reformist cognitive dissonance; yes/no to payday loans and social security

09.09.2011 § Leave a comment

Payday Loans Are Dead! Long Live Payday Loans! Nice post over at naked capitalism about the “yes! no!” attitude towards payday loans, for which 36% is considered a LOW interest rate. Much like with subprime lending, payday loan establishments were placed disproportionately in the middle of African-American neighborhoods (see for instance here), and The Nothing suspects that, much with subprime lending, African American women are ending up holding the bulk of the predatory debt.

While in theory short-term loans can be a boon to cash-strapped individuals, in practice, the usurious interest of payday loans result in many borrowers falling into a debt treadmill. The Pentagon was so concerned about the way that payday lending could wreak havoc with the lives of combat personnel that it restricted the rates that could be charged to military personnel to 36%. The industry howled that rules would drive payday lenders out of the business of serving the armed forces (they had previously been targeting bases). I suspect that result was a feature, not a bug.

In 2008, the Wall Street Journal reported on how payday lenders targeted the elderly…

The latest sighting, via the Associated Press (hat tip April Charney) is that bigger, more reputable-looking banks are offering payday loans, but predictably calling them something else…

The article does point out that Mississippi has put restrictions on payday loans. The maximum loan is $400 and the charges are limited to an equivalent of an interest rate of 572% a year.

Similarly contradictory are the recent moves around Social Security (from  testosterone pit…):

Out of one side of its mouth, our political system talks about reforming Social Security to preserve it for a few more years, and out of the other side of its mouth, it proposes to expedite its demise. As rational observer, you’d just like to get a big roll of duct tape and close off all these orifices for a while.

There are rumblings everywhere about a one-year extension of the “temporary” payroll-tax cut. Effective for all of 2011, it reduces the employee portion of the Social Security tax from 6.2% to 4.2%, thus giving us a little extra spending money. And collectively, it’s more than a little: $100 billion for the year. The idea is that we’d spend this extra money, which would nudge up GDP and create jobs somehow somewhere. Yep, GDP and consumer spending are up a bit, despite dropping real wages and sagging consumer confidence. The inexplicable American consumer in action.

But here is one thing the payroll-tax cut did do very effectively: It raided Social Security by $100 billion. And now, they’re proposing to raid it again. But to be fair, let’s include an employer portion. Combined, it would amount to $200 billion for next year. And why not make it permanent? Because letting it expire would be decried, much like today, as a huge jobs-destroying “tax hike,” while the $2.6 trillion Social Security Trust Fund just sits there, fat and plump with all this “money.”

So, if we wanted to phase out our Social Security Trust Fund, that would be one way of doing it. After a decade or so, it would be gone. China would have a quarter or more of it, and the rest would be spread around. End of story. We’d finally be rid of it.

It’s like raiding your 401k. Just clean it out, buy some stuff, and go on. Don’t worry about later. To heck with retirement. Sure, that’s one way to proceed. And if that’s what we want, let’s say it outright. Let’s state clearly that we want to phase out our Social Security Trust Fund, that we want to bankrupt the Social Security system on an expedited time line, and that this payroll-tax cut is a way to accomplish that in an efficient manner. So, the political thinking goes, let’s just go do that instead.


“recent research suggests that the austerity… will lead to social unrest”

17.08.2011 § Leave a comment

the relative debt load of leading developed economies… in german, sowwy

…recent research suggests that the austerity we see in places like Spain and Italy will lead to social unrest. “Austerity and Anarchy: Budget Cuts and Social Unrest in Europe, 1919-2009” is the title of the paper published by the Centre for Economic Policy Research. This paper finds that:

  • From the end of the Weimar Republic in Germany in the 1930s to anti-government demonstrations in Greece in 2010-11, austerity has tended to go hand in hand with politically motivated violence and social instability. In this paper, we assemble cross-country evidence for the period 1919 to the present, and examine the extent to which societies become unstable after budget cuts. The results show a clear positive correlation between fiscal retrenchment and instability.

Additionally, two economists have found that “higher per capita GDP growth is significantly negatively linked to the support for extreme political positions.” The German economists, Markus Brückner and Hans Peter Grüner wrote pointedly that:

  • Our results therefore make clear that countries should not expect right-wing parties to get majorities unless growth declines quite as much as in the 1920s. Nevertheless, even with a less significant fall in economic growth rates, a rise in support for extreme parties is likely to change political outcomes – for example through their impact on incumbent parties’ political platforms.

So what we should expect is a high level of political volatility and social unrest in Italy and Spain (as well as in Ireland, Greece and Portugal) and an increase in right extremism. The same is true regarding austerity and social and political outcomes in the US, by the way. If the level of social volatility accompanying this outcome is too great, the euro zone will break apart as the future right-leaning governments there will resort to economic nationalism and repudiate their debt by defaulting.

Eurobonds would certainly lower yields across the eurozone and reduce liquidity constraints that have required front-loaded deficit reduction attempts. The effect on Germany is arguable. But, at a minimum, euro bonds would minimize the potential for the extreme outcome from social unrest which I just outlined.

Goodbye no-interest government student loans…

12.08.2011 § Leave a comment

So just a few days ago they decided to raise tuition to all CUNY schools again by 300$ per year, starting this semester, going into effect NOW. Tuition’s been incrimentally raising for a while now. See article here:  “Cuny Raises Fall Tuition after Fall Tuition Already Due

But anyway, a really wild thing is that part of the whole “we’ll-raise-the-debt-ceiling-if-you-cut-more-social-programs” deal was cutting the no-interest period on government loans to grad students. So, usually if you get a government loan in grad school you don’t accrue interest while you’re going to school (cuz ostensibly you can’t work much). But no longerrr. Seems the only reasonable explanatory hypothesis for these things is that student debt is a new and exciting source of accumulation for capitalists. Subprime is over, manufacturing can’t catch up… let’s get the young ones.

Yes it keeps students scared and busy and overworked, too.

Anyway Silvia Federici has a nice take on the whole university issue, locating it within a broader politics of the ‘KRiSiS OV RePRoDUcTiOn” :

…the shift from production to reproduction in the analysis of class relations has been the product of a transformation that, in different ways, has traversed the theoretical field since the 1970s, visible both in post-structuralist as well as neo-liberal critique, from Foucault to Becker. The main impulse towards it has come from the feminist rethinking of work and redefinition of reproductive labor as the “hidden part of the iceberg” (in Maria Mies’ words) on which capitalist accumulation is based. This shift has had a powerful illuminating effect enabling us to think together a heterogeneous set of activities—such as housework, subsistence agriculture, sex work and care work, education both formal and informal—and recognize them as moments of the social (re)production of the work-force.

From this perspective, we can read the changes that have taken place in the universities politically. We can read the introduction of fees and the commodification of education as part of a broad process of disinvestment in the reproduction of labor-power. It is an attempt to discipline the future labor force, a process that began in the late 70s with the abolition of open admission, clearly a response to the 1960s campus revolts and the insubordination of which youth were the protagonists.

Making reproduction the window from which to analyze the capital-work relation should not be seen however as a totalizing operation. Reproduction (of individuals, of labor-power) should not be conceived in isolation from the rest of the capitalist “factory”.

– Political Work with Women and as Women in the Present Conditions

And George Caffentzis has written about the potentiality and necessity of an anti-debt struggles:

As of September 2010 total student loan debt amounted to $850 billion, having just surpassed credit card debt by about $20 billion for the first time. And it is rising at a catastrophic rate, e.g., by 25% in 2009 to meet the rising cost of tuition and other college fees. Even the Great Recession has not put an end to this financial explosion. On the contrary, while credit card debt has leveled off, student borrowing has continued to grow to cover the rising costs of living as well as the tuition fees, especially by unemployed workers who are “going back to school” to get a “better,” or at least some, job in the future.

The Student Loan Debt Abolition Movement in the U.S.

Lacking here is an analysis of how wimmens hold the majority of really deathly debt, in the US and globally. Cuz they do. Like a lot. More to come.


the nothing

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