This year marks the 15th anniversary of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), the Bill-Clinton- and Newt-Gingrich-led overhaul of cash assistance to poor families with children.* One of the major changes of that law was adding work requirements so that most cash assistance applicants (generally single mothers) couldn’t receive help without heading into the world of market-based work.** When the bill passed, and unemployment was below 5%, there was some concern about what would happen when the economy slowed and jobs weren’t as easy to come by.
Last week, the California legislature sent the governor a bill that would ban most employers from running credit checks on job applicants. If the governor signs the bill into law (which this web site tells us he’s likely to), California will become the biggest get yet for those pushing for such laws around the nation. Is this just what a country full of unemployed people with wrecked credit needs? Or is it, as HR managers have been hollering, a way of hindering them from finding good, upstanding workers?
By Barbara Kiviat
Back in 2007, New York City began paying members of some 2,400 poor families to do things like get dental check-ups, open savings accounts, hold down jobs, show up for school, and carry health insurance. Cash incentives were meant to get people with complicated, resource-constrained lives to invest in themselves and their children in ways that would ultimately break the inter-generational cycle of poverty.
By Barbara Kiviat
Consumer advocates have been worrying for a while now that the rapid rise of reloadable prepaid cards will lead to a two-tier financial system. There will be folks with bank accounts, and then there will be folks with prepaid cards.
There’s been some interesting discussion in response to my earlier post about why we expect too much from economists, although a lot of the comments miss my larger point. What I was trying to say is that economics might not entirely be up to the task of explaining what we generally consider to be economic phenomena because we are overconfident about what the discipline has the ability to account for. You might call this the Freakonomics Fallacy. Whatever it is in the world we are trying to explain—crime, climate change, test scores—economics has the answer.
Former Fed chairman Paul Volcker has some advice for financial regulators writing rules to define new limits on banks’ ability to trade for their own accounts: be as vague as possible. At least that’s the message in this WSJ piece by Deborah Solomon (for which, to be upfront, Volcker declined to comment).
Over at the Curious Capitalist, my former colleague Steve Gandel asks me to react to this NYT article about how economists manage to disagree on such fundamental questions as whether the government should spend more or less money in response to economic malaise. I’ve been perplexed by this sort of thing before. In this post from August, I worried about the influence of ideology, and then decided that maybe the bigger take-away is that we should spend less time listening to economists, who, after all, represent just one possible lens onto the world of human behavior, decision-making and social dynamics:
I don’t understand why everyone is so surprised to find out that large corporations are funneling massive amounts of money to the U.S. Chamber of Commerce. Last week’s NYT report has been making the Internet rounds, and while I appreciate the point that the Chamber is much more partisan than its non-profit status would suggest—70 of the Chamber’s 93 midterm campaign ads either support Republican candidates or attack their opponents, despite the Chamber’s promise to the Federal Election Commission that it only talks about issues—there’s also a curious amount of wonderment at big-company donations. Yes, Wall Street firms sent millions of dollars to the Chamber when financial re-regulation was on the table, and the insurance industry got out its checkbook when it was time to talk healthcare reform. Why would anyone be surprised?
Everywhere you turn these days, some bigwig policymaker is talking about the importance of financial literacy education. Here’s Ben Bernanke doing it. And there’s Tim Geithner and Arne Duncan. Even the President. It’s easy to understand why we feel like we need this, what with all the bad financial decision-making of recent years. The only problem is, there’s a fair amount of evidence that a lot of what we do to teach better financial habits, like courses in high school, doesn’t work. Some research has shown that financial education is more likely to stick if it’s focused on one topic and comes right before a person makes a related decision—learning about mortgages as you’re house shopping, say, or getting a lesson in compounding interest along with your credit card.