This week the Obama administration faced another Supreme Court challenge to the Affordable Care Act, reports the New York Times. (If you are a court geek like your editor, you can listen to oral arguments here). Plaintiffs argued in court that wording of the law does not allow people to receive federal subsidies unless their states set up the health exchanges, which more than half the states have refused to do. The ruling will affect about 7.5 million people, according to the Times, typically anywhere from 200 to 400 percent above the poverty line--which amounts to $40,000 to $80,000 per year for a family of three:
As your editor has noted several times in past posts, reports show that a lack of access to health care and services maycontribute to an inability to get ahead and tohigher mortality rates in poor people, many of whom work. In one impact investing play, David Bank over at ImpactAlpha looks at Carepayment, a program to help some people pay medical bills via a "pre-paid revolving line of credit"* at zero interest for their high deductibles and copayments:
Impact investors were attracted to CarePayment’s combination of social impact and steady payments. CarePayment financed its purchase of accounts-receivable with private-placements from individual accredited investors and institutions such as the W.K. Kellogg Foundation, which placed $3 million in 2011 as a fixed-income part of its $100 million mission-driven investing portfolio. Imprint Capital, an impact investment advisory firm that works closely with the Kellogg Foundation, also helped bring in a half-dozen or so other foundations and family offices. Particularly appealing to the investors was CarePayment’s annual return. In CarePayment’s model, the payments were backed by the credit-worthiness of the contracted hospitals, not individual patients themselves, mitigating some of the risks of the new approach.
In Mother Jones, Scott Carrier discusses a Utah program that has reduced homelessness by 72 percent in the last decade--"largely by finding and building apartments where they can live, permanently, with no strings attached":
Tsemberis and his associates, a group called Pathways to Housing, ran a large test in which they provided apartments to 242 chronically homeless individuals, no questions asked. In their apartments they could drink, take drugs, and suffer mental breakdowns, as long as they didn't hurt anyone or bother their neighbors. If they needed and wanted to go to rehab or detox, these services were provided. If they needed and wanted medical care, it was also provided. But it was up to the client to decide what services and care to participate in. The results were remarkable. After five years, 88 percent of the clients were still in their apartments, and the cost of caring for them in their own homes was a little less than what it would have cost to take care of them on the street.
In a Room for Debate post, the Manhattan Institute's Howard Husock cautions that more low-income housing for families might "discourage the steps that will help improve a household’s long-term economic condition." You might also be interested in this New York Times story about a football star who is now homeless. The Dallas Morning News reports that the city is rethinking the way it thinks about transportation because of growing poverty, in "car-centric cities like Dallas, whose 20th-century growth birthed highways that became developmental skeletons for suburbs where the middle class have fled for decades." A Yes! Magazine story looks how neighbors took matters in their own hands and created an investment cooperative to buy vacant buildings to revitalize a neighborhood:
In 2011, a group of dedicated neighbors came together to change that. In November of that year, five of them, including Watson, became the founding board of the Northeast Investment Cooperative, a first-of-its-kind in the U.S. cooperative engaged in buying and developing real estate. NEIC created a structure where any Minnesota resident could join the co-op for $1,000, and invest more through the purchase of different classes of nonvoting stock. The group began spreading the word to prospective members, and started looking for a building to buy. One year later, NEIC had enough members to buy the two buildings on Central Avenue for cash. The co-op quickly sold one of the buildings to project partner Recovery Bike Shop, and after a gut renovation, which it funded with a 2 percent loan from the city and a loan from local Northeast Bank, it leased the other building to two young businesses that had struggled to find workable space elsewhere, Fair State Brewing Cooperative and Aki’s BreadHaus. Today, NEIC’s impact spreads beyond the intersection of Central and Lowry. It’s catalyzed the creation of new jobs, engaged its more than 200 members in reimagining their neighborhood, and given residents a way to put their capital to work in their local economy.
New research shows a banking boom is crowding out the rest of the economy, shows an NYT report, largely because they prefer collateralize lending "that leaves fewer dollars for more promising research-and-development start-ups that may have only intangibles, such as knowledge and ideas, to offer a banker as collateral. Even though such start-ups have far more potential than projects backed by tangible collateral, they don’t attract the financing they need." Meanwhile Demos' Wallace Tubeville in a new report on de-financialization and how to improve the middle class:
Basic investment patterns provide a window on what is happening. Big businesses have increasingly elected to forego investment of profits and newly raised capital in job-creating enterprise growth and new product lines; instead, they distribute cash assets derived from operating profits to shareholders in share buybacks, reducing claims on remaining assets.7 Small business formation and investment have been shrinking for at least a decade, as is government investment—a critical growth engine in the twentieth-century economy—at every level.8 All of these negative trends are so closely related to financialization that they must be seen as an element of it. Effectively, the real economy is being converted into a servant of passive investment that either exploits or bypasses ordinary workers and households, with a bottom line of more household debt, shrinking labor incomes, diminishing job security and weak employment growth for a large majority of Americans. Whether and how America addresses this problem is extraordinarily consequential for our society: Current trends, if left unabated, will likely reduce the median living standard of future generations for the first time in American history. Further, as Piketty’s elegant historical model of growth and income distribution suggests, the compounding force of extreme income inequalities will create dynastic wealth, passing between fewer and fewer hands across generations, challenging our fundamental political values...Leading economists suggest that the United States may be in danger of falling into “secular stagnation,”10 a condition in which low interest rates cannot ignite a virtuous cycle of growth by simulating aggregate demand and investment in business growth (see Figure 2).
Also in the NYT, Eduardo Porter looks at retirement savings and argues that anyone who manages to save should be aware of the significant fund fees and self-serving financial adviser advice. "If there is an industry rived with conflicts of interest, it is the financial conglomerates that advise Americans on investing these savings," he says. "Yet nobody was paying attention to the safeguards that might be needed when corporate retirement funds managed by sophisticated professionals were replaced by individual 401(k)s and Individual Retirement Accounts." In the Wall Street Journal, the Cato Institute's Alan Reynolds says "middle class economics" is a bunch of mumbo jumbo because of a misinterpretation of statistics:
Both CBO and Census estimates show only six years of middle-class stagnation, not 40. The Piketty and Saez data are crucially flawed. The total income reported on individual tax returns, which is the basis of their estimates, is substantially less than any official measure of total income, and the difference keeps getting wider. In their original 2003 study, Messrs. Piketty and Saez mentioned one rapidly expanding source of missing income—disappearing dividends in tax-return data. These were “due mostly to the growth of funded pension plans and retirement savings accounts through which individuals receive dividends that are never reported as dividends on income tax returns.” The same is true of interest and capital gains accumulating inside such tax-free savings accounts. These have grown to nearly $20 trillion, according to a 2014 report by Tax Foundation economist Alan Cole.
Is the economy still weak? Unemployment numbers seem low, but there are still a number of worrisome trends says the New York Times Editorial board:
The latest jobs report showed that unemployment fell to 5.5 percent in February and that 295,000 jobs were added to the economy. But the labor market is not as healthy as those figures might suggest.
For example, the latest report shows that unemployment is still elevated for African-Americans, at 10.4 percent, and for Hispanics, at 6.6 percent, compared with 4.7 percent for white workers. In a truly strong job market, those racial gaps would be narrower because the competition for workers would drive joblessness down for minorities, who are the hardest hit in hard times.
Another sign of weakness is stagnant wage growth. In a stronger job market, competition for labor would push up wages as it pulled down unemployment. But wages have barely budged throughout the nearly six-year-old recovery.
Let's start this section with a cartoon from Miriam Engelberg:
I’m hyperbolizing, but it feels fair to say that data is among the most powerful, under-utilized, and incompletely understood forces in social problem solving. The time has come to wrap our arms around it, redefine it, and find its full potential for driving better human outcomes. Used well, data will help us along the pathway to large-scale change that can address the huge social needs of individuals and communities, which I’ve written about in two recent "Social Innovation Optimism" columns for Fast Company’s Co.Exist (here and here).
You also may be interested in the fact that Heron has passed the "halfway mark" in our move to align our endowment with our mission and values as reported by Forbes and Mission Investor Exchange. Weighing in on the donor-advised fund vs foundation endowment debate, Alan Cantor has this to say:
I’m neither a theologian nor an economist, but I challenge the sacred place held by endowments in American philanthropy. And while I will reluctantly agree that there are always likely to be some poor people, I suggest that our addiction to endowments makes poverty worse, now and in the future. I admit that speaking disparagingly about endowments is philanthropic heresy, but bear with me as I explain. I agree that there is value in building endowments for certain purposes, such as to support the maintenance of a museum or historic home. In those cases, the time frame of the endowment—perpetual—is the same as the mission, which is to preserve the building and its treasures forever. There are other examples for which a permanent endowment makes sense, such as endowments that pay for the perpetual stewardship of conserved wilderness. But in most cases, endowments are far from ideal for solving pressing societal problems... Money sitting in foundations and donor-advised funds is just that: money. But those same funds invested in people today would result in improved lives and futures for those individuals and for the nation.
Meanwhile, James Wan over at Al Jazeera America examines the legacy of BandAid, the 1980's movement address famine in Ethiopia, and says that charity has an image problem:
For decades, non-governmental organisations have been criticized for portraying people in the global South as helpless and passive. In countless surveys, respondents have said they are sick of seeing guilt-tripping appeals. And since the 1980s, some NGOs have themselves subscribed to codes of conduct against using "pathetic images"... n recent years, NGOs' fundraising arms have become increasingly dominated by people from marketing backgrounds, or are outsourced to professional advertisers. Kirk believes that while this may increase donations, it may do so at the expense of longer-term goals. "If you take a marketing mindset and if your only metric of success is income, the goal will be to tap into what people already think and reinforce that, because that's what people will respond to," he told Al Jazeera. "But if we keep implying that global poverty is something to be solved with paternalistic charity, we can never move the public to understand that these are man-made systemic problems that need long-term systemic actions."
Business school students in a fight over their loan debt following the demise of one of the largest for-profit colleges may be getting some help from crowdfunders:
"We paid dearly for degrees that have led to unemployment or to jobs that don't pay a living wage. We can't and won't pay any longer," they wrote in an open letter to the federal Education Department, one of several bodies regulating for-profit colleges and student loans. A creditor advocacy group called Debt Collective has taken up the Corinthian 15 cause. Debt Collective, which is an offshoot of Occupy Wall Street, has "erased" more than $13.3 million in student loan debt. (It buys the debt as a collection agency would, then "forgives" the loans by not demanding payment.)
Students also are looking for help getting an education they can actually take into the market place for decent jobs. On the flip side, our investee CAEL creates new opportunities for adult learners to receive educational credit for things they have learned on the job in addition to reducing barriers to getting more education while working. Check out this video: http://youtu.be/Y4pab0fyepY In Wired, Issie Lapowski discusses new software that helps business protect against slaves in their supply chain:
On FRDM, businesses can upload data on all the items they buy and where their suppliers are located, and FRDM will generate a dashboard, explaining who the riskiest suppliers are. Then, it’s up to the businesses to seek out bad actors and reassess their suppliers. “We help them identify where the hotspots are going to be,” Dillon says. “You can’t change all 30,000 suppliers at once, but if we can tell you the top 10 suppliers to focus on, that’s a good start.”
* This page has since been removed from ImpactAlpha's site. It was previously located at: