Why People Are Lying Down on Freeways

Despite the fact that thousands of people marched and protested on behalf of education yesterday, most people I speak to still levy either misunderstood or baseless criticisms of the movement. To address some of these concerns, I would like to clarify just a few of the missteps in education over the past few years, and explain some of what could be done to address these issues.

1. One of the main criticisms I hear is "What's your solution?" Meaning that while many people are protesting, they have no solutions to solve the problem, or the ill-thought solutions they do propose like taxing oil or eliminating Prop. 13 are untenable.

Two protester demands would provide some immediate relief. You may have seen the signs: "Democratize the Regents," and "Budget Transparency." The first is an issue that has arisen since Gov. Schwarzenegger began appointments to the Board of Regents, the governing body of the UC system.  Since 2004, he has appointed eleven Regents. Five regents have been investment bankers or advisors, two are corporate attorneys, and two have run property investment firms.

There are several problems with this, beginning with the fact that these people are appointed, rather than elected. They also serve twelve year terms. Beyond this, the main issue is that the Regents has become a corporate board of directors, whose goals are obviously not in line with campus communities or the California Master Plan. I can't and haven't seen these bankers and investors lining up in the capital to advocate for students. Why would people who run property investment firms advocate abolishing Prop. 13, the main source of California's financial ruin? They wouldn't, not now, and not ever. This is a direct conflict of interest. The UC needs who Regents who are interested in raising revenue from sources other than increased fees, and not singularly focused on cutting costs from the bottom-up. A democratically elected body would do exactly this.

The second complaint, budget transparency, stems from the fact the UC System does not publish the budget. It is impossible for anyone to provide any alternative ideas if they cannot see the numbers. The published information is limited to billions of dollars being divided into six sections on a pie chart. The vagueness of criticisms levied at the Regents is then a direct consequence of the vagueness of the information provided by the Regents. Transparency is necessary for any governing body, especially one that is controlling the education and careers for tens of thousands of people.

2. The other main criticism is that California just doesn't have the money.  In reality, a look at the budget reveals that it isn't necessarily that there isn't enough money, it is simply that education has become less of a priority.  From 2007-2010, the general fund for the state was reduced by $16 billion, mostly from the economic downturn. Education spending, which accounts for about half the expenditures in the general fund was has decreased by $9 billion in that same time frame.

Also, if you look at the history of California general fund expenditures over the last thirty years, education spending has risen as proportion of  general fund spending during each recession. Historically, education spending has been seen as an investment in the future, rather than a burden on the present. During this recession however, education has bitten off more than its fair share (from 52% of expenditures to 48%). This is also not adjusted for growth in the student population, which has been steadily increasing.

California's education systems have been hijacked by corporate interests and a governor who attempts to run the state like a business. The problem is "students aren't widgets" that can be churned out en mass by focusing on efficiency and cost reduction. Education is the heart of any democracy and the most important determinant of economic productivity. It is important looking forward that people realize than education spending is not just another wasteful government program; it is the most important factor in the future of California's economic and political success.

The New Credit Rules

Here is the summary of the new credit regulations from the Fed.

The main changes include: interest rates cannot be changed within the first year (with a couple of exceptions), new rates can only apply to future purchases, an end to two-cycle billing, and the annual fee is capped at 25% of the initial limit. Consumers must also have the option of over limit "protection." Another change coming in August is that consumers will have to opt-in to overdraft "protection" on their bank accounts.

One of the more blatant policies banks have been using was to enforce new interest rates to past purchases. This would be a blatant breach in any other contract. I don't expect the lender of my car loan change my interest rate in the middle of my four year repayment schedule. Banks cannot alter a fixed mortgage interest rate in the middle of the term either. Yet, credit cards were subject to this insane practice.

Most of the other regulations seem like common sense and are aimed at making sure consumers have the necessary information. In reality, I don't think this is going to be as big of a hit to banks as many are predicting. American's have gotten used to the idea of spending more money than have, regardless of the interest rate or other fees attached. Most people are going to continue to not read their credit card policies anyway.

One of the consequences of this is that banks are going to have to resort to a more standard business model: price discrimination, meaning that they are going to charge high fess to people who they believe can afford to pay more. This is standard practice in many industries. The interesting part is that before these new regulations,  banks had found a way to reverse-discriminate. By not providing or hiding information, and making retro-active rate changes, banks found a way to charge the highest price to those who could least afford to pay it.

I pay all my bills online. I review my interest charges and make sure there have been no unauthorized purchases, but I rarely review my paper bill unless there is a discrepancy. Banks push online banking and email statements almost as hard as they push overdraft protection. I wonder if banks will decide not to make the new information available in an easy to find manner on their websites. That could be a big loop hole.

A Day of Healthcare Reading

1. Why Americans have no idea about what healthcare legislation actually says:
                Obama Details Plan to Expand Health Care to Uninsured

                From: NY Times

                Obama Health Plan Costs $950 Billion Over 10 Years

                From: WSJ

                Finally, ObamaCare Arrives

               From: The Atlantic

               The President’s Proposal puts American families and small business owners in control of their own  

               health care.

               From: Whitehouse.gov

Now, if you put it all together, Obamacare is going to spend $950 billion to extend care to the uninsured, but in a way that helps people take control of their own healthcare. Still, after reading the three articles I have no clue how this proposal is going to affect me, or how it will provide healthcare to the uninsured--the only two aspects I care about. So I started a search. 

I found how it is going to affect me pretty easily:

Currently, UCB mandates that I have health insurance. They sold it to me for $1500 (and then paid for it in a back-handed way; but for the sake of argument, let's say I paid for it). That would put the cost around the $40,000 income range, which is above what most students earn. So I would get a tax credit. 

The chart makes it pretty easy to predict changes for most people who already have insurance, at least in the short term. Many of the long-term cost saving measures like the health insurance exchange and technology developments are going to be negotiated and implemented by corporations and labor unions. Oddly though, the chart stops at $88,000. And since the actual bill is not posted (that I could find anyway), I don't know what happens to people with incomes above that amount. 

The solution to my other concern, how to provide healthcare to the thirty millionish uninsured people, is a bit more convoluted and was harder to find. This is from the Whitehouse.gov:

Beginning in April of this year, States will be allowed to expand Medicaid eligibility to more individuals. Starting on January 1, 2014, all low-income, non-elderly and non-disabled individuals will be eligible for Medicaid. This includes unemployed adults and working famlies – all people with income below $29,000 for a family of four (133% of poverty). 

The Federal Government will support States by providing 100% of the cost of newly eligible people between 2014 and 2017, 95% of the costs between 2018 and 2019, and 90 percent matching for subsequent years.

So... he is going to give them Medicaid. Again, I am a bit upset that the actual bill does not seem to be posted anywhere. It seems that the President is counting on his other cost saving measures and some tax hikes to pay for this. I am also not sure what the term "cost" means in this context. Is it premium costs, out of pocket costs, or is up to the state?

How is he going to pay for this? He is going to tax insurance companies at a higher rate because their profits are going to soar as more Americans are forced to sign up for some form of insurance. He is going tax pharmaceutical companies. He is going to raise taxes by .9% on high income individuals; and he is going to tax health insurance plans that cost over $27,000.

There are definitely some elements lacking in the proposal, none of which are cleared up by reading the newspaper. I would like to think that these missing elements would be hashed out in the Summit, but I have no reason to believe that either the Summit itself or the coverage of it will focus on explaining to Americans how this bill is going to affect them or help the uninsured. If anyone has answers to these questions or has found the actual legislation, please share.