Mandatory:
House-Passed Budget Shows Parties’ Divergence
WASHINGTON — Representative Rodney Davis won his House seat in 2012 by barely a thousand votes, making him a leading candidate as Target No. 1 for Democrats who are eager to make his support for the latest House Republican budget a centerpiece of the fall campaign.
And as the budget vote approached on Thursday, the voters in his Southern Illinois district faced a deluge of attack ads. Mr. Davis, a freshman lawmaker, replied by inviting the plan’s architect, Representative Paul D. Ryan of Wisconsin, to join a town hall-style telephone conference call for constituents on Wednesday afternoon to detail his sweeping small-government vision.
The move underscored the different universes the two parties occupy as election season heats up. Democrats see the budget, which passed on Thursday in a 219-to-205 vote, as a political millstone, with brutal cuts to popular government programs, sweeping and controversial changes to Medicare, and tax cuts for the rich. Republicans consider it a modest step.
“Paul is going to be demagogued on this issue, as am I, as is every single target, and we need to get the facts out,” Mr. Davis said.
The budget — the fourth presented by Mr. Ryan, the chairman of the House Budget Committee — is nonbinding and will go nowhere in the Senate.
But Republicans will try to use the vote to prove their tough-minded fiscal credentials. And Democrats will seek to tar their opponents by spotlighting the budget’s deep cuts to education, food stamps and transportation programs, its proposed transformation of Medicare, and the tax rate cuts for the rich.
The budget bill tally demonstrated the Democrats’ certainty that the Ryan budget will badly hurt its supporters — no Democrats voted for it.
But the vote spoke just as loudly about Republicans’ lack of fear. Senator Marco Rubio of Florida called the budget “a positive step.” Senator Rand Paul of Kentucky said the plan actually takes too long to balance the budget.
Twelve Republicans broke ranks to vote no, but most, including three Georgians running for the Senate, said they did so because the cuts were not deep enough.
Other House Republicans running for the Senate — from West Virginia, Montana, Arkansas, Colorado, Oklahoma and Louisiana — all voted yes, as did virtually every Republican on the Democrats’ list of election targets.
Louisiana Democrats painted Representative Bill Cassidy, who is seeking the seat of Senator Mary L. Landrieu, as an opponent of the elderly who is ready to award tax breaks to billionaires at the expense of a struggling middle class.
Mr. Cassidy shrugged.
“The dominant issue in our race is the president’s health care law,” Mr. Cassidy said. “The second dominant issue is that Senator Landrieu has voted with Barack Obama 97 percent of the time. Everything else is monkey dust.”
The plan laid out by Mr. Ryan, a possible White House contender himself, cuts $5 trillion in spending over the next decade. He said it would bring federal spending and taxes into balance by 2024 through steep cuts to Medicaid and the food stamps program and by repealing the Affordable Care Act, even as millions are beginning to reap its benefits.
Military spending would rise under the plan, but domestic programs would be reduced to the lowest levels since before World War II. And Medicare would be converted into a “premium support” system: Americans 65 and older could buy private insurance with federal subsidies instead of receiving government-paid health care, beginning a decade from now.
Even with all of the tough political choices contained in the plan, the budget would be balanced in 2024 only because Mr. Ryan assumes that the cuts would create a burst of economic growth, raising tax revenues above what independent economists are forecasting.
Senator Mark Begich, an Alaska Democrat who is facing a tough re-election fight, said his staff was combing through the budget for cuts that would resonate with voters.
In House districts from California to Florida, the Democratic Congressional Campaign Committee has begun automated phone calls and Internet advertising attacks on Republicans either in power or seeking office. Democrats are highlighting the changes to Medicare and the budget’s spending cuts in all contested Senate races.
Those efforts may be having an impact. Conventional wisdom in Washington has already dismissed Senator Mark Pryor, Democrat of Arkansas, as a dead man walking. But two polls in two days this week had him leading his Republican challenger, Representative Tom Cotton, by as much as 10 percentage points.
“When you test elements of the Ryan budget, they remain either the top message or at the top of messages against Republicans,” said Jefrey Pollock, a pollster for many House Democrats.
Speaker John A. Boehner of Ohio showed little concern about the Democrats on Thursday.
“Democrats in Washington continue their usual politics, using their old playbook of pitting one group of Americans against another,” he said. “And, frankly, it’s pretty obvious that their efforts have failed.”
Q1: Do you think it can effect the upcoming Congressional elections and „help“ the Democrats?
Q2: Do you think that all those cuts in governmental programs will pay off? Or it is risky thing to do?
Equal Opportunity and Social Innovation: Obama’s Policy Agenda
By LAURA D'ANDREA TYSON and JONATHAN GREENBLATTApril 14, 2014, 12:01 am
Laura D’Andrea Tyson is a professor at the Haas School of Business at the University of California, Berkeley, and headed the Council of Economic Advisers and the National Economic Council under President Bill Clinton. Jonathan Greenblatt is a special assistant to President Obama and director of the Office of Social Innovation and Civic Participation at the White House.
As Thomas Piketty reminds us in his new book, “Capital in the 21st Century,” we are living in an era of rising inequality of income and wealth and of eroding equality of opportunity. In the United States, income and wealth inequality have reached levels not seen since the 1920s. Perhaps the most glaring signs of the pernicious effects of inequality are the large and increasing gaps in educational attainment between the children of middle-income and low-income families. Demographic trends and job-displacing technological change are aggravating the social and economic maladies rooted in widening inequality.
President Obama has set forth an ambitious agenda to expand opportunity for all Americans, including health care reform, investment in education, an expansion of the earned-income tax credit and an increase in the minimum wage. However, as a result of budgetary constraints, federal government financing for nonmilitary discretionary programs — a category that includes most federal support for research and for kindergarten through 12th grade and early childhood education — is on course to be lower in real terms than before the Great Recession.
Despite the long-term fiscal challenges, the federal government is still seeking to achieve better outcomes from policies designed to address social challenges. But it will have to provide stronger incentives for the private sector to develop and expand programs with the same objectives. And it will need to create conditions to support the nonprofit organizations that increasingly are asked to deliver essential human services as the government pulls back even as their resources fail to keep pace with growing demand.
In response to these challenges, President Obama created the White House Office of Social Innovation and Civic Participation in early 2009. He recognized that to deliver on the promise of opportunity for all Americans, the government must identify and invest in innovative solutions to social challenges and work with the private sector — nonprofits, the business community and investors seeking both social and financial goals — to develop and finance these solutions. The office set out to bring different groups into the policy making process to determine which programs get the best bang for taxpayers’ bucks, to tap new resources and scale what works and to develop market-based models to sustain successful programs.
Among its first efforts to invest in what works, the office established the Social Innovation Fund. The fund embodies the administration’s approach to addressing escalating social challenges at a time of inadequate federal financing. It works through intermediaries and partners with the private sector to amplify the impact of federal resources. The fund makes grants to social sector intermediaries like foundations, nonprofits and social enterprises on a competitive basis. It requires up to a three-to-one match of private money with government dollars.
The intermediaries are responsible for investing in nonprofits that try to create and expand effective programs. Funding over the life of a grant largely depends on evidence of success, much as venture capitalists invest in the early round of a start-up but maintain financing in further rounds only if the start-up shows success. To date, the fund has awarded over $175 million in grants, catalyzing more than $420 million in additional private philanthropic capital. More than 200 organizations have received money. The fund and its financing model enjoy bipartisan support in the Senate. The 2014 omnibus budget increased financing for the fund to $70 million, the highest level in its five-year history, from $47 million.
While the fund focuses on building capacity and financing nonprofits’ efforts, the $1 billion Small Business Investment Company Impact Fund, created by the Small Business Administration in 2010, focuses on fostering new venture funds whose investors seek both financial and social returns. The Small Business Administration provides up to a two-to-one match to private capital raised by these funds to invest in new businesses in underserved communities and areas like education and clean energy. To date, the small business fund has funneled $176 million in investment toward a dozen companies in California and Michigan. Applications for new investment money are pending as private sector interest in this kind of investing is gaining momentum.
Consistent with the goal of investing in what works, the administration has also pioneered Pay for Success financing to promote and expand social innovation. In a Pay for Success contract, sometimes called a social impact bond, the government sets a specific measurable target for a program to address a particular social goal — for example, reducing recidivism among juvenile offenders or providing early childhood education for vulnerable populations — and attracts an investor to pay for the program. The investor does so, lured by the promise of repayment of principal if the program meets the target and a higher return if the program exceeds the target. The investor gets no payback if the program fails to deliver results.
These contracts offer a win-win approach to their participants: The nonprofit secures a new source of money for a program to address a social challenge; the investor can earn a return but bears the risk; and the government pays only for success. Moreover, payment by the government is intended to come from the savings generated by the program’s success.
In fall 2011, President Obama gathered state and city officials to brainstorm about the most promising applications of the pay for success model in the United States. Since then, nearly $50 million has been invested in these kinds of transactions in Massachusetts, New York and Utah, and there is rising bipartisan interest in this model at all levels of government across the country.
At the federal level, the Obama administration proposed more than $80 million in its fiscal 2015 federal budget for these kinds of pilot programs in several federal agencies to encourage policy innovations in areas like juvenile justice, work force development and educational achievement.
More significantly, the administration has proposed a $300 million Pay for Success Incentive Fund to be housed in the Treasury Department. This fund would provide state and local governments with federal matching money for programs that produce federal budget savings. This fund would also offer a way to reduce the risk of these transactions to state and local governments, nonprofits and investors to encourage them to experiment with this approach and attract private capital for the upfront financing.
The hope is that this fund could do for “outcome financing” what the Community Development Financial Institutions Fund did for community finance 20 years ago. At that time, poor communities lacked access to private capital from both nonprofit institutions and banks. Yet, by 2013, the C.D.F.I. Fund supported more than 800 such certified financial institutions that made over 24,000 loans and investments, totaling almost $2 billion. In aggregate, these institutions manage more than $50 billion in assets and provide loans to nonprofits and small businesses that serve low-income populations and communities. If the Pay for Success Incentive Fund had a similar impact, it would mobilize private capital to finance and expand effective social programs, with benefits for vulnerable populations, risk-taking investors and the general public.
The United States is not alone in this approach. For example, Britain established a global Task Force on Social Impact Investing before the 2013 meeting of the Group of 8 industrialized countries in London. The United States is a member of the task force, which is expected to make recommendations this fall. Such initiatives offer considerable promise for addressing social challenges at a time of constrained government budgets and rising inequality.
OSFI moves to tighten mortgage insurance guidelines
Tyler Anderson/National PostOf the roughly $1.1-trillion of Canadian home loans outstanding, more than half are covered by default guarantees underwritten by the Canada Mortgage and Housing Corp. which is ultimately backed by taxpayers.
Canada’s financial regulator has unveiled a set of proposed guidelines for mortgage insurance providers aimed at tightening standards around underwriting governance and risk management.
The draft guidelines come two years after the Office of the Superintendent of Financial Institutions first announced it was developing a new set of principles around the provision of mortgage insurance in conjunction with international regulators led by the Financial Stability Board in Basel.
In a statement on Monday, OSFI said the so-called Guideline B-21 will “provide clarity about best practices in respect of residential mortgage insurance underwriting, which contribute to a stable financial system.”
Of the roughly $1.1-trillion of Canadian home loans outstanding, more than half are covered by default guarantees underwritten by the Canada Mortgage and Housing Corp. which is ultimately backed by taxpayers.
Critics worry that the easy availability of such insurance has contributed to the frothy real estate market.
The proposed rules have been released for public consultation until May 23.
For the past several years, the federal government has been closely scrutinizing the CMHC, with former Finance Minister Jim Flaherty, who died last week, musing publicly about privatizing the Crown corporation.
The draft guidelines come about 18 months after the federal government introduced new legislation to bring the CMHC directly under the jurisdiction of OSFI.
Observers compared the measure to an earlier set of guidelines focusing on banks’ mortgage underwriting processes. OSFI’s B-20 guidelines, presented in draft form in April 2012, included set of principles around mortgage lending that put responsibility for underwriting standards on the shoulders of banks and their top executives.
Observers say the move helped cool a housing market that appeared to be bubbling over.