Author: hankkalet

The Federal Housing Finance Agency says it’s protecting taxpayers in nixing a proposed refinancing plan being pushed by the Obama administration. But its math may not add up.

The Federal Housing Finance Agency said it had concluded after months of study that debt forgiveness might benefit up to half a million homeowners, but that the costs — including the cost to taxpayers — outweighed the potential benefits.

Offering debt forgiveness “would not make a meaningful improvement in reducing foreclosures in a cost-effective way for taxpayers,” the agency’s acting director, Edward J. DeMarco, said in a statement.

“The choices we’ve had to make are hard but they need to be made,” he told reporters.

DeMarco, focusing solely on the cost of mortgage reduction, admitted that lowering debt levels and its impact on economic growth were never considered — a failure that undervalues the administration’s plan and leaves far too many vulnerable to potential default. If that were to happen, it would be a huge additional drag on the economy. Ezra Klein points this out on his Wonkblog:

The key to the refinancing plan DeMarco rejected is the fact that the vast majority of mortgages backed by Fannie and Freddie are paying interest rates above 5 percent, well above current interest rates of about 4 percent. If the mortgages were refinanced, that’s a substantial amount of money that each of the 30 million families with Fannie or Freddie mortgages would save on their payments every month. Hubbard estimates (pdf) that the average borrower would save $2,800, and that the total savings would come to $70 billion.

It would function, effectively, like a $70 billion tax cut, albeit one that actually makes Fannie and Freddie money. Most studies suggest that tax cuts have a stimulative multiplier, meaning the economy would grow by more than $70 billion. Zandi, for instance, estimates that low-income tax cuts (and refinancing would disproportionately help low-income families) have a multiplier of about 1.24, so the total economic impact could be around $86.8 billion. That’s growth of about 0.56 percent, based on the latest GDP data, which translates to about 0.28 percent lower unemployment. That’s not huge, but given the size of the labor force, it’s around 370,000 new jobs.

So why wouldn’t DeMarco do it? He argues that it would lose taxpayers money.

There are two problems with that explanation. One, that isn’t how DeMarco, under the statute creating the FHFA, is supposed to be exercising his authority. He is supposed to protect Fannie and Freddie’s finances, to ensure (pdf) that they are “in sound and solvent condition,” not to prevent net losses of taxpayer money. Two, it’s not even clear he’s correct. As Krugman notes, DeMarco’s analysis fails to take into account the benefits to Fannie and Freddie of the economic growth resulting from the plan, a pretty glaring omission.

Yes, it is.

• Send me an e-mail.
• Read poetry at The Subterranean.
• Certainties and Uncertainties a chapbook by Hank Kalet, will be published in November by Finishing Line Press. It can be ordered here.
• Suburban Pastoral, a chapbook by Hank Kalet, available here.

My piece on Tent City in Lakewood — Evicting the Homeless — came out earlier this month in print in In These Times and is up now on the magazine Website.

• Send me an e-mail.
• Read poetry at The Subterranean.
• Certainties and Uncertainties a chapbook by Hank Kalet, will be published in November by Finishing Line Press. It can be ordered here.
• Suburban Pastoral, a chapbook by Hank Kalet, available here.

I watched a few hours of the Olympics last night and was struck by the paucity of coverage of non-American athletes. We had the men’s gymnastics competition on and got to see every success and failure of Team USA. The performances of the other four squads in the finals, however, were brought to us via highlight, despite the fact that the favored American team finished fifth.

The Chinese won the competition and the Brits, the games’ hosts, took a bronze, the “British men’s first team medal in a century.”

I understand that American audiences want American athletes, but we also want great performances. The Americans have won six golds and 18 medals, compared with nine golds and a total of 17 medals for the Chinese. One could argue that the Chinese should be sharing the focus with the Americans and, going forward, we’d see better coverage of other international athletes.

As a kid, I can remember the focus being more balance. I’m hoping that this is just an early blip and that we’ll be seeing a lot more of an international flavor as we move forward into the individual events.

• Send me an e-mail.
• Read poetry at The Subterranean.
• Certainties and Uncertainties a chapbook by Hank Kalet, will be published in November by Finishing Line Press. It can be ordered here.
• Suburban Pastoral, a chapbook by Hank Kalet, available here.

Even conservatives are starting to question the austerity push. A piece today in The Huffington Post, quoting The Wall Street Journal, offers the analysis from the conservative American Enterprise Institute that shows that cuts to government spending has been damaging to the economy.

The American Enterprise Institute, a conservative-leaning think tank, has some data out indicating that cutting government spending may be off-setting private sector growth. That’s notable, especially when coming from an organization with the motto “Freedom. Opportunity. Enterprise.”

Public sector GDP — a measure of the goods and services produced by the government — has shrunk for eight consecutive quarters, according to AEI. At the same time, private sector growth has increased for 12 quarters in a row, indicating that America’s slow overall GDP growth may mostly be a result of a drop in government spending.

In just the last year, federal spending has fallen more than 3 percent, and the cuts may be countering private-sector growth, the Wall Street Journal reports.

The findings show that slashing government spending may not exactly be the best way to boost the economy, even though that’s exactly what lawmakers around the world are considering. That some of the data comes from conservative-leaning AEI adds fuel to the arguments of progressive economists, who argue that painful austerity measures don’t help economies in trouble; they hurt them.

Spain offers another cautionary tale, as reported in Sunday’s New York Times:

As the effects of years of recession pile up here, more and more Spanish families — with unemployment checks running out and stuck with mortgages they cannot pay — are leaning hard on their elderly relatives. And there is little relief in sight.

Spain’s latest round of austerity measures appears to have done little to restore investor confidence. And new employment statistics released Friday showed that the jobless rate had risen to a record 25 percent.

Pensions for the elderly are among the few benefits that have not been slashed, though they have been frozen since last year. The Spanish are known for their strong family networks, and most grandparents are eager to help, unwilling to admit to outsiders what is going on, experts say. But those who work with older people say it has not been easy. Many struggle to feed three generations now, their homes overcrowded and the tensions of the situation sometimes turning their lives to misery.

Spain has tried to cut its way out of its economic troubles, but the cuts have only made things worse. Think there is a lesson in this?

• Send me an e-mail.
• Read poetry at The Subterranean.
• Certainties and Uncertainties a chapbook by Hank Kalet, will be published in November by Finishing Line Press. It can be ordered here.
• Suburban Pastoral, a chapbook by Hank Kalet, available here.

A quick glance at today’s story in The New York Times on the expanding shortage of physicians might leave the impression that the Affordable Care Act is to blame. Starting with an accurate, if somewhat misleading, headline — “Doctor Shortage Likely to Worsen With Health Law” — it then goes on to explain the dynamics of the growing shortage.

The Association of American Medical Colleges estimates that in 2015 the country will have 62,900 fewer doctors than needed. And that number will more than double by 2025, as the expansion of insurance coverage and the aging of baby boomers drive up demand for care. Even without the health care law, the shortfall of doctors in 2025 would still exceed 100,000.

Health experts, including many who support the law, say there is little that the government or the medical profession will be able to do to close the gap by 2014, when the law begins extending coverage to about 30 million Americans. It typically takes a decade to train a doctor.

A close read — and a quick glance at the paper’s chart — makes it clear that we are looking at a one-time bump in need and that the issue at hand is not the health law but the health system itself. There is a dangerous shortage of doctors now, especially primary care physicians, and any stress put on this shortage is due only to the need to cover more uninsured Americans.

So, what are the issues? First, there is the confluence of population growth and the aging of the population.

Across the country, a factor increasing demand, along with expansion of coverage in the law and simple population growth, is the aging of the baby boom generation. Medicare officials predict that enrollment will surge to 73.2 million in 2025, up 44 percent from 50.7 million this year.

“Older Americans require significantly more health care,” said Dr. Darrell G. Kirch, the president of the Association of American Medical Colleges. “Older individuals are more likely to have multiple chronic conditions, requiring more intensive, coordinated care.”

The pool of doctors has not kept pace, and will not, health experts said. Medical school enrollment is increasing, but not as fast as the population. The number of training positions for medical school graduates is lagging. Younger doctors are on average working fewer hours than their predecessors. And about a third of the country’s doctors are 55 or older, and nearing retirement.

Just as significantly, the Times reports, compensation remains a problem, encouraging med students to pursue the glamour specialties (I.e., plastic surgery) at the expense of primary care and general medicine.

The proportion of medical students choosing to enter primary care has declined in the past 15 years, as average earnings for primary care doctors and specialists, like orthopedic surgeons and radiologists, have diverged. A study by the Medical Group Management Association found that in 2010, primary care doctors made about $200,000 a year. Specialists often made twice as much.

The health-care system in the United States is broken. Its incentives have nothing to do with care and remain based on profit and money. The cost of becoming a doctor is enormous; recouping that money means chasing the big payday offered by the specialties, a recipe for poor care.

Tinkering around the edges, as the ACA does, is not a solution, but it aloso is not the problem.

We need systemic change in the form of single-payer.