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America’s Dilemma: Teachers or Food

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Remember that important NYT story from early this year describing the growing number of Americans whose sole income consists of food stamps?

About six million Americans receiving food stamps report they have no other income, according to an analysis of state data collected by The New York Times. In declarations that states verify and the federal government audits, they described themselves as unemployed and receiving no cash aid — no welfare, no unemployment insurance, and no pensions, child support or disability pay.

Their numbers were rising before the recession as tougher welfare laws made it harder for poor people to get cash aid, but they have soared by about 50 percent over the past two years. About one in 50 Americans now lives in a household with a reported income that consists of nothing but a food-stamp card.

Well, months after that report came out, some genius in the Obama Administration, according to a very shrill David Obey, proposed offsetting funds to keep teachers in the schools by cutting food stamps. Said genius wanted to cut these people’s only safety net so Arne Duncan could go on privatizing our schools.

The secretary of Education is whining about the fact he only got 85 percent of the money he wanted .… So, when we needed money, we committed the cardinal sin of treating him like any other mere mortal. We were giving them over $10 billion in money to help keep teachers on the job, plus another $5 billion for Pell, so he was getting $15 billion for the programs he says he cares about, and it was costing him $500 million [in reductions to the Race to the Top program]. Now that’s a pretty damn good deal.

So as far as I’m concerned, the secretary of Education should have been happy as hell. He should have taken that deal and smiled like a Cheshire cat. He’s got more walking around money than every other cabinet secretary put together.

It blows my mind that the White House would even notice the fight [over Race to the Top]. I would have expected the president to say to the secretary, “look, you’re getting a good deal, for God’s sake, what this really does is guarantee that the rest of the money isn’t going to be touched.”

We gave [Duncan] $4.3 billion in the stimulus package, no questions asked. He could spend it any way he wants. … I trusted the secretary, so I gave him a hell of a lot more money than I should have.

My point is that I have been working for school reform long before I ever heard of the secretary of education, and long before I ever heard of Obama. And I’m happy to welcome them on the reform road, but I’ll be damned if I think the only road to reform lies in the head of the Secretary of Education.

We were told we have to offset every damn dime of [new teacher spending]. Well, it ain’t easy to find offsets, and with all due respect to the administration their first suggestion for offsets was to cut food stamps. Now they were careful not to make an official budget request, because they didn’t want to take the political heat for it, but that was the first trial balloon they sent down here. … Their line of argument was, well, the cost of food relative to what we thought it would be has come down, so people on food stamps are getting a pretty good deal in comparison to what we thought they were going to get. Well isn’t that nice. Some poor bastard is going to get a break for a change. [emphasis original]

As a reminder, here’s David Dayen’s summary of the squabble between Obey and Duncan.

One of [the amendments in the war spending resolution] included this social spending money, comprised of:

$10 billion for an Education Jobs Fund, $4.95 billion for Pell Grants, $701 million for border security, $180 million for innovative technology energy loans, $163 million for schools on military installations, $142 million in additional Gulf Coast oil spill funding, $50 million in emergency food assistance, and $16.5 million to build a new soldier processing center at Fort Hood.

You can read the full summary from David Obey of the Appropriations Committee here. There were some underlying provisions from the Senate war supplemental that appropriated funds to disaster relief, victims of Agent Orange, mine safety, the oil spill, and other areas.

This money in this amendment is entirely paid for through rescissions in various programs, and actually reduces the deficit by $439 million. But in order to pay for the education jobs fund and save 140,000 teachers, House appropriators dipped into $500 million of the Race to the Top fund. Arne Duncan has been sitting on $4 billion dollars in stimulus money for over a year so he can bribe states into changing their education policies. In the meantime, state budgets are in absolute crisis and hundreds of thousands of teachers could lose their jobs. Read more →

Corporatist Dems Killing another Public Option

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This story is several days old. But I wanted to go back and show how, after a pack of lobbyists killed one attempt to get government to use its power to save money and improve health care, another pack of lobbyists are trying to do the same with higher education.

Eric Lichtblau (who, IMO, does much better at digging out DOJ scandals than reporting legislative battles) describes how the plan to replace privatized student loans–in which the government guarantees student loans that lenders then repackage and profit off of–with direct loans form the government is in political trouble.

But an aggressive lobbying campaign by the nation’s biggest student lenders has now put one of the White House’s signature plans in peril, with lenders using sit-downs with lawmakers, town-hall-style meetings and petition drives to plead their case and stay in business.

House and Senate aides say that the administration’s plan faces a far tougher fight than it did last fall, when the House passed its version. The fierce attacks from the lending industry, the Massachusetts election that cost the Democrats their filibuster-proof majority in the Senate and the fight over a health care bill have all damaged the chances for the student loan measure, said the aides, who spoke on the condition of anonymity because they were not authorized to discuss the matter publicly.

The effort to return to using direct loans to students rather than using government guarantees to support student loans stems from a series of scandals under the Bush Administration. Loan companies gave school administrators kick-backs to make their loans preferred at the schools, regardless of whether those loans made sense for the students. Lenders manipulated a subsidy (and churned some loans) to take advantage of a 9.5% profit guarantee that they weren’t otherwise entitled to. And, given a revolving door between the industry and DOE, students had little protection against fraud. As a result, students were paying far more than they should have for loans, and when they ultimately faced default, they had far fewer options for getting out of that debt assumed under what were basically fraudulent conditions.

By passing government-backed loans through private companies rather than lending money directly, students became captive consumers to an industry with little real competition and even less protection against fraud. The whole scheme turned college education from a necessary step to achieve a middle class lifestyle (and more broadly, to keep America competitive internationally) into a mere profit center for the finance industry.

The legislation before the Senate would curtail that system, replace a corporate welfare program, and use the savings to support the same number of loans plus many more education programs.

The money that would be saved by cutting out the private-industry middlemen — about $80 billion over the next decade, according to a Congressional Budget Office analysis — could instead go toward expanding direct Pell Grants to students, establishing $10,000 tax credits for families with loans, and forgiving debts eventually for students who go into public service, administration officials say.

The bill would also shift tens of billions of dollars in expected savings to early learning programs, community colleges and the modernization of public school facilities.

So back to my parallel with the battle over the public option.

The choices now being made in health care risk making the same mistake we’ve made in the student loan industry. Captive consumers will be asked to support higher overhead (20% or more, in the case of the Senate bill) without adequate regulatory controls to make sure those consumers get the health care they’re paying for in return. A public option would have served as one check on this system by offering consumers one option that didn’t include that 20% overhead that also benefited from more direct government oversight. It would have saved $100 billion–in the same neighborhood of savings we’ll get by reverting the student loans to direct government assistance. But corporatist Senators like Ben Nelson and Joe Lieberman killed that plan, and as a result, we have to hope (assuming a bill passes at all) the HHS Secretary proves better at regulating a powerful industry than the Secretary of Education under Bush.

And now, having seen how easy it was to kill the public option, a solution that would save the government money and better achieve the underlying goal–health care (as distinct from insurance)–some of the very same corporatist Senators are turning their sights on direct student loans.

Read more →