Debt https://www.morningsidecenter.org/ en Does America Really Have a Budget Crisis? https://www.morningsidecenter.org/teachable-moment/lessons/does-america-really-have-budget-crisis <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--title--teachable-moment-lesson.html.twig x field--node--title.html.twig * field--node--teachable-moment-lesson.html.twig * field--title.html.twig * field--string.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <span>Does America Really Have a Budget Crisis?</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--body--teachable-moment-lesson.html.twig * field--node--body.html.twig * field--node--teachable-moment-lesson.html.twig * field--body.html.twig * field--text-with-summary.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/contrib/bootstrap/templates/field/field.html.twig' --> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><h4><strong>To the Teacher:&nbsp;</strong><br> &nbsp;</h4> <p>The US budget deficit and the national debt are under debate in Washington. Lawmakers, particularly conservatives, consistently express alarm about the country's growing national debt and argue that budget cuts are necessary if the US is to prevent long-term bankruptcy. While the Obama administration has advocated for more modest budget cuts, it also discusses the debt as an urgent national issue. However, progressive lawmakers and economists argue that concern about a "debt crisis" are overblown and Republicans are playing political brinksmanship with the national budget—using concern about the debt as a cover to pursue tax cuts for the wealthy and to eliminate needed social services.<br> &nbsp;<br> This lesson is designed to get students to think critically about hot-button issues such as the "fiscal cliff," "sequestration," and the ongoing debate about the US budget. The lesson is divided into two readings. The first reading examines the general debate about the budget. The second reading discusses the human impact of budget cuts and sequestration. Questions for discussion follow each reading.<br> &nbsp;<br> &nbsp;</p> <hr> <p>&nbsp;</p> <h4><strong>Student Reading 1: </strong><br> <strong>Deficit Wars: Does the Federal Government's Budget Really Need to be Cut?</strong></h4> <p>&nbsp;</p> <p>The US budget deficit and the national debt are under debate in Washington. Lawmakers, particularly conservatives, consistently express alarm about the country's growing national debt and argue that budget cuts are necessary if the US is to prevent long-term bankruptcy. While the Obama administration has advocated for more modest budget cuts, it also discusses the debt as an urgent national issue. However, progressive lawmakers and economists argue that concern about a "debt crisis" are overblown and Republicans are playing political brinksmanship with the national budget—using concern about the debt as a cover to pursue tax cuts for the wealthy and to eliminate needed social services.</p> <p>Right-wing commentators and politicians point to the country's growing national debt and argue that spending cuts are necessary to prevent bankruptcy. Top Republicans in Congress have been quick to repeat this argument. House Speaker John Boehner said in an <a href="http://www.foxnews.com/politics/2013/03/17/boehner-ryan-us-has-no-imminent-debt-crisis-but-argue-issue-must-be-fixed-now/#ixzz2PQRnTmfZ">ABC News interview</a> on March 17, 2013, "We have [a debt crisis] looming because we have entitlement programs that are not sustainable in their current form. They're going to go bankrupt. I would argue that we do need to do something."&nbsp;<br> &nbsp;<br> By "entitlements," conservatives mean programs such as Social Security and Medicare. Social Security is a federal insurance plan that almost all Americans pay into; it provides support for them when they retire. Most Americans also pay into Medicare during their working years so that they can have healthcare when they retire.<br> &nbsp;<br> Some of the current debate over federal budget dates back to August 2012, when Congress and the country became embroiled in a controversy surrounding what is known as the "debt ceiling." By law, Congress is not permitted to let the national debt exceed an agreed-upon point. However, as a matter of practice, politicians have long agreed to pass regular extensions to the limit, in order to protect government credit and to signal that the United States will always pay its debts.<br> &nbsp;<br> Last year, however, Republicans in Congress decided to play hardball. They said they would not give approval to lift the debt ceiling unless a deficit reduction plan was put in place. As a result, the two parties agreed in August that if they could not come to a budget deal by January, $85 billion in automatic spending cuts would come into effect. These cuts would include both reductions in military spending (which Republicans tend to oppose) and in social programs (which Democrats seek to protect), and therefore both parties were seen as having incentive to reach an agreement. The threatened cuts came to be known as "sequestration."<br> &nbsp;<br> Many people used the term "fiscal cliff" to describe what was expected to happen on January 31, 2013, when sequestration was set to take effect and tax cuts passed under the administration of George W. Bush were set to expire. As this date approached, Republicans and Democrats could not come to a final deal, but they did come to a temporary agreement that delayed sequestration until March 1.<br> &nbsp;<br> By March 1, the two sides still could not come together. Congress did pass a resolution to keep the federal government from shutting down entirely until September 30. But the bill did not stop the budget cuts of "sequestration," which are now going into effect.<br> &nbsp;<br> The conservative policy think tank, <em>The Heritage Foundation</em>, argues that the spending cuts enacted by sequestration are not even enough to curb the looming crisis, and deeper cuts are needed. As <a href="http://blog.heritage.org/2013/03/01/sequestration-much-larger-spending-cuts-needed-to-balance-the-budget/"><em>Heritage's </em>Romina Boccia</a> wrote on a March 1, 2013:<br> &nbsp;</p> <div class="rteindent1">Federal spending is projected to grow from $3.6 trillion in 2013 to more than $6 trillion by 2023, a 69 percent increase without sequestration. Even&nbsp;<em>with</em>&nbsp;sequestration, federal spending would still grow by 67 percent. Sequestration barely even slows the growth in spending, let alone cuts any spending out of the overall budget... Spending continues growing at this massive pace because sequestration leaves the real drivers of spending and debt—the entitlement programs—nearly untouched. In 2013, spending is projected to grow by $57 billon without sequestration and by $15 billion with sequestration.</div> <p>&nbsp;<br> Liberal-leaning economists argue that now is not the right time to address the deficit. When the economy is slow and joblessness is high, cutting budgets only deepens the problem, they argue. In times of economic downturn, the government needs to step in and spend in order to make up for shortfalls in private sector spending. Not doing so only slows, or can even reverse, economic recovery. They point to the experience of several European countries whose budget-cutting "austerity" programs have caused further economic slowdown. Any budget cuts, they say, should be postponed till a time when the economy is growing. Then, increased tax revenues will erase much of the deficit, reducing the need for cuts. And if government does cut jobs, workers can find new ones, because the job market is strong. They note that in the 1990s (during the presidency of &nbsp;Democrat Bill Clinton), when the economy was booming, the government ran a budget surplus.<br> &nbsp;<br> Economist <a href="http://www.nytimes.com/2012/12/14/opinion/krugman-the-gops-existential-crisis.html?_r=1&amp;adxnnl=1&amp;ref=opinion&amp;adxnnlx=1355479252-a%20lmCLikrKC8C55tmz01iQ&amp;pagewanted=print">Paul Krugman</a> argued in a December 13, 2012 op-ed for the <em>New York Times</em> that, rather than a debt crisis, America faces a political crisis, with Republicans using concern about the debt and deficits as a scare tactic to drum up support for cuts to social programs and tax breaks for the wealthy. He wrote:<br> &nbsp;</p> <div class="rteindent1">We are not having a debt crisis.&nbsp;It's important to make this point, because I keep seeing articles about the "fiscal cliff" that do, in fact, describe it — often in the headline — as a debt crisis. But it isn't. The U.S. government is having no trouble borrowing to cover its deficit. In fact, its borrowing costs are near historic lows. And even the confrontation over the debt ceiling that looms a few months from now if we do somehow manage to avoid going over the fiscal cliff isn't really about debt.<br> &nbsp;<br> No, what we're having is a political crisis... Since the 1970s, the Republican Party has fallen increasingly under the influence of radical ideologues, whose goal is nothing less than the elimination of the welfare state — that is, the whole legacy of the New Deal and the Great Society. From the beginning, however, these ideologues have had a big problem: The programs they want to kill are very popular. Americans may nod their heads when you attack big government in the abstract, but they strongly support Social Security, Medicare, and even Medicaid. So what's a radical to do?<br> &nbsp;<br> The answer, for a long time, has involved... "starve the beast," the idea of using tax cuts to reduce government revenue, then using the resulting lack of funds to force cuts in popular social programs. Whenever you see some Republican politician piously denouncing federal red ink, always remember that, for decades, the G.O.P. has seen budget deficits as a feature, not a bug.</div> <p>&nbsp;<br> Many Democrats, including President Obama, believe we should cut the budget now, though not as severely as the Republicans recommend. In April President Obama introduced a budget plan that included cuts to Social Security, Medicare and Medicaid. A statement by the Obama administration about the proposed budget cuts said: "By including this compromise proposal in the Budget, the President is demonstrating his willingness to make tough choices and his seriousness about finding common ground to further reduce the deficit."<br> &nbsp;<br> Some progressives have criticized President Obama for jumping on the deficit reduction bandwagon. Economist <a href="http://www.huffingtonpost.com/dean-baker/the-sequester-is-presiden_b_2808247.html">Dean Baker</a> argued in a March 4, 2013 article for the<em> Huffington Post</em>:<br> &nbsp;</p> <div class="rteindent1">[T]he only choice in the near term is between larger budget deficits and higher unemployment. The people who clamored for cuts in government spending and lower deficits are in fact clamoring to throw people out of work and slow growth.We will never know if President Obama could have garnered support for more stimulus and larger deficits if he had used his office to pound home basic principles of economics to the public and the media. But we do know the route he chose failed.<br> &nbsp;</div> <p>&nbsp;Today, as politicians and economists debate the deficit and the debt, ordinary Americans are left to wonder how the budget cuts of "sequestration" will affect them.<br> &nbsp;<br> &nbsp;</p> <h4><strong>For Discussion:&nbsp;</strong></h4> <ol> <li>Do students have any questions about the reading? How might they be answered?</li> <li>The debate about the budget uses several technical terms. What is meant by the "fiscal cliff"? What is meant by "sequestration"?</li> <li>Why do conservatives think that addressing the budget deficit should be a priority? Why do liberals say that now is not the right time to cut federal budgets?</li> <li>What do you think? Is addressing the deficit a legitimate priority or is it being used as a pretext to pursue other political goals?</li> </ol> <p>&nbsp;<br> &nbsp;<br> &nbsp;</p> <hr> <p><br> &nbsp;</p> <h4><strong>Student Reading 2: </strong><br> <strong>The Human Impacts of "Sequestration's" Budget Cuts</strong></h4> <p>Often, when politicians and media commentators discuss federal spending cuts like those of the "sequester," the conversation is very abstract, which makes it hard to appreciate the human impact of the cuts. The reality is that these spending cuts can have a profound effect, especially on poor and working class Americans.<br> &nbsp;<br> Republicans such as Congressman <a href="http://www.jsonline.com/blogs/news/194694691.html">Paul Ryan,</a> the chairman of the House Budget Committee, have attempted to minimize the potential harm sequestration is expected to cause average Americans. When asked in a March 3, 2013, television appearance if he thought the cuts would cause pain for the American public, he stated: "I think it's overstated because we will [this] week give the president latitude to better direct the cuts to low-priority spending and the more wasteful programs instead of the across the board."&nbsp;<br> &nbsp;<br> But Ryan's assessment of the impact of sequestration is at odds with the on-the-ground reality many Americans face. Philadelphia is one city that serves as an example of how these cuts will filter to the ground level.&nbsp; In a March 12, 2013, article for <em>NextCity.org,</em> journalist <a href="http://nextcity.org/daily/entry/what-the-sequester-means-for-cities">Jake Blumgart</a> described the wide-ranging effects that sequestration will have in that city:<br> &nbsp;</p> <div class="rteindent1">Under sequestration, 9 percent of the discretionary non-defense budget will be&nbsp;hacked away in seven months&nbsp;(Fiscal Year 2013 ends on September 30), which includes huge swaths of funding for programs such as affordable housing, low-income education, child care, nutritional assistance for pregnant women, mental health services and assistance for the homeless. No one seems clear how quickly these cuts will be implemented. But from the local level in cities like Philadelphia, at least, they're being anticipated as anything but boring.<br> ...<br> "The School District of Philadelphia has already gone through a couple years of cutting budgets, so we are down to the bone," said Fernando Gallard, the district's chief of communications. "[We] don't have taxing authority, so we have to deal with cuts by reducing expenditures. That's the only way the School District of Philadelphia is able to deal with it. It will hurt..."<br> &nbsp;<br> The sequester will also hit affordable housing and homelessness assistance, cutting $938 million, nationally, from the Housing Choice Voucher program and snatching $96 million from homelessness assistance programs (a little more than $5 million will be&nbsp;lost in Pennsylvania)...<br> &nbsp;<br> The sequester seeps into almost every area where federal grant money is concerned. Thousands of women and children in Philadelphia will lose nutritional aid from the Special Supplemental Nutrition Program for Women, Infants, and Children. Substance abuse treatment and domestic violence services will lose federal money, too, even though both of these&nbsp;essential&nbsp;supports have been struggling to meet demand and losing other sources of funding in recent years.</div> <p>&nbsp;<br> &nbsp;<br> According to many polls Americans oppose many of the budget cuts being proposed. For example, a CBS poll in March 2013 found that about 80 percent of Americans opposed cuts to Social Security and Medicare. Despite this, politicians from both political parties voice support for such cuts as a necessary step in reducing the budget deficit. &nbsp;If there is going to be a pushback against these cuts, it will likely need to come from outside the nation's capital, from those who are most affected.<br> &nbsp;<br> &nbsp;</p> <h4><strong>For Discussion:&nbsp;</strong></h4> <ol> <li>Do students have any questions about the reading? How might they be answered?</li> <li>Why do conservatives such as Representative Paul Ryan think that the budget cuts of "sequestration" will not be particularly painful for Americans? What do you think of this argument?</li> <li>What are some of the programs that will be cut back as a result of sequestration?</li> <li>Do you think that sequestration cuts could affect you and your family directly? How so?</li> <li>Does the question of addressing the federal deficit and debt affect all Americans equally? What do you think about this?</li> </ol> <p>&nbsp;</p> </div> <!-- END OUTPUT from 'themes/contrib/bootstrap/templates/field/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--uid--teachable-moment-lesson.html.twig x field--node--uid.html.twig * field--node--teachable-moment-lesson.html.twig * field--uid.html.twig * field--entity-reference.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--uid.html.twig' --> <span> <!-- THEME DEBUG --> <!-- THEME HOOK: 'username' --> <!-- BEGIN OUTPUT from 'core/modules/user/templates/username.html.twig' --> <span>fionta</span> <!-- END OUTPUT from 'core/modules/user/templates/username.html.twig' --> </span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--uid.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--created--teachable-moment-lesson.html.twig x field--node--created.html.twig * field--node--teachable-moment-lesson.html.twig * field--created.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <span> <!-- THEME DEBUG --> <!-- THEME HOOK: 'time' --> <!-- BEGIN OUTPUT from 'core/modules/system/templates/time.html.twig' --> <time datetime="2013-04-14T10:58:50-04:00" title="Sunday, April 14, 2013 - 10:58">April 14, 2013</time> <!-- END OUTPUT from 'core/modules/system/templates/time.html.twig' --> </span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'links__node' --> <!-- FILE NAME SUGGESTIONS: * links--node.html.twig x links.html.twig --> <!-- BEGIN OUTPUT from 'themes/contrib/bootstrap/templates/system/links.html.twig' --> <!-- END OUTPUT from 'themes/contrib/bootstrap/templates/system/links.html.twig' --> Sun, 14 Apr 2013 14:58:50 +0000 fionta 589 at https://www.morningsidecenter.org Economic Crisis & the Plan for Recovery https://www.morningsidecenter.org/teachable-moment/lessons/economic-crisis-plan-recovery <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--title--teachable-moment-lesson.html.twig x field--node--title.html.twig * field--node--teachable-moment-lesson.html.twig * field--title.html.twig * field--string.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <span>Economic Crisis &amp; the Plan for Recovery</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--body--teachable-moment-lesson.html.twig * field--node--body.html.twig * field--node--teachable-moment-lesson.html.twig * field--body.html.twig * field--text-with-summary.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/contrib/bootstrap/templates/field/field.html.twig' --> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p><strong>To the Teacher:</strong></p> <div>&nbsp;</div> <div>The economic crisis affecting Americans is also a global crisis. We haven't experienced anything like it since the Great Depression of the 1930s. But the current deep recession has elements that make it unique.</div> <div>&nbsp;</div> <div>The first student reading below offers an overview of how and why the crisis developed and its impact. The second outlines President Obama's economic recovery plan, with special attention to the economic stimulus program, its pros and cons, and its approval (without bipartisan support) by Congress.</div> <div>&nbsp;</div> <div>Teachers may also find useful <a href="http://www.morningsidecenter.org/teachable-moment/lessons/fdr-and-barack-obama-leading-nation-through-hard-times">"FDR and Barack Obama: Leading the Nation Through Hard Times</a>" and other materials on the economic crisis available on TeachableMoment.</div> <div>&nbsp;</div> <div>&nbsp;</div> <div> <hr> <h3>Student Reading 1:&nbsp;</h3> </div> <h2>Why is the American economic system in crisis?</h2> <div>&nbsp;</div> <div>Millions of Americans have lost their jobs or have been cut back to part time. Millions have been forced into home foreclosure. It's almost impossible to get a loan to buy a house or a car, finance a business or go to college. Businesses and banks teeter on the brink of collapse, schools and colleges face losses of staff and programs.</div> <div>&nbsp;</div> <div>Tax receipts have plummeted. States and cities across the country are in deep trouble. For instance, California will receive some money from President Obama's economic stimulus program to meet a budget deficit of $41 billion. But it will not be enough to avoid slashing $9.3 billion from public schools. That means bigger classes and program cuts. Social service program cuts of $1.3 billion in California mean less help to the disabled and people in the state's welfare-to-work program.</div> <div>&nbsp;</div> <div>How did all this happen?</div> <div>&nbsp;</div> <div><strong>The real estate bubble</strong></div> <div>&nbsp;</div> <div>"Irrational exuberance." The "social contagion of boom thinking." The "psychology of the real estate bubble." These are terms used by Robert Shiller, a Yale University economist, to describe the economic crisis, which he predicted in 2005. Shiller believed back then that home prices could not rise indefinitely, as many others thought. He believed their collapse was inevitable.</div> <div>&nbsp;</div> <div>In the 20th century, banks were conservative about giving people home mortgage loans. A potential borrower could not get home financing until the bank checked out a person's credit history and had reasonable evidence that the borrower was a good risk to pay back a loan with interest over 20 or 30 years.</div> <div>&nbsp;</div> <div>But the "psychology of the real estate bubble" changed all that. It led banks and mortgage broker companies to lend money to just about anyone who walked through their doors and wanted to buy a house. Credit was easy. For little or no money down, a home buyer could get an adjustable rate mortgage with very low fixed payments for maybe two years before payments would rise.</div> <div>&nbsp;</div> <div>Banks and mortgage companies were eager to provide loans to these risky borrowers because there was much money to be made. In the past decade or so, bankers, brokers, and other financial wizards began dreaming up new ways to resell mortgages and multiply their profits: "securitization," the process of turning bundles of mortgages into stock securities. Millions of high-risk mortgages were repackaged and sold as relatively low-risk but high-yielding investments to people and institutions all over the world. Securitization led in turn to "derivatives," or investments based on other investments. An example of this lucrative business was the sale of "credit default swaps." Each derived from a mortgage-backed security and offered a kind of insurance an investor could buy to guarantee the safety of a mortgage-backed security.</div> <div>&nbsp;</div> <div><strong>Easy money and regulatory failure</strong></div> <div>&nbsp;</div> <div>Until the collapse, everyone was happy. Consumers were able to buy houses on borrowed money they might never be able to repay — but they figured they could always sell their house for more than they owed, since housing prices were soaring. Banks sold mortgage-backed securities at a handsome profit. Investors collected the returns on these lucrative securities.</div> <div>&nbsp;</div> <div>Besides human greed, these new securities and the careless, even fraudulent speculation on them were made possible because government agencies had failed to regulate the financial industry. The depression-era Glass-Steagall Act of 1933, which barred bank speculation (among other things), was repealed during the Clinton administration, during a time when Congress was on an anti-regulatory kick. Many elected officials of both parties had come to office with the support of the financial industry, and had little interest in curbing or even investigating its excesses.</div> <div>&nbsp;</div> <div>The Securities and Exchange Commission (SEC), also created during the depression, was charged with overseeing and regulating the stock market. But it saw no problems in the housing and securities extravaganza. Nor did Secretary of the Treasury Henry Paulson, Federal Reserve Chairman Ben Bernanke, or CEOs of banks, who presided over huge profits, received gargantuan salaries and bonuses, and seemed ignorant of danger.</div> <div>&nbsp;</div> <div>Alan Greenspan, Federal Reserve Chairman, 1987-2006, confessed to a congressional committee in October 2008 that he did not see the collapse coming. "I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms..." He was one of the very few officials to admit he was wrong.</div> <div>&nbsp;</div> <div><strong>The bubble bursts</strong></div> <div>&nbsp;</div> <div>In 2006 home sales began to stall in an overstuffed housing market. By 2007 home prices were falling. In 2008 came the deluge. Increasing numbers of new homeowners fell behind on their rising mortgage payments. In a declining market, they were unable to sell their homes at any price, much less a profit. Home foreclosures became an epidemic.</div> <div>&nbsp;</div> <div>The nose-diving housing market also meant that banks and other mortgage providers were unable to sell their mortgage-backed securities or to pay off credit default swaps. They were left with pieces of paper worth far less than their face value.</div> <div>&nbsp;</div> <div>Stock markets worldwide fell sharply, creating huge losses for investors. Lenders became unwilling to lend, even to individuals and businesses with good credit histories. Investment banks with famous names—Bear Stearns, Lehman Brothers, Merrill Lynch—either collapsed or were absorbed by other banks.</div> <div>&nbsp;</div> <div>Businesses struggled or failed to pay their bills as credit tightened and consumers pulled back on spending. Big companies like General Motors fired thousands of employees. The jobless often also lost their health insurance.</div> <div>&nbsp;</div> <div><strong>A global crisis</strong></div> <div>&nbsp;</div> <div>Simultaneously, the crisis was going global. Job losses across continents—in Chile, Greece, China—led to worker protests and threatened governmental stability. In the U.S., the official unemployment rate is 7.6%. In Spain it is 14.4%.</div> <div>&nbsp;</div> <div>Iceland's banks collapsed under the weight of the same kind of bad debt held by American banks. Dubai's booming real estate sales swooned for lack of buyers, Russia's oil-fueled economy foundered as drivers got off the road. China's huge export market declined as consumers stopped buying.</div> <div>&nbsp;</div> <div>America's new National Intelligence Director, Dennis Blair, told the Senate Intelligence Committee that the most immediate security threat to the United States is "the global economic crisis and its geopolitical implications." Risks of "regime-threatening instability," cutbacks on "defense obligations," and "mishandling of humanitarian issues" could "help foster terrorist movements," he told the committee. (2/12/09)</div> <div>&nbsp;</div> <div>The words John Maynard Keynes, a famous British economist, used to describe the Great Depression seem relevant today: "We have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand." (The Great Slump of 1930)</div> <div>&nbsp;</div> <div><strong>For discussion</strong></div> <div>&nbsp;</div> <div><strong>1. </strong>What questions do students have about the reading? How might they be answered?</div> <div>&nbsp;</div> <div><strong>2. </strong>What was a major cause for the rise in home prices? Why was it so easy to buy a house? What role did mortgage-backed securities play in rising home prices and in home sales?</div> <div>&nbsp;</div> <div><strong>3.</strong> Why didn't government officials and regulatory agencies prevent a looming crisis?</div> <div>&nbsp;</div> <div><strong>4.</strong> Why did home prices begin to fall? What effects did falling prices have on home foreclosures? On banks and other mortgage providers? On stock markets? On employment? Why?</div> <div>&nbsp;</div> <div><strong>5.</strong> What reasons are there for the global spread of the crisis?</div> <div>&nbsp;</div> <div><strong>6.</strong> Why does Dennis Blair regard the global crisis as America's most serious security threat?</div> <div>&nbsp;</div> <div><strong>7. </strong>What evidence is there in the reading to apply Keynes' words about "The Great Slump of 1930" to today?&nbsp;</div> <div>&nbsp;</div> <div>&nbsp;</div> <div> <hr> <h3>Student Reading 2:&nbsp;</h3> </div> <h2>What does the economic recovery program aim to do?&nbsp;</h2> <div>President Obama's economic recovery program has two major parts: 1) an economic stimulus program and 2) a financial program. While both are enormously expensive, the basic argument for both is that only the government has the huge resources needed to bring about America's economic recovery.</div> <div>&nbsp;</div> <div>The economic stimulus program approved by Congress includes</div> <div>&nbsp;</div> <ul> <li>Infrastructure projects: repair and building of roads and bridges, school construction, modernization of transit systems</li> <li>Green energy projects: tax incentives for wind, solar and other renewable power sources; purchase of plug-in hybrid cars and solar panels for schools; funding to make federal buildings more energy efficient; funding to enable people to weatherize their homes</li> <li>Extension of unemployment benefits</li> <li>Extra money for food stamps</li> <li>Middle class income tax cuts</li> <li>Money to computerize medical records</li> <li>Aid for state budgets</li> <li>Environmental protection-flood control, pollution cleanup</li> </ul> <div>Cost: $787 billion</div> <div>&nbsp;</div> <div>&nbsp;</div> <div><strong>Evaluating the president's program</strong></div> <div>&nbsp;</div> <div>"How can the American people gauge whether or not your [economic stimulus] programs are working?" one reporter asked President Obama at his February 9, 2009, press conference. The president's answer:</div> <div>"I think my initial measure of success is creating or saving 4 million jobs. That's bottom line number one, because, if people are working, then they've got enough confidence to make purchases, to make investments. Businesses start seeing that consumers are out there with a little more confidence, and they start making investments, which means they start hiring workers..." A second measure of success, the president said, is helping homeowners avoid foreclosure and stabilizing the housing market.</div> <div>&nbsp;</div> <div>Several days later President Obama announced a $275 billion plan aimed at helping an estimated 9 million households refinance their mortgages or avoid foreclosure. The president said the plan "will give millions of families resigned to financial ruin a chance to rebuild...and by bringing down the foreclosure rate, it will help to shore up housing prices for everyone."</div> <div>&nbsp;</div> <div>He also said the plan would not help "dishonest lenders who acted irresponsibly" or "folks who bought homes they knew from the beginning they would never be able to afford." The largest group of households not helped by this plan are millions of borrowers who are "under water" — people holding mortgages that are bigger than the sharply declining market value of their homes.</div> <div>&nbsp;</div> <div>Another measure of success for Obama's financial program is whether it deals effectively with the bad debt that is weighing down banks, which would make credit more readily available. Secretary of the Treasury Timothy Geithner has estimated this debt to be a staggering $2 trillion or more.</div> <div>&nbsp;</div> <div>Not officially included in the economic and financial recovery efforts is the federal bailout of General Motors and Chrysler. GM and Chrysler have already received $17.4 billion, but are seeking another $21.6 billion to avoid bankruptcy. The auto companies have already sharply cut workers, plants and product lines. Ford, the third major U.S. automaker, has so far not asked for help.&nbsp;</div> <div>&nbsp;</div> <div>The president admitted that his economic stimulus plan is "not perfect. No plan is. I can't tell you with complete confidence that everything in this plan will work exactly as we hoped, but I can tell you with complete confidence that a failure to act will only deepen this crisis, as well as the pain felt by millions of Americans." The president later amended his prediction of the job creating and saving potential of the stimulus program to 3.5 million jobs.</div> <div>&nbsp;</div> <div><strong>Critics</strong></div> <div>&nbsp;</div> <div>Republican legislators were very critical of the stimulus program. Most of the elements in it, they argued, were long-time liberal projects. Whatever their merits, they had nothing to do with stimulating the economy. A second major criticism was that while the program included income tax cuts, they were insufficient. Larger tax cuts stimulate the economy, Republicans argued. They put money into people's hands quickly by decreasing withholding from paychecks.</div> <div>&nbsp;</div> <div>Other critics found fault with tax cuts because, they argued, it has been demonstrated in the past that they do little to stimulate the economy. Perhaps more importantly, critics said, the stimulus package should have included much more money for education, health, and state budget needs. Some cited Japan's 1990s recession, which many economists think was prolonged by the government's initial inadequate response.</div> <div>&nbsp;</div> <div>The president met with Republican as well as Democratic legislators to discuss his economic stimulus measures and to listen to suggestions and criticisms. He has named three Republicans to his cabinet, although one decided not to take the position. He has socialized with members of both parties and spoken repeatedly about the need for bipartisan support, particularly at a time of economic and financial crisis.</div> <div>&nbsp;</div> <div>But Obama did not get Republican support for his economic stimulus program. The House voted 246-183, with 7 Democrats and all 176 Republicans in opposition. Senators voted 60-38 to support the bill, with all Democrats voting for it, but only 3 Republicans.</div> <div>&nbsp;</div> <div>&nbsp;</div> <div><strong>For discussion</strong></div> <div>&nbsp;</div> <div><strong>1. </strong>What questions do students have about the reading? How might they be answered?</div> <div>&nbsp;</div> <div><strong>2.</strong> What are President Obama's three priorities for stimulating the economy? Why?</div> <div>&nbsp;</div> <div><strong>3. </strong>What cautions about success did he include in his press conference?</div> <div>&nbsp;</div> <div><strong>4. </strong>What criticisms have been made of the president's economic stimulus program?</div> <div>&nbsp;</div> <div><strong>5.</strong> Why has he tried to get bipartisan support? Why has he not received it?</div> <div>&nbsp;</div> <div>&nbsp;</div> <div> <hr> <h4>For inquiry</h4> </div> <div>The economic stimulus plan includes many programs, only a portion of which are described in the reading. A complete list is easily available online (including on the Obama administration's no longer active website on the economic stimulus, www.recovery.gov). Individual students and/or small groups might investigate what happens with any of these particular programs during the remainder of the school year. For example, students might consider:</div> <div>&nbsp;</div> <ul> <li>What does X part of the stimulus package aim to accomplish?</li> <li>Why?</li> <li>How much will it cost?</li> <li>How effective is it in saving and creating jobs?</li> <li>What obstacles are there to its success?</li> <li>What is being done to overcome these obstacles?</li> </ul> <div>&nbsp;</div> <div>&nbsp;</div> <h4>For citizenship</h4> <div>See "<a href="http://www.morningsidecenter.org/teachable-moment/lessons/student-action-economic-crisis">Student Action on the Economic Crisis</a>."</div> <div>&nbsp;</div> <div>&nbsp;</div> <div>&nbsp;</div> <div><em>This lesson was written for TeachableMoment.Org, a project of Morningside Center for Teaching Social Responsibility. We welcome your comments. Please email them to: <a href="mailto:lmcclure@morningsidecenter.org">lmcclure@morningsidecenter.org</a>.</em></div> </div> <!-- END OUTPUT from 'themes/contrib/bootstrap/templates/field/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--uid--teachable-moment-lesson.html.twig x field--node--uid.html.twig * field--node--teachable-moment-lesson.html.twig * field--uid.html.twig * field--entity-reference.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--uid.html.twig' --> <span> <!-- THEME DEBUG --> <!-- THEME HOOK: 'username' --> <!-- BEGIN OUTPUT from 'core/modules/user/templates/username.html.twig' --> <span>fionta</span> <!-- END OUTPUT from 'core/modules/user/templates/username.html.twig' --> </span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--uid.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--created--teachable-moment-lesson.html.twig x field--node--created.html.twig * field--node--teachable-moment-lesson.html.twig * field--created.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <span> <!-- THEME DEBUG --> <!-- THEME HOOK: 'time' --> <!-- BEGIN OUTPUT from 'core/modules/system/templates/time.html.twig' --> <time datetime="2009-02-18T13:00:00-05:00" title="Wednesday, February 18, 2009 - 13:00">February 18, 2009</time> <!-- END OUTPUT from 'core/modules/system/templates/time.html.twig' --> </span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'links__node' --> <!-- FILE NAME SUGGESTIONS: * links--node.html.twig x links.html.twig --> <!-- BEGIN OUTPUT from 'themes/contrib/bootstrap/templates/system/links.html.twig' --> <!-- END OUTPUT from 'themes/contrib/bootstrap/templates/system/links.html.twig' --> Wed, 18 Feb 2009 18:00:00 +0000 fionta 910 at https://www.morningsidecenter.org Economic Anxiety: Lost Homes, Lost Jobs, Debt & Dropping Markets https://www.morningsidecenter.org/teachable-moment/lessons/economic-anxiety-lost-homes-lost-jobs-debt-dropping-markets <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--title--teachable-moment-lesson.html.twig x field--node--title.html.twig * field--node--teachable-moment-lesson.html.twig * field--title.html.twig * field--string.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <span>Economic Anxiety: Lost Homes, Lost Jobs, Debt &amp; Dropping Markets</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--body--teachable-moment-lesson.html.twig * field--node--body.html.twig * field--node--teachable-moment-lesson.html.twig * field--body.html.twig * field--text-with-summary.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/contrib/bootstrap/templates/field/field.html.twig' --> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p class="byline"><strong>To the Teacher</strong></p> <p>To use the words "economic downturn" or "looming recession" to describe the situation in the U.S. today may be accurate but it is also abstract. The first student reading below describes how the current mortgage crisis is affecting real people and why; the second focuses on the domino effect of sub-prime mortgage loans; the third summarizes proposals for an economic stimulus that President Bush and Congress are considering. Discussion questions and inquiry activities follow.</p> <p>&nbsp;</p> <hr> <h3 style="font-weight: bold; ">Student Reading 1:</h3> <h2>The housing bubble that burst</h2> <p>Elaine Pellegrino and her husband bought a three-bedroom house for $97,000 seven years ago in an undeveloped area of Cape Coral, Florida. They did not have to make a down payment. A housing boom soon had construction crews putting up new houses in this once vacant area. Demand for houses grew. The Pellegrinos' house and property more than doubled in value.</p> <p>It was easy for the Pellegrinos to refinance their mortgage at a low rate, effectively borrowing against the higher value of their home, and to use this money to buy an auto repair shop and a lawn service. "We were thinking we were on the way up," Elaine Pellegrino said. ( <em>New York Times,</em> 12/23/07)</p> <p>So did Leonid Frolov, who bought his first home three years ago, a condo in Washington D.C., with a "piggyback mortgage." This involved two loans. The first was at a fixed rate of interest. The second was an adjustable rate mortgage that he borrowed against to buy a car and pay credit card debt. "Frolov felt confident he could refinance again before it adjusted." (<a href="http://www.washingtonpost.com">www.washingtonpost.com</a>, 12/10/07)</p> <p>In the past, most people went to a bank or their workplace credit union to borrow money to buy a house. The fixed or unchangeable interest rate on such a mortgage loan might have been six percent on a house selling for $150,000. Let us also say the buyer had to make a down payment of twenty percent, or $30,000. That buyer had to make monthly payments on the $120,000 still owed at six percent interest for perhaps twenty or even thirty years. Before making the loan, the bank or credit union investigated the buyer's financial situation to make reasonably certain that the loan and the interest rate on it would be paid. And the buyer knew exactly what the monthly payments would be.</p> <p>Beginning in late 2001 as demand grew for houses, prices began to climb. Developers bought tracts of vacant land and hired construction crews to create housing developments and multiple condos. People like the Pellegrinos and Frolov who might not have ventured to buy a home before began buying them. One major reason was their new access to "sub-prime" adjustable rate mortgages (A.R.M.s) like Leonid Frolov's.</p> <p>The practice of making loans to people who want to buy houses but who do not qualify for market price or prime rate loans is called "sub-prime mortgage lending." Many people apply for these loans because they have a shaky credit history or do not have enough money to make the monthly payments at the prime rate and cannot make a down payment. A typical sub-prime A.R.M. might call for low fixed rate payments for two years followed by rising adjustable rate payments for the next 28 years of a 30-year mortgage.</p> <p>Banks and credit unions no longer monopolize the home mortgage business. Today 70 percent of this business is in the hands of mortgage brokers. And some of these brokers, reported National Public Radio, "got bonuses for steering borrowers to higher interest loans in the sub-prime market because so much money could be made from them." (<a href="http://www.npr.org">www.npr.org</a>, 1/13/08)</p> <p>Sub-prime mortgages became such a hot item that brokers and banks packaged and sold them to investment companies. They, in turn, sold them to investors and other companies around the world. Everyone was happy. Hundreds of thousands of Americans who had never been able to afford a house now had one. And brokers, banks, investment groups and individual investors were all making money.</p> <p>Many brokers fast-talked and manipulated borrowers into signing high-interest sub-prime loans whose initial repayments looked good. The <em>Wall Street Journal</em> reported that more than half of sub-prime loans made as the housing business exploded "went to people with credit scores high enough to often qualify for conventional loans with far better terms." The housing boom led banks and brokers into the careless practice of making sub-prime loans without checking the income of borrowers.</p> <p>So imagine a new homeowner managing to make mortgage payments of $2,000 per month for two years. But this sum might jump to $2,600 in the third year, then $3,300. By the fifth year the homeowner might be required to pay double what he or she had originally.</p> <p>During a boom time when there are many new buyers entering the market and house prices are rising steadily, as they did from 2004 to 2006, making higher mortgage payments each year is not necessarily too difficult for the homeowner with a sub-prime mortgage. The homeowner might easily get what is called a home equity loan based on the higher value of the home and use the money for the payments or even to buy a business, as the Pellegrinos did, or a car, as Frolov did. A homeowner might also be able to make payments by borrowing money on their credit card or even selling the house for much more than its original price, as the Pellegrinos might have, and buy another.</p> <p>But the Pelegrinos, who thought they were on the way up were on the way down, and Frolov's confidence was misplaced. The housing boom years between 2004 and the first part of 2006 turned into a highly inflated "bubble" that burst. More houses were for sale than there were buyers. Low interest rates began to rise. Obtaining credit became difficult.</p> <p>"During the bubble years, the mortgage industry lured millions of people into borrowing more than they could afford, and simultaneously duped investors into investing vast sums in risky assets. Reasonable estimates suggest that more than 10 million American families will end up owing more than their homes are worth, and investors will suffer $400 billion or more in losses." (Paul Krugman, "Blindly Into the Bubble," <em>New York Times,</em> 12/21/07)<br> In December 2006 Elaine Pellegrino's husband died suddenly, leaving her with two businesses heavily in debt and owing $207,000 borrowed against the inflated value of her home. She says the home has gone down in value to $130,000 and that she and her daughter are "probably going to lose the house" and be "put out on the street."</p> <p>Cape Coral is in Lee County, "where a tidal wave of foreclosures is turning some neighborhoods into veritable ghost towns. &nbsp;Real estate agents and construction workers are scrambling for other lines of work, and abandoning the area. &nbsp;Creative finance lubricated the developing boom, making it easy for buyers to take on more mortgage debt that they could otherwise handle, driving prices skyward." ( <em>New York Times,</em> 12/23/07)</p> <p>As for Leonid Frolov, the value of his condo dropped as the bubble burst. He now owes more than the condo is worth, so he can't refinance the mortgage. Like the Pellegrinos, he too may find himself out on the street.</p> <p style="font-weight: bold">For discussion</p> <p><b>1.</b> What questions do students have about the reading? How might they be answered?</p> <p><b>2.</b> How has the mortgage business changed? Why has it changed?</p> <p><b>3.</b> What made it possible for low-income Americans to buy homes? Define these terms: mortgage, down payment, sub-prime A.R.M., home equity loan.</p> <p><b>4.</b> Why have brokers been eager to convince prospective homeowners to get sub-prime A.R.M.'s? What are the risks associated with them? How and why did investors around the world become owners of them?</p> <p><b>5.</b> The Pellegrinos and Leonid Frolov represent more than 2 million Americans who were eager to buy homes on easy credit terms. Why did their sub-prime mortgages turn sour on them?<br> &nbsp;</p> <hr> <h3><b>Student Reading 2:</b></h3> <h2>A tanking economy?</h2> <p>The debt problems and anxiety over possible home loss experienced by people like the Pellegrinos as home sales nose-dived spread in widening circles to millions of Americans. Falling home prices made it very difficult or impossible to borrow against property. This meant less money to spend. As consumer spending dropped, businesses reduced hiring and limited salary increases. This became another brake on consumer spending.</p> <p>Banks and other institutions took huge losses on mortgage-related investments. The nation's largest bank, Citigroup, announced it had lost nearly $10 billion in the last three months of 2007 and that it was laying off 4,000 workers in addition to the 17,000 fired earlier. AT&amp;T said that a number of customers were not paying their bills. American Express reported a drop in spending by its cardholders.</p> <p>"Housing starts and new-home sales are off 50 percent from their peaks," said Ben Bernanke, chairman of the Federal Reserve System or Fed, as it is usually called. The <em>New York Times</em> reported that "Foreclosures are rising, and so is the number of households behind on their mortgages. In the financial markets, the sub-prime shock 'has contributed to a considerable increase in investor uncertainty,'[Bernanke] reported, adding that the Fed is seeing 'considerable evidence that the banks have become more restrictive in their lending to firms and households.'" ( <em>New York Times</em> , 1/11/08)</p> <p>The Fed is composed of a board of governors appointed by the president. It regulates monetary policy. One way it does this is to set interest rates within the banking business that affect the interest rates charged on everything from home mortgages to payments on cars, TVs, and washing machines.</p> <p>Adding to fears of an even more serious downturn in the economy were other signs:</p> <ul> <li>the weakest holiday shopping season in five years, not only for big chain stores like Target and Kohl's but also for firms selling expensive items like Nordstrom's and Tiffany's</li> <li>high oil and gas prices</li> <li>volatile and mostly sinking stock market</li> <li>rising unemployment</li> </ul> <p>According to the Labor Department, 7,655,000 people in December 2007 were unemployed and looking for work. This was 13.2 percent higher than in December 2006. But these figures did not include unemployed people who are not looking for jobs because they have given up trying to find one. Their number is unknown.</p> <p>A recession seemed more and more likely. A recession, or economic downturn, is defined by the National Bureau of Economic Research as "a significant decline in economic activity spread across the economy, lasting more than a few months." Seventy percent of U.S. economic growth depends on Americans buying things. Worried about their future, Americans were buying fewer things. The Pew Research Center reported that consumer satisfaction with the economy as of mid-January 2008 was at a 15-year low.</p> <p>Meanwhile, investigations got underway in New York State and Cleveland. Did banks and other mortgage lenders lure people to sign on to sub-prime mortgages knowing they would not be able to repay them? Did lenders knowingly fail to disclose risks to investors? A spokesperson for a firm that verifies borrowers' incomes for mortgage companies said that lenders ignored their warnings. "Common sense was sacrificed on the altar of materialism," he said.</p> <p>Cleveland suffered more than 7,000 foreclosures in each of the past two years. "Entire city blocks have been abandoned, the <em>New York Times</em> reported. "The city's budget has been strained by the effort to maintain thousands of boarded-up homes, and by the cost of responding to a rise in violent crime and arson." The city is suing such prominent Wall Street firms as Citigroup, Bank of America, Wells Fargo, and Merrill Lynch for forcing the city into this crisis by selling sub-prime mortgage loans to people those financial institutions should have known could not repay. ( <em>New York Times,</em> 1/12/08)</p> <p>Sub-prime mortgages make up only 13 percent of existing home loans but 55 percent of all foreclosure proceedings, according to the Mortgage Bankers Association.</p> <p>The Fed made it clear that such lenders had acted deceptively. In December 2007, the Fed issued new regulations requiring lenders to: 1) show that borrowers can afford their mortgages, 2) disclose hidden sales fees, and 3) stop running misleading advertisements. But these rules do not help some two million people who will probably lose their homes when higher interest rates kick in. Critics accused the Fed of ignoring warning signs of a crisis and acting too late.</p> <p style="font-weight: bold">For discussion</p> <p><b>1.</b> What questions do students have about the reading? How might they be answered?</p> <p><b>2.</b> What were the domino effects of the "housing bubble" that burst and why?</p> <p><b>3.</b> What is a recession? Why are many people worried about one?</p> <p><b>4.</b> What questions have been raised about the business practices of mortgage brokers?</p> <p>&nbsp;</p> <hr> <h3><b>Student Reading 3:</b></h3> <h2>What should be done?</h2> <p>The worsening economy has caused national anxiety. President Bush called upon Congress to "provide a shot in the arm" for the economy by providing $145 billion in tax relief for individuals and businesses.</p> <p>Republicans, Democrats, and their respective presidential candidates agreed that Congress should quickly adopt temporary measures to stimulate the economy and to promote consumer spending and confidence. The Fed signaled that by the end of January it will lower interest rates, providing an additional boost to the economy. But how effective all of these actions will be in preventing a recession was uncertain.</p> <p>Democrats proposed measures aimed at middle- and lower-income Americans on the theory that they need money most and would probably spend it immediately, providing a quick economic stimulus. Among the proposals advanced by Democrats:</p> <ul> <li>Issue income tax rebates to middle- and lower-income Americans.</li> <li>Extend the tax rebate to 45 million families earning too little to pay income taxes.</li> <li>Raise unemployment benefits.</li> <li>Create new jobs with a sustained program of infrastructure rebuilding-roads, bridges, tunnels, airports, public works of many kinds.</li> <li>Increase food stamp benefits.</li> <li>Provide money to help low-income family pay heating bills this winter.</li> <li>Create investment incentives for small businesses.<br> &nbsp;</li> </ul> <p>Republicans emphasize measures to help businesses. For example:</p> <ul> <li>Lower the corporate income tax rate.</li> <li>Offer an expanded tax deduction businesses take for investment in equipment.</li> </ul> <p>Because the pressure for an economic stimulus is overwhelming, Democrats and Republicans will probably reach agreement quickly on a package that includes at least some of the items above, and the president will probably sign this legislation. Individuals and businesses will begin receiving these benefits by spring.</p> <p>At a time of growing anxiety among many Americans about homes, jobs, income, and paying off debt, it is also important to consider the following government statistics released by the Internal Revenue Service in March 2007:</p> <p><b>1.</b> 37 million Americans live below the official poverty line, which is $19,971 for a family of four. That is one of every eight Americans. Another 50 million Americans live on or just above the poverty line.</p> <p><b>2.</b> These 87 million Americans-almost one in every three-in a nation of 300 million and the richest on earth live what Princeton sociology professor Katherine Newman calls "a fragile existence." (Newman is author of <em>The Missing Class: Portraits of the Near Poor in America</em>. Her findings are the subject of "<a href="https://www.morningsidecenter.org/teachable-moment/lessons/missing-class">The Missing Class</a>" on this website.)</p> <p><b>3.</b> 300,000 Americans, the top 1 percent, have average incomes above $1.1 million.</p> <p><b>4.</b> These 300,000 Americans enjoy as much income as the bottom 150 million Americans.</p> <p><b>5.</b> Income inequality in America is at its greatest since 1928.</p> <p>In offering its own stimulus plan, the Economic Policy Institute said, "The distribution of wages, income, and wealth in the United States has become vastly more unequal over the last 30 years. In fact, this country has a more unequal distribution of income than any other advanced country." (<a href="http://www.epi.org">www.epi.org</a>) EPI describes itself as a "nonprofit, nonpartisan think tank that seeks to broaden the public debate about strategies to achieve a prosperous and fair economy."</p> <p>A quick cash infusion to promote immediate consumer spending may prevent a recession, But even if all 87 million Americans living in poverty or on the edge get a tax rebate, their condition will only improve briefly. Some need jobs. Those who have jobs need higher wages.</p> <p><b>For discussion</b><br> <b>1.</b> What questions do students have about the reading? How might they be answered?</p> <p><b>2.</b> Have students consider the stimulus proposals. How well do they understand each one? What questions do they have about each? How might each give the economy a boost?</p> <p><b>3.</b> Do students understand typical differences between the Republican and Democratic parties and why these differences exist?</p> <p>&nbsp;</p> <hr> <h4>For inquiry</h4> <p><b>1.</b> Study the website of a presidential candidate. What specific proposals to deal with the growing economic crisis does this candidate propose? What reasoning is behind each proposal? How do you evaluate it?</p> <p><b>2.</b> John Edwards is the only presidential candidate to speak regularly about America's poor and how to help them. What are his proposals? How would you evaluate them? See www.johnedwards.com&nbsp;(website no longer active).</p> <p><b>3.</b> Inquire into sub-prime mortgage lending. What evidence can you find that mortgage brokers did or did not employ deceptive practices?</p> <p><b>4.</b> What evidence is there that enacting current proposals to stimulate the economy and avoid a recession will work? See such websites as the Center on Budget and Policy Priorities (<a href="http://www.cbpp.org">www.cbpp.org</a>), The Heritage Foundation (<a href="http://www.heritage.org">www.heritage.org</a>), the American Enterprise Institute (<a href="http://www.aei.org">www.aei.org</a>) and the Economic Policy Institute (<a href="http://www.epi.org">www.epi.org</a>) for differing political and economic analyses.</p> <p><b>5.</b> Investigate the recession of 2001 and consider how that period is similar and different from our economic situation today.</p> <p style="text-align: left">&nbsp;</p> <p><em>This lesson was written for TeachableMoment.Org, a project of Morningside Center for Teaching Social Responsibility. We</em> <em>welcome your comments. Please email them to: <a href="mailto:lmcclure@morningsidecenter.org">lmcclure@morningsidecenter.org</a></em></p> <p>&nbsp;</p> <h4>&nbsp;</h4> <p>&nbsp;</p> </div> <!-- END OUTPUT from 'themes/contrib/bootstrap/templates/field/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--uid--teachable-moment-lesson.html.twig x field--node--uid.html.twig * field--node--teachable-moment-lesson.html.twig * field--uid.html.twig * field--entity-reference.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--uid.html.twig' --> <span> <!-- THEME DEBUG --> <!-- THEME HOOK: 'username' --> <!-- BEGIN OUTPUT from 'core/modules/user/templates/username.html.twig' --> <span>fionta</span> <!-- END OUTPUT from 'core/modules/user/templates/username.html.twig' --> </span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--uid.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--created--teachable-moment-lesson.html.twig x field--node--created.html.twig * field--node--teachable-moment-lesson.html.twig * field--created.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <span> <!-- THEME DEBUG --> <!-- THEME HOOK: 'time' --> <!-- BEGIN OUTPUT from 'core/modules/system/templates/time.html.twig' --> <time datetime="2008-01-28T13:00:00-05:00" title="Monday, January 28, 2008 - 13:00">January 28, 2008</time> <!-- END OUTPUT from 'core/modules/system/templates/time.html.twig' --> </span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'links__node' --> <!-- FILE NAME SUGGESTIONS: * links--node.html.twig x links.html.twig --> <!-- BEGIN OUTPUT from 'themes/contrib/bootstrap/templates/system/links.html.twig' --> <!-- END OUTPUT from 'themes/contrib/bootstrap/templates/system/links.html.twig' --> Mon, 28 Jan 2008 18:00:00 +0000 fionta 961 at https://www.morningsidecenter.org