I spend a lot of time measuring the costs of the current health care system, mostly in counting the broken families that end up in bankruptcy. For families hit with medical bills they cannot pay, the current health care system magnifies their pain. But even those who have health insurance and can afford to pay are knocked around in a broken system. A friend--with insurance--had some minor surgery a while back. She bounced back quickly, but the pain of trying to pay is still not over:

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The fastest growing segment of private health insurance is called "Tier 4." Under this system, co-payments for drugs vary with how expensive they are. Expensive drugs are classified "Tier 4" (some plans even have a "Tier 5"), and the co-payments are based on a percentage of the drug's cost. As the New York Times reports, 10% of private plans, and 86% of Medicare plans, now have Tier 4. A person's co-payments can now easily jump from several hundred to thousands of dollars a year. The system began with Medicare drug plans, and it has spread in the private market to employers looking to keep down costs. Those who are healthy can pay less, while those who are sick pay more.

This is a perversion of insurance. The point of insurance is to socialize costs. No one can control or predict when they will get sick. Although the cost of health care can be enormous for an individual, it's entirely predictable how many people overall will get sick and how much money their care will require. Without a deep, visceral commitment to this fundamental concept, universal healthcare will have no chance. Americans will have to reject Tier 4's individualistic ideology, and the new president will need a way of communicating the alternative.

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Tomorrow, the Coalition for a Democratic Workplace will begin its television ad campaign against the Employee Free Choice Act (EFCA). (You can view the ad on their website.) This legislation would require employers to recognize a union after a majority of the workers have signed a card stating their desire to be represented by the union. The alternative, which employer groups like the CDW support, is to continue allowing employers to demand a secret-ballot "election" even after such union support has been demonstrated. Despite what the name of the CDW suggests, employers do not support the right to demand an election because they are deeply committed to democracy and unions are not. Employers want this right because it allows them to have more time to threaten, intimidate and even fire pro-union employees and then re-ask employees if they want the union.

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I agree with Dana Chasin that the time in act to stop the decline in the housing market is upon us, but I disagree with his weather report on the New York Times editorial. The Times has the central point right: As a practical matter, the proposed housing bill and the bankruptcy bill are alternative--not complementary--approaches. If the housing industry believes it can get millions of bad mortgages off its books by selling them to the FHA (and making taxpayers guarantors), then the industry will continue to fight to the death a bankruptcy bill that will force the industry--not the taxpayer--to eat substantial losses on the worst loans. In other words, they will take the best deal on the table and block any other deal.

So far, the industry has been getting exactly what it wants: useless voluntary non-plans. Next up is a Congressional plan to put the taxpayer in the line of fire. The one plan the industry has lobbied ferociously against has been a bankruptcy bill that would cost taxpayers nothing, would leave hundreds of thousands in their homes with refinanced mortgages, and would cause the mortgage investors to bear the full costs of their underwater mortgages.

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The Wall Street Journal reports today on a lawsuit brought by the San Francisco city attorney against the National Arbitration Forum, a major provider of arbitrators in consumer vs. company disputes. (Here's the article; subscription required.) The city claims that NAF is biased in favor of the companies that hire NAF's arbitrators. NAF claims that it is not, and that the companies' higher success rates are the result of the companies' greater experience with and knowledge of arbitration. There are court decisions on both sides. My intuition is that San Francisco is right. But there does not appear to be an easy way out of this.

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The New York Times yesterday examined the challenges middle- and upper-middle-class families now face as they try to pay for college with less home equity. Only home-owners, of course, can benefit from home-equity loans, so what makes this story sad is how even the ostensibly well-off are struggling to meet the demands of "the great risk shift" in American society. A number of families, for example, are dipping into their retirement savings to finance their children's education. This story focuses on how expensive private schools are and cites empirical research that the prestige of an undergraduate degree does not impact a student's future earnings. State universities look like bargains in this story, offering the same education for way less money. But we're increasingly privatizing the costs of "public" universities. State universities, receiving ever less state funding, are increasingly turning their students over to financial-services companies, who are, of course, happy to oblige.

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This is an appealing new YouTube video on Senator Wyden's Healthy Americans Act:

I think this is quite effective, and reminds me of the Center for American Progress's recently-launched campaign to rebrand progressivism.

What do you think of video ads like this? Do campaigns like this divert funds from more efficient forms of policy advocacy?

Sunday's Washington Post published an informative and disturbing article about how undergraduates are "majoring in plastic," relying heavily on credit cards to finance tuition and basic living expenses, such as food, gasoline and housing. The story reports on the incredibly aggressive marketing campaigns waged by credit card companies, which target students by staking out tables on college campuses and handing out a variety of freebies.

The article raises two interesting issues that suggest the need for significant policy changes in order to give young people a real chance at building solid financial futures. First, the article suggests the need for significant increases in low interest education financing. The article reports the results of a U.S. PIRG survey of 1500 students at 40 colleges in 14 states which recently found that 2 out of 3 students had a credit card, 55 percent of whom used their card to finance day-to-day expenses. Fifty-five percent charged their books and almost one quarter paid their tuition with a credit card. Freshmen who were not financially assisted by their parents had an average balance of $1,301; seniors had an average balance of $2,623.

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With April in full swing, a rising generation of future college and graduate students is combing through financial aid awards and contemplating the five- and six-figure of student debt necessary to becoming marketable in the global economy. The effects of the subprime mortgage meltdown have extended to the student loan market, with recent failures in the auction-rate securities market squeezing dozens of lenders out of federally-backed student loans and making other lenders choosier.

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The BBC reports that at least 19,000 teachers and students have protested in Paris, along with more protesters in other cities, in response to a proposal to cut funding for schools and lay off teachers. The contrast with the situation in Massachusetts school districts, the subject of my last post, could not be more stark. This demonstration of democratic energy is amazing. It is also a bit demoralizing, though, since it is so foreign to my experience of democracy here.

For the third time in two years, Massachusetts' lawmakers passed a bill that would require employers to pay triple damages to workers for not paying wages on time or other violations of the state's wage laws.

When the bill was passed in 2006, the veto by the pro-business governor, Mitt Romney, was no big surprise. But when Democrats pushed the bill through the legislature earlier this year, Governor Deval Patrick's response shocked many. Instead of signing the legislation into law, he proposed amending the bill to create more wiggle room for employers who break the law. Lawmakers have rejected Patrick's attempt to please business by watering down the bill; instead they sent the original version to his desk once again. This time, hopefully, Patrick will not repeat his mistake.

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It's school budget time in Massachusetts (and elsewhere), which means it's time to lay off teachers, increase class sizes, and cut funding for everything from basic supplies (i.e., make teachers pay more out of their own paltry salaries) to "extras" like music, art, or P.E.. As the Boston Globe has reported this week (here and here), some towns are putting measures on the ballot to allow them to assess additional property taxes for school funding and other municipal services. Since 1981, Massachusetts has prohibited municipalities from raising property taxes more than a certain amount unless voters specifically approve the increase by referendum (details here). In "Taxachusetts," although some towns are enacting the increases, many are voting them down (not to mention those towns where the council doesn't even put it on the ballot). If only we lived in a society where "Support Our Teachers" had the same valence that "Support Our Troops" commands now.

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The Washington Post published quite an interesting story a few days back for those of you who missed it. It turns out that the Mortgage Brokers Association is having trouble paying its mortgage!

This is, of course, just a particularly glaring example of how much the industry has suffered from its own excesses. With the exception of a handful of top managers in the financial sector who have made out pretty nicely with exorbitant severance packages, a whole lot of bankers and brokers and real estate agents are suffering from unemployment and otherwise right now. It's too bad the industry spent so long 1) taking risks; and 2) pushing back on regulation.

A New York Times article of March 30 described the “foreclosure machine:” the law firms and default servicing companies that represent and assist mortgage lenders in foreclosing and pursuing claims in bankruptcy and regular courts. The article gives several examples of questionable practices, including payment by volume of motions filed rather than by the legitimacy of those motions. This can lead to homeowners having to fight off baseless motions in court, or paying to settle a case that never should have been brought. As the article explains, bankruptcy judges and the U.S. Trustee (the powerful office that oversees the integrity of the bankruptcy system) have already noticed this abuse of the system. A recent Bankruptcy court ruling in Houston is the most recent example.

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James Surowiecki, in this week’s New Yorker, recalls the 2005 bankruptcy bill and how it privileged credit-card companies over both consumers and the economy. Credit-card companies were hugely profitable in the decade before 2004, but they wanted more, and Congress—with the help of some Democrats—was happy to oblige. For the economy as a whole, though, it created dead-weight economic loss and deterred entrepreneurial innovation. “In responding to an imaginary threat,” he writes, “we ended up making the economy less dynamic and less flexible. Now that hard times are here, we may find ourselves with a genuine bankruptcy crisis. But this will be one that Congress created.” His observation—that Congress has privileged the private wealth of corporations over not only consumers’ interests but also over sound economic policy—could not be more timely. Will the current crisis provoke huge reforms, as it did after the Depression, or nothing substantial, as it did after the Savings and Loan crisis?

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Since the beginning of the sub-prime crisis, anti-predatory lending advocates have pointed to how the egregious behavior of lenders and mortgage brokers have contributed to the crisis; their arguments recently found yet another anchor of evidence in the recently surfaced memo from JP Morgan Chase entitled “Zippy Cheats & Tricks.”

The nation's second-largest bank, Chase originates mortgage loans in addition to operating as an underwriter and funder of loans brought to them by a network of mortgage brokers. The memo instructs brokers on how to get their loans approved by Zippy, the bank’s automated loan underwriting system, explicitly suggesting that brokers inflate borrowers’ income or otherwise falsify loan applications.

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It appears that John McCain really is running for George W. Bush’s third term. In a nice column in Slate, Daniel Gross outlines how, for McCain, “[t]he problem with the last eight years isn't that the Bush administration had the wrong policies or was incompetent. No, the problem is that it lacked intensity.” (A similar piece from Salon is here.) This is true, Gross shows, on issues from Iraq to taxes, and he is, if anything, to the deregulatory right of the Bush administration on the housing crisis. (See this story explaining the administration’s proposal and criticisms of its woeful inadequacy here and here.) Nevertheless, as several recent articles are suggesting, McCain’s campaign—running on Iraq and on anti-consumer pseudo-economics—is increasingly anachronistic, even in Republican circles. Many Republicans are now acting like New Democrats, which could mean that the era of anti-government is over.

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ABC News tells the story (watch here) of how a credit card company’s predatory practices stifled one young woman’s plan to attend college. After graduating high school, Selena Alvarez needed to pay her $350 college tuition bill. Her mother advised Selena to open a Visa card with a $500 limit and offered to make the payments. But soon after doing so and paying her tuition, the bank soon charged her an additional $100 origination fee and a $10.95 monthly maintenance fee—she had just $33 of credit left. Instead of enrolling in school, Selena had to find a job to pay off her credit card bills.

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The New York Times reported yesterday that Senator McCain thinks “it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers.” Indeed, even though the instruments of the credit crisis were so complicated they “weren’t particularly well understood by even the most sophisticated banks, lenders and hedge funds,” he offered no policy to address those or similar instruments – and even suggested, in the words of the Times, that “government should eliminate obstacles to the ability of financial institutions to raise more capital.”

When taken together, these extraordinary comments show just how committed Senator McCain is to a particular theory of political economy that rejects government action in the economy. What would it take for Senator McCain to acknowledge the need for government action in the economy? Would he ever act?

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The credit situation is only getting uglier as Bear Stearns shareholder lawsuits and Congressional scrutiny begin, and New Country and KPMG (its accounting firm) are accused of “irregularities” that often resulted in increased earnings reports. For personal debtors, the ugly situation is evident in the increase in Fair Debt Collection Practices Act complaints about both third-party debt collectors (up 2.4% from 2006) and creditors’ in-house collections efforts (down 6.5%). The net increase is 0.3%, a small increase that masks the puzzling drop in in-house collections complaints, which may be explainable by an increase in collections outsourcing, or by debtors’ tending to allow foreclosure rather than fight the collection.

The most frequent complaint in 2007 was attempts to collect debts not owed or debts larger than owed, and the second-most-frequent was abusive collections, including harassment, obscenity, calls during off-hours, and threats of violence.

I noticed two articles today in the New York Times that are most interesting when read together. First, the Times profiles Roy Miller, a nonprofit housing counselor in Baltimore who has helped a number of local homehowners work out repayment plans and avoid foreclosure. This success story shows how the dedication of a non-profit organization has led to dropping foreclosures in a Baltimore neighborhood while the rate has skyrocketed everywhere else.

Second, the Times also published an editorial about Alphonso Jackson, the Secretary of Housing and Urban Development for the Bush Administration. The article notes how Jackson has become the subject of investigation "into allegations that he rewarded developer friends and abused political enemies in doling out taxpayers’ funds." While Alberto Gonzales fell from grace for focusing too much on politics and too little on law enforcement, now it looks like Jackson may fall from grace for focusing too much on politics and too little on the housing crisis. This story, of course, has become all too familiar over the past seven years. It's too bad Roy Miller isn't running HUD!

Just as we receive word that Arkansas has finally pushed payday lenders out the door, bad news arrives from Ohio: the number of payday lenders in that state have risen fourteen fold in 12 years. According to the report, Ohio customers of these shops take out an average of eight loans a year. That is a lot of business.

Looking to the absolute numbers, a strong correlation appears between Ohio's urban areas--already hit by high foreclosure rates, as this article's graphics demonstrate--and the largest clusters of payday stores (see page 8 of the report). But remarkably, the highest concentrations (on a per person basis) of payday lenders exist in rural areas rather than in urban areas. This is shocking and troublesome. As the urban foreclosures and credit crisis hit the whole economy, these rural areas are now more vulnerable to financial trouble.

I had the privilege of getting a chance to hear Geoffrey Canada speak last week. Canada runs the Harlem Children's Zone. He broke it down in term that anyone can understand and it is well worth a listen.

For those of you who don’t - the bottom line is that helping children is expensive. Canada’s reaction to critics that say his comprehensive approach to helping children is just too expensive – “Would you stop parenting your kids for four years?”