The Intractable Student Loan Mess

Student loan debt has reached crisis proportions and shows no sign of abating. It has reached $1.16 trillion, according to the New York Federal
Reserve, with $31 billion added in the 4th quarter of last year alone. The aggregate is more than credit card debt and auto loans and is exceeded only by home mortgages. Incentives on all sides have seen to a situation that has veered out of control.

National policy is to create a college-educated public and a globally competitive workforce, so it is not too great an exaggeration to say that the government willingly loans money to any student, of any qualification, to take any course, at any school, at any price.

Colleges and universities have been overjoyed by this arrangement. With the government willing to pay whatever is the going rate, the rate has been going ever upward, causing borrowing limits to rise so that students can borrow ever more to pay the higher tuitions.

Then there is Congress, which charges interest on the loans. Those just starting out in life are viewed as a kind of profit center for the government, with vigorous opposition to lowering the rates. The base rate was once an indefensible 6.8%, was reduced to 3.4% in 2013, but is on the rise. Depending on who is the borrower and the degree sought, current rates run from 4.66% to 7.21% — this at a time in which banks can still borrow from the Fed at close to 0%.

Students earn their share of blame by spending their loans on courses that simply interest them — what The Weekly Standard neatly summed up as “trendy classes on race, class, and gender” — but are of no interest to employers. If they graduate, they too often have earned their degrees in fields with limited employment prospects or that don’t pay enough for them to retire their debt.

the due bill

In 1993 that debt for the average undergraduate on leaving college was $9,300 (inflation-adjusted). But the quartet of players above has combined to produce an expected debt load of $35,000 for the student leaving college this year (his or her parents may have borrowed a good deal more). Even if our student were able unfailingly to pay about $200 a month, that amount, borrowed at the lowest 4.66% rate, would still take nearly 25 years to pay down, interest having added some $20,000 to the principal.

softening the blow

There was a leniency provision put in place during the Clinton administration when the federal government was only in the business of guaranteeing student loans made by banks. Loan repayments were limited to 20% of net income after deducting an allowance for living expenses, and any balance after 25 years of payment was forgiven.

With the banks and the economy weakened by the 2008 crash, a bill amending the Affordable Care Act ended the bank guarantees, turned the Education Department a direct lender to students, cut the maximum payment from 20% to 10% no matter how much was owed, and cancelled debt after 20 years rather than 25.

As tuition rose and the burden for students worsened, President Obama made further changes — a more generous deduction for living costs reducing the income subject to the 10%, and wiping clean remaining debt after only 10 years for persons working in “public service” (liberally defined) and
not even requiring them to declare the forgiven balance as effective income for tax treatment. Steam rises about that one from the editorial desk at The Wall Street Journal — the special treatment accorded by Obama to those whom the writers pointedly call “aspiring community organizers” and “do gooders”.

slowing the flow

As if fighting against the colleges and the Congress for the harm they have visited on students, the administration offers additional ways to mitigate payments. If a student returns to college for additional courses or an advanced degree, payment on prior debt is suspended. A benefit called “forbearance” is freely granted by loan-servicing companies; it suspends payments for as long as three years from debtors who can show simply that their payment to income ratio is problematic. Forbearance can be granted even after a few payments have been missed, and it wipes the delinquency slate clean. Debtors have flocked to this avoidance option; already, payments on $125 billion in loans are in suspense under the forbearance plea.

Interest is accruing all the while, of course, so by taking advantage of forbearance or other deferrals, students add to the ultimate debt they owe, or that will be left to taxpayers to pay come 10 or 20 years when the debt is cancelled.

Three years ago, when the administration provided an estimate, $41,000 was the average amount of debt forgiven under the income-based repayment plans.

check isn’t in the mail

These many easements have caused the number of loans in default to gradually decline — by 1% between 2013 and 2014 — to the current level of 13.7%. But loans can be delinquent for
nine months before they are counted as being in default and in addition, as BloombergBusinessWeek points out, roughly half of loans are in some form of payment deferment which, for a sizable portion may be hiding difficulties in making payments.

The 13.7% also is presumably measured against the full universe of student loans, which includes active students from whom no payment is as yet due. If measured against loans that have come due, the default percentage rises to an alarming 19.8%, says a Journal op-ed citing the Education Department as its source. That’s 7.1 million borrowers with $103 billion in balances outstanding.

The bill for forgiven debt or default is sent to the taxpayers. There will then be the fundamental unfairness that those who never had the opportunity to go to college could find themselves paying for those who did, and those who did will be paying twice.

the for-profit plague

By far the most serious pathogen in the student loan contagion are the for-profit colleges, which we covered some time ago in a story titled “For Profit Colleges — A National Disgrace”. The scent of easy government money that students can indiscriminately spend set large corporations, private equity and even hedge funds baying in the chase to fund any outfit that calls itself an educational institution. Some 2,000 self-proclaimed colleges sprung up, willing to accept any applicant waving proof of a loan.

The outcome has been that, while the for-profits account for only 12% of students, they account for nearly half of all loan defaults. Only 32% of students stay to graduate from the four-year programs, earning degrees viewed as inferior by employers. The other two-thirds drop out with nothing to show for their mistake but a debt that Congress has made sure cannot be discharged in bankruptcy court. Of 21 institutions that last fall were running default rates so high that they could lose the right to accept federally issued students loans, 20 of them were from the private, for-profit ranks.

what’s the answer?

Certainly the greatest failing has been the willingness to pay any price with the result that colleges and universities gleefully raised tuitions to draw in more money. Indeed, they even compete for students, bidding for superstar professors who are promised they will barely have to teach, and adding so-called “amenities” from welcoming dormitory rooms to food courts that accommodate the latest fetishes. The student of fifty years ago, when Spartan rooms were minimally heated and certain dishes served up in the dining hall were awarded unprintable names, would be stunned by a visit to a campus of today.

The loan system let this happen, with students and taxpayers the ultimate victims, by not restricting loan amounts to force down tuitions. Fed by perverse incentives, college tuitions soared by 79.5% in just the ten years between 2003 and 2013, says the Labor Department. Compare that to the 43.1% rise in medical costs and the 26.7% increase in the consumer price index. This has been going on unchecked for decades. Since 1978, tuitions have risen by 1,225%, nearly twice the rate of health care costs.

The Obama administration is developing a rating system meant to staunch the flow of student loan dollars to poorly performing schools. First announced in 2013, its ratings criteria are scheduled to be announced this summer. But progress has been slowed by factions holding their self-interest higher than that of our youth.

College administrators are of course up in arms, fearful of being made accountable for what they produce. And enter the politicians. The Republicans who are outraged at the bad debt write-offs of the administration’s loan forgiveness programs are the same as those opposed to any federal oversight of education that might cure the problem. Democrats are concerned that inferior colleges in their districts might see less money and fret about what might happen to liberal arts programs.

The ratings criteria are no easy matter and a subject on their own — our educational system should not be based solely on whether graduates get jobs — but some scheme is essential to shut off parasitic operations that only dupe students and harm their lives.

But these fixes have to do with eliminating waste and fraud in the programs in place. Of greater concern is how the country should think of the role of higher education going forward. Once again, America is an outlier in a world that places a much higher value on education. To be sure its youth is educated, Europe believes college should be essentially free, with tuition costing just a few hundred dollars, as seen by scrolling through this website. High taxes pay for it. The U.S. has gone in the opposite direction, with heavy tax cuts across the board, except for a few percentages added recently to the topmost brackets. The conservative right wing equates taxes with socialism and preaches a free market doctrine that believes that our universities should be at liberty to charge prohibitively, blocking millions from a higher education and saddling the rest with a debt that can take much of their lives to repay. An Obama proposal for free community college has been hooted down, and to be fair, was probably too hastily considered given the damage that would do to funds and applicants at four-year universities. Some think education should be entirely free.

All of which says that we have not really considered what the answer should be.

Cracks Develop in the Iran Deal’s Framework

One view of the talks
    Steve Breen, UT San Diego
The ink was hardly dry on the term sheet rushed out by the U.S. before it began to smear. Called a “framework, it was immediately disavowed by Iran’s negotiators who felt they’d been framed. That the list was immediately released to the media was clearly an attempt to hold the Iranian negotiators to their word.

The Iranian public was joyous at the prospect of sanctions removal, but Iran’s President Hassan Rouhani and Foreign Minister Mohammad Javad Zarif had hoped to avoid details spelled out in public that would give ammunition to hard-line critics that think their negotiators gave away too much. They already faced the difficult job of selling the deal to Supreme Leader Ayatollah Ali Khamenei, who has the ultimate say.

That didn’t go well. A week later, the Ayatollah denounced the agreement on state television. “Everything done so far neither guarantees an agreement in principle nor its contents, nor does it guarantee that the negotiations will continue to the end”, he reminded all parties to the tenuous seven-nation accord while calling the U.S. “devilish” and “backstabbers”.

Zarif and Rouhani seem genuinely intent on sealing a deal and taking some steps toward normalizing relations with the West after 35 years of hostility with America. The CIA’s intelligence, revealed by Director John Brennan speaking at Harvard a week after the terms were announced, says that President Rouhani told the Ayatollah that the country’s leadership could be in peril and its economy, having felt the bite of six years of sanctions, is “destined to go down” if an understanding cannot be reached.

That may be why President Obama confidently said the Ayatollah is only playing to the public to protect his regime’s standing in their eyes. “Even a guy with the title supreme leader has to be concerned about his own constituencies,” said Obama at the Latin American summit in Panama, which, given Khamenei’s vitriol, seemed wishful in the extreme. Having firmly demanded that all sanctions be lifted immediately as a condition of signing the deal, and that inspectors will not be allowed on military bases, how does Obama imagine the Ayatollah will explain to those constituencies three months from now that it was only bluster?

It seems that the agreement announced on April 3rd, heralded a bit too hastily in a New York Times editorial as “a significant achievement that makes it more likely Iran will never be a nuclear threat”, has turned into more of a list of disagreements.

sanctions

The Ayatollah Khamenei insists on immediate sanction relief the moment final documents are signed, signaling that he will not agree to the terms negotiated. The framework says sanctions will be lifted if Iran “verifiably abides by its commitments” and President Obama has repeatedly insisted on relieving sanctions “in a phased way”. He was not surprised that Khamenei and his negotiators are characterizing the deal “in a way that protects their political position.” He reiterated his own demand with, “If that is his understanding and his position in ways that can’t be squared with our concern … then we’re not going to get a deal.”

There is no timetable linking sanctions to each of steps Iran is required to take, and obtaining agreement to a schedule should prove dicey in the negotiations to come. If the U.S. and partners were to capitulate to the Ayatollah, among other blessings showered upon Iran would be the release of $100 billion in blocked funds before Iran had honored any of its obligations.

What is called the “architecture” of restricted imports will be kept in place to “allow for the snap-back of sanctions in the event of significant non-performance” in the words of the term sheet. But there is confusion. A State Department representative spoke of “suspension” as the first step. “It’s suspension and then later termination to ensure that Iran has abided by its commitment.”

Once undone, sanction reinstatement will not be simple, and with commercial relations profitably reestablished, the question is whether the negotiating partners — particularly Russia and China — can be counted on to re-commit?

centrifuges & enrichment

Centrifuges spin to enrich uranium. The Bush administration refused to negotiate unless all Iran’s centrifuges stopped spinning. So the few hundred working in 2003 had expanded to thousands by the time Obama took over and the count has since swelled to 19,000.

The hope in the current negotiations was to eliminate the centrifuges altogether, but Iran decreed that none are to be destroyed. “As soon as we got into the real negotiations with them, we understood that any final deal was going to involve some domestic enrichment capability,” a senior U.S. official said, so the Obama administration yielded, allowing Iran to keep 5,060 less efficient first generation machines — at the Natanz facility only, restricted for 15 years to enriching no higher than 3.67% in U-235 isotope content, a level suitable for power plants but nowhere near 20% level needed for a nuclear bomb. The rest of the centrifuges are only to be idled or mothballed.

At Fordo, the secret facility deep within a mountain and discovered during Obama’s first year in office, there is to be no fissile material nor uranium enrichment for 15 years. The plant is to be used to produce medical isotopes.

But there is no restriction at the Fordo site about what type of centrifuge can be retained there, and while inspectors may see to it that they do no enrichment, in the event of a breakdown in the agreement, they “could be rapidly repurposed for enriching uranium under a breakout scenario” that could produce the fuel for a bomb in as little as three months”. That’s the belief of R. Scott Kemp, a centrifuge expert at M.I.T.

anywhere, anytime

The framework of “parameters” released by the Obama administration covers “anywhere” quite thoroughly but there is no mention of “anytime”. It says that the International Atomic Energy Agency (IAEA) is to have “regular access to all of Iran’s nuclear facilities” and “suspicious sites of allegations or a covert enrichment facility, centrifuge production facility, or yellowcake production facility anywhere in the country” as well as monitoring of the industry’s supply chain. What it does not promise is the “anytime” unannounced access of surprise inspections. Will Iran insist on by-appointment-only and long advanced notice

In his television appearance the Ayatollah ruled out military bases. “It must absolutely not be allowed for them to infiltrate into the country’s defense and security domain under the pretext of inspections,” he said. Why that is important to the U.S. and partners is because at least one major military site, Parchin, is suspected of conducting research on nuclear weapons. The IAEA has repeatedly been denied access by Tehran.

And if Iran blocks access or is suspected of cheating on any of the requirements of the agreement? Secretary of State John Kerry said on the PBS NewsHour,”We’re going to have a very robust inspection system”, but the framework says only that “a dispute resolution process will be specified” by which any of the signatories can “seek to resolve disagreements”. Asked about military bases, Kerry evaded.

enriched stock

The stockpile of already enriched uranium — listed as 10,000 kilos in the Framework — was to have been shipped out of the country, presumably to Russia, presumably to be converted to rods for use in power plants. But just days before the end-March deadline, Iran refused and the Framework shows that the parties acceded.

Stocks are to be “reduced” to 300 kilos in some unspecified away that does not account for what is to become of the remaining 9,700 kilos, with the small remainder diluted and held to the 3.67% limit for 15 years.

There is an ominous portent to the maneuver, as if Iran is poised for a breakdown in the agreement. Was there perhaps anguish over the fact that once out of the country, the stock would be irretrievable? Kept at home, Tehran would not have to start over.

past work

In 2011 the IAEA put forth a report that listed a dozen concerns it has about Iran’s past nuclear work that could have military dimensions. Tehran has so far partially answered only one. It is difficult to be certain that Iran would need a year after breakout to produce a nuclear weapon if we do not know how far they have already progressed. Olli Heinonen, the former Deputy Director-General for Safeguards at the IAEA, makes the point: “You need to have that baseline [to] disclose past military-related nuclear activities. Iran is increasingly looking like it’s not going to do this. Is the U.S. prepared to accept that?” The Obama administration hasn’t made clear what it will require, but John Kerry did in an interview with the NewsHour’s Judy Woodruff. “No. They have to do it”, that is, answer all the IAEA’s questions. “It will be done. If there’s going to be a deal; it will be done… It will be part of a final agreement. It has to be”. But there is no sign of progress in the Framework.

research

Iran’s insistence that it may continue with its research and development on advanced centrifuges was the subject of a “lengthy battle” with Iran the victor. One has to ask, why the obsession over centrifuges if no bomb is intended? Is nuclear blackmail part of this ayatollah’s grand design for Iranian hegemony in the Middle East as we see it extend its reach, and is the acceptance of the framework only a temporary expedient to end the sanctions and rebuild the Iranian economy before resuming the grand plan? If not, why does Khamenei have a dream that he voiced his dream last summer of building 190,000 centrifuges?

Reuel Marc Gerecht, a former CIA analyst who is now a senior fellow at the Foundation for Defense of Democracies, warns, “A reading of the supreme leader or of Hassan Rouhani in their own words ought to tell you that there is a near-zero chance that an accord will diminish the revolutionary, religious hostility that these two men, the revolutionary elite, have for the United States”.

closing the deal

That it has taken 19 months of negotiations to arrive at a robust list of demands, but not signed to by Iran, partly rebuffed by Iran’s supreme ruler, and with details to be worked out in only three months (when it is usually th details that are the mostly hotly argued), says that arriving at Obama’s hoped-for pact with Iran by the end of June is a precarious bet.

And we haven’t yet mentioned Congress. It wants a say beyond the fact that it is up to them to rescind the sanctions because they are congressionally mandated. Engineered by Republican Senator and committee chair, Bob Corker (R-Tn), the Senate Foreign Relations Committee just voted 19-0 on a bill that would give the Senate 30 days to review any final deal, the President 12 days to veto any disapproval, and 10 days for Congress to override the veto.

But the bill itself should earn Obama’s veto for attempting to take away his legislated power to waive the sanctions temporarily – flexibility that he will surely need for perhaps the most sensitive tripwire that could blow up the deal.

Further, this is only a committee vote. For Congress at large to now barnacle the pact with amendments to toughen the deal and then expect seven nations to give them even a moment’s consideration after two years of painstaking work and argument is an absurdity.

Israeli Prime Minister Netanyahu is expected in these few months to spur Congress to disrupt any deal with his pronouncement that “no deal is better than a bad deal”, demagoguery that in fact makes no sense. The reality of the negotiations is that Iran, toughing it out with its “resistance economy”, has been testing the U.S. and its partners’ eagerness to strike a deal by just saying ‘no’ to one after another demands. A tougher deal short of war would mean another layer of sanctions and the risk that Iran, having an often mentioned breakout capability now standing at only two to three months, would simply go for the bomb. Any agreement that inhibits Iran’s march toward nuclear weapon capability is obviously better than no agreement. Will Congress figure that out?

Panel Says Let’s Start Messing With Our Atmosphere

<|90||Geo-engineering becoming our only option>Last September we ran a story the gist of which was, if you are not convinced humans are changing the climate and think nothing should be done, you should be aware of the desperate measures we Earthlings would have to take if you turn out to be wrong. The story was titled “ If We Don’t Stop Global Warming, You’re Not Going to Like Plan B” and it explored geo-engineering, the various methods, such as spraying sulfates in the clouds, that climate scientists postulate as a way to reflect sunlight away from the Earth.

If that seems far-fetched, the sort of future speculation that Popular Science readers enjoy, a two-volume report commissioned by the National Research Council has since been released that should persuade any doubter. One volume looks at capturing and burying the carbon dioxide emitted by power plants and certain manufacturing and finds that it is both too costly and too limited in effect. The second volume says we should get moving to expand research on what would be the best methods to block sunlight and conduct actual tests in our atmosphere to see if they work. As we plunge headlong into the future without doing anywhere enough to prevent irreversible damage to the only planet we have, the grotesque and unpredictable scenario of tampering with the atmosphere will be all that’s left to us.

Our geo-engineering piece is found here.

Congress, Left and Right, Finally Wary of Alarming Trade Pact

It was thought that the trade pact that hopes to tie together twelve Pacific nations would be where the left and right in Congress would finally come together to pass a bill with bipartisan comity. Instead, both sides began to align against it.

If you were a subscriber over a year ago, you hopefully read our analysis of the Trans-Pacific Partnership (TPP), a huge trade pact that we identified as giving multinational corporations greater powers than the government of the signatory countries themselves, the United States being one.

It is for Congress to approve it, yet only now are members on both sides of the aisle awakening to some of the jaw-dropping provisions they will be asked to vote for.

The Pacific pact (and a European counterpart) is what President Obama, Mitch McConnell and John Boehner have been holding up as a benefit to all that will prove all sides can work together. So why not just rush this through on a “fast track” where there is no filibuster, no debate, no amendments. Just a thumbs up-or-down vote.

Before anyone discovers what’s in it, they are careful not to mention, because the terms of the trade pact are secret.

Here’s s summary of what we said a year ago February (found here, plus these two updates):

The trade agreement would link twelve nations that circle the Pacific. The talks were initiated by George W. Bush in 2008 and have taken place in secrecy all this time — secret from Congress, secret from the public. Only Wikileaks has succeeded in exposing sections that have given hints of what’s in store.

Corporations are another matter. Representatives from some 600 have special reviewing access are letting their desires be known.

Only 5 of the TPP’s 29 covenants are concerned with typical trade rules such as tariffs and quotas. The rest for the most part give special privileges to corporations. This is what Congress has been principally ignorant of, thinking of it as purely a trade deal. And that is what may explain why member nations are pledged not to reveal the contents of the agreement until four years after the final deal is struck or talks are abandoned. Are we mistaken or doesn’t that mean Congress would be asked to vote for the pact without being allowed to read it?

All government contracts would be open to bidding by foreign corporations. Buy American would be outlawed.

Corporations will not be constrained by a country’s laws. They will be able to sue governments when disputes arise, their cases decided not in that country’s judicial system, but by World Bank and United Nations tribunals.

Corporations setting up shop in a member country would be given special privileges. If a law is subsequently passed that affects their profits negatively, they will be compensated. Native companies will not enjoy that benefit.

There is more in our original article.

attention deficit

The arguments for or against the trade deal have been almost entirely unmindful of the bulk of the draft agreement that is occupied with elevating the corporation above the state.

Business interests and the Obama government are promoting the pact with no mention of the transfer of power to corporations. An example is a Wall Street Journal op-ed in December co-written by Robert Zoelick, the U.S. Trade Representative under George W. Bush and then head of the World Bank, that urges signing the agreement because Americans, somehow able see past its secrecy and divine its virtue, think the TPP is a “good thing”, 55% to 25%, according to a poll they don’t specify. The writers say the TPP will add $3,000 a year to the U.S. family of four. A trade agreement that flattens barriers between rich and poor nations cannot help but result in a transfer of jobs from the former to the latter, in some cases small Pacific countries with wages a fraction of America’s. So the writers can only be counting on dollars a family would save from buying low cost imported goods.

A bill referred to as Trade Promotion Authority that sets the rules for fast tracking is expected to come up for a vote in the coming weeks. It is understandably crucial for Obama because letting loose among the 535 members of Congress an agreement years in the making by twelve nations for debate and amendment would be its destruction.

Some Tea Party members base their objections to fast-tracking on their distrust in Obama, who they say has once again “seized power” with a “usurpation of legislative authority” by keeping negotiations secret and pressing for an up-or-down vote. Even this late, lawmakers permitted access to the text of the negotiations may not bring aides and may only take notes.

Democrats in their traditional role of siding with labor are focused on the loss of still more jobs overseas, not the plotting of corporations to gain special privileges. They point to the damage done to American manufacturing by the North American Free Trade Agreement (NAFTA) between the U.S., Canada and Mexico, signed by President Clinton.

The left ia also preoccupied with inserting clauses to police against currency manipulation, “a favorite moan of unions and uncompetitive businesses, which like to blame their problems on currency shifts”, as a Wall Street Journal
columnists puts it, which gives an idea how much both left and right are distracted from what’s really being manipulated.

dawn

And so it was that not until late February did we spot a small mention in an inside page article in The New York Times that “a provision of the Trans-Pacific Partnership would undermine American sovereignty by allowing foreign companies to challenge United States laws”. There was no further elaboration.

In mid-March the Journal reported that “some 50 to 60 House Republicans are expected to buck GOP leadership” promoting passage of the fast-track bill that they “oppose on ground of U.S. sovereignty”. Comes the light. [4]

In late March, dawn broke. The lede (as in lead) story in the New York Times business section began,

An ambitious 12-nation trade accord pushed by President Obama would allow foreign corporations to sue the United States government for actions that undermine their investment “expectations” and hurt their business, according to a classified document… Companies and investors would be empowered to challenge regulations, rules, government actions and court rulings — federal, state or local — before tribunals organized under the World Bank or the United Nations.”

The Times acknowledged WikiLeaks as its source.

What explains Obama? Some might think his dogged advocacy is a narcissistic urge to put his name on yet another “signature achievement” to embellish his legacy, jobs and sovereignty be damned. But he does have interests that go beyond trade that cause him to go too far. He hopes to tie together twelve nations rimming the Pacific as part of his tilt eastward to create a bulwark against China, which is on the move to establish its own trade alliance. And over Obama’s unsuccessful pleas to them not to join, China has just gathered even our European allies into a rival to the U.S. dominated World Bank called the Asian Infrastructure Investment Bank (AIIB).

But opposition is mounting as different elements in Congress object to the secrecy and are discovering what is being covered up. Conservatives abhor anything that infringes on sovereignty, and on the left the article above cites both Chuck Schumer and Elizabeth Warren as being alarmed at ceding authority to foreign corporations.

Apr 7 2015 | Posted in World | Read More »

What the Republican Budgets Have Planned for Us

A federal budget does not have the force of law, but extending 10 years out, it makes a statement of where the dominant party wants the country to go.

In recent years, the Republican-controlled House, the Democratic majority Senate and the White House each produced its own conflicting version of the future, so budgets went nowhere. With Republicans now in control of both chambers of Congress, the pressure was on to see if the Party is capable of governing, one test being whether its factions can agree on a budget. Both chambers just succeeded in separately doing so, although reconciling the House and Senate versions could throw off sparks. Even among themselves, there were fireworks. In the House there was conflict between those such as John McCain who want to see increased defense spending, and those such as Rand Paul who want to withdraw from the world and lower the deficit.

But now, we could see an agreed-to budget for fiscal 2016 handed to the committees that decide on the appropriations — the actual dollar amounts doled out to all government departments — with instructions to stick to plan. So maybe we should pay attention this time.

passing the buck

The goal of both proposed budgets, as with each preceding Republican draft, is a balanced budget, i.e., no deficit by the 10th year. But the proposed budgets go beyond mere money, promoting enormous upheaval that would require new laws and a president willing to sign them. The aspirations expressed by these budgets raise the question of why Republicans want to go to extremes that are guaranteed to alienate we the people?

Holding to doctrine, both House and Senate versions would diminish the federal government and disperse functions to the states — both Medicaid and food stamps (Supplemental Nutrition Assistance Program or SNAP). Now, Congress sets the eligibility rules as part of the multi-year farm bill and the states issue the monthly EBT cards (“stamps” are no longer used) to people for use in groery and other stores. The budget plans hand all of it to the states — some state governors say they don’t want it — and Washington’s role would be limited to annual block grants.

It is a scheme that easily lends itself to yearly cuts in those grants that would tend to escape notice; a future Congress would no longer be so clearly linked to the specific social programs. How else can the Senate claim transfer to the states will somehow miraculously save $732 billion over a decade — $913 according to the House — other than by major cutbacks that the budgets evidently already plan for? With federal dollars shrinking yea after year, the states would be left with the problem of either raising taxes to fill in the missing money or continually tightening eligibility rules and taking food off the table.

The inevitable result will be disparities in benefits between poor and wealthier states, dividing what should be one country with all citizens treated alike into a patchwork quilt of inequity, and all due to the conservative infatuation with reducing the federal government and breaking programs into 50 pieces, efficiency and uniformity be damned.

The 2008 farm bill (enacted over George W. Bush’s veto) combined with the financial crash and the recession that followed caused the rolls of SNAP recipients to swell by 69% to 46.5 million households costing $80 billion a year. It would seem that review of eligibility rules — the net income threshold below which families must earn to qualify, the deductions allowed in arriving at that net income — would be far more productive in cutting costs.

Republicans are deeply suspicious that a large percentage of food stamp recipients cheat. Wouldn’t it make more sense to achieve their savings by rooting out fraud — or possibly convincing themselves that the fraud problem may be modest?

obamacare repealed

“I want to pull this law out, root and branch”, said Mitch McConnell a couple of years ago. Now he has his chance, or at least to express it, since the President’s veto of repeal is a certainty. For the House, the budget’s call for total repeal of the Affordable Care Act is what that body with nothing else to do has done well over 50 times — we’ve lost count.

The budget counts on a ten-year savings of over $2 trillion by eliminating Obamacare. One oddity picked up by media analysts: repeal would end Obamacare’s taxes that are slated to bring in approximately $1 trillion over the decade, but while the budget removed the costs of Obamacare, it forgot — if that’s the word — to remove the revenue, which is therefore badly overstated.

Republicans have floated a few ideas but, even though a Supreme Court decision in June (covered here) could sink Obamacre, they are not ready with any replacement. Are they telling us that we should return to the status quo ante when insurers refused pre-existing conditions and were free to conjure specious reasons to cancel when policy holders fell seriously ill?

cutting medicare adrift

And then there’s the plan to drive away voters of an entire demographic group.

The House budget retains Paul Ryan’s deliverance of Medicare to the private insurance industry. Instead of signing up once and seeing their medical bills paid thereafter, seniors would receive a voucher every year — scrip from the government convertible into a certain amount of money that tells seniors they are back on their own and need to go shopping for an insurance policy.

Here again, Republicans would put themselves in a position to, year after year, reduce the dollar value of the vouchers as their way to cut entitlement spending. If a policy costs more than the dollars on the voucher, seniors would need to come up with the difference. This approach is a subterfuge that avoids proposing above-board adjustments to unsustainable costs Medicare is facing as the baby boomer generation enters its final years. Democrats are equally guilty; they refuse to confront the subject at all, and insist on no changes.

But researching health insurance and its fine print is what those who are now seniors had to do all their grown lives. That’s what they are so glad to be rid of now that, as partial compensation for growing older, they are at least relieved to be eligible finally for hugely popular Medicare.

Seniors are retired. They have time to go to the polls and they vote disproportionately compared to other groups. And they lean Republican. So, how many votes are Republicans trying to lose with their free-market uprooting of Medicare?

Not many, they apparently think, by the ruse of starting their plan only with those who are 56 and younger today. The hope seems to be that those already in the senior ranks will be unconcerned for what is to happen to those who follow them.

The Republican plan would hand an enormous bonanza to the insurance industry, again with huge inefficiencies. The job of paying medical bills would be scattered across 50 states and among multiple insurance companies within each. And in each company a layer of administration is introduced, with money siphoned away from medical care for big paychecks to executives and the corporate profits they seek to maximize. Medicare itself would be reduced to little more than printing and mailing coupons.

No mention is made of rules for insurance companies. As with killing Obamacare, would private insurers be free to turn away oldsters with pre-existing conditions? Would their policies be cancellable?

three-card monte to pay for defense

In an increasingly chaotic world, even the White House thinks the defense budget needs to be raised, yet no action was taken by either chamber of Congress to modify the caps for defense and other so-called discretionary expenses chiseled in granite by the 2011 Budget Control Act — the so-called sequester. By slashing costs uniformly and indiscriminately across the board without regard to what should be cut and what shouldn’t, that Act was designed to be so unpalatable that certainly the administration and Congress would forge a better agreement. They didn’t. They still haven’t.

The sequester sets a base of $496 billion a year for defense. The President wanted $538, but insisted on a matching increase for the other discretionary accounts, which include social programs. Congress refused to budge, at least in the budget. Instead, both houses of Congress resorted to trickery. Separate from the budget and not subject to the sequester cap is the Overseas Contingency Operations account — the variable funds for fighting wars and supporting troops abroad that must be free to fluctuate as world events dictate. In a cynical end run that blows past the cap and gets the military what it wants but not the other programs, Republicans simply padded the Overseas account with an extra $40 billion, thus moving basic operating costs into an account meant only for war fighting and related. It’s a sure bet that we will see this chicanery replicated year after year.

fudge facto

In the final years the projections of the House budget didn’t quite eliminate the deficit, so a magic elixir called “Macroeconomic Impact on Deficit” has been inserted as a line item. [2] From a modest $1 billion in revenue in 2020 and 2021, it zooms to $83 billion in the final year, 2025. The authors are saying that the pronounced changes elsewhere in the budget, while they provide savings on their own, create a prosperity that will produce a bonus to balance the budget. The line item might have been captioned “Chickens counted before hatching”.