Austerity Isn’t the Solution, Economic Growth Is

By Janis Bowdler, Director of Economic Policy, NCLR

It has been three weeks since Congress managed to avoid the so-called fiscal cliff by the narrowest of margins.  The deal brokered at the eleventh hour prevented burdensome tax hikes on working- and middle-class families and generated new revenue.  This is good news for Latino families.  However, like all compromises, the deal leaves something to be desired.  The fight to protect the interest of Hispanic workers, students, and households is not over.  On the contrary, now is a critical time for Latino leaders to tell elected officials that Latino voters are not solely paying attention to the issue of immigration.

After weeks of tough negotiations, the Senate and White House were able to agree on a tax-only solution, and the issue of deep automatic spending cuts, known as sequestration, has been delayed another two months.  The upsides are clear—tax savings for most Americans while generating revenue from the top 1%—but the risks are just as stark.  First, Congress and the White House still have to grapple with the sequestration—the across-the-board automatic cuts to discretionary spending that are scheduled to take place on March 1, 2013, if they fail to act.

Another concern is permanence of the deal.  We all expect compromise to be part of getting a bill through Congress.  While it was not unexpected that the senior Democrats gave ground on their original demand for a 45% estate tax on inheritance over $3.2 million (final negotiation was 40% on estates over $5.2 million for an individual), it is a surprise that they made these rates permanent.  On the other hand, the expansions of the working family tax credits that keep many Latinos and other Americans out of poverty such as the Earned Income Tax Credit, the Child Tax Credit, and the American Opportunity Tax Credit were temporarily extended for five years.  The extension is an important victory for Hispanic families, but we must continue to press Congress to treat working families the same as the wealthy by making their tax relief permanent.

A final concern says much about where we need to go from here.  The deal produced roughly $600 billion in revenue, which is less than one-quarter of the $3.7 trillion that experts say is necessary to stabilize the national debt.  Meanwhile, working- and middle-class families that rely heavily on federal spending on education, job creation, and infrastructure will absorb $1.7 trillion in cuts that were put in place last year.  That’s nearly halfway (45%) to the deficit reduction target figure and exceeds the recommendations of the Simpson Bowles Commission.  In this next round of negotiations, Congress and the White House will be looking for an additional $1.3 trillion in savings.  Republicans are insisting all of the savings come from spending cuts while the White House is only slightly better positioned, angling for a 50/50 split of revenue and cuts.  If negotiations continue in this direction, the lion’s share of deficit reduction will be shouldered by working- and middle-class families.

Last fall, Hispanic voters cast their ballot with a different objective in mind.  A number of polls show that Latino voters favor a fair and balanced approach to deficit reduction as well as smart investments that grow our economy.  In fact, Latinos arguably have the most at stake in the budget battles.  Deep cuts to programs and services will come just as Hispanic students and workers are becoming a growing share of the population.  Latino children now make up nearly one in four students enrolled in America’s public schools.  Hispanics will account for 80% of the growth in the workforce between now and 2050.  Moreover, it will be our children disproportionately affected decades from now if Congress bargains away the safety nets they should be able to rely on as they age.

The voices of Hispanic voters will only be heard if the prominent leaders from our community stand up for this issue.  Many are asking whether the timing and politics of the debt debate will jeopardize our shared agenda on comprehensive immigration reform.  This is a good question and a real concern.  However, we cannot give Congress or the administration a pass on issues of economic security.  Latinos make up 16% of the population but 25% of those that are poor.  Investing in the upward mobility of Latinos is not only a community imperative, but a national necessity.

Rather than austerity, Congress should be focused on growing the economy and facilitating job creation.  Economists and business leaders alike have warned that cutting the deficit too much too soon could stymie our fledgling recovery.  This isn’t just a short-term problem.  Bankrupting programs that invest in future growth, such as skills training, education, and health care, will undermine our long-term competitiveness.  We cannot turn our back on the social compact that has existed between generations just as the nation’s fastest-growing populations need it the most.  Doing so would be mutually harmful.  Hispanic families would miss the opportunity to maximize their potential as workers, taxpayers, and contributors to the economy.  Such a blow would come at the same time as those moving into retirement would need to rely on the earnings of Latinos to support Social Security and Medicare.

Now is the time to advance policy that fosters a fair economy where hard work is rewarded and prosperity is broadly shared.  We can do this by focusing on raising revenue to make strategic investments that lead to economic mobility and growth.  The formula doesn’t have to be as complicated as Washington makes it.  Double down on education by ensuring all children who need it can access quality early childhood education.  Invest in infrastructure and clean energy jobs, and make sure local workers have access to skills training so they are able to compete.  Maintain economic ladders that lift people out of poverty, move families into the middle class, and support their retirement, such as working family tax credits and business and homeownership opportunities.  Finally, protect the vulnerable among us by ensuring kids do not go hungry and the sick are cared for.

No Cliff, Yet Danger Remains and the Stakes are High

By Eric Rodriguez, Vice President, Office of Research, Advocacy, and Legislation, NCLR

Two weeks ago, Congress steer us away from the so-called fiscal cliff and many of us thought we were out of danger, yet the threat is greater than ever.  The agreement, which prevented tax hikes on working families, raised taxes on the affluent, and extended unemployment insurance, was a good deal for hardworking, taxpaying Latinos, but lawmakers disagreed on spending cuts and fell well short of the $3.7 trillion needed to stabilize the debt.  Congress and the President now have two months to work out a deal or face automatic cuts in sensitive areas of the budget that will affect both parties—and millions of Americans.

Experts predict that by March the government will run out of cash to pay its bills.  Since we need congressional approval to borrow money, negotiators need to work fast.

The Latino vote flexed its muscle in the presidential election and Congress now has more Latino representatives than ever.  However, Republican leaders in the House of Representatives pledge to withhold support for lifting the debt ceiling unless all of the savings come from spending cuts to programs, including Medicare, Medicaid, and Social Security—programs that many Latinos depend on to survive.  On the other hand, the White House seeks a split between increased tax revenue and cuts to spending.

Once the fiscal cliff was “avoided,” many Hispanic leaders and voters may have understandably turned their attention toward immigration reform, another urgent national priority, but it may be perilous to look past the fiscal debate.  Negotiators should know that Latinos haven’t left the table and our economic, educational, and health interests are not bargaining chips.  A good deal would balance taxes and spending, including through investments that generate economic growth and create jobs.  This will improve Latinos’ financial outlook by maintaining economic ladders that move families out of poverty and into the middle class.  A good deal would do no harm and protect the vulnerable among us.  Hispanic leaders and voters should expect to be heard in this debate, and we must do all we can to ensure that negotiators continue to hear us.

Learn more about NCLR’s position on the federal budget.

Quick fix: Recent Mortgage Settlement Still Leaves Latino Homeowners Vulnerable

By Janis Bowdler, Director, Wealth-Building Policy Project, NCLR

Sign Of The Times - Foreclosure
Photo: Jeff Turner.

With all the commotion that surrounded the fiscal cliff debate, it was easy to overlook the recent news of yet another new mortgage settlement that will pay cash to homeowners who experienced fraud or abuses committed through mortgage servicing. The settlement replaces the Independent Foreclosure Review (IFR)—an enforcement action made by the Office of the Comptroller of the Currency (OCC) against servicers under its supervision for violations in the foreclosure process—with $8.5 billion in cash payments. Not only does the amount pale in comparison to the need, the abrupt change in approach also puts the credibility of the entire process in jeopardy.

The Independent Foreclosure Review (IFR) was a terribly flawed enforcement action during which banks hired independent consultants to assess abuses and compensate the homeowner. The project was severely inefficient and used an underwhelming amount of public outreach to inform families that it was there to help them. As a result, participation was low; as of December 13, only 356,000 of the estimated 4.4 million families eligible have filed for assistance. To further muddy the waters, several of the reviewing groups chosen to serve as “objective” entities were not actually disinterested parties. Though the OCC claimed to thoroughly vet such groups, they have since removed some participants due to conflicts of interest.

The good news is that the settlement could reduce the immense cost and bureaucracy required to conduct the reviews, thereby speeding aid to families who have been waiting much too long. However, this is small consolation in light of the potential pitfalls of this approach. The deal—which was negotiated with an alarming level of secrecy—could leave struggling homeowners with another failed program. The deadline to file a request for review was pushed back several times because of inadequate outreach conducted by OCC and the servicers, evidenced by the dismal participation rates. In fact, despite launching in November 2011, the OCC and servicers only implemented a dedicated campaign to reach hard-hit neighborhoods, including communities of color, over the last six weeks. Moreover, we have not seen any data indicating whether or not the outreach was successful.

Poor outreach notwithstanding, news reports suggest the OCC has arbitrarily determined that those who filed for a review will be awarded greater compensation, even though this has nothing to do with a person’s level of harm. It is not fair to determine after the fact that filing for a review entitles you to a higher level of compensation. If families knew about this in advance, they would have been more likely to file before the agreement.

That the sluggish IFR process halted in such an abrupt and nontransparent manner is truly unfortunate, as it will undoubtedly impact millions of Americans and the economy as a whole. Experience shows that quick fixes come up short in delivering relief and justice to families who have been irreparably harmed by wrongful foreclosures and other servicing abuses. If corrective action is not taken, the OCC will miss yet another opportunity to help the most harmed families, reinforce accountability through data collection, and lay tracks to avoid future offenses.

Let’s Give Our Children a More Certain Future This Holiday Season

By Janet Murguía, President and CEO of NCLR, and Bruce Lesley, President of First Focus

The New Year usually symbolizes an opportunity for new beginnings and growth, but American households face a very different reality in 2013. On January 2, the fiscal cliff will leave many families with $2,000 less to put food on the table, or even a roof over their children’s heads, unless Congress comes to a budget agreement this month.

The fiscal cliff’s automatic, across-the-board budget cuts come at a time when children and their families are already struggling. Kids are facing the highest levels of poverty since the Great Depression, and Latino children are faring the worst: about 1-in-3 Hispanic kids live in poverty today. If sequestration goes into effect, federal funding for kids will be cut by an additional $6.4 billion in Fiscal Year 2013.

Children represent the largest constituency of Americans who would be impacted by the fiscal cliff at 30 percent of the U.S. population. And Latino children now make up nearly 1-in-4 children under the age of 18, and are critically important to our nation’s future. An analysis from NCLR (National Council of La Raza) highlights what sequestration means for our kids:

  • 96,000 children will not be served by Head Start, including 34,000 Latino kids
  • 80,000 children will not receive the Child Care Development Block Grant, including 16,000 Hispanic children
  • 1.8 million low-income public school students will not receive extra reading and math help because of cuts to Title I. The 37 percent of Latino kids who attend high-poverty schools could be affected by these cuts.

We saw from the recent presidential election that Latinos, as a voting bloc, highly favor greater investment in all our children. At 10 percent of the electorate and over 12 million voters, the historic turnout of Hispanic voters is a critical factor in urging politicians to take action for kids. A nationwide election eve poll released by Lake Research Partners on behalf of First Focus Campaign for Children (FFCC) shows overwhelming support from Latino voters for a wide range of federal investments in America’s children at levels higher than voters of all demographics and political affiliations.

The damage sequestration would mean to kids is simply unacceptable to Hispanic voters and the public at-large that broadly supports raising revenue and oppose budget cuts that impact kids. Latino children are one of the fastest growing segments of kids in school. Cutting programs that contribute to their development and ensure they are prepared to meet the requisites of a future labor market would not only hurt their personal future success but undercut the strength and competitiveness of the nation’s economy. This is not lost on Hispanic voters who consistently list education and children’s issues at the top of their priority list.

In another poll conducted by Public Opinion Strategies on behalf of FFCC, the majority of American voters disapprove of Congress making budget cuts to an array of children’s programs, including: education (75-24%), the Children’s Health Insurance Program (74-17%), Medicaid (73-27%), child abuse and neglect (66-33%), the Child Tax Credit and Earned Income Tax Credit (63-34%), student loans and financial aid for college students (59-40%), Head Start (59-40%), and child care (54-44%).

Despite the popularity of investing in America’s next generation, discretionary spending on children has declined by about $2 billion since 2010. Children have borne a disproportionate share of the spending reduction to combat the federal deficit. In fact, the share of federal spending going to kids fell six percent in the past year.

The budget and impending sequestration clearly do not align with our children’s needs, and what voters want. Kids and their families deserve better. Let’s hold our lawmakers accountable. Contact your representative and tell them to keep kids off the table.

As Fiscal Cliff Draws Nearer, There Is No Time For a Plan B

By Janis Bowdler, Director, Wealth-Building Policy Project

This New Year’s, many Americans across the country will have quite a bit weighing on their minds at a time when they are supposed to be clinking champagne glasses and making their resolutions for 2013.  In less than two weeks, our country will go over the fiscal cliff, resulting in a tax hike for millions of Americans and severe funding cuts to education, health care, and housing programs, to name a few.  That is unless Congress and the Obama administration can reach a deal on the federal budget.

For a brief moment earlier this week, it appeared that both sides were willing to compromise.

But that glimmer of hope was fleeting, and it seems negotiations are at a standstill.  Republican leadership is now pushing “Plan B,” which the House will vote on tonight at 6:00 p.m.

Simply put, “Plan B” is bad for Hispanic families.  It fails to meet NCLR’s principles for a fairer federal budget.  The plan further reduces tax liability for those at the top while pushing working families toward poverty.

The wealthiest would be the big winners should this plan pass.  Under “Plan B,” millionaires would get an estimated $50,000 tax cut, while 25 million middle class families making less than $250,000 a year would see their income taxes increase by an average of $1,000 apiece.  And,millions would lose access to the Child Tax Credit, as well as the Earned Income Tax Credit, which are valuable tools that help prevent many Latinos from falling below the poverty line.

All of this while also allowing the sequester to move forward, gutting critical investments in education, jobs, and housing.  For example, in many poor districts, where federal funding covers a substantial portion of their budgets, for every $1 million that a school district receives in federal funding, sequestration will take away $82,000.  For districts with disproportionately large Hispanic and Black populations, that loss could have devastating effects.

“Plan B” is not a viable option for Latinos or this country.  Thankfully, President Obama has already issued a veto threat.  However, that does not mean both sides should stop trying to reach an agreement.  We strongly urge House Speaker Boehner and President Obama to put America’s working and middle-class families ahead of politics.  We need a fair approach to deficit reduction where everyone pays their share.

We must end this stalemate.  Far too much is at stake for the American people.  Nobody wins if we go over the fiscal cliff, and the clock is almost up.

State job creation policies matter for Latinos

By Alicia Criado, Policy Associate, Economic and Employment Policy Project, NCLR

I recently received an email from Vicky, an NCLR supporter, who thanked me for reporting each month on how Latinos are doing in today’s economy.  She also shared that she is unemployed and has come to realize that being bilingual is not enough to help her land a job.  Vicky does not have postsecondary education has found that employers want the whole package in a worker:  adequate training, in-demand skills, and education beyond high school.

Many jobseekers like Vicky are keenly aware of what it takes to stand out in today’s job market, where the ratio of unemployed workers to job openings is more than three to one.  Just over five years from now, in 2018, only 10% of jobs in the U.S. economy will be open to workers with less than a high school degree.  Yet today nearly two out of five (38.4%) Latino adults—and almost half of foreign-born Latino adults (47.5%)—do not have a high school diploma.  These facts are alarming given that by 2050 one in three American workers will be Latino.

It is not clear that the legislators who Vicky and approximately 12 million Latinos helped elect in 2012 understand the needs of the Latino workforce.  According to our latest report, Now Hiring?  Latinos and the Job Creation Policies in the South Atlantic, legislators in South Atlantic states have made plans to create jobs without taking stock of the barriers that the burgeoning Hispanic labor force faces.  State policymakers are paying little to no attention to the intersections of local job creation policies and current state workforce development, immigration, and transportation systems.  Necessary investments in programs like basic skills training, which help Latinos successfully compete for jobs, are often overlooked.  Priority is placed on developing and expanding tax incentives to encourage companies to create jobs and endorsing actions like anti-immigrant legislation that hinder Hispanic workers’ access to employment.  These choices are to the detriment of workers and businesses alike, thus undermining job growth initiatives.

There is a need for significant policy adjustments at the state level to ensure that jobs in the fastest-growing industries are available to Latinos, the fastest-growing segment of workers.  Given the diversity of Latino workers, a one-size-fits-all approach won’t work when developing strategies to meet their unique needs.  This is especially true for Latinos in the South Atlantic.  Disproportionate numbers of Hispanics in the region possess limited formal education or English proficiency and largely have inadequate access to language training.  For example, among Latinos over the age of 25 in Georgia, 44.2% have not completed high school and 70.5% have limited English proficiency.  If we look at this same population next door in Florida, we find that just 26.3% do not have a high school diploma and 57.4% speak English less than very well.  Solutions and approaches must be tailored to local needs.

Now more than ever there is a need for policymakers to ensure that Latinos have a seat at the table to inform the job creation agenda at the state level.  The needs and concerns of the Hispanic community should no longer be an afterthought.  The early warning signs uncovered in Now Hiring?  Latinos and the Job Creation Policies in the South Atlantic call for serious policy discussions on how to ensure that jobs are within reach for a broader share of workers and their families.  It is paramount that in this time of limited resources legislators endorse customized policy solutions that benefit employers and cultivate the workforce for years to come.  These discussions can’t wait because our economy won’t work without Latinos.

Read NCLR’s latest study, Now Hiring?  Latinos and the Job Creation Policies in the South Atlantic, to learn more about the barriers that Latinos face in the labor market and why job creation policies are failing to maximize the employment potential of America’s rapidly growing workforce.  For more information, please contact Alicia Criado, Policy Associate at NCLR, at acriado@nclr.org.

We’re a Unified Voice for Communities

By Jesus Altamirano, Regional Field Coordinator, Colorado

Not much can keep our Affiliates down when they band together.

Our Colorado Affiliates know this well. Recently, NCLR Affiliates El Comite de Longmont, Scholar-to-Leader Academy, GOAL Academy, and Mi Casa Resource Center, descended on Denver to speak to U.S. Senators Mark Udall (D) and Michael Bennet (D) about the impact of the impending debt crisis, the so called “fiscal cliff.” Like NCLR, our Colorado Affiliates are concerned about the effects extreme cuts would mean to the millions of American Latino families who rely on vital social services and they expressed just that to their senators.

Kudos to our Colorado Affiliates for being champions for communities! Check out some photos of their advocacy below and then tell us what the impending fiscal cliff crisis could mean to you.

Colorado advocates in their meeting Colorado advocates outside the meeting Colorado advocates in their meeting

The Federal Housing Administration: Unsung Hero of the Housing Market

By Jose A. Garcia, Policy Fellow, Wealth-Building Policy Project

The Federal Housing Agency (FHA) is one of the unsung heroes of the housing market.  Despite helping to save the housing market following the mortgage crisis in 2007, the FHA is continuously attacked, erroneously, for its commitment to provide mortgage liquidity in times of need and encourage lending to low income households.

American Enterprise Institute (AEI) recently released a report on the riskiness of the Federal Housing Administration’s (FHA) lending practices.  The report conflates and confounds data to reach misleading conclusions and recommends unnecessary changes.  FHA’s current financial challenges are overwhelming due to loans insured between 2007 and early 2010 as well as a single loan product:  seller-financed mortgages.  However, its losses are not due to creditworthy borrowers with lower credit scores and lower down payments, and AEI would do well to remember that correlation is not causation.  Furthermore, FHA no longer insures seller-financed loans.

If that is not enough for you, let’s look into this further.  For decades, lenders have been able to successfully provide reliable and sustainable mortgage products to low income communities across the country that are profitable for the markets and fair to vulnerable borrowers. A decade long study conducted by UNC Center for Community Capital of 46,000 low-income homeowners found that of those who received traditional 30-year, fixed-rate mortgages with a small down payment, 95% of homeowners were paying their mortgages. UNC’s study shows that correctly structured home loans to low-income households perform quite well, leading to sustainable homeownership and sound business opportunities for lenders.

For many low- and middle-income American households and communities of color, the FHA is a critical part of the mortgage lending repertoire to access homeownership.  By insuring loans made by private lenders—even during severe economic downturns—the FHA provides stability to the housing market and access to credit.  This was never truer than after the recent housing crisis, when credit became difficult to access and many lenders turned to the FHA.  Now the 78-year-old agency may need help to continue its good work, and if it does, American taxpayers should lend a hand.  Doing so benefits not only families looking to purchase their first home but the economy at large.

The FHA helped hold down the fort as the housing market reeled from the aftermath of bad loans and Wall Street greed.  Based on an analysis by Moody’s analytics, the agency’s actions in 2011 alone helped prevent housing prices from decreasing an additional 25% and from a 40% decrease in the sales of new and existing homes, saving three million jobs and half a trillion dollars in economic output.  By stepping in, the FHA rescued tens of thousands of middle-class families from losing their home equity and, in many instances, their homes.  The agency did this by backing a larger share of mortgage originations as private investors fled the housing market.  At the peak of the housing bubble,  FHA insured one-third of loans made in 2009, compared to 5% before the alarms rang in 2006.

Despite the important role that the FHA played in keeping the housing market from total economic collapse, Edward Pinto from AEI stated that, “This paper reports on a comprehensive study that shows the FHA is engaging in practices resulting in a high proportion of low- and moderate-income families losing their homes.”  Fiscal projections point to a shortfall between what the FHA needs to cover all its claims over the next 30 years and how much it has on hand.  FHA’s possible shortfall was not caused by lending to low- and middle-income households but rather due to maintaining liquidity in the housing market.  The shortfall does not mean a definitive need for taxpayer monies to cover it—it will be months before we know that for sure.

The FHA has already addressed unsustainable programs that contributed to its trouble.  Its seller-financed down payment assistance program, which called for the originator to cover the down payment, often resulted in originators inflating the purchase price of a home in order to do so.  This in turn led to financially unstable loans, especially during the recession, that resulted from the subprime debacle.  Congress banned the program from FHA insurance in 2008, after FHA had tried to eliminate the program for years.

While the seller-financed down payment program did not work, most FHA products do.  Low- and middle-income borrowers and communities of color have benefited from sustainable and profitable mortgage loans insured by the FHA.  The FHA provides a necessary service that the conventional market does not provide.  However, by pointing fingers at the FHA, critics are undermining the ability of an agency that has been critical in keeping the mortgage market accessible and affordable, providing sustainable pathways to homeownership for millions of Americans.

Now It’s Personal: Viewing the Fiscal Cliff from the Perspective of Youth

By Mario Enríquez, Líderes Associate, NCLR

The fiscal cliff has been a hot topic in recent weeks.  From the TV screen to endless posts on our newsfeeds, we can see that the fiscal cliff will not be good for anyone, especially youth.  As a young person you may ask yourself, “What is the fiscal cliff and how exactly does it affect me?”  Some might say, “Why should I care about this?”  The reason is simple:  Out of all the demographic groups in this country, young people will feel the impact of the fiscal cliff the longest, not only now but for decades to come.  Yes, many of us may not earn enough right now to potentially lose $2,000 in taxes, but we should consider how this will affect us down the road.

Failing to avert the fiscal cliff will only exacerbate the already deep hole we are digging for ourselves with our national student debt and our unemployment rate.  As a member of the Millennial Generation, I have seen my friends struggle to find a job that fits their career goals. Black and Latino youth, who are the fast-growing segments of our young people, are suffering unemployment rates of 23% and 18% respectively.”  These rates are much too high, and we cannot bear the burden of inaction from Congress.

We grew up believing in the notion of the American Dream, that if we work hard we can succeed and prosper in America.  We have aimed to achieve this dream for ourselves, for our families, and for our communities.  We know the value of hard work and are ready to join the workforce in our respective fields.  Young people across this country should not have to worry about massive student debt.  We need to start holding the Obama administration and Congress accountable to ensure that we, too, have a fair shot at pursuing the American Dream.

I ask you to think about your personal situation and what life would be like if you didn’t have opportunities to succeed.  What would that mean for you?  We are the leaders of today and tomorrow, and I know that if we stand our ground and make our voices heard, Congress will listen.  We need to start taking action not just for ourselves but also for our families who we fight for every single day.  Let’s get out there and show the power we have as rising leaders in this country!