Senate Banking and Finance in the Next Congress (December 7)

Update 317: Incumbent Ranking Members in the Next Congress
Sens. Brown of Banking and Wyden of Finance

Last week, we looked at the agenda for the House Financial Services Committee under new Chair, Maxine Waters. The midterms were less kind to Democrats in the Senate, as Republicans narrowly increased their majority. Gavels on Senate Banking and Senate Finance therefore stay with the GOP. But ranking members will play a critical role in fashioning legislation and holding regulators accountable for overreach in the 116th Congress.

This morning, Donald Trump signed the continuing resolution presented by Congress that now funds the government through December 21. On that date or prior, Congress must act or a government shutdown will begin.

Happy weekends all,



Senate Banking Committee

In the next Congress, Sen. Crapo will continue to serve as Banking Committee chair. Sen. Brown, a critical center of gravity for progressive banking policy on Capitol Hill, will remain Ranking Member. Sens. Donnelly and Heitkamp, both moderate members of the Committee, lost their seats in the midterm election and therefore, the Committee. Their defeats change the complexion and reduce the number of moderate members on the Committee.

Senator-elect Kyrsten Sinema is the most frequently mentioned candidate to join as a new member on the Committee, but the full makeup and ratios are yet to be decided. Sinema, with experience serving on the House Financial Services Committee, would have a distinctly moderate voice among the Committee Democrats.

Sen. Crapo will continue to conduct oversight of the regulatory implementation of S. 2155 next year. Sens. Crapo and Brown have a good working relationship, which bodes well for potential areas of bipartisanship, such as GSE reform. Prior to the passage of S. 2155, Crapo launched a joint effort with Brown and publicly solicited for ideas to craft a bipartisan bill. Negotiations eventually broke down, but it shows a commitment by Crapo to work with Brown on this area going forward. Also watch for a new dynamic between the House and Senate, as Crapo’s agenda may conflict with Rep. Waters’ as Chair of House Financial Services.

Housing: Wait Till Next Year Again?

Outside of the contentious issues surrounding big bank deregulation, the following areas are where we see possible legislative agreement between Chair Crapo and Ranking Member Brown:

  • Housing reform: A bipartisan housing finance reform bill was crafted this past January by Sens. Corker and Warner, but Sen. Reed and Ranking Member Brown felt that the bill didn’t do enough to address affordable housing. This area becomes more promising now that Democrats control the House, as Chair Waters has put affordable housing high on her priorities list in HFSC. Sen. Brown wants a GSE reform package that addresses affordable housing, but that doesn’t preclude the House from looking at it separately and working in tandem with the Senate on workable proposals. 
  • Big data and privacy reform: Sen. Crapo has publicly stated his intention to push for major legislation to tackle big data and privacy issues heading into 2019. Proposals in this area would likely garner Democrat support and might be similar to the recent General Data Protection Regulation privacy protections that went into effect in the European Union earlier this year. 
  • BSA/AML reform: Changes to the Bank Secrecy Act to combat illicit financial transactions and reforms to anti-money laundering laws are also areas for both parties to come to the table. Sen. Brown has called this issue an important topic, reflecting his priorities of protecting consumers and holding big banks accountable.

Other areas of potential bipartisanship include flood insurance reform and issues surrounding proxy advisors and their duties to Main Street investors. The Export-Import Bank has allies on both sides of the aisle, as many on the committee see the agency as a job creator and a deficit reducer. Financial technology (or Fintech) is also ripe for bipartisanship as Congress continues to grapple with how to regulate this nascent sector.

JOBS 3.0 Redux

Rep. Hensarling, departing Chair of HFSC, has been pushing for a Senate vote during the lame-duck session on the JOBS 3.0 package that passed through the House in July. Despite his insistence, action before the end of the year is looking increasingly unlikely. The full package (see here) contains some dubious regulatory relief bills and would require reintroduction by another member of Congress should it not be voted through before 2019. It is possible that some of the bills in the package could be re-worked, including improving the Accredited Investor standard, to make the package more palatable in the 116th Congress.

Senate Finance Committee

Sen. Wyden remains Ranking Member of Senate Finance in the next Congress. He has been a healthcare champion in the past, pushing through critical expansions in Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP) earlier this year. The horizon on tax reform in Congress is limited, though Ranking Member Wyden has a history of advocating for more progressive and fair tax policy. He will continue to be a vocal counterweight to Sen. Grassley’s agenda.

Sen. Grassley will replace Sen. Hatch as chair of Senate Finance, marking his return to the committee after serving as Chair from 2003 to 2006. Like Hatch, Grassley is a traditional, party-line, GOP voice. He is a staunch opponent to financial regulation and reasonable tax rates, and has voted in the past for generous exemptions for large corporations.

Legislative Agenda

Grassley can be expected to pursue technical fixes to the Tax Cuts and Jobs Act (TCJA) — the GOPs signature tax reform bill passed last year. Senate Finance Republicans met with Treasury Secretary Mnuchin this week to discuss potential revisions to the law. Though current House Ways and Means Chair Brady has tried to get a floor vote on corrections to the TCJA during this lame-duck session, action on the legislative front looks unlikely before the next Congress.

We can also expect to see oversight — but not in the way Democrats will like. Sen. Grassley has said he plans to prioritize “diligent oversight” of government bureaucracy, particularly with regards to healthcare, blaming “excessive regulation” for a dysfunctioning government.

Area of Agreement?

  • Opportunity zones (OZs): OZs provide various tax incentives to businesses in economically distressed areas. Championed by Republican Sen. Tim Scott and originally supported by Sen. Cory Booker, opportunity zones offer temporary tax deferrals, tax liability reductions, and tax exemptions on capital gains.

Despite this initial glimmer of bipartisan hope, Sen. Wyden and other Democrats have vocalized concerns for the program, citing the potential for conflicts of interests by elected officials in the use of zoning for political or financial gain. Other concerns include potential gentrification and tax benefits going to parties who would have invested in OZs without the legislation. Another concern is larger established businesses crowding out local upstarts, the intended beneficiaries of the bill — a point exemplified by the recent decision from Amazon to locate its new headquarters in an opportunity zone in Long Island City.

Leading in Minority

Senate Democrats may not hold the gavels on these committees, but they will still be able to pursue positive agendas with the Democrat-controlled House on a limited and selective basis.

Economic Policy Issues Throughout the 2018 Midterms (November 2)

Update 311: Economic Policy Issues
Throughout the 2018 Midterm Campaign

As we look ahead to next week’s midterms, we take a look back at four of the key economic policy themes that have played out this cycle. Across the country this cycle we have seen common themes and policies resonating with voters in seemingly disparate districts — from Appalachia to rural California.

In a long series of change elections, Democrats in the House have been able to harness the energy of a strong, grassroots movement and advocate for progressive economic policies that throw down the gauntlet to Republicans. On Tuesday we will find out if this diverse, but united freshman class will make it into the 116th Congress.

If you would like to get involved this weekend, click here to see what you can do.




Wall Street and Financial Regulation

2018 saw the passage of the broadest deregulation of financial institutions in the post-Dodd-Frank era. The enactment of S. 2155 in May showed how Republicans in Congress — and some Senate Democrats — are still beholden to the big financial firms on Wall Street and the mega-regionals.  While the issues can be arcane and unfamiliar to voters, many candidates acknowledged the ten-year anniversary of the 2008 financial crisis by campaigning in favor of Dodd-Frank — a refreshing change to the deregulatory drumbeat on the Hill.

Among them:

  • Katie Porter in CA-45 has experience as a consumer protection attorney and has witnessed first-hand some of the unscrupulous practices of banks without proper oversight. If elected, she will be a staunch defender of the imperiled Consumer Financial Protection Bureau.
  • Amy McGrath in KY-06 calls for greater oversight of payday lenders. Her position is in stark contrast to her GOP-opponent, Rep. Andy Barr, who voted for the Financial CHOICE Act, a bill which would repeal many provisions under Dodd-Frank. Rep. Barr has also received nearly $40,000 in campaign contributions from the payday lending industry.

Two-thirds of registered voters say they are more likely to support a candidate who includes regulating Wall Street as a part of their economic agenda and 69 percent agree that weakening regulations on banks that got bailouts after the financial crisis is an example of Washington corruption.

To this end, here at 20/20 Vision, we have put together a Banking Policy Pledge for candidates and incumbents this cycle to commit to protecting the welfare of taxpayers and rejecting the deregulatory banking industry legislative agenda.

Fiscal Policy

At the beginning of the election season, GOP candidates for Congress tried to run on the success of the Tax Cuts and Jobs Act, but quickly found out that message wasn’t playing out as well with voters as expected.  Republicans passed the bill nearly a year ago and many soon realized that the majority of benefits went to corporations, not middle-class Americans. Perhaps most importantly, there is the issue of the pending $1.5 trillion increase in the deficit.

Democrats have been using the TCJA as a successful weapon against their opponents this cycle. In the PA-18 special election, Republican strategists thought the TCJA message would take Conor Lamb down. Instead, voters paid much more attention to other issues like health care, the opioid crisis, and entitlements, propelling Lamb to victory. Specifically in terms of entitlements, Democrats have been able to use the TCJA, and the accompanying hole in the federal budget, to emphasize the risks to Medicare, Medicaid, and Social Security.

Senate Majority Leader Mitch McConnell said in an interview on October 16, “[the debt] is driven by the three big entitlement programs: Medicare, Medicaid, and Social Security.” In the next Congress, Republicans, suddenly and disingenuously promoting a fiscally conservative agenda, may talk about cutting entitlements to make up for the huge increase in the deficit. Fortunately, they won’t be able to pass bills to enact that agenda without a House majority.  

Political Corruption

Though typically not a conventional economic policy issue by definition, political corruption has played an outsized role in this cycle. In a 2015 Gallup poll, 75 percent of Americans saw corruption as “widespread” in Washington. Democrats are pushing hard for voters to see their party as one that will fight corruption and make government work for them:

  • House and Senate Democrats rolled out the Better Deal for Our Democracy in May as a general anti-corruption and citizen empowerment package to capture voters’ attentions early in the midterm cycle. 
  • Sen. Elizabeth Warren exercised leadership by introducing her Anti-Corruption and Public Integrity Act in August about lifetime bans on lobbying for members of Congress.

A large majority of Democratic challenger candidates this cycle have made democracy reform a top issue, with almost 200 Democratic candidates rejecting corporate PAC money. Democrats are also incorporating the GOP tax “scam” into this messaging, which folds in easily, as nearly 83 percent of the bill’s benefits go to the top one percent of income earners.

Progressive candidates have used Republican corruption scandals this cycle, including those of the President and his close colleagues, to bolster their notion that the Democrats will implement real anti-corruption and empowerment solutions.

Democrats have also focused on local corruption issues, such as Rep. Scott Taylor’s third-party fraud in VA-02 and Rep. Duncan Hunter’s misuse of campaign funds CA-50. In these key districts, Democrats are using this platform to win over minority constituents and independents, who are fed up with the status quo and looking for leadership to get government working for people, instead of wealthy special interests.


This election cycle, candidates everywhere are referring to healthcare as the top economic issue for their constituents and therefore, for their campaigns.  For Democratic candidates, protecting what is left of the Affordable Care Act (ACA) has become the baseline priority of the cycle. The repeal of the individual mandate, further attempts to gut the ACA, and Trump’s continued calls for rescinding protections on pre-existing conditions threaten millions of Americans’ coverage and well-being.

In states where the effects of the opioid epidemic are felt, we are seeing Democratic candidates gain ground in typically safe GOP districts, such as PA-01 or VA-05.  In party strongholds, establishment figures have been upended in several primaries by grassroots challengers, like Alexandria Ocasio-Cortez, who advance progressive policies such as Medicare-for-all.

Republicans, in contrast, are divided. Many GOP candidates have found themselves in a bind and have shifted their positions after the failed attempt to repeal the ACA. Their campaigns have turned to focus on other topics, like immigration. GOP support from older constituents is particularly hemorrhaging over the issue of repealing protections against pre-existing conditions. At the party level, there is virtually no consensus by the GOP on healthcare. Candidates find themselves backtracking on earlier calls to repeal the ACA as their voters strongly rely on, or approve of, existing ACA provisions. Facing the prospect of millions of Americans going uninsured, the Republican party and the majority of Americans find themselves at odds.

Corporate Governance/Citizenship (September 10)

Update 297: Corporate Governance/Citizenship
A Look at Issues and Progressive Solutions

Whether or not corporations are people, my friends, they certainly have citizenship-like functions from paying taxes, to engaging in community relations, to supporting candidates for office.  For the many progressives who believe that corporate citizenship in the U.S. can be improved, reform of rules relating to corporate governance is a high priority.

Today we take a look at the challenges facing the country regarding corporate governance rules, the solutions proposed recently in this area by leading progressives, reflecting what’s playing on this issue on the campaign trail.  




Historically, courts and legislatures have considered a corporate charter akin to a public trust.  Most corporations in the United States are chartered under state law and have thus followed the corporate governance provisions in their state’s statutes.  State corporate governance statutes have required directors of corporations to seek maximization of shareholder profits as the primary objective of the corporation they serve.  

High-profile corporate scandals, however, have called into question the doctrine of shareholder primacy with recognition that the participation of other major stakeholders, such as employees and the community at-large, could benefit and refocus the corporate decision-making process.

The Accountable Capitalism Act

On August 15, Senator Elizabeth Warren introduced the Accountable Capitalism Act (S.3348) in an attempt to challenge the status quo of corporate governance.  Sen. Warren uses the corporate personhood argument long advocated by conservatives (think Citizens United) to argue that if corporations can claim legal rights of personhood, they should also be legally required to accept the moral obligations of personhood that this status logically implies.

The bill’s primary focus is to make American corporations beholden not just to their shareholders, but also to their workers, the community, and participants in the economy at-large.  Given the fact that 84 percent of American-held shares are in the hands of the top 10 percent of earners, “maximizing shareholder value” does not maximize value for middle and working class Americans.  

The bill makes four key proposals:

  • Creates the Office of United States Corporations inside the US Department of Commerce: American corporations with over $1 billion in gross revenue would have to obtain a federal charter from the new agency, which would obligate directors to consider all stakeholder interests, replacing the doctrine of shareholder preeminence.

  • Mandates that employees elect at least 40 percent of the membership of the Board of Directors: This bold provision would return power to employees by giving them a voice over the direction of the company they work for. This idea is gaining traction among voters; a recent poll by Civis Analytics found that a majority of likely voters, and 71 percent of Democrats, support the principle of employee-elected board members.

  • Limits executives’ ability to sell stock: Stock that executives receive as part of their compensation must be held for five years, or three years after a share buyback. This provision aims at tackling the “short-termism” issue which rewards executives for taking actions that have short-term benefits rather than making more sustainable decisions that invest in the future.

  • Requires corporate political activity to be authorized by both 75 percent of shareholders and 75 percent of board members (many of whom would be worker representatives under the full bill):  An attempt to mitigate the effects of the 2010 Citizens United ruling, this provision would democratize corporate political spending and make the process more transparent.

Alternative Congressional Dem. Proposals

Sen. Warren’s bill is not sui generis in some of its provisions.  The Reward Work Act of 2018 (H.R.6096 and S.2605), introduced in the Senate in March and in the House in June, introduced the concept of codetermination into the political zeitgeist.  The bill is supported by AFL-CIO, Americans for Financial Reform, Take on Wall Street, and Public Citizen.

The bill proposes to give employees the right to elect one-third of the board of directors, a similar percentage to Sen. Warren’s proposal.  The Reward Work Act of 2018 also prohibits stock buybacks on the open market by repealing SEC “safe harbor” rule 10b-18 and shifting all buybacks to tender offers.  

The Reward Work Act of 2018, like the Accountable Capitalism Act, focuses on shifting the balance of power in corporate boardrooms and eliminating the incentives for short-term arbitrage from the corporate elite. The Senate bill has three original cosponsors: Sens. Warren, Baldwin, and Schatz, who were joined by Sen. Kirsten Gillibrand in April. The House bill has two original cosponsors: Reps. Keith Ellison and Ro Khanna.

Shareholders versus Stakeholders

Calls for changes to the corporate governance status quo have come from academia and think tanks for years.  An overriding goal of these is to alter the makeup of firms’ Boards of Directors to reflect the wishes of a broader swath of stakeholders, with a view to improving decision-making and allocating corporate surplus more fairly, and ultimately helping stem the tide of rising inequality, should changes in corporate finances practices follow:

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Source: Center for American Progress

The issue pits stakeholders versus shareholders.  Sen. Warren’s bill is influenced by other models of corporate governance around the world that question the ideology of shareholder primacy and considers a corporate governance structure that is run by, and therefore benefits, a wider array of stakeholders and the community at large.

The Reward Work Act of 2018 and the Accountable Capitalism Act begin to question prevailing corporate governance wisdom that has not seen a significant challenge since the 1980s. Some see Sen. Warren’s challenge as an affront to a free market, but given diminished union power, large corporate dominance, and poor wage growth, it’s beginning to look like the market-led corporate governance structure in America and its practices work for fewer and fewer.  

GOP Solution: Making a Bad Situation Worse

President Trump recently requested the U.S. Securities and Exchange Commission (SEC) to look into changes that would alter the current reporting requirements for publicly traded companies from a quarterly period to a semi-annual basis. This change makes clear that the current administration is intent on obscuring corporate disclosure, exacerbating the current problems with corporate governance, rather than seeking to improve them.

In addition, in a recent interview with Politico, SEC Commissioner Hester Peirce expressed her view that public companies should “absolutely” have the right to require arbitration, taking away the rights of shareholders to bring legal action against the companies which defraud them.  SEC Commissioners Robert Jackson and Kara Stein, ardent supporters of robust corporate governance, are likely to oppose these changes that would jeopardize corporate disclosure in a disingenuous attempt to “reduce red tape.”

Policy for the People

According to the Trump Administration and the GOP-controlled Congress, the economy is going gangbusters and the tax cuts were a huge boon for all Americans.  This is belied by the fact that the recent growth is increasingly benefiting a select few.

The theme we’ve seen play out in other policy areas this election cycle remains prominent in the fight for corporate governance.  As the House Democrats’ new slogan puts simply, “Democrats are for the people and Washington Republicans are for the special interests who are lining their pockets at the expense of everyday Americans.”

Education Finance Update (August 31)

Update 296 — Education Finance Update:
Effect of Student Loan Dollars on Scholars

The aggregate burden of US student loan debt surpassed $1.5 trillion this month.  A generation of students and graduates is struggling to keep up with payment plans and debt relief programs.  To put this figure in perspective, the total student loan burden in 2006 was under 500 billion; since the 2010-11 academic year, the total US student debt outstanding has surged 50 percent.

A coincidence offers a telling comparable: the tax cuts passed by Congress last year will cost the US Treasury an estimated $1.5 trillion over 10 years.  While corporations and the wealthy receive this whopping tax break, millennials are saddled with a growing debt burden that is holding back their broader participation in the economy.

More on this back-to-school special below.  Good long weekend and happy Labor Day, all.




Drowning in Debt

According to the US Department of Education, students who attain a bachelor’s degree owe an average of $30,500 upon graduation.  Student debt is one of the worst performing areas of consumer credit in the United States. A January Brookings report warns that nearly 40 percent of borrowers are at risk of defaulting on their student loans by 2023.

The details are grim.  Women hold almost two-thirds of all student loan debt but as a result of the continuing gender pay gap, they take longer to pay off their loans and incur more interest payments as a result.  There are racial disparities, as well: black BA graduates default at five times the rate of their white counterparts and even default at a higher rate than white college dropouts.

About one in 10 borrowers who started repaying in 2012 defaulted on their loans after three years. According to a report by the Center for American Progress, after five years, the default rate surges to 16 percent — amounting to over 840,000 borrowers in default. Almost as many borrowers were severely in arrears or not repaying their loans, resulting in around 30 percent of borrowers struggling to pay off their debt after just five years.

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Source: NYT

Dereliction of Duty

The current administration is hindering rather than helping the situation.  This week, Seth Frotman, student loan ombudsman at the CFPB, stepped down from his position. In a pointed resignation letter directed at CFPB director Mick Mulvaney, Frotman explained that his position was no longer tenable because, “the Bureau has abandoned the very consumers it is tasked with protecting.”

Frotman highlighted three recent examples of the Bureau’s recent dereliction of duty, gravely compromising its ability to oversee the student loan market:

  • abandoning enforcement — Since its inception, the Bureau has returned over $750 million to harmed student borrowers and stopping predatory practices that targeted millions of Americans. Recently, the Department of Education stopped helping CFPB conduct oversight of the largest student loan companies, which has undermined CFPB’s ability to oversee malign practices and hold companies accountable to the student loan market.

  • sabotaging the Bureau’s independence — Recent decisions by the leadership of the Bureau have made it clear that its independence is compromised. The agency is capitulating to political demands by the Trump Administration, rather than serving the needs of American students. This is exemplified by recent moves to block actions that would have shed light on predatory for-profit schools and blocking attempts to alert ED about its recent “unprecedented and illegal” actions to protect student loan companies from accountability for abuses.

  • protecting bad actors — When it emerged that the nation’s biggest banks were ripping off student borrowers by charging legally questionable account fees, the Bureau’s leadership suppressed publication of a report and shirked its responsibility, leaving students vulnerable to predatory lending practices.

In addition to the actions by the CFPB, Education Secretary Betsy DeVos recently proposed damaging cuts that would make it more difficult for students swindled by for-profit colleges to receive loan forgiveness. Under the new policy, the burden of proof would fall on students to prove they were intentionally misled or in financial distress. In addition, schools will be allowed to require students to sign arbitration clauses, barring them from taking legal action against the school.

The proposed changes were unsurprisingly lauded by for-profit schools, but lambasted by advocates for student borrowers—for good reason. Borrowers who attended for-profit schools (disproportionally students of color) default at twice the rate of their two-year public counterparts. To add insult to injury, for-profit students are more likely to borrow and as a result, the rate of default among all for-profit entrants, excluding non-borrowers, is nearly four times that of public two-year entrants:

Screen Shot 2018-09-10 at 4.52.26 PM.png
Source: Brookings

Congress Shoots and Does Not Score

There have been a few legislative proposals introduced in the last year to address the student debt crisis. There are two notable bills in the House and one in the Senate.

  • H.R. 4001 — Student Loan Refinancing and Recalculation Act: This is a bipartisan bill that was introduced by Rep. John Garamendi (D-CA) and Rep. Brian Fitzpatrick (R-PA). The bill would allow students to refinance their student loan interest rates, lower future interest rates, eliminate origination fees, and delay interest accrual while pursuing education. The bill has 28 cosponsors but has been held up in the House Committee on Education and the Workforce since last year.

  • H.R.6543 — Aim Higher Act: This bill was introduced by Rep. Robert Scott (D-VA) in July of this year.  It is a comprehensive reauthorization of the Higher Education Act. It includes free community college and student loan refinancing.The bill has 57 Democratic cosponsors and was referred to the House Committee on Education and the Workforce in July.

  • S.2598 — Debt-Free College Act of 2018: This bill was introduced by Sen. Brian Schatz (D-HI) in March of this year.  The bill would provide incentives to states to increase investments in public higher education through a dollar-for-dollar federal match to state higher education appropriation. It has 9 Democratic co-sponsors, including Sens. Booker, Warren, Gillibrand, and Harris — all rumored to be aiming for 2020 presidential runs. The bill was referred to the Committee on Health, Education, Labor, and Pensions, but no action has been taken since.

Bipartisan or not, lawmakers are struggling to pass bills that address the growing student debt crisis. If ignored, this crisis will only get worse and will undoubtedly have negative effects on the economy.

Implications for the Economy

Student loan debt has pervasive effects across different sectors of the economy. These effects are sometimes subtle but have substantial consequences. One area that has been getting a lot of attention lately is the housing market. CNBC reported yesterday that pending home sales fell for the seventh straight month in July. Home prices have been rising and with that affordability has been falling.

Millennials, who are classified as people born between the early 1980s and the mid-1990s, are on track to be the largest living adult generation by 2019. They also hold the most student debt, which prevents them from doing things like buying a house. CNBC reports, “Eighty-three percent of people ages 22 to 35 with student debt who haven’t bought a house yet blame their educational loans.” This problem will only get worse as housing prices rice and millennials become a larger share of the adult population. As we know, the housing market has large impacts on the economy as a whole.

Student loan debt doesn’t just threaten the housing market, it threatens the whole health of our economy. Earlier this year, Fed Chairman Jerome Powell testified to Congress that he believed student loan debt could hold back economic growth and should be discharged in bankruptcy. He said, “You do stand to see longer-term negative effects on people who can’t pay off their student loans…It hurts their credit rating, it impacts the entire half of their economic life.” He went on to say that you can’t see the full negative effects in the economy right now and that they would get worse over time as student loan debt continues to grow.

Implications for Midterms

In the 2016 election, many believed that Hillary Clinton’s platform appealed less to young voters than Bernie Sanders did. Sanders ran on a debt-free college platform, which Clinton later emulated. Sanders’ platform truly galvanized young voters in the primary, in which he won 71 percent of Democratic millennial primary voters compared to the 21 percent that Clinton won.  A national poll done in 2016 found that millennials ranked college affordability and student debt as their second most important voting issue, right after the economy.

As of 2016, millennials made up 31 percent of the electorate, the same proportion as baby boomers. Millennials will soon surpass them.  Appealing to these voters and getting them to the polls is crucial for Democrats. Millennials once preferred Democratic candidates overwhelmingly, but that has become less certain in the last coulomb of years.  According to a Reuters-Ipsos poll from April of this year, 46 percent of millennial respondents said they would vote for the Democratic candidate over the Republican in their congressional district, a nine point drop from 2016 when 55 percent said they would vote Democrat. If Democrats wish to take back the House and the Presidency, they must appeal to millennial voters.

The Neverending Gender Pay Gap (August 13)

Update 291:  The Neverending Gender Pay Gap as a Phenomenon and a Political Issue in ‘18

Today, women in the U.S. are earning, on average, just 82 cents for every dollar men earn for the same work. This is a two cent improvement over a decade ago.  At this rate, we will achieve pay equity in 190 years. It’s a situation that calls out for affirmative action.

Below we look at the nature and extent of the problem and the possibility of a policy solution.  Though during the primary season, the issue has been muted, its salience could rise dramatically during the general election debate in the fall.




Size and Contours of the Gap

Although the pay gap has improved over the years, the problem continues to persist. It is particularly bad for women of color. It is increasingly evident that this is a problem that will not rectify itself, especially in light of the slow rate of progress over the last ten years. Left to its own devices, the gender pay gap will exist for at least another century.

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The Long Road to Equal Pay

The gender pay gap has been a divisive issue for several Congresses. The Lilly Ledbetter Fair Pay Act of 2009 was the last legislation to pass through Congress that confronted the gender pay gap. The Act overturned a Supreme Court decision in Ledbetter v. Goodyear Tire & Rubber Co., Inc., which severely restricted the time period for filing complaints of employment discrimination concerning compensation.

The Paycheck Fairness Act, first introduced in 1997 and re-introduced multiple times over the last 20 years, would amend the Equal Pay Act of 1963. It would hold employers accountable for retaliating against workers who share salary history, put the burden on employers to justify why someone is paid less, and allow workers to sue for wage discrimination. Democrats almost passed the Paycheck Fairness Act in 2010, but were thwarted by Republican Filibuster. Then-Senate Minority Leader Mitch McConnell defended voting against the bill by arguing that the legislation would not help women and would “line the pockets of trial lawyers.”

An Embarrassing Exceptionalism

Gender earning disparities relate both to the reality and perceptions of the work of caregiving, which is the unpaid work to care for children and other family members most often performed by women.  Around 85 percent of workers in the United States do not have access to paid family or medical leave, costing American families $20 billion a year. Up to 12 weeks of unpaid leave is offered to the majority of workers under the Family and Medical Leave Act (FMLA), but there is no federal guarantee for paid leave. Five states controlled by Democrats and the District of Columbia have enacted their own paid family leave laws, but there is agreement on both sides of the aisle that something needs to be done on a federal level.

GOP Proposal: Here Today, Gone Tomorrow

On Aug. 1, Sen. Marco Rubio introduced S.3345: a bill to provide paid parental leave benefits to parents following the birth or adoption of a child. The bill would allow new parents to defer the collection of their social security benefits in return for receiving paid leave benefits.  Sen. Sherrod Brown, during a recent Senate hearing on the issue, summed-up the GOP solution: “It’s robbing from your retirement to be able to care for your loved ones now.”

Not only does the GOP’s proposal create a Hobson’s choice between retirement and paid leave, it also would fail to cover the majority of people who need to take family leave, because it focuses solely on paid maternal leave.  Currently, 75 percent of workers who take leave through the Family and Medical Leave Act (FMLA) take it because of a personal health issue or to take care of family member or loved one.

The Democratic Solution: FAMILY First

Last year, Sen. Kirsten Gillibrand and Rep. Rosa DeLauro introduced the Family and Medical Insurance Leave (FAMILY) Act as an alternative to the social security model proposed by the GOP. The bill would establish the Office of Paid Family and Medical Leave within the Social Security Administration (SSA) and would be funded through a small payroll tax — “the cost of a cup of coffee a week.”

The bill would provide workers with up to 12 weeks of paid leave that would guarantee 66 percent of an individual’s wages for three months and cover all family leave situations, not just new mothers. The bill is endorsed by small and big business groups alike because it reduces the burden on individual employers and would improve employee retention, thereby increasing profitability and worker productivity. Importantly, it does not create a false dilemma between siphoning money from your future retirement and caring for your loved ones (or yourself) today.

Support for paid family leave is high in the general population. According to a 2017 Pew Research Center study, 82 percent of Americans support paid maternity leave, 85 percent support paid leave for workers suffering from a personal health crisis, and 67 percent support paid leave for those caring for a loved one.

Economic Win for Everyone

Closing the gender pay gap and facilitating paid leave for women makes economic sense.  Women are increasingly relied upon as the main breadwinner in the household, or as a major contributor in a couple’s joint earnings. According to a recent report by the Institute for Women’s Policy Research (IWPR), the US economy would add nearly $513 billion if women received equal pay with men — 2.8 percent of 2016 U.S. GDP. In addition, over 25 percent of new mothers leave work entirely for child or family care, so encouraging their continued participation through paid leave would undoubtedly boost corporate productivity and profits.

Equity and Representation

Lack of representation is a huge factor slowing progress for both pay gap and paid leave initiatives.  The problem is particularly bad for the GOP, but exists for both parties:

  • In the Senate, there are 23 women Senators — 17 Democrats and six Republicans. Women comprise 35 percent of the Democratic caucus, whereas they comprise just 12 percent of the Republican caucus.
  • In the House, there are 84 women Representatives, only 19 percent of the 435 members.  Of those women Representatives, 61 are Democrats and 23 are Republicans. Women House Reps. comprise 32 percent of the Democratic caucus, whereas for Republicans, they comprise a meager 10 percent.

Women are increasingly moving away from the Republican party, presumably because of these vast discrepancies. According to the New York Times, “Men of all races say they intend to vote for Republican House candidates 50-42, while women of all races say they intend to vote for Democratic candidates 58-33.”

Women are running for office as Democrats, and winning, at a much higher rate than as Republicans. In 2018, Democrats have already nominated 143 women in US House races, compared to just 42 on the Republican side.  If the majority changes next Congress, prospects for progress on this issue will change as well.

Ideological Opposition and a Curious Quorum Conundrum Bedevil EXIM (July 6)

Update 284 — Ideological Opposition and a Curious Quorum Conundrum Bedevil EXIM

One of the most glaring examples of the feckless approach of the Trump administration to running the federal government is its approach to the Export-Import Bank. A late convert to the value of the Bank, Trump’s mix of active efforts to undermine the Bank and inaction belie his statements in support of it, and the Bank is unable to function as intended.

Ideological opposition and a desire to promote U.S.manufacturing have never been in greater conflict, disserving American economic interest without draining any swamps. Great reading and tooth-gnashing material.

Happy weekends all.




In June, President Trump nominated Kimberly Reed to lead the beleaguered Export-Import Bank of the United States (EXIM). EXIM has been floundering without a quorum since 2015, limiting the agency’s financing authority. The 84 year-old Bank has been constrained from making loans greater than $10 billion. $40 billion of export deals have been held up awaiting financing. Business groups have bemoaned the Bank’s dysfunction, and Reed’s nomination is an indication the Trump administration might at last be taking the problem seriously.

Up until last month, the Administration treated EXIM with the same disdain that it has given most other federal agencies. In October 2017, the president nominated former Rep. Scott Garrett to serve as EXIM president, despite Garrett’s ideological opposition to the bank during his time in the House of Representatives. Garrett failed his Senate Banking nomination hearing, 13-10, after Sens. Mike Rounds (R-SD) and Tim Scott (R-SC) crossed party lines to join Democrats as “Nay” votes.

Ms. Reed, who has Capitol Hill experience and worked in George W. Bush’s Treasury, has signaled her support for EXIM, arguing that the Bank has become an, “important source of funding for small businesses and an avenue for job creation.” She also has the advantage of having already survived a Senate Banking nomination process when she was approved in to serve as EXIM’s first vice president last December (a process which stalled after Garrett’s defeat).

EXIM’s Underappreciated Importance

Business groups have been quick to praise Reed’s nomination. Jay Timmons, President and CEO of the National Association of Manufacturers, called Reed a “sterling” choice to lead the agency, and argued that a functional EXIM Bank is crucial to stopping American companies from losing business to overseas competition. In 2014, the last year EXIM was fully active, the Bank provided more than $20 billion in export credit to U.S. firms, supporting 164,000 U.S. jobs and generating $675 million in profit sent back to taxpayers.

EXIM’s opponents claim the Bank is a form of corporate welfare that picks winners and losers, but this fundamentally misrepresents how it functions. One of EXIM’s primary functions is to help keep good paying manufacturing jobs in the United States, a mission it pursues through a variety of loan, guarantee, and insurance products. Instead of lending to companies, EXIM principally engages with creditworthy foreign buyers to finance American export sales, making a healthy profit in the process.

Business groups have good reason to be concerned about the condition of EXIM. Globally, close to 100 government-supported export credit agencies finance export sales. As a result of the dysfunction at EXIM, many American exporters have been put at a competitive disadvantage in the international marketplace — which has only hurt American industry and job growth.

Value to Small Business

The EXIM Bank is known for working with large American companies, such as Boeing and GE, but it also provides essential support for small businesses. In 2013, almost 90 percent of exporting companies using Bank facilities were small businesses. In addition to those companies directly affected, there is a ripple effect downstream on tens of thousands of small businesses throughout the country.

Small businesses are particularly reliant on EXIM’s export insurance products to help offset the risk of doing business abroad. For a small premium, about 50 cents for every $100 of goods shipped, small businesses can be reimbursed up to 95 percent of their loss for both commercial reasons and political instability.

EXIM insurance allows exporters to offer more flexible terms. Without this insurance, small businesses would face a higher risk when selling their products abroad, diminishing their ability to trade and create jobs. The U.S. Chamber of Commerce found that in Texas — the top exporting state which accounts for almost 20 percent of all US exports — the Bank financed $22 billion in exports for 1,345 Texas businesses from 2007 to 2014, supporting 9,136 jobs in the Greater Dallas area and more than 135,000 jobs around the state over the same period.

Ideological Opposition to EXIM

The Trump Administration’s initial decision to scuttle EXIM put U.S. jobs and manufacturers at risk. As with several presidents before him, President Trump appears to be realizing the merits of the Bank.

The president’s discovery last fall that EXIM “actually makes money” will come as little solace to U.S. manufacturers and workers who, for three years, have been disadvantaged by a president and a GOP Congress that refuses to support middle class jobs and U.S. exports by reauthorizing this vital federal agency. Early signs that the president is having a change of heart should be welcomed, but we’ve heard this tune before from this administration without seeing follow-through (infrastructure comes to mind).

Bank to the Future or Going Postal? (May 31)

Update 275 – Bank to the Future or Going Postal? S. 2755 and Postal Banking’s Promise and Pitfalls

Last month, Sen. Kirsten Gillibrand introduced S. 2755, the Postal Banking Act.   The bill would establish retail banking services at every U.S. post office and authorize the U.S. Postal Service (USPS) to offer checking and savings accounts, small-dollar loans, debit cards, cash withdrawals and money transfer services in each of its roughly 30,000 offices.

The idea is not unheard of.  Below we look at the history, the proposal, and the promises and pitfalls of postal banking.  





In 1910, President William Howard Taft introduced a postal-savings system for new immigrants and the poor that lasted until 1967. The idea of postal banking has been revived by several recent events.  

The USPS Inspector General (IG) published a report in 2014 in response to its $2.7 billion deficit on how the USPS would implement postal banking policies to address the funding crisis. The report found that if the USPS implemented postal banking, it could generate $9 billion in profit.  Sen. Warren has been a long time advocate of postal banking since the 2014 report and lauded many of the benefits of postal banking. Then Sen. Sanders brought postal banking back to the forefront with Sen. Warren during the 2016 primary campaign.

The endorsements of progressive stars Sens. Warren and Sanders led to an explosion of popular support, but neither has introduced legislation. While there is progressive support and Senators have shown interest in postal banking, S. 2755 is the first legislative step taken to implement the practice since 2014.

S. 2755 — Benefits Told and Untold

  •  Serving lower income and rural communities

    Due to a lack of access to high quality financial institutions, many Americans take out high interest, high-cost alternative financial products, totaling up to $100 billion a year. This costs the average underserved household 10 percent ($2,412) of their gross income in fees and interest. Postal banking would allow more than 80 million lower-income Americans without bank accounts to access essential financial tools and be safeguarded from predatory lenders.

    The USPS’s 30,000 office locations would house the retail arm of the bank because they are located in every community. These locations exist in banking deserts. 38 percent are in zip codes with zero banks and 21 percent are in zip codes with only one bank branch. Providing access will help Americans generate savings, wealth and credit, while bringing millions of households into the banking system.

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  • Eliminating the USPS funding crisis

    President Trump recently gave a speech blaming Amazon for the USPS funding crisis. Nevertheless, Congress is the entity most responsible for the funding crisis facing the USPS. This funding crisis has plagued the USPS since the Bush administration passed the Postal Accountability and Enhancement Act of 2006 (PAEA). The USPS has reported losses every year since 2007, losing $2.7 billion in 2017 alone. This can be attributed to the provision in PAEA that requires the Postal Service to prefund its retirees’ health benefits up to 2056. Costing $5 billion per year, this is a requirement that no other entity, private or public, has to make. According to the 2014 IG’s report, postal banking would generate $9 billion in profit annually, effectively eliminating the funding crisis the USPS faces. 
  • Payday Lending

    The main focus of S. 2755 is to fight payday lending. S. 2755 would implement smaller short term loans as a public option. 12 million people spend a total of $7 billion a year on short term, smaller loans known as payday loans. These loans average $375 initially with an additional $520 (138%) in fees and interest. Payday lenders have been known to charge interest rates in excess of 300 percent. The USPS has estimated that they could provide the same loan for less than 30 percent in interest rates. S. 2755 would set the interest rates around 10 percent.

Payday lending may be a trickier legislative fix than the first two benefits provided by the bill. There would be underwriting issues that would have to be solved and the interest rate would have to be debated. Implementing small dollar loans into postal banking, however, would decrease predatory payday lending and increase the number of low income Americans who have access to loans they can pay back, improving credit scores.

Why the Idea Hasn’t Been (Re-)taken up

It should come as no surprise there are opponents to incorporating financial services into USPS operations. The Citizens Against Government Waste has been vocal, publishing a letter arguing the Postal Service should not be trusted to manage money, pointing to it surpassing its statutory debt limit and $120 billion unfunded liability. Consisting of anti-government conservatives, the Republican Party is unlikely to warm up to an idea like S. 2755 anytime soon. The bill is something to watch for down the road after Democrats regain power in upcoming elections.

Expanding Access to Financial Institutions

S. 2755 would assist millions outside of the banking system who are vulnerable to predatory lenders and other risks, especially those living in rural areas. Many of these people have been denied access to financial institutions simply because of their location.

Although access to financial institutions has not been regarded as a fundamental right in the past, this bill attempts to frame it that way and poses the question: why haven’t we regarded it that way before? And why isn’t access to financial institutions a fundamental right?