Erika Eichelberger

Erika Eichelberger

Reporter

Erika Eichelberger is a reporter in Mother Jones' Washington bureau. She has also written for The NationThe Brooklyn Rail, and TomDispatch. Email her at eeichelberger [at] motherjones [dot] com. 

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Report: When It Comes To the Deficit, Washington is Still Acting Like It's 2010

| Thu Jun. 6, 2013 9:41 AM PDT

Washington's obsession with the nation's budget deficit is a mistake, according to a new report released Wednesday by the liberal Center for American Progress (CAP). Congress and President Barack Obama are locked in a budget-cutting state of mind, still hoping to reach some sort of a grand bargain deficit reduction deal later this year that would replace the sweeping spending cuts that went into effect in March.

But as the report notes, the state of the economy has changed since 2010, the year that talks over how to reduce the deficit began:

  • The deficit has fallen by $2.5 trillion, due to tax increases and big spending cuts already enacted.
  • Growth in health care costs has slowed.
  • Inflation and interest rates are still low, despite concern that running a big deficit would increase them.
  • The key academic argument that high debt causes slower economic growth has fallen apart.
  • Austerity policies in Europe have not worked out so well.
  • The US economy has not come back to life as quickly as was projected when all the budget cutting began.

"Much has changed," Michael Linden, the author of the CAP report, writes, "and the debate should change with it."

Although the initial push for austerity came from the right, Obama and congressional Democrats soon fell in line. As Ezra Klein noted at Wonkblog Thursday, lower deficit forecasts didn't change Rep. Paul Ryan's (R-Wisc.) budget-cutting mania. "With some of the urgency gone, did Ryan ease up on the cuts to programs like Medicaid and food stamps?" Klein writes. "Of course not....The facts changed. The policies in the Republican budget didn't." As for Democrats, Klein says, "they’ve kept pursuing the exact kind of budget deals that led to sequestration in the first place." Obama put forward a budget in April that, as Linden says, "goes well beyond halfway to meet the demands of conservatives in Congress."

"It is time to reset the entire budget debate," Linden says. "No more pretending that the sky is falling."

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Report: Mansions Getting Bigger, Rental Apartments Getting Smaller

| Wed Jun. 5, 2013 9:05 AM PDT

It's a metaphor for the lopsided economic recovery: Data out from the Census bureau Tuesday shows that new single-family homes are getting bigger, while new rental apartments are shrinking.

Construction of new homes plummeted as the 2007 financial crisis hit. Residential housing construction is barely coming back to life, but as the New York Times' Economix blog reports in a post titled "The Return of the McMansions," the new homes being built are ballooning in size. Think the 90,000 square foot manse timeshare billionaire David Seagal and his wife Jackie designed pre-crisis, with 30 bathrooms, ten kitchens, and an ice rink. Ok, they're not all that big. The average size of new single-family homes climbed to 2,306 square feet last year,  the largest average home size since the government started keeping track in 1973. The Times has this graph:

The average number of bedrooms and bathrooms per home is also at record levels. Last year, 41 percent of new homes had at least four bedrooms, and 30 percent had at least three bathrooms.

When it comes to new rental units, the opposite is true. The average square footage of new units in multi-family buildings decreased between 2011 and 2012. In 2011, 62 percent of new rental units were under 1,200 square feet, and 17 percent were 1,400 square feet or larger. In 2012, those numbers had changed to 64 percent under 1,200 square feet, and 16 percent above 1,400 square feet. (The percentage of apartments in the mid-range, remained steady.) See here:

The divergence in square footage aligns with the nature of the economic recovery. A new report released by the Federal Reserve earlier this week shows that most of the wealth recovered since the recession has gone to well-off white people. The Fed says that about 62 percent of the wealth Americans have regained since the economy bottomed out has been through the recovery of the stock market. And 80 percent of stock wealth is held by the rich—people with income in the top 10 percent.

Many younger and minority Americans have not experienced any recovery at all, and some are still losing wealth. Hence the need for more shoebox apartments.

Elizabeth Warren Calls for Grassroots Movement on Student Loan Debt

| Tue Jun. 4, 2013 7:03 AM PDT

On Monday night, Sen. Elizabeth Warren held a briefing on student debt with the progressive policy group MoveOn.org, taking calls from students, parents, and graduates struggling with student loan debt. Warren discussed the the current fight in Congress over student loan interest rates, and what kinds of fixes would work best for the 37 million Americans with student loan debt. And she called on Americans to take matters into their own hands.

Over the past decade, student loan debt has nearly quadrupled, and now stands close to $1 trillion. On July 1, rates for federal need-based student loans are set to double from 3.4 percent to 6.8 percent. The deadline has lawmakers scrambling for a fix. There are a bunch of proposals out there, including Warren's call for students to be allowed to pay the low, low rate that big banks pay the Federal Reserve for their short-term borrowing; a plan President Barack Obama laid out in his budget in April; and the GOP plan that recently passed the House, which Warren and Obama hate.

The GOP bill would allow interest rates on student loans to rise or fall from year to year with the government's cost of borrowing, ending the current system under which rates are fixed by law. Because market rates are low right now, the initial rate for the loans envisioned by the Republican bill  would be about 4.4 percent, but the legislation would allow them to rise to as much as 8.5 percent. Warren says the plan would turn students into "a profit center": "Already the government is scheduled to make $51 billion in profits in loans it makes next year. That's 36 cents in profit for every dollar they lend out. And the House bill would make even more money off students," Warren said at the briefing.

She touted her own plan, the Bank on Students Loan Fairness Act, which would act as a one-year patch, cutting student loan rates to the same rock-bottom interest rate that banks pay to the Federal Reserve for short-term loans. "If a big bank wants to take out a loan from the Fed, it can get .75 interest rate. These are the same banks that cost millions of Americans their jobs and nearly broke the economy. But next year, a student would have to pay nine times as much on her debt," Warren said, referring to the scheduled jump in interest rates to 6.8 percent. "It isn't right. It isn't fair. And it isn't good economic policy."

The ultimate solution, Warren said, is not her one-year fix. It's Americans demanding a fair student loan system. "You can't do this by having a few people stand up in the US Senate and the House and say 'this is important,'" she said. "This is test of whether we can organize something at the grass roots and move it forward. It will take us... and a whole lot more people to show [Congress]... that it does matter and they have got to respond."

Elizabeth Warren to Hold Emergency Briefing on Student Debt

| Mon Jun. 3, 2013 4:34 PM PDT

On Monday night, Sen. Elizabeth Warren will hold an "emergency briefing" on student debt with the progressive policy group MoveOn.org. The senator will take calls from students, parents, and graduates struggling with student loan debt to discuss "the student loan fight, [and] understand some potential solutions," MoveOn said in an email blast Monday.

Since 2004, student loan debt has tripled, and now stands close to $1 trillion. On July 1, rates for Stafford loans are set to double from 3.4 percent to 6.8 percent. The deadline has lawmakers scrambling for a fix. There are a bunch of proposals out there, including Warren's call for students to be allowed to pay the low, low rate that big banks pay the Federal Reserve for their short-term borrowing; a plan President Barack Obama laid out in his budget in April; and the GOP plan that just passed the House, which Warren and Obama hate.

The GOP bill would allow interest rates on student loans to rise or fall from year to year with the government's cost of borrowing, ending the current system under which rates are fixed by law. Because market rates are low right now, the initial rate for the loans envisioned by the Republican bill  would be about 4.4 percent, but the legislation would allow them to rise to as much as 8.5 percent. Warren says the plan would turn students into "a profit center."

Under Obama's plan, the interest rate at which student loans are issued would vary depending on the economy, but once the student has borrowed the money, the interest rate would be fixed for the life of the loan, allowing students to plan for consistent payments. Obama's plan would also aid low-income borrowers by letting them cap their monthly loan payments to 10 percent of their income after graduation.

Warren's proposal, the Bank on Students Loan Fairness Act, would act as a one-year patch, cutting student loan rates to the same low .75 percent interest rate that banks pay to the Fed for short-term loans. After a year, a longer-term student loan solution would be drawn up. (Here is a round-up of all the plans, plus some nice charts.) Warren's bill has drawn praise from students and advocates around the country. MoveOn said in an email blast that more than 434,000 of their members have voiced support for the legislation.

But MoveOn wants more students, graduates, and parents to get involved in influencing the outcome of legislation that will determine how much money they spend on education debt over a lifetime. The Monday briefing is part of that effort. "We can win this fight and show that Congress needs to respond to an agenda that works for us," MoveOn said in a statement, "But only if we organize together in our communities, on college campuses, and everywhere our representatives can see us."

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