With Health Care Passed, Focus Shifts Back to Economy

Now that health care reform has finally been enacted, a host of critical economic issues are taking center stage, including financial reform, unemployment and deeply rooted economic inequality. But it’s important to note that with its health care vote, the U.S. House of Representatives actually approved a very important, and often overlooked financial reform: Student lending.

Pedro de la Torre III of Campus Progress explains the current student loan nightmare in an interview with The American Prospect’s Rebecca Delaney. For years, the U.S. government has paid massive subsidies to some of the worst-run companies in the country.

Thanks a lot, Sallie Mae

As de la Torre notes, instead of directly making loans to students, the government spent years funneling money to firms like Sallie Mae to actually make the loans. When things went sour, taxpayers covered the lender’s losses from student loans that ultimately went bad.

Taxpayers were also footing the bill for the loans and taking on the risk, while private companies and their executives enjoyed the benefits. The executives made quite a haul. In 2008 alone, Sallie Mae CEO Albert Lord took home an astonishing $46 million. Even among CEOs, that’s a princely sum—more than double what Halliburton CEO David Lesar made the same year. All of that money could have financed a lot of college educations.

Fortunately, the student loan landscape is almost certain to change as a result of the health care vote. The House bill included a provision to end student loan subsidies and boost funding for direct grants from the government to students.

Since the student loan reform and health care were both eligible for reconciliation in the Senate (meaning only 51 votes are needed for passage instead of the 60 to clear a filibuster), House Democrats decided to move on both at the same time. It’s a significant reform, and one that will soon become law with President Barack Obama’s signature.

What would an overhaul of the consumer finance industry entail?

The student loan system is just one aspect of the consumer finance industry that needs a major overhaul. On mortgages, credit cards, overdrafts, and payday loans, the banking status quo is one of outright predation. As Heather McGhee of Demos explains to The Nation’Christopher Hayes, there’s a reason why federal agencies do a lousy job regulating consumer banking abuses.

Right now there is no agency responsible for consumer protection alone. Every regulator also focuses on making sure banks don’t fail, which generally means that regulators support anything that increases short-term profits. Egregiously predatory practices generally lead to big short-term gains in banking.

A new consumer financial protection bureau 

Last week, Senate Banking Committee Chairman Chris Dodd (D-CT) introduced a bill that would create a new bureau of consumer financial protection, with no constraints from bank profitability. It’s a step in the right direction, but as McGhee notes, there are plenty of problems with Dodd’s proposal. Most problematically, the bill gives existing agencies a veto power over any new consumer protection rules. That’s a terrible loophole. Existing regulators have actively opposed consumer protections in the past, and there is every reason to expect that practice to continue.

Rapid tax refunds scam the poor

It’s late March, which means tax season is getting into full swing. All over the country, mascots from Liberty Tax are spilling into the streets wearing goofy costumes, trying to win your business. But millions of Americans don’t realize that Liberty, along with H&R Block, Jackson-Hewitt and hundreds of smaller businesses are engaged in a monstrous scam disguised as a complicated accounting service.

As Alexander Zaitchik emphasizes for AlterNet, these tax preparers have used deceptive advertising and slick salesmanship to con people into taking out “refund anticipation loans,” also known as “rapid refunds” and a handful of other pleasant euphemisms. It’s a simple gimmick: H&R Block does your taxes, and then presents you with your tax refund, right away, no waiting. But the check you receive is not actually your tax refund—it’s your tax refund minus a truckload of fees that you didn’t realize were being deducted. This is the tax-time equivalent of payday lending.

When the government sends in your actual, larger tax refund one-to-two weeks later, you won’t see it—it goes straight to H&R Block’s bank partner. Those banks are making big money taking from your tax returns. Here’s Zaitchik:

“In 2008, more than eight million Americans spent nearly a billion dollars paying interest and fees on RALs—often based on misleading or incomplete information—swelling the profits of tax preparers and their partner banks.”

The one break low-income people get under the U.S. tax code is the Earned Income Tax Credit (EITC), the nation’s largest anti-poverty program. Only about 16 percent of taxpayers qualify for the EITC, but as Zaitchik notes, nearly two-thirds of the people who take out refund anticipation loans receive the credit. Tax preparers are making a concerted effort to prey on the poor, making the EITC program more expensive and less efficient for all taxpayers—not just those who go to H&R Block or Liberty Tax.

More action needed on jobs

Beyond finance, the U.S. economy has a serious jobs problem. Last week, Congress approved an $18 billion jobs package that is simply far too small to make a serious dent in the nearly double-digit unemployment rate. As Art Levine explains for Working In These Times, the package will create 250,000 jobs at best. That number shouldn’t be acceptable to anyone watching the U.S. economy, which has shed about 7 million jobs since the recession began.

There are much stronger options available than the $18 million bill the Senate approved. Rep. George Miller (D-CA) has introduced a bill in the House that would quickly save or create one million jobs, and the House has already passed a separate $154 billion jobs package that would prevent 900,000 lay-offs. If the Senate moved on either one, the result would be a major economic boost.

The link between poor economies and poor health

All of these problems—unemployment, student loan scamming, refund anticipation loan sharking and other forms of financial predation—reinforce economic inequality in the United States, which is at levels unseen since before the Great Depression. That inequality is ultimately actively damaging to public health, as epidemiologist Richard Wilkinson explains in an interview with Brooke Jarvis for Yes! Magazine. Rampant economic inequality in the United States is literally making us sick.

“We looked at life expectancy, mental illness, teen birthrates, violence, the percent of populations in prison, and drug use,” Wilkinson says. “They were all not just a little bit worse, but much worse, in more unequal countries.”

With health care finally finished, Congress and the administration have an opportunity to make serious headway on the economy. They’ve got plenty of work to do.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint.

photo credit: thanks to rob lee via flickr for the pic


Tom Rose
Thomas Rose7 years ago

The economy should have been the # 1 priority all along, though not to down-play the need for health care reform. It`s time to keep on moving forward.

Robert S.
Robert S7 years ago

Getting people back to work and fixing the economy should have been the # 1 priority all along, Wasn't that what the stimulous bill was suppose to fix? Taking over banks, the auto industry and the healthcare industry was more important. Now it will be giving amnesty to illegals and then passing cap and tax.

Charlene M.
Charlene T7 years ago

What is up with the Quick Vote question: Due to health care, have our economic issues been forgotten? What kind of question is that?
Our economic issues are all tied into this Obama takeover of America including healthcare! Look around people are laid-off, struggling and people with jobs their hours were cut back, if you can’t see how are economy as been divided you must be blind, deaf and dumb, and this comment is not met to be offensive but either (a) You have not read the bill (1,000 plus pages) and (b) not have been paying very much attention since 2009. You have a choice, I pray you make the right one. Kick the bums out including Nancy!

The very idea that the government will dictate & ration patient care is dangerous & certainly not helpful in designing a health care system that works for all. Every physician agrees that we need to fix our health care system, but the proposed heath care bill currently passed will be a disaster.

Thank God PA is fighting this!

Charlene M.
Charlene T7 years ago

I believe in Freedom, Capitalism and Free Markets. I want less of the government involved in my life; I am fed up with giving almost 50 percent of my hard-earned money the government. This in not what our ancestors fought for, Communist Darkness Fall upon America. Whoever is reading this wise-up and get involved for you do have the power to make a difference and kick these bums out!
At this time Attorney Generals of thirteen States and Pennsylvania where I am from is one of them is filing an anti-trust lawsuit against our current government against this Bill created behind closed doors!

Call your senators it is not over! Please… take a moment to call your Representative and your two Senators and let them know you are OUTRAGED by the way, ObamaCare was handled. Then let them know you will be supporting litigation against this unconstitutional bill.

Charlene M.
Charlene T7 years ago

Obama has succeeded in his audacious plan to remake America into a full-fledged godless communist empire “nothing at all to do with health, but everything to do with control.” Obama’s power grab over the American people with his Nationalization of the United States entire Health care industry and student loan programme accomplished with the passing of this law, it must be remembered that since taking office on January 20, 2009 he has also taken over our automobile, mortgage, and banking industries too with the Internet said being next “in his sights”.
These takeovers have been destroying America’s once vibrant capitalistic system is the new regime this is not the “Change” that I voted for. Once free people we are now destined to live under, the new health care law which will require all us them to carry a National ID card and allow Obama government unlimited access to all of our bank accounts and personal records, did any of you really read the bill.

Leanne B.
Leanne B7 years ago

Be calm everything will be fine. I can feel the panic have some tea!lol

Judith S.
Judith S7 years ago

Noted, thanks.

Sandra S.
Sandra S7 years ago

"...It is odd if both Cuba and the U.S. have similar birth weight distributions that the U.S. has more than 3 times the number of births under 1,500g, unless there is a marked discrepancy in the way that very low birth weight births are recorded. Cuba probably does much the same thing that many other countries do and does not register births under 1000g. In fact, this is precisely what the World Health Organization itself recommends that for official record keeping purposes, only live births of greater than 1,000g should be included.

The result is that the statistics make it appear as if Cuba’s infant mortality rate is significantly better than the United States’, but in fact what is really being measured in this difference is that the United States takes far more serious (and expensive) interventions among extremely low birth weight and extremely premature infants than Cuba (or much of the rest of the world for that matter) does.

This does not diminish in any way Cuba’s progress on infant mortality, which is one of the few long term improvements that the Cuban state has made, but infant mortality statistics that are that close to one another are often extremely difficult to compare cross-culturally."


Does this clear things up for you, Harriet?

Sandra S.
Sandra S7 years ago

"...How does this skew the statistics? Because in the United States if an infant is born weighing only 400 grams and not breathing, a doctor will likely spend lot of time and money trying to revive that infant. If the infant does not survive — and the mortality rate for such infants is in excess of 50 percent — that sequence of events will be recorded as a live birth and then a death.

In many countries, however, (including many European countries) such severe medical intervention would not be attempted and, moreover, regardless of whether or not it was, this would be recorded as a fetal death rather than a live birth. That unfortunate infant would never show up in infant mortality statistics.

This is clearly what is happening in Cuba. In the United States about 1.3 percent of all live births are very low birth weight — less than 1,500 grams. In Cuba, on the other hand, only about 0.4 percent of all births are less than 1,500 grams. This is despite the fact that the United States and Cuba have very similar low birth rates (births where the infant weighs less than 2500g). The United States actually has a much better low birth rate than Cuba if you control for multiple births — i.e. the growing number of multiple births in the United States due to technological interventions has resulted in a marked increase in the number of births under 2,500 g...

Sandra S.
Sandra S7 years ago

"We have a higher infant mortality rate, than so many other industrialized nations. That is a disgrace.": Cuba (& Europe, etc.) vs. the US "... statistics on the infant mortality rate in the Western hemisphere yielded an odd conclusion — Cuba’s infant mortality rate, 6.0 per 1,000, is ...lower than the U.S. infant mortality rate, at 7.2 per 1,000. Given Cuba’s poverty level, its 6.0 rate is very impressive, but is it accurate to say that Cuba now has an infant mortality rate lower than the United States? No.

The problem is that international statistics on infant mortality are helpful in revealing large differences, but when it comes to small differences such as that between Cuba and the United States, often other factors are really behind the numbers.

The primary reason Cuba has a lower infant mortality rate than the United States is that the United States is a world leader in an odd category — the percentage of infants who die on their birthday. In any given year in the United States anywhere from 30-40 percent of infants die before they are even a day old.
Why? Because the United States also easily has the most intensive system of
emergency intervention to keep low birth weight and premature infants alive
in the world. The United States is, for example, one of only a handful countries that keeps detailed statistics on early fetal mortality — the survival rate of infants who are born as early as the 20th week of gestation...