responding to text messages at all hours. As education becomes more critical to get a good job, parents are even more demanding of their children’s instructors putting constant pressure on under resourced teachers.

How do our teachers’ salaries and raises compare with other developed countries? Japan, Korea, Ireland, Poland, Canada are way ahead of us in offering raises of 75% to almost 60 % in providing raises for elementary teachers over the last 15 years versus the US at 25 %.

Sources: OECD, Education Week – 6/2014

If we want to provide the opportunities for our children to have good careers, in whatever field they choose we need to be making a much larger investment in our education system from kindergarten through college.

Next Steps:

Robert Reich, former Secretary of Labor for President Clinton and Professor at UC Berkeley sees part of the salary issue in the source of funds for our schools. The school systems evolved from local cities and districts mostly funded by local property taxes. Wealthy districts in California spend about 3 times the funding or poorer districts. When school foundations are considered the disparity is even greater and rich parents receive a tax deduction as well. We see a need to provide funding primarily across states (which some states do supplement poorer districts) but equally across the country. In OECD countries they invest in their students equally with even more funding provided to poorer districts. In the US only 14 % of the funding for local district schools comes from the federal government. OECD governments provide 54 % of the funding for local districts. We need to get serious about the future of our children and provide consistent national funding for education. Increasing taxes on corporations who have the lowest tax rates since the 1980s would be a good place to start since they are sitting on $1 trillion in cash mostly in off shore accounts or using their profits to do stock buybacks compensating executives at 300 % of their average workers’ pay. Especially, in America’s Heartland our young people are not receiving the education they need to build careers, and businesses in their communities to make thriving regions after being hit with many businesses shutting down or moving overseas.

High Gasoline Prices Hurt Low Income Consumers Most

By Patrick Hill

On May 15, 2018

In Climate Change, Environment, Oil

Image: earthfinds.co.ug

OPEC nations have been reducing their oil output over the past few months, while the US has been increasing its output – to the point where the US has become a net oil exporting country. Yet, with the US pulling out of the Iran Nuclear Agreement, oil prices shot up even higher. For a regular gallon of gas, the price has increased 23 % over a year ago.

Source: gasprices.aaa.com – 5/15/18

Prices are highest in the Western states and East Coast where there are more environmental regulations requiring special gas additives and higher taxes for road maintenance. Major gasoline price rises anywhere hit the lowest income groups the hardest, yet even harder in expensive Western and East Coast states.

Sources: Bureau of Labor Statistics, Morgan Stanley Research, The Wall Street Journal, The Daily Shot – 5/15/18

Low income people are already squeezed by higher rents, fewer low cost homes to purchase, rising health care costs, higher health insurance for individuals by undermining the Obamacare exchanges, higher debt, low wages and longer commutes (as often they don’t have the money to live near work). Longer commutes mean that a gasoline price increases hurt these long commuters harder than other drivers.

Next steps:

We need to get back to a focus on the 80 % and the lower income 10 – 20 % who are taking the brunt of price increases for necessities across our economy. We need to invest in affordable housing near employment to reduce commutes (reduce as purchases), public transportation in rail, bus and tram systems. While, reducing environment regulations may help the oil industry to pump more oil, we do so at the cost of our environment and health in the future – where quite often lower income people live near refineries and pollution leaking tank sites. Investing in renewable energy sources to reduce our need for costly gas offers more alternatives and is an environmentally sound strategy. Plus, corporate employers could help hourly and lower salary workers with public transportation credits to be used to reduce expenses of driving by supporting car pools and using public transportation. Local and State government can offer tax deductions on the matching grants to corporations that offer public transportation and carpooling credits.

Administration Drug Price Reduction Plan Falls Short

By Patrick Hill

On May 14, 2018

In Drug Pricing, Health insurance, Medicare

Photo: NASHP – National Academy for State Health Policy

The Administration last week announced a series of proposals to reduce the price of medicines for seniors and the general patient population. The policy initiatives include: review ways to speed generic drugs to market, placing trade restraints on countries until they pay their fair share of a drug’s costs, lowering out of pocket expenses for patients, require drug companies on TV ads to list the price of the drug advertised, updates to a Medicare drug pricing monitoring tool, and not until 2020 more transparency on drug list prices to consumers, drug rebates from manufacturers will be passed through to consumers, considering a requirement that middlemen like pharmacy benefit managers act in a fiduciary role for clients (consumers), and a report on how to use the Medicare Part D (drug) plan to negotiate for services Medicare Part B (services).

When investors and drug and biotech companies saw how vague the plan was, and the fact it did not give Medicare the right to negotiate prices stock prices went up after the 11 am announcement:

Sources: Money.net, Axios – 5/11/18

Today, biotech stocks were up another 1.0 % and health insurers Aetna and United Healthcare saw stock price moves up almost 2.0 %.

POTUS promised repeatedly during his 2016 campaign that drug companies were ‘getting away with murder’ on pricing. He even promised to Rep. Elijah E. Cummings (D- Maryland) in March of 2017 that he would seek Medicare authorization for drug price negotiations. He did not provide for direct negotiation by Medicare in this set of proposals, basically selling out the American people to the drug and biotech industries.

Next Steps:

“Until we get closer to policy solutions that address the ability of drug manufacturers to set whatever price they want and increase prices year after year, we may only be scratching the surface of this problem.” — Juliette Cubanski, a health-care expert with the Kaiser Family Foundation.

Ms. Cubanski perfectly outlines the problem; drug company pricing power is out of control, shows not restraint and little regard for the common good. Drug companies are making money off of people that are sick or dying. They have a social responsibility for the common good of all people to ensure their drugs are safe and offered at the lowest possible price. We have proposed previously and continue to believe that just showing list prices for advertised drugs is not enough – prescription drug advertising on TV should be banned as it is in all countries of the world except New Zealand. Banning advertising would give the drug companies at least $ 1 Billion per year they could put into research and development or to cut the cost of drugs. The pharma industry is one of the worst offenders in manipulating stock prices in a misleading way, and juicing executive compensation with stock buy backs. Companies like Amgen and Abbvie plan to buy back shares totaling $20 billion in 2018 which could be better used to lower prices or increase productivity, if the whole industry is considered it is over $50 billion.

Source: Company filings, Axios 5/11/18

Stock buy backs can be banned by an SEC policy change and do not require Congressional approval it should be done now covering all health industry companies not just pharma companies.

We are pleased to see the Administration moving on stock rebate discounts going directly to consumers as we have noted in the past. Yet, these proposals are so vague, are missing timelines and will need to be supported by officials in the Health and Human Services organization whose Director came from Eli Lilly. What we think will really happen is these proposals will be used as PR pieces to the voters for the mid-term elections while industry lobbyists water down the key provisions in back rooms. Certainly, the drug companies and investors see nothing to be concerned in the POTUS plan – so if it doesn’t hurt their valuation then these policies may be really don’t really have any bite. We want our drug industry to be profitable and thriving but at the same time it needs to take social responsibility for its products. Since the industry can’t seem to focus on a fair profits for its products, our government needs to bring these companies into alignment on the common good for all the people.

Representative Government Handles Damaging Factions Best

By Patrick Hill

On May 11, 2018

In Common Good, Factions

(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us, on Thursdays we spotlight in more depth Solutions to issues we have identified. Fridays we focus on how to build the Common Good. Please right click on images to see them larger in a separate tab.)

Image: Your Little Planet

Today, we see with the populist movement across our country in cross currents both right and left factions seeking to take control of the major parties. In one case, the GOP populists were successful in taking control of the Republican Party in 2016.

James Madison saw the issue of how to deal with factions who may override the needs of the people for the public good. In Federalist Paper No. 10, Madison said;

“By a faction, I understand a number of citizens, whether amounting to a majority or minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adversed to the rights of other citizens, or to the permanent and aggregate interests of the community.”

Certainly, his observation of what happens when factions move against the common good is true today, as we see the oligarchy faction taking control of the populists by making huge donations to our representatives in Congress. Madison saw that taking away the liberty of the faction was like taking away the air we breathe and keeps people engaged in their government. Plus, he saw issues in making laws to constantly set limits which would change around the effects of the factious movement. So, what might the answer be?

He knew that he was dealing with the inherent nature of man:

“The latent causes of faction are thus sown in the nature of man, and we see them everywhere brought into different degrees of activity…” Thus this factious, tribal nature of man unfortunately is coming forth with ever increasing strength and lack of civility.

We see partisanship growing to new heights of conflict. Our Congress has very few Senators willing to cross party lines as this chart illustrates so well:

Chart: Reddit.com – 113^th Congress – 5/11/14

Only two senators Sen. Susan Collins – R – Maine, and Sen. Lisa Murkowski – R – Alaska seem to be the only ones willing to cross the isle. Sen. John McCain – R – AZ cast the deciding no vote last summer on repealing the Affordable Care Act. How can this total lack of vision in the public interest be? An act of Congress effecting every American and we cannot create a common vision of what the future of health services for all? Creating that common vision, building consensus and moving the country ahead together is the responsibility of our elected leaders – clearly they are not doing their job.

The common good is certainly missing. Madison thought a pure democracy of citizens voting in a public forum to decide major matters would not work in a large geographically dispersed area and that a faction could easily overtake the democratic vote. He advocated as structured in the Constitution a republic of representatives of the people who could see the damage possibly done to the republic by the faction. Sen. Mc Cain invoked the need to strengthen the common good when he said his no vote was due to lack of ‘common order’ and process in the creation and rushed partisan vote taken without hearings from experts, citizens and consideration of amendments. In McCain’s no vote on ACA repeal, Madison’s vision worked, of ‘a body of citizens, whose wisdom may discern the best interest of the country, and whose patriotism and love of justice will be least likely to sacrifice it to temporary or partisan considerations.’ However, in so many other pressing issues for our country the elected leaders financially bound to their donor’s will are not solving urgent issues confronting the citizens and their public interest.

Where do we go from here to build the common good aligned to the public interest? We will look at various proposals to build the common good in this series of posts beginning next Friday.

California Leads with Solar New Home Requirement

By Patrick Hill

On May 10, 2018

In Climate Change, Environment, Renewable Energy, Solution

Photo: npr.org

The State of California is the first state in the country to require all new homes being built beginning in 2020 have solar panels. The requirement applies to all single family and condo units up to three stories high. The additional cost is estimated to be about $9, 500 added onto one of the highest median prices in the country at $565,000.

Some observers would have preferred that the State focus on building large solar farms rather than residences since the residence approach means that utilities have to deal with power coming up line that may be difficult for them to handle. Yet, residence based solar panel electricity provides for a more distributed system, rather than a centralized one offering more redundancy, options for homeowners and great self-reliance.

The residence based electricity option basically poses an alternative to central line based power utilities. Essentially with competition from residences it will spur utilities to cut costs and see how to move into renewable energy quicker to take advantage of lower costs for solar power.

Sources: California Energy Commission, The Wall Street Journal – 5/9/18

The shift to renewable energy sources is crucial to meet objects for climate change as endorsed by 175 countries in the Paris Climate Accord. When we think about the consequences of not meeting the challenge of climate change it is unthinkable how hostile our planet will be to live on – eventually making it uninhabitable.

We call for a national initiative to make renewables the standard for all new homes. As we have noted almost 60 % of the people want to set the environment as a priority even if there is an economic cost. if the federal government won’t do it then the top 20 new housing states should implement the plan and make renewables as the de facto approach toward home building.

To assist first time buyers, we recommend the State of California offer for homes under $400k an energy credit to be used as a credit on families’ state taxes to help out with the added solar expense added onto the price of a new home.

Let’s get the country moving toward renewable energy as our standard way of building communities and enjoy a climate that we all can live in.

US Washer Manufacturers Raise Prices Due To Tariffs

By Patrick Hill

On May 9, 2018

In Consumer Squeeze, Low Income Finance, Trade, Wages

Photo: consumerreports.org

As we predicted one result of import taxes (blog of January 24) the Administration placed on imported washers was that domestic suppliers would raise prices. Sure enough they have raised prices by 7 – 15 % at a time when consumers are squeezed. As tariffs were placed on imports we forecasted that domestic manufacturers would take advantage of the higher competition prices and raise their prices as Maytag and Whirlpool have done. Their spokesman say they had to raise prices due to increasing costs of steel and aluminum yet they have raised prices before the steel tariffs went into effect. Once again corporations lobbied government to change the rules in their favor to make more profits while consumers lose.

Other manufacturers for processed goods, food and items with a high shipping cost are raising prices as well.

Sources: Labor Department, The Wall Street Journal – 5/9/18

Of major concern is a combination of higher interest rates, tariffs and competition will cause increases in producer prices that companies will not be able to pass along to consumers. Consumers are too indebted to accept the price increases. Margins are squeezed, companies lose sales, and a recession begins. Possibly the wealthy can continue to purchase major appliances and processed items but the middle class will not.

Next Steps –

The middle class is caught in the cross fire of competing interests in our economy where the Federal Reserve did keep interest rates artificially low increasing the value of financial assets like stocks, homes and consumers were able take on too much debt. The real assistance would be for the federal government to invest in jobs training, career development, Heartland regional economies, African American and Hispanic community development, welcome immigrants, and end stock buybacks. Corporations could allocate the $1 trillion in cash they are holding in accounts mostly overseas and invest in their employees – raising their wages, productivity research, decent family leave programs and giving them more voice in corporate decision making.

Consumers Squeezed Between Debt and Stagnant Wages

By Patrick Hill

On May 8, 2018

In Consumer Squeeze, Debt, Employees, Executive Compensation, Low Income Finance, Student Debt, Wages

Image: americanprogress.org

The Federal Reserve just reported that consumer debt related to auto and student loans are at the highest level they have ever been since 1970 (2^nd chart). As we have noted wages have stagnated since the Great Recession with 90 % of the income gains going to the top 10 % in income. The middle class has been left out of the mainstream of the economic recovery over the past 10 years.

Sources: The Federal Reserve Bank – St. Louis, The Wall Street Journal, The Daily Shot – 5/8/18

While revolving debt from credit cards has fallen (top chart) since the recession, non revolving debt for autos and student loans has soared. Consumers are caught in a squeeze between debt and flat wages. The Commerce Department reported on 1^st Quarter GDP noted that consumer spending had decelerated during the quarter. Sentiment surveys have also shown a reduction in buying plans due to trade issues and any benefit from the tax cuts being lost due to rising prices from tariffs. Banks have posted 7 straight months of an increasing percentage of charge offs on bad loans where consumers are not making payments on non-mortgage debt.

As interest rates go up, payments grow larger per month, with the added tightening of increased prices. The middle class is caught trying to maintain their standard of living by borrowing money to mitigate flat wages.

Next Steps –

There are two sides to the squeeze – increasing wages and reducing loan payment size and principal.

We have endorsed Sen. Cory Booker’s bill called the Worker Dividend Act to share billions of dollars in stock buyback dollars 50/50 with employees. We see a need for incentives for employers to share management extreme wealth now at 300 times average worker salary with the line staff. Or if they can’t do it with incentives we like the City of Portland’s plan to require corporations share their funding above the 150 times level with employees. In our blog about why Wages Are Stuck we outline a series of steps including: placing workers on Boards, ending outsourcing overseas, end H1-B low wage visas, allow repatriated funds be brought back to the US only for wages, productivity or training investments, end stock buybacks and raise employee wages with the funds, breakup anti-competitive oligarchies of huge corporations to create more competition and jobs, balance the recruiting and hiring process for candidates, and offer incentives for employee training and development.

On the loan side, we recommend that student loan rates be brought back to reasonably fair rates as a percentage of the Fed Funds rate, and offer a series of forgiveness programs for universal service, community teaching and caregiving. For auto loans, we request that the Consumer Finance Protection Bureau evaluate major bank auto loans to ensure they are fair and do not have hidden fees or unusual interest rate riders.

1100 Economists Predict Trade War Disaster

By Patrick Hill

On May 7, 2018

In Protectionism, Trade, US - China Trade

Image: knowledge.wharton.upenn.edu

The economist group letter to President Trump quotes passages from a 1930 letter that was ignored by government leaders at the time leading to a trade war and the Great Depression, many economists believe.

“Much has changed since 1930 — for example, trade is now significantly more important to our economy — but the fundamental economic principles as explained at the time have not”, the economists declared including last year’s Nobel winner Richard Thaler and former George H.W. Bush economic advisor Gregory Mankiw. Economists in 1930 advised against the Smoot – Hawley act at the time causing a trade war and a disastrous economic downturn for all Americans.

The trade war with China has already begun as we noted in our April 23^rd blog the Chinese have not stood back waiting, they placed at 179 % tariff on sorghum shipped from the US causing China bound ships to reverse course. Soybean orders have been cut way back by the Chinese as well:

Sources: Bloomberg, The Wall Street Journal, The Daily Shot – 5/7/18

Corn contracts are in jeopardy as well in the Midwest as the Chinese threaten tariffs on those crops as well. Corn farmers are already facing increased competition from Brazil and other countries undercutting their prices.

The reality is the Trump Trade War is on! Companies and nations are already acting on the threats and in some cases the implemented tariffs that the present Administration has in a misguided manner put in place.

We do not understand why the White House is ignoring the lessons of history, their own constituents in the Farm Belt and 1100 economists in implementing a catastrophic policy that will hurt every American’s pocketbook and many of our foreign allies.

Next Steps:

Our blog on April 2nd outlined two distinct factors that the Administration policy makers need to take into consideration:

“First, we need to understand how corporations, suppliers and customers respond to political uncertainty. Corporations either buyer or seller are seeking certainty around first of all selling their products and second at the highest price. Second, when our government starts picking winners and losers in the US economy and linking unconnected segments like sacrificing US agriculture for intellectual property theft by China from US high technology companies – then any economic shot is fair game. Just the threat of tariffs on certain goods is enough to cause customers, in this case Chinese buyers of US agriculture goods to find other lower cost suppliers. Once these buyers discover new suppliers with lower prices and similar quality they are likely not to switch back to US suppliers. Sales for US agriculture companies are likely to drop as a result.”

The solution is in working within the international frameworks of the WTO and our agreements with other nations to peacefully solve these economic issues. Sound economic policy is based on win-win agreements that put in place long term relationships that both sides can build their economic futures on. Plus, these are complex integrated trade issues and cannot be settled by blunt, prejudiced based ideas that history has proven are false.

What Happened to Our Common Good?

By Patrick Hill

On May 4, 2018

In Common Good, Conflicts of Interest, Corporate Nation State

Image: Your Little Planet

Alexander Hamilton, James Madison and John Jay wrote a series articles in 1787 called the Federalist Papers defending the newly written Constitution. In Federalist Paper No. 57, Madison proposed to ‘first obtain for rulers men who possess the wisdom to discern, and most virtue to pursue the common good’. They were quite concerned that an overbearing majority would run over the needs of the public good or a minority group. Or that a ruling class of the privileged and wealthy would use the tools of government to continue to gain more wealth at the expense of the common people.

Today a sense of the common good is almost non-existent in our political discourse as our federal government has become so partisan as to be completely inept at coping with the common problems facing Americans. There is intense conflict between factions about our public interest in clean air, water and land, safe communities, equal economic opportunities, an open education system for all, justice for immigrants seeking to contribute to our country and being a leading light of democracy around the world. On many issues, corporations, public interest groups and other nations are ahead of us by 10 – 20 years in solving many foundational issues of our time.

What happened to our shared sense of the Common Good? One way to understand the loss of our common shared interest is in the lack of trust Americans feel in their democratic institutions that have the responsibility to protect and sustain our common interests and public good.

Source: Pew Research Center – 12/14/2017

There has been a slow and continuous decline in public trust since President Eisenhower until the ultimate low today during President Trump’s administration.

We see two major factors for the lack of trust. One, is that economic inequality has been increasing over the last 60 years to the point where it is at the worst it has ever been since 1929. Americans expect their government to be the rule keeper of a fair shot at economic opportunity not a bastion for the rich and powerful. As wealthy donors have taken over control of both major parties, the influence of the average citizen has been reduced to nearly nothing except at the ballot box – but not in legislative policy. A study by Professors Martin Gilens of Northwestern, and Benjamin Page of Princeton found that the opinion of the bottom 90 % made no difference in laws passed by Congress over a 20-year period. For example, the present GOP Administration is out of step with most Americans that want a clean environment even if there is an economic cost based on a Gallup poll. Americans know that the system is rigged as both candidates on the far left and far right, Bernie Sanders and Donald Trump gained great support by proclaiming that the economy and government was rigged against them.

The second major factor was the evolution of media and the Internet. In the 1950s and 1960s families gathered around the television set to watch Walter Cronkite or Huntley and Brinkley bring them the news for the day. These news anchors had teams of trained journalists on how to gather news, ensure airing of opposing views and investigation to reveal the facts of the story. As cable news programs became popular people drifted away from central network journalist supported news programs toward popular ‘viewpoint news’ programs like Fox News or CNN. Then, from 1995 until today, the Internet was a catalyst for the growth of blogging, and ‘friend news’ which had virtually no formally trained journalists and limited understanding of the difference between facts and opinions. Opinions spread virally through the Internet often with no foundation in formal fact gathering or fact finding investigation techniques. Today, we even have presidential spokespersons talking about ‘alternative facts’ to justify their policies or opinions.

We have come a long way from a shared common understanding of the facts to base opinions and policy ideas about. Unfortunately, the factional conflict is tearing at the foundations of our democratic institutions that keep our country free and protect the rights of all.

Next week, we will examine deeper how Madison and the founding leaders viewed factions and how to deal with them to keep new ideas coming yet keep the Union together. They had ideas that are insightful for our situation today as they placed their trust in the people to make the right decisions when provided with good information and facts.

Gillibrand – Khanna Postal Bank Bill Helps The Underserved

By Patrick Hill

On May 3, 2018

In Consumer Protection, Low Income Finance, Solution

Image: Campaign For Postal Banking

As payday lenders make low cost loans to minorities and the poor at exorbitant interest rates a possible solution is at hand. Senator Karen Gillibrand – D- NY and Congressman Ro Khanna – D- CA 17 and others have introduced a bill to provide checking accounts, savings accounts and low cost loans to underserved neighborhoods in cities across the US. Many community banks and large city banks left these neighborhoods in the 1990s when banking deregulation occurred for more profitable locations. We have seen the present GOP Administration pander to payday lenders by relaxing consumer protection regulations that cap loan rates and require full disclosure for loans with interest rates of 400 % to 1200 %. Fourteen states of have outlawed payday lenders entirely. There are 37 million the adults that do not have a bank account:

Source: Pew Charitable Trust – 2016

The Postal Banking Bill would offer loans up to $500 at T-bill rates of 1.65 % clearly targeting the payday lender market. The Postal General in a report on the bill viewed that rate as too low and will probably need to be raised to 25 % to handle possible defaults. According to the United Nations Postal Union 87 nations provide checking and savings accounts to over 1 billion customers, though not that many offer low cost loans.

We need to serve those that have been left out of the economic mainstream by offering reasonable low cost financial services with inexpensive loans – not making our low income population a target of loan sharks.