↳ Analysis

September 17th, 2020

↳ Analysis

Unceasing Debt, Disparate Burdens: Student Debt and Young America

Since the Great Recession, outstanding student loan debt in the United States has increased by 122% in 2019 dollars, reaching the staggering sum of \$1.66 trillion in June of this year. Student loan debt has grown faster than other debt types, including auto, credit card and mortgage debt. For many, education is the only pathway towards good employment with benefits, leading to economic and social opportunities later in life. But as college becomes more unaffordable with each passing year, student loans are bridging the ever-expanding chasm between college savings and obtaining an education. The crisis has reached the national political arena, with policymakers recently calling for debt cancellation up to \$50,000 for federal borrowers.

Our research demonstrates that the student debt crisis has exacerbated existing inequalities. We found that all young borrowers are saddled with dramatically rising debt since 2009, but low-income groups, BIPOC, and those in their 30s fare far worse than others. While richer students have higher absolute debt, low-income students experience massive and growing relative debt burdens. And students in majority-Black and Hispanic zip codes, who are more likely to attend for-profit private institutions, have seen larger debt increases than those in majority-white zip codes. Debt levels have jumped in states like Wisconsin, Michigan, Pennsylvania, and Ohio. Gaining insight into broad trends in debt accumulation, as well as details about the particular demographic or labor market characteristics that shape changes in individuals’ debt burden over time, allows us to more effectively tailor our policy recommendations. For example, our research finds that forgiving $50,000 in student loans would make 80% of young adult borrowers student debt free.

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September 5th, 2020

Hot Oil

Gardiner Means, administered prices, and why the Texas Railroad Commission should regulate oil production again

Even at the depth of the Great Depression, oil producers were always paid a positive price for their product. But on April 20 of this year the price of West Texas Intermediate oil traded for negative prices, reaching a record low of negative \$37.86. While oil prices have largely recovered at the time of writing, negative prices indicate deep underlying problems with the oil market. Currently, OPEC+ coordinates with Russia, Mexico, and other oil producing nations to set production quotas and balance supply and demand. Their systematic reduction in oil production prevented the collapse in prices that the United States saw, and the Brent oil contract, a global benchmark, continued to trade for positive prices (on the same day West Texas Intermediate reached subterranean prices Brent Oil traded for +\$17.36, a spread of over \$50). In response to the US disaster, oil producers called for the Texas Railroad Commission (TRC) to regulate oil production to try and balance American oil markets.

Yet the Texas Railroad Commissioners maintained that plunging prices would reduce production and balance the market on their own. It is true that US producers, facing negative prices, have rapidly reduced production. But with prices rising, production may return quickly, setting the stage for another crash.

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August 15th, 2020

Another Lost Decade?

The systemic character of the global periphery debt crisis

Contrary to common beliefs on fiscal fundamentals, the current debt crisis in the global periphery demonstrates that the solvency of sovereign states is critically determined by their monetary power. Crucially, liquidity has a cyclical character in the periphery of global capitalism and a countercyclical character in the core.

During economic booms, when many contracts look safe, private actors are more prone to purchase assets denominated in peripheral currencies, which typically reward higher interest rates. But during busts, perceptions of asset safety may quickly change. Peripheral currency states are more vulnerable to suffering quick withdrawals from contracts denominated in their currency. Private investors seek the safest assets in the global economy, which, despite lower interest rates, guarantee low credit and market risks, high market liquidity, and limited inflation, exchange rate and idiosyncratic risks.

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July 27th, 2020

Essential Infrastructures

The case for sovereign investment in telecommunications infrastructure

As social distancing became norm and law in the early days of the Covid-19 pandemic, people turned to video teleconferencing to meet with friends and family, attend religious services, and go on dates. Zoom work accounts became a conduit for maintaining nonwork social ties and, as people came to depend on this enterprise tool, Zoom's stock valuation soared. The pandemic has widened the sphere of life dependent on such market technologies, heightening existing questions around the political, legal, and economic governance of these companies. How should the fabric of social life, especially as it is rewoven by the pandemic, relate to the private ownership of telecommunications?

Two legal regimes regulate the ownership of and access to telecommunications technology: the market disciplining forces of antitrust law (along with allied concepts like public utilities regulation), and the national security protections of critical infrastructure regulation. Certain applications of the former, concerned primarily with market power, identify privately-owned infrastructures that are “essential,” and regulate firms to ensure that access to that infrastructure is made available to competitors and consumers on reasonable terms. The latter, on the other hand, identifies infrastructures that are “critical,” and regulates them to serve the US’s national and economic security interests.

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July 22nd, 2020

Laws of the Land

Property rights and extraction in the mineral frontier

“The Mining Law of 1872,” reported California Democrat Alan Lowenthal in May 2019, "is one of the most obsolete laws still on the books.” At a hearing before the House Subcommittee on Energy and Mineral Resources, Lowenthal was rehearsing a longstanding critique of antiquation against hard rock mineral legislation—a law to privatize federal mineral lands that has remained in place since the nineteenth century.

For decades, this statute has come under scrutiny, with Congressional hearings on its merits held under every President since George H. W. Bush. Two objections are raised consistently. The first is that, in contrast to developers in other extractive industries, hard rock mining corporations may purchase Western mineral lands from the federal government for the minuscule price of \$5.00 per acre, and are charged no royalties on the resources they extract. This nearly 150-year-old arrangement remains a major gift to multinational corporations: in 1994, the US Interior Department sold about 1,949 acres in Nevada to the Barrick Resources Corporation. The land contained 30 million ounces of gold, which was valued at \$380 per ounce. Sold for just under \$10,000, the land was worth billions. A small royalty commensurate to those of other extractive enterprises would by now have generated hundreds of millions of dollars for the public.

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July 16th, 2020

The Dollar and Empire

How the US dollar shapes geopolitical power

What does the US dollar’s continued dominance in the global monetary and financial systems mean for geo-economic and geo-political power? In a recent article, Yakov Feygin and Dominik Leusder question whether the United States actually enjoys an “exorbitant privilege” from the global use of the USD as the default currency for foreign exchange reserves, trade invoicing, and cross-border lending. Like Michael Pettis, they argue that the USD’s primacy actually imposes an exorbitant burden through its differential costs on the US population.

Global use of the dollar largely benefits the top 1 percent by wealth in the United States, while imposing job losses and weak wage growth on much of the rest of the country. This flows from the structural requirements involved in having a given currency work as international money. As Randall Germain and I have argued in various venues, a country issuing a globally dominant currency necessarily runs a current account deficit. Prolonged current account deficits erode the domestic manufacturing base. And as current account deficits are funded by issuing various kinds of liabilities to the outside world, they necessarily involve a build-up of debt and other claims on US firms and households.

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July 10th, 2020

The Crisis and the Free Market

On crisis, partisanship, and public policy

Will the current crisis transform America’s politics and economic institutions? With unemployment higher than at any point since the Great Depression, rising food insecurity, and an increasingly muscular role for government—are we witnessing the beginning of the end of the four-decade-long era of the free market ushered in by Ronald Reagan? It’s a question worth considering, whether you’re a Democrat who blames the rising inequality of the last four decades on the policies of smaller government, or a Republican who thinks those policies saved America.

It wouldn’t be the first time a crisis has altered the trajectory of the country. The Republican Party of today is defined by its commitment to tax cuts, deregulation, and cuts in social spending. But prior to the Reagan administration, the Republicans were actually the party seen as most likely to increase taxes, because their main commitment throughout the post-war period had been to avoid deficits. The party was, in Newt Gingrich’s famous dismissal, the tax collector for the welfare state.

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July 3rd, 2020

Pandemic and Poverty

What the pandemic teaches us about poverty measurements

Since the onset of the Covid-19 pandemic in the United States, more than 40 million people have applied for unemployment benefits. In April, unemployment spiked to nearly 20 percent, almost double the rate observed at the peak of the Great Recession. To blunt the financial blow, Congress passed the CARES Act, a package that included, among many other things, around $500 billion in income transfers for the U.S. population.

With my colleagues at Columbia University’s Center on Poverty & Social Policy, I have worked to understand how the CARES Act might affect annual poverty rates in the U.S. Our findings took us by surprise: despite the rapid rise in unemployment, we find that the CARES Act’s two major income transfers—the Recovery Rebates (one-time stimulus payment) and expanded unemployment benefits—have potential to return projected poverty rates to pre-crisis levels if access to the benefits is adequate. Jason DeParle of The New York Times neatly brings life to the findings here, while our full report can be found at the Center’s website. The report also details the many important shortcomings of the CARES Act, such as its exclusion of undocumented immigrants, the difficulties that families are facing in accessing the benefits, and the upcoming expiration of the top-up to unemployment benefits.

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June 25th, 2020

Declining Access, Rising Cost: The Geography of Higher Education Post-2008

Mapping concentration and prices in the US higher education industry

During and after the Great Recession, public funding for higher education was slashed as part of state budget austerity. Staff and programs were cut and tuition rose; in many states, even by 2018, funding had not returned to pre-recession levels. Meanwhile, enrollment soared. As students locked out of a slack labor market were told they “lacked the skills necessary for today’s jobs,” the solution to unemployment and wage stagnation was to be found in more degrees at higher prices. The result was the acceleration of what is now a four or five-decade trend in US higher education: the replacement of a public good model with a private consumer model, dependent on tuition financed with federal debt, all justified on the back of supposed earnings increases that fail to materialize.

With skyrocketing prices and ballooning student debt, the private for-profit model has taken hold in even traditional schools, which are seeking to cut teaching costs while retaining students and their hefty tuition payments. Even leaving aside the possible collapse of tuition revenues from nonattendance, forecasts for state budget cuts coming out of the Covid-19 recession are alarming—unless the patterns of the Great Recession are avoided, we can abandon hope of a more equitable, inclusive, or expansive higher education landscape into the 2020s.

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May 28th, 2020

Digital Scab, Digital Snitch

On automation and worker surveillance

Before Covid-19 hit, we'd become used to reports about Amazon's robotics innovations and the impending large-scale automation of warehouse jobs. But recent strikes and protests by Amazon's very human workers have exposed how far we are from robotic warehouses. In fact, as part of its effort to keep its warehouses fully staffed during the crisis, Amazon recently announced that it is ending its recently-instituted sick leave and base pay expansions, replacing both with increased overtime pay. While higher pay encourages more workers to apply for jobs, overtime incentivizes existing workers to work longer hours. Amazon’s strategy for increasing output in the pandemic seems to be getting its human employees to work harder.

In late-February, I took what must have been one of the last public tours of an Amazon warehouse in Edison, New Jersey. Prepared to witness vast and impression automation, I was met instead by a traffic jam of workers exiting the facility. Inside, there were of course robots—shelving units known as "pods," whizzing stuff from one end of the warehouse to the other—performing tasks previously done by people with forklifts. (According to Amazon, these robots have raised productivity of the remaining workers by orders of magnitude.) But there were other innovative technologies on view, at the workstations of human “stowers,” who distribute incoming products to the pods, “pickers,” who take items off the pods to fulfil orders, and “packers,” who put the orders in boxes and tape them shut. Over their shoulders, there were clocks counting down how much time each worker had to complete each task. The technology tracks which workers fall behind, and ‘learns’ how hard it can push them. In place of a human foreman, Amazon's timers dictate the pace of work and mete out automated discipline.

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