How I Learned to Stop Worrying and Love the Debt

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Our nation is a sinking ship, our national debt* is the hole and the only thing to do now is throw social programs overboard and hope the rest of us can swim. At least, that’s what the deficit hawks want us to believe. And many people.  

To be clear, I do not dispute the fact that our country is in debt; our country was born into debt and minus the few years preceding the civil war, we have remained in debt since 1776.

What I do not believe is that balancing our budget by means of throwing vital programs overboard is the only conversation we need to be having regarding our country’s welfare and economic growth. A narrative that places balancing the budget through spending cuts at the forefront of the national conversation hinders our ability to discuss necessary spending that will serve as an investment in long-term growth, productivity and in our nation’s workers. 

To understand the debt situation our nation faces, we must look at the federal debt as a percentage of GDP.  The federal debt held by the public as a percentage of GDP at the end of the fiscal year 2015 was 75%. And, while this is higher than our debt has been since 1950, it is not unusual for it to be this high in years following an economic disruption.

World War II, for example, left us with debts over 50% well into the 1950s and peaked at 103% in 1945. Rather than ruining us, our nation’s spending in response to WWII actually helped propel our economy out of the Great Depression. And after the war was over, rather than cutting taxes and social welfare programs, we invested in our economy and its workers. The GI Bill, for example, was set up through government spending with a goal to allow returning (white) soldiers to get an advanced degree that would lead to well-paying work.

The GI Bill also provided affordable housing (again, for white families) and tax rates remained above 70%, which is nearly double the highest tax rate today. All of this resulted in higher purchasing power of a more robust middle class. Imagine if the GI Bill had been seen as unnecessary spending. Better yet, imagine if something like the GI Bill was made available to all Americans, and this time without racist overtones. Millions of families still benefit from the support previous generations received and if spending like this could be used to assist families today, we may actually be able to begin to deal with our nation’s widening wealth inequality.

So why are deficit hawks focusing so intensely on cutting programs such as social security? In his book Debtor’s Prison: The Politics of Austerity Versus Possibility author Robert Kuttner highlights a mixture of self-interest coupled with a strong anti-government sentiment. By keeping social security a government program, big banks miss out on huge sums of money flowing through their systems and instead the government is responsible for a relatively secure and popular program. Banks hate to lose popularity contests to the government.

Additionally, there is a fear that deficits will cause higher interest rates and increases in inflation, scaring away investors from the private sector. But what has actually been shown is that when the government increases spending, much of the increased demand for services results in a higher need for private sector production, which actually acts as an incentive rather than a deterrent.

It’s time to push back against this narrative of reducing our debt by cutting spending period. Our economy is more complex and requires investment in order to engender long-term economic stimulus. Our collective debt is not a scary phenomenon that should be avoided at all costs. Rather, we should view this debt as a necessary tool that ebbs and flows and can be utilized to grow our workforce participation and social wellbeing. Placing a further burden on America’s workers by cutting vital programs will not save a sinking ship. Investing in these workers and, subsequently, in our nation’s economic growth is enough to build a solid ship and is the only rescuing we need.

*Pro-tip: The debt is different from the deficit. The deficit is the amount of debt we accrue each year while the debt is the total amount of money we owe. This is why the deficit can be decreasing while the debt is still increasing. Many politicians use these terms interchangeably; don’t let them fool you.

Caite Eilenberg
MPP 2017
Poverty Alleviation Concentrator

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It’s Time to Revisit Rent Control in Massachusetts

In 1994, Massachusetts voted on Question 9, a referendum prohibiting rent control. Question 9 passed by a narrow margin, abolishing rent control laws in Boston, Cambridge, and Brookline.

Now more than 20 years later, it’s time to revisit rent control in Massachusetts. As homeownership becomes an increasingly unrealistic option for many, the cost of not addressing rent control is simply too high. Data from Harvard University’s Joint Center for Housing Studies indicate that homeownership rates are at two-decade lows and primed to fall further. According to the Center, Generation X (born 1965-1984) was hit hardest by the 2008 Housing Bubble. The generation prior, the Baby Boomers, escaped largely unscathed. By 2030, Generation X will start reaching retirement age, and it’s likely many of them will rent. With home equity wiped out due to the Housing Bubble, Generation X may be deterred from purchasing homes. For those of Generation X who manage to buy a home between now and retirement, low levels of equity may push them back into the rental market.

Housing continues to conglomerate into the hands of corporations. Americans lost trillions of dollars in wealth during the Great Recession, due in part to bank seizure of 5 million homes. African American families were especially affected, with 53% of all wealth held by African American families evaporated. Of the foreclosed homes, many were purchased by private equity firms. In one case, Blackstone, a behemoth New York firm, purchased 1,400 Atlanta houses in a single day. In 2013, Blackstone was accumulating homes to the tune of $100 million per week.

Meanwhile in Boston, students are renting apartments using student loans. Rental prices, and student debt, are driven higher. This confluence of events, a sizable population with cost-deferred capital, and decreased market competition due to consolidation of rentals into fewer and fewer hands is unsustainable. Clearly, we need a policy solution that both encourages competition and creates affordable housing.

Pre-Question 9, rent control in Metro Boston had three parts: maximum rents and increases, anti-conversion regulations, and tenant protections. Laws differed by municipality. In all cases, a commission set maximum rents and approved rent increases. Boston and Brookline commissions regularly approved rent increases of 4-5%. Cambridge tied rent increases to inflation. Anti-conversion regulations deterred apartment-to-condominium conversion. Some regulations mandated advance notice of conversion, while others required severance payments and relocation assistance. Tenant protections made it harder for landlords to evict and made the failure to maintain essential services punishable by fine. Together, these functions made up what was referred to as rent control.

Twenty-two years later, housing is more expensive than ever. Skyrocketing rents are driving market prices far above assessed value. Consequentially, entrepreneurs have high barriers to entry into the rental market. Small property owners are bought out and consolidated. It seems Question 9 led to fewer individuals having the means to invest in and own property, a key underpinning of our democracy. Market competition has decreased because of Question 9. The market has been shaped in favor of corporations, not small property owners. In addition, the elimination of rent control means one less bulwark to gentrification for economically vulnerable communities. Homeownership, historically, has been a means of wealth-building and upward mobility, but for many young people, this opportunity has been foreclosed.

Policymakers have three options. First, they can do nothing. The result will be further conglomeration of housing stock, increased prices, and stunted competition. Second, policymakers can increase government subsidy of renters, and, ultimately, the conglomerates that own rental units. Merely increasing subsidies is not sustainable at scale because, as Generation X enters the rental market, and young professionals’ homeownership is impeded, rates of rental will continue to soar. This isn’t sound policy. The alternative is that citizens and policymakers have a real discussion about rent control and related mechanisms. That means dispelling the myth that rent control is inherently anti-competitive and bad for the economy.

A thoughtful discussion on rent control must seek viable solutions for the socioeconomic realities of 2016. We must contend with what Robert Reich, Labor Secretary under President Clinton, says about “the market.” According to Reich, there is no such thing as the “free market.” The market is a set of rules written by politicians and special interests. So, the choice becomes, what kind of market do we want to establish? Who are its winners and losers? If we look to America’s ethos, namely that everyone should have a fair shot, we’ll see that rent control comports better with our nature than the current state of affairs.

By: Nick Croce
M.P.P./M.B.A. ’17
Poverty Alleviation Concentrator

How the on-demand economy threatens workers and democracy

File illustration picture showing the logo of car-sharing service app Uber on a smartphone next to the picture of an official German taxi sign

Image from:https://mises.org/blog/how-uber-threatens-our-way-life

 

 

As on-demand companies like Uber and Instacart find savvy ways to navigate employment law, the misclassification of employees as independent contractors allows them to maximize profits at their workers’ expense. Through misclassification, employers avoid paying both reimbursements for on-the-job costs like gas and car maintenance as well as the minimum hourly wage. The growth of independent contractors not only stifles wage growth for low-wage earners, but also leads to higher rates of poverty and increased costs to US taxpayers.

To dodge regulation Instacart and Uber classify themselves as software companies rather than grocery delivery or transportation service providers. According to the companies, their software platforms are used by entrepreneurs looking to connect with clients. As an Instacart “independent contractor” myself, I know this classification is both misleading and harmful to working-class people.

Instacart has performance metrics, reliability notices, and on-the-job expectations. Although there is a guise of flexibility, the company actually decides my shifts. They call me when I’m running late and punish me if I cancel within 24 hours. There is no option to skip an order assignment without having a shift terminated, regardless of where the assignment will require me to travel. My vehicle isn’t a resource I use to make money; it is a resource they use to make money. And here is the difference: they don’t pay for it.  

For each order completed, Instacart drivers make $13 plus tip. At an hourly rate, this would place drivers above the minimum wage. However, drivers don’t just deliver groceries, they also buy them, making the completion of more than one order per hour difficult. Additionally, when the company sends drivers from Market Basket in Somerville to an apartment in Boston’s Seaport, 30 minutes away, and then back to Somerville for the next order, commission wages are limited and drivers are working for an entire hour without pay. After calculating gas and wear and tear on the car, earned wages fall below $9/hour.  

In 2015, the US Government Accountability Office (GAO) calculated that 12.9 percent of the US Workforce is now classified as independent contractors. Without thoughtful government intervention, this rate is only expected to increase, and the impact of growing contract employment could have negative implications for millions of Americans.  

As the GAO report points out, independent contractors experience higher rates of poverty than the standard full-time worker and are twice as likely to be laid-off or lose work. Additionally, independent contractors have greater on-the-job expenses, limited access to long-term savings plans, and a higher dependency on taxpayer funded public assistance.

The growth of contract work negatively impacts the financial stability of working class families with a disproportionate impact on urban, lower-income communities of color, targeted by on-demand recruitment efforts. Uber’s recruitment efforts  in lower-income communities with high rates of unemployment indicates that these jobs are a primary source of income for many. And, because of the lack of regulation, lower-income people are subject to jobs without benefits that involve a high degree of wage uncertainty. Depending on how often one is scheduled and how busy shifts are, weekly earnings fluctuate significantly.  

Although the Department of Labor recently released strict guidelines for the classification of workers as independent contractors, the current regulatory framework requires victims to file lawsuits against their employer. The paperwork can be complicated, the process can take months, and an investigation is not guaranteed. To prevent the abuse of low-wage workers, regulators must think outside the box to identify more proactive oversight procedures. Enforcement agencies need adequate funds to proactively investigate the growing on-demand economy and contingent employment classification emerging across all industries.

The concern of strict regulation stifling innovation is also one that regulators should take seriously. The on-demand economy has, in fact, created thousands of jobs in economically depressed areas. Building new regulatory frameworks that simultaneously protect workers and incentivize innovation is an option. However, when companies treat their workers as employees, it only makes sense to regulate such companies as employers. Not doing so undermines US law and creates additional obstacles between working class people and quality employment.
By: Erica Brien
M.P.P./M.B.A. ’17
Poverty Alleviation Concentrator

 

SNAP Cuts in a Land of Constraint

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Image from: http://thinkprogress.org/economy/2013/12/10/3044741/food-stamps-deal-liheap/

“Ma’am, you don’t qualify for food stamps because you’re not working 20 hours a week. You have to work at least 20 hours a week to even be eligible to apply.”

When the Massachusetts Department of Transitional Assistance representative explained to me that I couldn’t receive assistance my gut clenched with anxiety. After weeks of crunching numbers trying to determine how to cover all my expenses as a full-time graduate student, the reality of the inflexible requirements of the public assistance system hit hard. Already working 5-7 hours a week amidst balancing a full course load, working 15 additional hours weekly to qualify for Supplemental Nutrition Assistance Program (SNAP) assistance wasn’t feasible.

My experience of rejection of SNAP based on work requirements isn’t unique to me or to Massachusetts guidelines. As part of the 1996 welfare reform under President Clinton, policy makers implemented a time limit and a work requirement of the then Food Stamp program to decrease people’s dependency on the government. This measure was intended to increase the independence and self-sufficiency of recipients. That restriction was lifted as the Great Recession drove many Americans into the depths of poverty. For several years, the federal government increased spending in public assistance programs, like SNAP, to ensure the stability of Americans across the country. Now, as the economy grows again and unemployment rates fall, Congress seeks to re-implement the time restriction and work requirements on SNAP.

By the end of this month, up to 1 million Americans will lose their SNAP dollars as 22 states across the country carry out the re-implementation of the federally mandated SNAP time limit and work requirement. Thousands of others will be restricted from accessing SNAP at all. By April of this year, a total of 40 states will require that anyone aged 18-49 who does not have a child and is able-bodied must work a minimum of 20 hours per week in order to qualify for SNAP funds. Further, households are limited to three months of assistance in a 36-month period, regardless of employment status

National Public Radio explains that states and regions can waive the federal restrictions if they prove that their unemployment rate is greater than 10%, if there is a surplus of workers, or if the state or regional unemployment rate has been 20% higher than the national average for two consecutive years. Some states, like Mississippi and regions of North Carolina, are eligible for the waiver but choose not to apply.

Republican Representative Mike Conway from Texas expressed his agreement with federal decisions in a Huffington Post article, stating, “Though there have been dramatic increases in government spending on SNAP and related programs, these numbers are a strong indication that additional resources have simply produced stagnant results, and by in large haven’t helped families improve their overall stability.”

Certainly, tremendous sums of money have been invested in public assistance programs. Despite government funding, the number of U.S. households reporting food insecurity has increased from 11.1% in 2007 to 14% in 2014. With significant government financial investment, some people wonder why that percentage rose and consider time limits and work requirements as a way to curb government spending.

However, as we dig deeper we uncover the comorbid human conditions and environmental constraints that engender the complexities of poverty cycles. Working a minimum of 20 hours weekly isn’t so simple. The Center on Budget and Policy Priorities reports that only half of the people affected by the impending cuts have a high school diploma or GED. One-fourth have not completed high school. Many do not have a license and live in food deserts 1.8 miles from their nearest super market. To garner anything more than “stagnant results”, policy makers must take these other barriers into account by considering the availability and location of jobs, access to computers to apply for jobs, and transportation costs. What results when Representative Conway and other policy makers ignore such complexity are several unintended consequences that knock people further into the depths of poverty and further away from the goal of self-sufficiency.

A more fitting proposal would be to align SNAP eligibility with other assistance programs – recipients must demonstrate an active attempt to find work – while decreasing funding on a sliding scale that considers other life costs such as transportation and education. Doing so will gradually decrease government spending, grant people the flexibility they need to survive, and allow more households to be active participants in the market in the meantime.

Cutting the assistance of those most in need does little to help our nation. To help families gain financial stability, we must provide them the resources they need to survive. Without taking into account the circumstances of those requesting assistance is to ignore the objective of SNAP itself.

By: Anna Mahathey
M.P.P./M.A. in Women and Gender Studies ’17
Poverty Alleviation Concentrator

Student Spotlight: Brian Kennedy

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Please introduce yourself (name, year, concentration, activities or positions you might hold here at Heller):

I’m Brian Kennedy, a second-year MPP student concentrating in Assets and Poverty Alleviation. I’ve held a few jobs and positions here at Heller and Brandeis. Most recently, I served as a Teaching Assistant for Professor Shapiro’s Wealth and Poverty course as well as Professor William’s class, Hip Hop History and Culture. Currently, I work as a student research assistant at the Shuster Institute for Investigative Journalism which is housed at Brandeis University. At Shuster, I am researching mass incarceration trends in Massachusetts, using Michelle Alexander’s framework.

 

What were you doing before you came to Heller?

Before Heller, I taught 7th and 8th grade social studies in Charlotte, North Carolina. My school was a part of an innovation district called Project L.I.F.T. which leveraged private-public partnerships and utilized community engagement to try to increase student achievement. My favorite part of teaching were the conversations my students and I had around justice, equality, and how to achieve it.

 

Why did you decide to come to Heller?

Leaving the classroom was not an easy decision. I felt that I was making really important progress with my students, but was doing nothing to address larger structural issues that they were facing outside of the classroom. Regardless of how well they did in my class, they were still faced with the obstacles of a broken school system. I decided to attend Heller because I think it’s important that there are a multitude of voices at the decision-making table. I wanted to be able to address the issues my students faced from a systemic perspective. Heller, in particular, attracted me because of its focus on practicing social justice, rather than simply discussing it in academia.

 

What are some of the classes/activities that you’ve really enjoyed here at Heller?

I’ve had the opportunity to take multiple classes with Professor Anita Hill: Law and Social Justice as well as Social Justice in the Obama Administration. Not only is Professor Hill an excellent educator, she pushes us to think about the ways we speak, conceptualize, and practice social justice. I think it is this level of critical analysis that has the potential to transform the way we approach social justice work within public policy. The conversations and questions that come up in her course are really the highlight of my experience here at Heller.

 

Can you say a little about your summer internship?

I completed my summer internship with the North Carolina Budget and Tax Center at the North Carolina Justice Center. At the Budget and Tax Center, I worked on a wide range of projects ranging from labor market analysis to coalition building across the state. One of my major projects was to create a tool to explain the impact of the Supplemental Food Nutrition Program (SNAP) for advocacy organizations and stakeholders in the state. In creating the NC SNAP Chartbook, I utilized every one of my policy analysis tools from econometrics to short and concise writing. My summer allowed me to take the conceptual tools we learned at Heller and really put them into practice.

 

Weekly Round-Up

What’s the Solution to Middle-Class Stagnation?

“Economists have considered the implications of building more housing, raising taxes on the rich, expanding unions, and reducing social safety nets. Is there an answer we haven’t considered yet?” – Derek Thompson, The Atlantic

The Eviction Economy

“America stands alone among wealthy democracies in the depth and expanse of its poverty. Ask most politicians what we should do about this, and they will answer by calling for more and better jobs… But jobs are only part of the solution because poverty is not just a product of joblessness and low wages. It is also a product of exploitation.” – Matthew Desmond, The New York Times

Why the Poor Pay More for Toilet Paper

“The world, in fact, is full of opportunities to save money — if you just have enough money to access them.” – Emily Badger, The Washington Post

Marriage Will Not Fix Poverty

“For years, conservatives have been saying that wedlock is a ticket out of destitution. So why are so many married people poor?” – Rebecca J. Rosen, The Atlantic

Student Spotlight: Erica Brien

Erica Brien
Erica Brien, first-year MPP/MBA student concentrating in poverty alleviation, co-chair of the MPP Student Association Community Partnerships Committee

Prior to coming to Heller, I worked as a Protected Areas Management Adviser in Peace Corps Honduras and as the Manager of Recruitment and Community Partnerships at Big Sister Boston. In Peace Corps Honduras, I worked with community leaders and families on numerous income generation projects. Although much was accomplished through the efforts of local leaders, I also had the opportunity to observe the implications of US economic policy on a global level and the additional obstacles it creates for those battling poverty internationally. After two years, I returned to the United States to apply what I learned within a more familiar context.

At Big Sister Boston (BSB), I used my leadership to address pervasive inequities by focusing on youth development and the advancement of girls and women. As BSB Manager of Recruitment, I led a team to establish partnerships that increased monetary and programmatic resources. Through the cross-sector community partnerships I established, I had the opportunity to collaborate with city leaders and local residents, deepening my understanding of policy issues in Boston.

Through these experiences, I have grown to understand that systemic change is both possible and necessary. Although BSB programs yield significant outcomes for girls in many areas including educational achievement, I grew to understand that social challenges can be more permanently addressed by challenging the dominant systems in which they are rooted. In this way, more effective public policies are necessary, and I came to Heller to build the skills and knowledge needed to advance justice through policy.

The first semester as an MPP student at Heller can be an exciting one, and I enjoyed many of the core classes. Having the opportunity to learn from social justice advocates like Professor Anita Hill, however, is exceptional. Professor Hill’s Gender Equity Policies and Litigation module offered me a unique theoretical lens by focusing on current U.S. antidiscrimination law while simultaneously providing analytical tools to critique the structure and development of future policy.

I also have enjoyed the opportunity to collaborate with students within the MPP Student Association as well as a number of student working groups: the LGBTQIA Working Group; the Work, Wealth and Inequality Working Group; and the Gender Working Group.