Category: Public Policy

debt-trapWhat’s the biggest problem with payday loans?

The obvious answer would seem to be “high interest rates.” But interest rates are often tied to credit risk, and so charging high interest rates is not always wrong. Another answer may be that the loans appear to be targeted toward minorities. But research shows that the industry appeals to those with financial problems regardless of race or ethnicity.

No, the problem with payday loans — what makes them a debt trap — is “rollovers.”

A study by the Consumer Financial Protection Bureau (CFPB), the U.S. government’s consumer protection agency, found that four out of five payday loans are rolled over or renewed within 14 days. 40 percent of borrowers take out only one loan, about 15 percent take out two loans in sequence, and 45 percent take out three or more. But 14 percent of borrowers take out more than 11 loans in a row.

The CFPB is considering proposing rules that would end payday debt traps by requiring lenders to take steps to make sure consumers can repay their loans.

All lenders making covered short-term loans would be required to adhere to one of two sets of requirements. The first set would “prevention requirements” which the CFPB says:
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This past Friday, I blogged about the U.S. Securities and Exchange Commission’s recent decision to allow a vaguely worded proxy resolution proceed to a vote. The resolution was submitted by, among others, members of the religious shareholder activist group the Interfaith Center on Corporate Responsibility.

The ICCR resolution calls upon ExxonMobil Corporation to take action intended to mitigate climate change. ExxonMobil requested the SEC deny the ICCR resolution on the grounds it was based mainly on nonspecific greenhouse-gas reduction targets and unclear strategies to achieve them.

Since that post, I received an email from a subject matter expert that helps place the SEC’s decision in perspective. Legal Director Allen Dickerson from the Center for Competitive Politics, a free-speech nonprofit, commented:

The SEC’s decision was routine. It is extraordinarily easy, under U.S. securities laws, to put a proposal before a company’s shareholders, and politically active groups have done so with increasing frequency in recent years. But these policy proposals are seldom adopted. Shareholders generally want corporations to maximize the value of their investment, as management is legally obligated to do, and rebuff attempts to turn the annual meeting into an extension of the broader political arena.

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RiskAhead“Most of economics can be summarized in four words: ‘People respond to incentives,’” says economist Steven E. Landsburg. “The rest is commentary.”

When governments create a regulation, they are creating an incentive for individuals and businesses to respond in a particular way. But the people who create the regulations — government regulators — also respond to incentives.

As Elon Musk, the CEO of Space X and Tesla Motors, explains,

There is a fundamental problem with regulators. If a regulator agrees to change a rule and something bad happens, they can easily lose their career. Whereas if they change a rule and something good happens, they don’t even get a reward. So, it’s very asymmetric. It’s then very easy to understand why regulators resist changing the rules. It’s because there’s a big punishment on one side and no reward on the other. How would any rational person behave in such a scenario?

 

 

mass-incarcerationWith the 2010 publication of The New Jim Crow: Mass Incarceration in the Age of Colorblindness by Ohio State University law professor Michelle Alexander, the conversation about America’s exploding prison population singularly became focused on the intersection of race, poverty, and the War on Drugs. According to the narrative, the drug war disproportionately targets blacks in lower income communities as a means of social control via the criminal justice system similarly to the way Jim Crow controlled blacks in the early 20th-century.

The one problem with mass incarceration-as-Jim-Crow thesis is that it does not fit the empirical data. The drug war is not the reason that today we have nearly 2.5 million people incarcerated in this country. In the mid-1970s the U.S. prison population grew from about 300,000 to 1.6 million inmates, and the incarceration rate from 100 per 100,000 to over 500 per 100,000 largely due to violent crime, property crime, and rogue prosecutors. Drug policy changes would, therefore, have little effect on prison population rolls.

The first significant challenge to the Alexander thesis came from Yale Law School professor James Forman, Jr. In a 2012 article, “Racial Critiques of Mass Incarceration: Beyond the New Jim Crow,” Forman observes that drug offenders constitute only a quarter of our nation’s prisoners, while the violent offenders make-up about one-half. While sympathetic to the ways in which those living in poor black communities are more likely to end up incarcerated than those in middle-class black communities, it is simply not true that drug policy, targeted at blacks, is driving prison numbers.
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anti-establishment-bernie-sanders-donald-trumpWith Donald Trump and Bernie Sanders outperforming all expectations in the current election cycle, much has been said and written about the widespread dissatisfaction with the so-called “establishment.”

“We’re tired of typical politicians,” they say. “It’s time for real change and real solutions. It’s time to shake up the system!”

Yet, as Jeffrey Tucker points out, blind opposition to the status quo, no matter how bad it may be, is not the same as supporting liberty.

The state power we oppose is not identical to the establishment we reject. You can overthrow the establishment and still be left with a gigantic machinery of legalized exploitation. All the agencies, laws, regulations, and powers are still in place. And now you have a problem: someone else is in charge of the state itself. You might call it a new establishment. It could be even more wicked than the one you swept away.

Indeed, it usually is. Maybe always.

Or, as Peggy Noonan recently wrote, considering the prospect of a completely dismembered GOP: “Something important is ending. It is hard to believe what replaces it will be better.” (more…)

single-payerA plurality of Americans support “Medicare for All”, legislation endorsed by Bernie Sanders and other Democrats that would establish a universal single-payer health care system in the U.S. At least they do until they find out what “single-payer” really means.

A recent AP poll found that 39 percent support and 33 oppose replacing the current private health insurance system in the U.S. with a single government-run and taxpayer-funded plan like Medicare for all Americans that would cover medical, dental, vision, and long-term care services. (Another 26 percent neither support nor oppose the change.)

But the same percentage (39 percent) opposed single-payer when it was found that it would cause their own taxes to increase or they’d need to give up other coverage, like health insurance provided by their employers. In both cases, about 4 out of 10 flipped to opposition when they discovered that caveat.

Even higher numbers opposed the plan if it would lead to longer wait-times for non-emergency medical services (47 percent) or if it took longer for new drugs and treatments to become available (51 percent).

“People say they believe in a principle, but when you describe the policy, it often loses support because they don’t like that there are side effects,” said Robert Blendon, a professor who tracks public opinion on health care at the Harvard T.H. Chan School of Public Health.

So what exactly would an American version of single-payer plan look like?
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The Blue MarbleYesterday I had the pleasure of taking part in a panel discussion at Calvin College, hosted by the Paul B. Henry Institute, focusing on challenges facing the next president. The topic of this inaugural panel for the series was “The Environment,” and there was what I thought was a very worthwhile conversation with Jamie Skillen of Calvin’s Geology, Geography and Environmental Studies department, moderated by Micah Watson of Calvin’s political science department.

I had the chance to prepare some opening remarks, and I ordered them as five basic theses each paired with its own corollary. To wit:

Thesis 1: Our world belongs to God. Corol. God’s world belongs to us.

Thesis 2: Humans have a unique stewardship responsibility. Corol. Humanity is of unique significance in the world.

Thesis 3: Stewardship involves being productive. Corol. A clean environment is a costly good (cf. Cornwall Declaration).

Thesis 4: Economic and environmental stewardship, rightly understood, are not fundamentally opposed. Corol. Short-termism is the enemy.

Thesis 5: Good stewardship of fossil fuels is the key environmental challenge today. Corol. Nuclear has to be part of the solution for transcending fossil fuels.