The wealth gap between the richest 20 percent of Americans and everyone else is the widest it's been in three decades, according to a report released last week by the Pew Research Center. Many factors contribute to this great divide: tax rates on the rich have been falling for decades; the Great Recession decimated the assets of a lot of low- and middle-income folks; and technology is replacing workers. One often-overlooked factor, though, is that 16.7 million poor Americans don't have a bank account. Lack of access to this basic financial tool cramps poor Americans' ability to prove credit-worthiness and build assets, and forces them to rely on expensive alternative financial services, trapping them in a cycle of debt and instability.
Here's a look at banking access in the US and how it affects Americans' ability to grab onto the lowest rung of the socioeconomic ladder.
The percentage of Americans without bank access has fluctuated since the Great Recession. In 2009, 7.6 percent of Americans lacked a bank account. In 2011, that number was 8.2 percent, and in 2013, 7.7 percent—or approximately 16.7 million adults—had no banking access, according to the Federal Deposit Insurance Corporation (FDIC).
Eighteen percent of people in the bottom 40 percent of the income spectrum lacked an account at a formal financial institution in 2011, according to the World Bank. Non-whites are less likely to have a bank account:
The main reason people don't open bank accounts is that they lack sufficient funds to open one or can't afford the fees associated with the account. But some people simply don't trust financial institutions.
Bank fees associated with checking accounts have skyrocketed over the past few years, with the percentage of truly free checking accounts falling from 76 percent in 2009 to 38 percent in 2013,according to the most recent data from Bankrate, a consumer financial services company. The average minimum balance required to open a checking account rose nine percent over the past year to $66, and the average overdraft fee reached $32.74, a record high. ATM fees are at all-time highs, too.
"Even plain vanilla checking accounts have gotten more expensive," Abby McCloskey, a program director at the American Enterprise Institute, wrote at Forbes last year. "Free checking was long championed by the FDIC to bring the unbanked into mainstream banking, and it has all but disappeared as banks cut costs." (The Consumer Financial Protection Bureau, which Congress created in the wake of the 2008 financial crisis to protect average Americans from banks' predatory practices, is weighing new regulations on overdraft fees.)
When low-income customers close their accounts to avoid minimum balances and fees, they're forced to rely on alternative financial services including payday lending, money orders, check cashing, and pawn shops—which often charge even more exorbitant fees and penalties. The average household that uses these alternative financial services spends $2,412 per year on interest and related fees, according to a report released this year by the Postal Service's inspector general. A 2011 Pew survey of 2,000 low-income families in Los Angeles found that using alternative financial services consumed 6 percent of an average household's income, whereas buying the same services at a bank ate up just half a percent of an average family's income.
Americans without bank accounts also tend to miss out on tax benefits such as the Earned Income Tax Credit—mostly because people without bank accounts are less likely to file tax returns. More than two-thirds of families with bank accounts in Pew's LA study filed their tax returns. Just 38 percent of the families without bank accounts filed. Three quarters of the families that filed got a tax refund.
Not surprisingly, low-income people with access to bank accounts are more likely to save money and have better overall economic health. Check it out.
Marine Infantry Officer Course students stand by before a helicopter drill in Arizona.
The cost of US war-making in the 13 years since the September 11 terrorist attacks reached a whopping $1.6 trillion in 2014, according to a recent report by the Congressional Research Service (CRS).
The $1.6 trillion in war spending over that time span includes the cost of military operations, the training of security forces in Afghanistan and Iraq, weapons maintenance, base support, reconstruction, embassy maintenance, foreign aid, and veterans' medical care, as well as war-related intelligence operations not tracked by the Pentagon. The report tracks expenses through September, the end of the government's 2014 fiscal year. Here's a breakdown of where most of that money went:
The key factor determining the cost of war during a given period over the last 13 years has been the number of US troops deployed, according to the report. The number of troops in Afghanistan peaked in 2011, when 100,000 Americans were stationed there. The number of US armed forces in Iraq reached a high of about 170,000 in 2007.
Although Congress enacted across-the-board spending cuts in March 2013, the Pentagon's war-making money was left untouched. The minimal cuts, known as sequestration, came from the Defense Department's regular peacetime budget. The Pentagon gets a separate budget for fighting wars.
In the spending bill that Congress approved earlier this month, lawmakers doled out $73.7 billion for war-related activities in 2015—$2.3 billion more than President Barack Obama had requested. As Mother Jones' Dave Gilson reported last year, US military spending is on pace to taper far less dramatically in the wake of the Iraq and Afghanistan wars than it did after the end of the Vietnam War or the Cold War.
Other reports have estimated the cost of US wars since 9/11 to be far higher than $1.6 trillion. A report by Neta Crawford, a political science professor at Boston University, estimated the total cost of the wars in Iraq and Afghanistan—as well as post-2001 assistance to Pakistan—to be roughly $4.4 trillion. The CRS estimate is lower because it does not include additional costs including the lifetime price of health care for disabled veterans and interest on the national debt.
Last week, Congress did Wall Street a solid. When lawmakers passed a giant spending bill that funds the government through September, they included a provision written by Citigroup lobbyists that allows banks to make more risky trades with taxpayer-insured money. Then, on Thursday, bankers got another giveaway: The Federal Reserve announced it would delay for up to two years implementation of a crucial section of the Volcker rule—one of the most important regulations to come out of the 2010 Dodd-Frank financial reform bill. The rule generally forbids the high-risk trading by commercial banks that helped cause the financial crisis. The move by the Fed pushes the deadline for banks to comply past the next presidential election and gives Wall Street lobbyists more time to weaken it.
"Less than a week after Wall Street slipped a bailout provision written by Citigroup into the government spending bill, the Fed has given the big banks another victory," Sen. Elizabeth Warren (D-Mass.) said in a statement Friday.
"It's really hard to see an excuse for this," says Marcus Stanley, the financial policy director at Americans for Financial Reform, an advocacy group.
The Volcker rule ensures that financial institutions don't engage in something called proprietary trading, which is when a bank trades for its own benefit as opposed to for the benefit of its customers. Banks were supposed to comply with the Volcker rule by July 21, 2014. Last year, when banking watchdogs finalized the rule, the Fed granted banks a year-long extension. The Fed's Thursday announcement gives banks another year to get rid of certain investments—including those in private equity firms and hedge funds. The central bank also noted Thursday that it plans to push out the deadline again next year, by another 12 months. That brings the new compliance deadline to July 2017, far past the 2016 election. If the new president is a Republican, he could fill his administration with Wall Street insiders opposed to the rule, making it even easier for lobbyists to gut it.
Before the Volcker rule was finalized last year, the financial industry fought like mad to weaken it. The regulation could slash the total annual profits of the eight largest US banks by up to $10 billion, according to an estimate by Standard & Poor's. Banking reform advocates were fairly happy with way the final reg turned out. But now the financial industry has extra time to take a few more whacks at rule before banks actually have to obey it. "Wall Street’s loophole lawyers and other hired guns will… continue to hit at the rule as if it were a piñata," Dennis Kelleher, the president of the financial reform advocacy group Better Markets, said when regulators completed the rule in 2013.
The Dodd-Frank law already contains a provision allowing banks that will have difficulty getting rid of particular investments before the initial compliance deadline to request an extension from banking regulators. The Fed's announcement yesterday amounts to an unnecessary "blanket" extension, Stanley says. "It's hogwash."
The massive government spending bill President Barack Obama signed on Tuesday contains provisions that bar federal funding for most abortions, forbid federal and local funding for abortions in the District of Columbia, and deny abortion funds for federal prisoners. But Planned Parenthood supported the legislation anyway. Why? Because this spending bill doesn't contain any new restrictions on abortion, and Planned Parenthood feared that if this bill was defeated, the new Republican-dominated Congress that takes office next month would pass its own spending measure—complete with harsh new limits on abortion rights.
Language barring federal funding for abortions has been attached to appropriations measures since 1976. Congress first passed the provision, known as the Hyde Amendment, three years after Roe v. Wade, the landmark Supreme Court decision that held that women have a constitutional right to abortion. Though Planned Parenthood opposes the Hyde Amendment, the group doesn't lobby lawmakers to vote against wide-ranging spending bills because of this provision, which enjoys overwhelming Republican support and has become a staple of spending legislation.
Many Democrats had threatened to block the appropriations bill after outcry over a big Wall Street giveaway tucked into the legislation. But blocking the bill could have meant a hit to reproductive rights next year, Planned Parenthood spokesman Eric Ferrero says. If Congress had failed to approve the spending measure, which funds the government through September, lawmakers would have had to pass a short-term bill continuing government spending at current levels for a few months. Then, once Republicans took over the Senate in January, they would have been able to craft a full spending bill without much Democratic input. With control of both houses of Congress, Republicans would have had a good chance of sneaking new anti-abortion measures into the bill. The "anti-women's majority could push any number of dangerous provisions," Ferrero notes, including reduced family planning funding and a measure that would allow hospitals to refuse to offer certain abortion services.
The bill that Obama signed Tuesday protected Planned Parenthood's main priorities. The group's leaders were especially happy that Democratic lawmakers succeeded in stripping several anti-abortion measures from the final bill, managed to secure current funding levels for important federal reproductive health programs, and won new abortion coverage for Peace Corps members. That's why Planned Parenthood staffers made a round of calls last week to lawmakers to make sure they knew the bill did not contain new anti-abortion provisions. Two congressional staffers tell Mother Jones that Planned Parenthood lobbied lawmakers to vote in favor of the spending bill.
"The appropriations bill is an important step in the right direction when it comes to women's health—holding the line on deeply unpopular abortion restrictions and expanding access for Peace Corps volunteers," Planned Parenthood president Cecile Richards said in a statement.
Planned Parenthood's support for the spending bill was far from assured. A month ago, when lawmakers were still hashing out what to include in the bill, Republicans tried to shoehorn in a number of anti-abortion measures. One of those was the Abortion Non-Discrimination Act, which would have allowed doctors, health insurance companies, and hospitals to decline to provide certain abortion services, and to refuse to give out information to women about abortion options. Another proposal would have prevented health insurance plans sold through the new Obamacare exchanges from covering abortion and would have nixed tax benefits for small businesses that buy health plans that cover abortion. Democrats managed to strip both provisions from the final bill.
Planned Parenthood and its allies feared that GOPers would force a reduction in funding for family planning programs next year. Here, again, Dems held their ground. The Title X Family Planning Program, which helps low-income women avoid unwanted pregnancies, got an appropriation of about $300 million, the same as last year. Congress doled out $101 million to the Teen Pregnancy Prevention Program, and roughly $600 million for international family planning programs.
In addition to staving off Republican assaults on abortion rights, Dems forced into the spending bill new rights for some federal employees. For the first time, Peace Corps members will now have access to (limited) abortion coverage. The federal government will now cover abortion for Peace Corps volunteers in cases of rape or incest, or to save the life of the mother—as it does for most other women on the federal payroll. A recent study by researchers at the University of Ottawa, Princeton, and Cambridge Reproductive Health Consultants found that out of 433 Peace Corps volunteers interviewed, 8.8 percent reported that they had been raped or sexually assaulted during their service.
"On balance," says Heather Boonstra, the director of public policy at the Guttmacher Institute, a pro-abortion-rights think tank, "in terms of the reproductive rights agenda, we could have been in a lot worse position than where we ended up."
On Tuesday evening, lawmakers released the text of the massive spending bill that Congress must approve to avoid a government shutdown. Buried on page 615 of that 1,603-page piece of legislation is a provision entirely unrelated to government funding that a few lawmakers managed to sneak into the bill without any public debate during last-minute negotiations. It's a Wall Street giveaway—written by Citigroup—that would allow banks to engage in more types of risky trading with taxpayer-backed money. Progressive Democrats and their allies have since launched an all-out campaign to strike the Citi-written provision from the spending bill. Elizabeth Warren railed against the provision on the Senate floor Thursday afternoon, warning, "A vote for this bill is a vote for taxpayer bailouts of Wall Street." As of Thursday afternoon, it was unclear whether House Speaker John Boehner (R-Ohio) could secure enough votes to pass the spending bill containing this measure and send it to the Senate. (Update: The bill passed the House.)
Here are the problems with the Citigroup-drafted provision, according to Michael Greenberger, a former derivatives regulator at the Commodity Futures Trading Commission who is now a law professor at the University of Maryland.
What is so bad about this provision? If Congress okays this measure, taxpayers could be on the hook in the event of another financial crisis. This provision guts the so-called push-out rule created by the 2010 Dodd-Frank financial reform act. This rule forbids banks from trading certain derivatives—complicated financial instruments with values derived from underlying variables, such as crop prices or interest rates. Instead, banks would have to shift these high-risk trades into separate nonbank affiliates that aren't insured by the Federal Deposit Insurance Corporation (FDIC) and are less likely to receive taxpayer bailouts. If the Citi-written measure becomes law, the largest FDIC-insured banks in the country will be able to make a wider range of these risky trades.
What will happen if there's another financial crisis? If there's an economic downturn triggered by derivatives trading gone bad, banks will be able to count on a taxpayer bailout—just like they received in 2008. "It's very dangerous," Greenberger says. "If [banks] lose on this type of trading and that causes a disruption in the markets, the taxpayer will be confronted with whether to let the banks fail or bail them out to the tune of trillions of dollars."
Could taxpayers be at risk even in boom times? Yep. In 2012, JPMorgan Chase lost $6 billion on a bad trade that has come to be known as the London Whale. "JPMorgan was essentially gambling with FDIC-insured money, secure in the knowledge that major losses would be borne by the public while profits would stay in the bank," David Dayan wrote in Salon last year. JPMorgan, it turned out, was able to withstand that loss without a bailout, but a lot of other US banks couldn't, Greenberger explains: "You could have a trade that loses a lot more than $6 billion by a rogue trader, in which case taxpayers have to foot the bill."
How were lawmakers able to sneak this into the big appropriations bill? It's common for lawmakers to force bills through Congress by attaching them to larger must-pass legislation. The practice is part of the wheeling and dealing that allows Republicans and Democrats to come to agreement on major legislation. But, Greenberger says, "putting these substantive provisions in appropriations bills is very, very dangerous stuff…If you want a controversial provision in there that you couldn't get in under regular order, this is the way to do it." He adds, "Then the president has problems vetoing it because the government will shut down. It's a bad way to do business."
If Congress approves this measure, what does it mean for economic populism? "Economic populism is alive and well," Greenberger maintains. "It's just that nobody in leadership wants to take advantage of it, whether they're Republican or Democrat." Lawmakers from both sides of the aisle worked to push the Citi-written provision into the spending bill.