Category Archives: Poverty & income gap

A Greater Role for Nurse Practitioners

nurse_practitionerby James A. Bacon

While Medicaid expansion may have been dead on arrival at the General Assembly this year, the Senate Education and Health Committee has been thinking of other ways to improve medical access for Virginia’s poor. One solution is to loosen the regulatory restrictions that limit the ability of nurse practitioners to handle routine medical cases without a physician’s supervision. Three bills passed by the committee would improve medical access by expanding the role for nurse practitioners.

Reports the Richmond Times-Dispatch:

  •  SB 369 would establish a pilot program in which nurse practitioners would practice without direct supervision of a physician in clinics in medically under-served or high-unemployment areas. The nurses would collaborate with physicians via tele-medicine, and would have authority to issue prescriptions.
  • SB 264 would allow a nurse practitioner to provide care for up to 120 days in the event that the physician overseeing the patient care team dies, retires, becomes disabled or no longer has a license.
  • SB 463 would authorize nurse practitioners certified as nurse midwives to practice without the requirement for collaboration and consultation with a patient care team physician.

By themselves, these measures will not solve the plight of Virginia’s uninsured population, which Medicaid expansion is meant to address, but they are a step in the right direction. Combined with other measures such as the rollback of Certificate of Public Need regulations and the expansion of primary-care clinics, Virginia can do a lot to ensure better access for the poor and near-poor without exposing taxpayers to the massive fiscal risk of expanding Medicaid.

Advocates of Medicaid expansion tend to overlook a critical point: Having access to health insurance is not the same as having access to primary care services. Because Medicaid tends to pay health care providers less than it costs them to provide a service, Medicaid patients are money losers. As a consequence, many primary-care physicians, who tend to be over stretched as it is, refuse to take Medicaid patients. The looming physician shortage makes it increasingly difficult for Medicaid patients to find a primary-care physician, which is why so many end up in the emergency room.

The U.S. health care system is an extraordinarily complicated organism, and its problems cannot be fixed by throwing money at it. By taking up the if-you-don’t-like-Medicaid-expansion-what’s-the-alternative challenge, Virginia can build a health care system that works better for all. These three bills are excellent examples of the kind of thinking we need. If Republicans win the White House in 2016 and succeed in their dream of dismantling Obamacare, we’ll be darn glad we chose this path.

The Small Business Route out of Poverty

Raheim Watson grew up in Harlem, New York, surrounded by drugs and violence but decided he wanted a different life when his son was born. He moved to Richmond in 2014, where he has purchased a home, the first one in his family to do so, and started his own business. His window washing business is focused on the residential and small-commercial market.

Raheim Watson grew up in Harlem, New York, surrounded by drugs and violence but decided he wanted a different life when his son was born. He moved to Richmond in 2014, where he has purchased a home, the first one in his family to do so, and, with help from UnBoundRVA, started his own business. His window-washing business is focused on the residential and small-commercial market.

by James A. Bacon

UnBoundRVA is my kind of anti-poverty initiative! The organization identifies people in low-income neighborhoods who have the potential to succeed as small business owners, and then provides them a year of training, advice and networking support as they develop a business plan.

Once the business models are in place, each hopeful business owner makes a pitch for startup capital from a collective pool of $100,000 in low-interest loans. UnBoundRVA then connects the businesses with partners who provide pro bono services in areas such as legal, accounting, marketing and banking.

UnBoundRVA made it into the news recently when the Richmond Times-Dispatch highlighted a $20,000 donation to the group by Pat Hull, the entrepreneur behind logistics apps Getloaded.com and Scoopmonkey.com. “Your dream may not be the next Google. But who cares, if you are supporting your family and creating jobs?”

The not-for-profit enterprise was founded by Sarah Mullens and Richard Luck, who met while teaching in the inner city as part of the Teach for America program. They saw a large number of talented individuals who weren’t pursuing a college track for reasons that had nothing to do with ability or work ethic. “We believe that potential is restricted by the forces of the poverty cycle, and that the human capital of these individuals is our nation’s greatest underutilized asset,” states the UnBoundRVA website.

High-potential individuals in the current class, which will finish in June, are pursuing businesses in the following areas: clean-up services for construction projects, a mobile auto detailing service, a professional house organizing and redesign service, vegan cookies, and a mobile virtual reality gaming experience.

Bacon’s bottom line: Give a man a fish, you feed him for a day. Teach him how to fish, and you feed him for his life. In contrast to so many leftist-inspired “social justice” programs that don’t even feed a man for a day — they teach him to march and protest until someone gives him a fish — UnBoundRVA teaches people to fish. It may not provide a systemic cure for poverty, a goal that has eluded this nation despite the expenditure of trillions of dollars in public and philanthropic anti-poverty programs over the years, but it can make a tremendous difference to the people whose lives it touches.

If you want to address the “root causes” of poverty, you have to change the lives of people one individual at a time. UnBoundRVA does that.

That said, it’s not clear from the website if UnBoundRVA is a cost-effective way to address poverty. The program has an annual budget of $268,000, supporting a staff of four full-time employees and one part-time. How many people does it help with that annual investment? According to the website, UnBoundRVA collects the names of individuals interested in starting their own business, enrolls twelve candidates in a six-week workshop and selects the five most promising for a one-year program of business support. The website does not say how many times it runs through this cycle each year. If only once, not so good. If eight or nine times, helping 40 or more people, that’s more defensible. One thing I do believe: It’s a model worth trying.

IG of the Day: Virginia GINI

Source: Virginia Public Access Project

Source: Virginia Public Access Project

Where is income inequality in Virginia the most severe? College towns like Blacksburg, Charlottesville and Harrisonburg, and poor, rural mill-town jurisdictions like Danville and Grayson, Halifax and Greensville Counties.

Where is inequality in Virginia least evident? In the Washington suburbs and a broad swath of rural counties in eastern Virginia.

That’s the insta-analysis of a map published by the Virginia Public Access Project, which shows the GINI coefficient, a measure of income inequality, for Virginia localities based on 2012 data. (Hat tip: Tim Wise.)

— JAB

Your Tax Breaks at Work

terraces_at_manchester

Terraces at Manchester

by James A. Bacon

The Terraces at Manchester, a 148-unit luxury apartment across the river from downtown Richmond, opened in August. Its amenities include views of downtown and the river, an outdoor pool, a club room, a sky lounge, a rooftop dog park and, of course, an active urban lifestyle. Its cheapest apartment, with a small bedroom, a small bathroom and a living-kitchen area, rents for $1,200 per month.

Thank to an “affordable housing” ordinance enacted in 2014, the developer was able to pocket $2 million in real estate tax breaks over 10 years by renting 15% of the units to individuals making $41,000 a year or less. The company isn’t required to offer reduced rents in exchange for the breaks.

poolNow City Council has activists’ remorse. Councilwoman Ellen F. Robertson, author of the measure, wants to close the “loophole” she designed in the first place. “Once we realized there was a loophole, we decided to revise the legislation to make it more restrictive,” she was quoted as saying by the Richmond Times-Dispatch. “It was unfortunate that we did have a developer that didn’t operate in the true spirit of the law.”

Yeah, right, it was the developer’s fault! He read the fine print. Shame on him!

“We fully complied with the ordinance,” said Robin Miller, one of the principals in the project. However, he added, after the project’s use of the tax breaks were reported last month, his staff has reduced rents for some tenants.

Isn’t that special? Tenants making up to $41,000 (more than the median household income for the City of Richmond) who voluntarily signed a lease, presumably because they found the cost-to-value proposition attractive, suddenly get a break in their rent. Well, that certainly promotes the cause of affordable housing for the city’s lower-income residents!

So, what’s Robertson’s fix? Here’s the T-D’s explanation:

Robertson … said her proposed changes tighten eligibility requirements for developers seeking to qualify. Among the changes the City Council will consider: requiring developers to charge rent proportional to a qualifying tenant’s income and lowering the maximum salary that a qualifying low-income tenant can make up to $31,200, which is 60 percent of the area’s median income.

If the program changes are adopted, the most an individual tenant could be charged is $780 monthly.

Charge rents proportional to the tenant’s income? That sounds like a winner. Imagine how tenants will game the rules on that one (with landlords doing a wink, wink, nod, nod). Say an unmarried couple wants to live in a project qualifying for the tax break. The partner with the lowest income rents the apartment in his or her name, qualifying for a rent reduction. Then the other partner moves in, too, and pays all the utilities and groceries. Trust me, this fix is ripe for abuse.

Here’s an idea: Maybe City Council should stop trying to “fix” the housing market and start acquainting themselves with the law of supply and demand. Instead of passing tax breaks and incentives, maybe it should loosen up zoning restrictions against building new housing stock. If the supply of housing increases faster than the demand, prices will fall.

But what happens, I hear the economically illiterate ask, if builders just build luxury apartments that generate the biggest profits?

Here’s what happens. People moving into the luxury apartments and condos presumably lived somewhere else. They put their properties on the market (or free up apartments for someone else to rent). Someone else moves in, and they create vacancies where they formerly lived. Ultimately, vacancies open up in the lower end of the housing market, creating options that poor people didn’t have before. Here’s the really astounding thing — it doesn’t take any tax dollars, and it doesn’t herd poor people into crime-ridden projects.

Unfortunately, a fostering a free market in housing doesn’t help the politicians. After all, any politician worth his or her salt gets re-elected by “doing something” that proves they “care” (regardless of whether what they do actually works). Even scarier for politicians, their low-income constituents might move out of their district — maybe out of the city entirely — to be replaced by affluent constituents living in luxury apartment who, gadzooks, might vote for someone else!

Sadly, in the war between economic logic and political logic, political logic usually prevails. As the T-D article concludes, Robertson’s proposal is on Council’s consent agenda, an indication that it is considered “likely to receive unanimous approval.”

Slaying the Debt Dragon – or Feeding the Beast?

slaying_debt_dragonby James A. Bacon

There aren’t many things that almost everyone across the ideological spectrum agrees about, but one of them is that indebtedness from student loans is out of control. Here in Virginia, about one million students owe roughly $30 billion, according to the Richmond Times-Dispatch — or about $30,000 each on average.

The loan burdens can be difficult enough for students who graduate with degrees, but the debt can be devastating for those who don’t complete their degree requirements and don’t achieve the earning power they expected. Commenting on the Richmondsunlight website, Ruth Hall asks:

What about a person who becomes disabled before completing their education? Where is the concern for them regarding paying back student loans when their only source of income is social security disability? My daughter has a rare disease (as defined by the NIH) that struck her in her early 30’s. She is unable to work, but her social security disability check is garnished to pay her outstanding student loans. Already living in poverty with an income of $1000 a month, losing $150 a month to student loans affects her ability to provide for herself. Student loans never go away and she will never be able to finish college or return to earning a living due to this rare disease.

But not all debtors inspire the same degree of sympathy. The Times-Dispatch quotes one student griping about the $250,000 cost of his education, including the interest on the $190,000 he borrowed to attend the University of Virginia and the University of Richmond Law School. Is his complaint really with the debt and interest — or with the outrageous cost of higher education? The young man worries that he might have to sacrifice his career in public interest law. Perhaps he should have considered the consequences such a massive debt before embarked upon that particular goal!

Another student said she didn’t realize she owed $32,000 for a nine-month medical assistant diploma from Corinthian College, which she says turned out to be worthless, until it showed up on her credit report. She said she had been told grants and scholarships would cover her costs. “I still to this date have never received a bill” or documentation, she said. Either she was defrauded, in which case she should collect damages in a civil suit, or she was negligent in understanding the obligations she was incurring, in which case it’s hard to muster much sympathy.

Regardless of the circumstances of individual loans, it’s clear that thousands of Virginians have a problem. The question is, what do we do about it?

Sen. Janet Howell, D-Reston, and Del. Marcus Simon, D-Falls Church, are lead patrons of SB 52 and HB 400 respectively, identical bills that would create a Virginia Student Loan Refinancing Authority. The Authority would be tasked with creating a program in which Virginia students with educational loan debt “may receive a loan from the Authority to refinance all or part of his qualified education loans.”

Where would the money come from to refinance the student loans? The Authority would issue bonds. However, the Commonwealth of Virginia would take on no financial risk. The bills explicitly state: “No bond of the Authority shall constitute a debt or pledge of the full faith and credit of the Commonwealth or any political subdivision of the Commonwealth and each bond shall be payable solely from the revenues and other property pledge for such payment.”

Bacon’s bottom line: Howell and Simon deserve credit for devising an innovative approach to the problem of student indebtedness. I have major reservations, but I think their idea deserves deserves thorough airing and debate. The devil, of course, is in the details.

Investor appetite for the Authority’s bonds will determine how much money the Authority will have to work with and how many students it can help. I would like to know how prospective bond underwriters would evaluate the quality of the debt, what interest rates they would demand, and what flexibility the Authority actually would have to offer students better loan terms. I presume that the bonds would be classified as tax-free municipal debt, which would be cheaper than private-market financing. On the other hand, participating students , presumably those with the greatest need, pose a higher-than-normal risk of default, which could push interest rates higher.

Currently, the federal government assumes the risk for student loans gone bad. A Virginia student loan authority would assume that risk for the debt that it restructures. The transfer of risk needs to be examined very carefully. Even if the state’s full faith and credit weren’t on the line, bond defaults by the Authority would be a debacle for the state.

Otherwise, my main reservation is that creation of a Virginia Student Loan Refinancing Authority is only a palliative. This proposal would not address the underlying causes of the problem — out-of-control costs at Virginia colleges and universities, and indiscriminate lending by the federal government regardless of a student’s likelihood of repaying their debt. That’s what got us into this predicament, and anything that dulls our laser-sharp focus on those realities only delays addressing them.

A Poverty-Fighting Program that Pays Its Own Way

Long-Acting Reversible Contraception -- poverty-fighting tool

Long-Acting Reversible Contraception — poverty-fighting tool

by James A. Bacon

People have lots of ideas about how to address poverty. Most of them don’t work, as the United States has learned from more than 50 years of building a welfare state. Ever-hopeful social reformers always have some bright new idea they believe will make a difference — unlike all the bright new ideas that failed in the past. In the process, poverty has metastasized from a condition of material deprivation into inter-generational family breakdown and social dysfunction atop of material deprivation.

Some people would rise out of poverty if the economy could create more jobs and pay workers more. How to accomplish that falls under the rubric of economic policy. But escaping poverty for others means overcoming the challenge of dysfunctional parents — typically poor, single women — raising children in a dysfunctional environment. The odds are mightily against them. A few extraordinary individuals break out of the cycle; most do not.

Inter-generational poverty is, at its root, a demographic problem: baby mamas having babies of their own before they have the means and maturity to be good parents. As I have blogged before, poor women give birth to more children, and earlier in life, than women in higher income brackets. That’s why, while 11.7% of all Virginians live in the poverty, according to 2013 numbers, 15% of all children live in poverty.

When Ralph S. Northam, Virginia’s Democratic lieutenant governor, opines about how to build a healthier, more prosperous Virginia, as he did this morning in the Richmond Times-Dispatch, he places great emphasis on contraception — something you don’t see much of from Republicans. Northam also espouses traditional remedies like expanding Medicaid and pre-K education, which to my mind may alleviate the symptoms of poverty but do little to lift anyone out of it. But Northam’s discussion of birth control gets to the heart of the matter.

Citing recommendations of the Commonwealth Council on Childhood Success, of which he is chairman, he advocates expanding education and access to birth control, including Long-Acting Reversible Contraception (LARC) such as IUDs and birth control patches. The goal is to empower young women to decide when they want to start a family and when they want to focus on other life goals like getting an education or starting a business.

One such program in Colorado reduced teen births by 40% and teen abortions by 42%, Northam writes. “For every $1 invested in educating women and providing access to contraceptive options, the program saved Colorado more than $5 in Medicaid costs.” You can’t beat that: a program that funds itself out of the identifiable savings it generates.

Some Republicans and conservatives are reluctant to support birth control on the grounds that teenagers should practice abstention. Well, in an ideal world that would be nice. Republicans and conservatives should feel free to teach abstention in their own homes and churches, and even to include it as part of sex-ed curricula in schools. The idea might work in stable social environments where parents retain a lot of control over their children’s lives. But in the real world of inner cities and trailer parks and mountain hollows where peoples’ lives are more disordered, sex is happening regardless.

Think about it: A program like the one that Northam describes (1) reduces pregnancies and births among poor teens and young women, (2) reduces abortions, and (3) pays for itself with identifiable Medicaid savings. That’s about as close to a win-win-win as you can get in social welfare policy.

Social “Justice” and Wealth Destruction

Source: Federal Reserve Bank of St. Louis

Source: Federal Reserve Bank of St. Louis

by James A. Bacon

It is well documented that African-Americans and Hispanics lost a higher percentage of their net worth since the Great Recession of 2007 than did whites and Asians. The pressing question is why?

The dominant explanation is that racism and discrimination — or at least the after-effects of overt racism and discrimination reflected in practices embedded in major U.S. institutions such as schools, universities, banks, real estate markets and the like — is to blame. But there is a hardy dissenting viewpoint that, while private U.S. institutions may fall short of the ideal, the greatest threat to minority well being is activist government: In the effort to fix inequality, social justice advocates exercising the levers of government power unwittingly do more harm than good. The effects of the real estate crash and ensuing recession are a perfect illustration of that principle.

William R. Emmons and Bryan J. Noeth don’t frame the issue that way in a paper published last year, “Why Didn’t Higher Education Protect Hispanic and Black Wealth?” The two economists, working for the Federal Reserve Board of St. Louis, were preoccupied with the question of why collegeeducated Hispanics and blacks fared so poorly during and after the recession. Given that higher education is associated strongly with higher income and greater household wealth, it seemed anomalous that college-educated blacks and Hispanics saw much greater plunges in net worth than whites and Asians. But the data the authors provide is entirely consistent with the idea that social-justice activism combined with blundering government efforts to right past wrongs is a recipe for minority disaster.

Look at the chart atop the post. The thing that will stand out to social-justice warriors, always alert for any sign of inequality, is that the percentage loss in net worth between 2007 and 2013 was far greater for college-educated blacks and Hispanics than for college-educated whites and Asians — the very points that caught the attention of Emmons and Noeth. But at least two things will stand out to those who don’t embrace the presumption of racism.

First, the percentage loss in net worth for less-educated whites is in the same ballpark as that for less-educated blacks and Hispanics. If racism/ discrimination were a decisive factor, why did non-college-educated whites fare nearly as badly?

Second, educated Asians actually gained wealth during the time period, the only group to do so, while their less-educated peers suffered more disastrous losses (expressed as a percentage of net worth) than any other ethnic racial group. How does the racism explanation fit here? Do the forces of institutional racism disproportionately favor educated Asians and punish less-educated Asians?

As it turns out, Emmons and Noeth provide data that account for much of the disparity. The key variable was indebtedness, or more precisely, the median debt-to-income ratio in 2007. Some racial-ethnic groups had piled up more debt, much of it mortgage debt, than others. Consequently, when the real estate market tanked, the economy crashed, and people started losing their jobs, some were more vulnerable to the downturn than others.

Let’s take a closer look.

Source: Federal Reserve Bank of St. Louis.

Source: Federal Reserve Bank of St. Louis.

It turns out that not only did college-educated Americans in 2007 take on more debt in absolute terms than did their less-educated peers, they took on more debt in comparison to their incomes. College-educated blacks and Hispanics took on the highest debt levels of all — up to 164.7% in the case of blacks. When real estate markets crashed, they were the most exposed, and they suffered the greatest losses. It is not coincidence that the group taking on the least debt, educated Asians, was the one group that saw an increase in net worth.

Conversely, less-educated Asians were the most highly leveraged of their racial-ethnic peers. Not surprisingly, they saw the greatest percentage losses in net worth.

Why did educated Hispanics suffer even greater net-worth losses than educated blacks? Is America’s real estate-financial system more rigged against Hispanics than blacks? No. A better explanation for the disparity between Hispanics and blacks is that Hispanics predominated in California, Florida, Arizona, Nevada and other real estate markets that suffered the worst crashes.

Social justice and government activism, a deadly combination

So, the real question is how blacks and Hispanics came to be so highly leveraged? Was it a rapacious capitalist system that preyed upon the poor and ignorant by loading them up with debt? No. Poor blacks and Hispanics took on the least debt (as a ratio of their income) of any group. It was the educated blacks and Hispanics who loaded up on debt and got clobbered the worst by the recession.

Now let’s take a little journey back through time. Does anyone remember the political climate of 2006? Everyone, Republicans and Democrats alike, was supporting programs to promote home ownership. And no one was targeted for this feel-good initiative more than blacks and Hispanics — minorities who were deemed to be the victims of past discrimination, thus denied the wealth-creating opportunities of home ownership. No one was more aggressive than the social justice warriors who agitated endlessly to remove the “barriers” to home ownership — in other words, to lower lending standards. Private-sector “greed” did not lower lending standards. Social justice advocates dismantled the lending standards that “greedy, uncaring banks” supposedly had erected to unfairly limit access minorities to mortgage markets. (I refer you to Gretchen Morgenson’s book, “Reckless Endangerment,” for the details of the sordid story.)

As a consequence of this disastrous policy, millions of Americans of all races and ethnicities were suckered into taking out mortgages in the most over-heated real estate market in U.S. history. The devastating loss of wealth experienced by blacks and Hispanics was the direct result of misguided social activism and government meddling in mortgage markets during a time when sane people (like me) were warning that consumer debt generally, and real estate prices particularly, were unsustainable.

But being a social-justice warrior is never having to say you’re sorry. Just cloak yourself in moral superiority, wave the bloody flag of racism and move on to the next fiasco.