Month: August 2011

Ready, Fire, Aim, for Oregon’s Payday Lending Policy

By Christopher Robinson

In 2006 and 2007 the Oregon legislature passed two bills which significantly curtailed the ability of traditional “brick and mortar” payday lenders to operate within the state. Senate Bill 1105 (2006) and House Bill 2203 (2007) capped interest rates greater than 36%, limited origination fees to 10%, established a waiting period between payday loans, and required a minimum 31-day maturity. The goal was to protect Oregon consumers from “predatory” lending practices.

Prior to the legislation, there were 346 licensed payday lenders in Oregon. As of 2008 that number had dropped to 82, according to data from Oregon’s Consumer and Business Services Department. On paper the crackdown looks good: “In terms of achieving what the legislation set out to do, it is a complete success story for consumers,” says Dave Rosenfeld, executive director for Oregon State Public Interest Research Group (OSPIRG). However, the reality goes beyond what is on paper.

History shows that when significant demand exists for a good or service, and people are denied access, they will find other methods to satisfy the need, including circumventing the law altogether. Alcohol and drug prohibitions are two notable examples. There is no question that demand for payday loans is, in fact, significant. In Oregon it was a $334 million business and $40 billion nationally.

The biggest proponent of the payday lending legislation was U.S. Senator Jeff Merkley, during his time in the Oregon legislature. Merkley’s website explains the reasoning behind his support: “Many Americans are being forced to turn to short term payday loans just to deal with day to day expenses…causing financial burdens that are practically impossible for families to escape.” This implies that those who seek most payday loans are families who have fallen on hard times. Academic research shows otherwise.

In October 2008, a researcher at Dartmouth University published a study on the Oregon payday loan rate cap. The purpose was to determine its effect on borrowers and also who those people were. “The results suggest that restricting access to expensive credit harms consumers on average,” the study says. This may come as a shock, but when given the facts it makes sense. All people surveyed for the study were payday loan customers. Less than 50% of respondents were married (with an average of 1.1 dependents), and only 12% were unemployed. 66% said they used the loan to pay for emergency expenses (such as car repairs and medical) as well as bills (such as utilities). 70% said if a payday loan hadn’t been available, they would have had no other option or did not know where they would get the money. Finally, 76% expected their financial situation to improve after receiving the loan. The study shows payday borrowers are primarily employed individuals with unexpected expenses. If they are unable to pay for these expenses, their financial situation will be worse in the long run.

Legislators have jumped the gun in banning traditional payday lending in Oregon. They aren’t protecting vulnerable consumers as much as denying a necessary service. Furthermore, there has not been a major push to provide consumers with a convenient, viable alternative.

Senator Merkley’s office could not be reached for further comment, but it appears legislators used the issue for political gain without doing significant research. Responsible advocates should have, at the very least, devised a new business model to provide quick cash at low interest rates to these high-risk borrowers. So far nothing has materialized, leaving former customers worse off than they were before.

Payday lending may seem negative because of high interest rates, but in any industry there will be a premium for last-minute transactions. If you book an airline ticket the day before a flight, the price usually will be much higher than if the ticket had been purchased six weeks in advance. The same principle applies to lenders, especially when the borrowers have poor credit and there is a relatively high risk of default.

Washington State also enacted payday lending restrictions, but some legislators there are already considering relaxing them. Oregon should consider doing so as well. According to the Portland Business Journal (February 11, 2011), there already has been a rise in complaints against out-of-state online payday lenders conducting fraudulent and illegal business practices. These are the real risk to consumers because the Oregon Attorney General’s office has little control over them. If legislators had looked deeper into the facts before enacting legislation from a politically favorable standpoint, this situation could have been avoided.


Christopher Robinson is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

Read Blog Detail

Is the Road to Economic Growth Paved with Broken Windows?

Columnist Paul Krugman is credited with a line of thinking that should be debunked before it gains traction. Krugman wrote after 9/11 that the terror attacks could “do some economic good” because “all of a sudden, we need some new office buildings.”

Before the real Krugman could weigh in on the recent East Coast earthquake and hurricane, a fake Krugman wrote that “…we would see a bigger boost in spending and hence economic growth if the earthquake had done more damage.”

Such statements may seem plausible to those without much knowledge of economics. But the fallacy was exposed as early as 1850 in Frédéric Bastiat’s essay, That Which Is Seen and That Which Is Not Seen.

The argument seems to be that paying money to replace a broken window creates more prosperity than having the original window and spending the money on something else. But, as economist Sandy Ikeda asks, “If destruction is so good for an economy, why wait for a hurricane or a bombing raid? Why not just bomb your own cities?”

We can all “see” the new window. But whatever the money could have gone for instead remains “unseen.” No net economic benefit results from replacing the broken window. In fact, the economy is worse off because we now have just a window, not a window and the money that went to replace it.

Read Blog Detail

“Ready for College and Life”

In just a couple weeks, students everywhere return to school. Have you ever thought of how important it is where a child goes to school? After their family, the greatest influence on growing children is usually their school.

Private scholarship programs like the Children’s Scholarship Fund-Portland help elementary children from lower-income families choose the school that is right for them.

This summer I attended a luncheon at Central Catholic High School to honor graduating seniors with athletic scholarships to college. I was invited by a young man who began to be sponsored by the Children’s Scholarship Fund-Portland when he was in grade school. One of Central Catholic’s star basketball players, he will attend Portland State and play for the Vikings. He was able to attend private schools because of scholarship assistance from caring Oregonians.

“I have learned that nothing’s going to be handed to you and that you’ll succeed through hard work,” he told me. “[Private school] was challenging, but it has gotten me ready for college and life.”

The Children’s Scholarship Fund-Portland helps lower-income Oregon children get a hand up early in life through a quality elementary education. That simple step puts kids with limited choices on a path to success that can change the rest of their lives. To see how you can help a child reach his or her potential through this program, visit www.cascadepolicy.org/links/children.

Read Blog Detail

REPORT: The Dirty Secret Behind Clean Jobs

With unemployment on the rise, new jobs are scarce. Creating jobs has become a top priority for politicians. One can hardly watch the news without hearing catch phrases like the “renewable energy economy,” “green jobs” and “leading the world in clean energy technologies.” In short, environmental policies have been rebranded as job creators.

Cascade Policy Institute’s new report, The Dirty Secret Behind Clean Jobs, reveals numerous flaws with this approach. The authors address the misconceptions behind creating “green jobs.” The definition of “green jobs” is vague, green job subsidies are based on flawed economic principles and, lastly, assumptions for job growth are inaccurate or downright false.

The report’s co-author, Nick Sibilla, states, “Our report focuses on Oregon, national and international attempts to create green jobs. Overwhelmingly, we found that green jobs are based on faulty economics and wishful thinking.”

The Dirty Secret Behind Clean Jobs reveals:

  • Numerous definitions of the term “green jobs” exist. In fact, most government agencies interchange the terms “clean” and “green,” adding to the confusion of what really constitutes an environmentally friendly job.
  • Proclamations about green jobs fixing the economy are exaggerated and misleading. Oregon employers predicted the number of green jobs would grow 14 percent between 2008 and 2010, which would have equated to 7,400 new jobs in the state. Meanwhile, statewide employment levels have dropped by 140,000 jobs over the same two-year period.
  • “Clean jobs” turns out to be just another term for big government. According to The Brookings Institution, the industry of “regulation and compliance” (i.e., government employees) was the fourth largest source of clean jobs in the United States. Meanwhile, in Oregon, three of the larger green jobs employers are the U.S. Forest Service, the U.S. Army Corp of Engineers and the U.S. Bureau of Land Management. All of those salaries are ultimately paid by taxpayers.
  • One clear example of green job pork barrel spending is the Shepherds Flat wind farm under construction in Gilliam and Morrow Counties. The project has obtained $1.2 billion in federal, state and local subsidies but will create only 35 permanent jobs. Each job will cost over $34 million to American taxpayers.
  • Green job estimates do not account for job losses in other sectors. Spain, a pioneer in renewable energy before the recession, is a sobering example. A recent Spanish economic analysis revealed that for every green job created, more than two jobs were lost.
  • Many green job advocates claim that green industries are more labor intensive and thus create more jobs than other sectors of the economy. Although inefficiency is not something to be praised, the claims are still downright false. A recent Italian study suggests the green industry is a capital-intensive, not a labor-intensive, industry and that the data show that green investments generate fewer jobs than investments in other sectors of the economy.

Cascade’s vice president and co-author of the report, Todd Wynn, stated, “Despite the continued rhetoric from politicians, our report shows the utter failure of the green job movement. It turns out to be more about corporate welfare and government handouts than actual job creation.”

DOWNLOAD THE DIRTY SECRET BEHIND CLEAN JOBS REPORT

FOR MORE INFORMATION:

Todd Wynn
T: 503.242.0900
F: 503.242.3822

 

Read Blog Detail

Hand-Up Versus Handout Tackles Homelessness

By Michael Bastasch

Since 1986, Portland and Multnomah County have launched a slew of programs targeting homelessness, culminating in the “10 Year Plan to End Homelessness” in 2004. Portland and Multnomah County have built thousands of housing units and shelter beds and provide many services, but homelessness is still on the rise. Despite evidence that their approaches may be exacerbating the homeless problem, public officials continue to use the same failed methods.

The city’s approach to eradicating homelessness is based on the Housing First strategy which focuses on getting people into housing, then providing them with services as needed. Emblematic of this approach is the recent construction of Bud Clark Commons. The Commons was finally completed and opened in June 2011 and contains 130 studio apartments for permanent residents, a 90-bed men’s transitional shelter and a day center offering a variety of services. The city wanted a place with as many services as possible under one roof to provide convenient services for the homeless without referring them to other facilities, increasing the likelihood they will get help.

Those living in the Commons’ apartments are the most vulnerable of Portland’s homeless population, and many suffer from severe mental illness and substance abuse. Just giving these people housing won’t help them, however, as many need an environment where they must commit to getting long-term help. In the Commons, recovery isn’t mandatory, and drug and alcohol use are permitted in the apartments (though not in the shelter and day center). Addicts trying to recover will live next to those who are still using, making recovery much harder.

 

Recovery is easier when a community of recovering addicts is fostered as a mutual support network; but in the Commons, such a community may not occur. Jeanine Carr, a community health nurse at the Multnomah County Westside Health Center downtown, reportedly said, “It’s not like (the housing authority) is trying to build a community that will work well together.” Stacy Borke, housing and support services director of Transition Projects Inc., said, “The housing authority and the city are taking real leaps of faith,” with regard to fostering a community that works well together.

More concerning than the dynamics of the Commons’ residents, however, is the cost. The building cost $49.6 million dollars and will require federal and local subsidies to operate throughout the year. The permanent housing will cost somewhat less than $1 million annually, and the temporary shelter and day center will cost a little under $2 million annually. But even if all the services and housing capacity of this building were utilized, it still wouldn’t be enough to accommodate all the homeless in Portland. How many more $50-million-dollar buildings can the city afford or spare the land for?

These grandiose public projects may be well intentioned, but they cannot achieve results at a reasonable cost. The city of Portland and Multnomah County have poured tens of millions of dollars (over $31 million on average annually from 2001 to 2003) during the past 25 years into combating homelessness, but their spending is utterly useless when aimed at such projects. Much more efficient ways to combat homelessness require little government involvement.

One way is to allow private charities to take over where government intervention has failed. Private charities are voluntary and able to work with the homeless throughout their lives, requiring those they help to make a commitment to getting sober and back on track. Union Gospel Mission (UGM) in downtown Portland has a LifeChange program that works with homeless individuals suffering from drug and alcohol addiction and creates a recovering addict support network. UGM requires those in the LifeChange program to work in their store and at their mission downtown, giving them valuable career skills. They explicitly reject the Housing First approach and focus on getting people sober and responsible before transitioning them back to normal life.

Another way to combat homelessness is to follow the example set by Dignity Village, a homeless community near the Portland International Airport. The Village is campsite with wood shacks that was designated by the city in 2001. It requires all residents to pay $20 per month and to volunteer time to help the community. No drugs or alcohol are allowed, and the Village is self-governed by a board of directors elected by residents every year. The Village teaches residents to be entrepreneurial since they operate small-scale businesses on their properties. In fact, 50-75% of residents have income from work or benefits. Dignity Village also has a low cost to the city, estimated at $14,990 per year for city services and about $30,000 per year for internal costs (which Village residents pay themselves). It is much less expensive per person per night than transitional housing. Most importantly, the Village demonstrates that the homeless can take care of and provide for themselves when they are given a place to do so and are left unmolested.

The city continues to give handouts and spend millions of taxpayer dollars to achieve scant results. Bud Clark Commons, though generating a lot of attention, is just a repetition of the same failed policies of the past 25 years. More efficient and compassionate ways exist to tackle homelessness, with places like Dignity Village or through private charities. Spending taxpayer money doesn’t automatically yield results. No matter how much nicer homeless shelters get or how many more Portland builds, it doesn’t stop homelessness. Rather, it tends to exacerbate it and keep people dependent.


Michael Bastasch is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

Read Blog Detail

You’re teaching my child what? And it is costing us how much!

Join U-Choose exploring public education. Speakers will present information on the history and degradation of curriculum, sex education, censorship of children in the classroom, and parents’ rights. The impact on youth, adults and the family will be addressed. Solutions provided.

Featured Topics/Speakers:

Progressive” Education: How did we get here? How John Dewey’s vision of progressive education was implemented, resulting in the weak “dumbed down” curriculum of today.

Rob Kremer, Host of Kremer and Abrams KXL Radio 101FM, Founder and President of Oregon Education Coalition, Principal Third Century Solutions

“Dumbing Down” of America’s Youth – Is this real? See examples of the watered down teaching in math, science and English that present day students are receiving in our schools compared to a century ago.

Dr. Chana Cox, Senior Lecturer in Humanities, Lewis and Clark College

Sex “Hyper” Education Indoctrination – Human Sexuality is a far cry from the biology of reproduction. Now by law students in Kindergarten through 12 grades will be taught everything from mutual masturbation to homosexual experimentation. Discover why this is important to government educators.

Suzanne Gallagher, Business Owner, Former Candidate for State Representative, Pro-Family Activist

Political Incorrectness and Censorship – What are your rights? Learn about “viewpoint discrimination” including Anti-Christian, and what you can do to defend your right to direct your child’s education.

Herb Grey, Esq.- Alliance Defense Fund Affiliated Attorney

 

America and our children face a bleak future. Their future depends on acting now!

Come share your views and experiences during U-Talk.

When: Tuesday, September 13, 6:30pm- 9:00pm

Where: Stafford Center, 21065 SW Stafford Road, Tualatin, OR 97062

$5 donation welcome at door.

 

If you can help with event publicity within Portland areas, please contact

Debra Mervyn 503-819-8800 at debrauchoose@gmail.com

 

Read Blog Detail

You’re teaching my child what? And it is costing us how much!

Join U-Choose exploring public education. Speakers will present information on the history and degradation of curriculum, sex education, censorship of children in the classroom, and parents’ rights. The impact on youth, adults and the family will be addressed. Solutions provided.

 

Featured Topics/Speakers:

 

§  Progressive” Education: How did we get here? How John Dewey’s vision of progressive education was implemented, resulting in the weak “dumbed down” curriculum of today.

Rob Kremer, Host of Kremer and Abrams KXL Radio 101FM, Founder and President of Oregon Education Coalition, Principal Third Century Solutions

 

§  “Dumbing Down” of America’s Youth – Is this real? See examples of the watered down teaching in math, science and English that present day students are receiving in our schools compared to a century ago.

Dr. Chana Cox, Senior Lecturer in Humanities, Lewis and Clark College

 

§  Sex “Hyper” Education Indoctrination – Human Sexuality is a far cry from the biology of reproduction. Now by law students in Kindergarten through 12 grades will be taught everything from mutual masturbation to homosexual experimentation. Discover why this is important to government educators.

Suzanne Gallagher, Business Owner, Former Candidate for State Representative, Pro-Family Activist

 

§  Political Incorrectness and Censorship – What are your rights? Learn about “viewpoint discrimination” including Anti-Christian, and what you can do to defend your right to direct your child’s education.

Herb Grey, Esq.- Alliance Defense Fund Affiliated Attorney

 

America and our children face a bleak future. Their future depends on acting now!

 

Come share your views and experiences during U-Talk.

 

When: Tuesday, September 13, 6:30pm- 9:00pm

 

Where: Stafford Center, 21065 SW Stafford Road, Tualatin, OR 97062

 

$5 donation welcome at door.

 

If you can help with event publicity within Portland areas, please contact

Debra Mervyn 503-819-8800 at debrauchoose@gmail.com

 

Read Blog Detail

How many presidential buses does it take to equal the cost of one light rail car?

President Obama is traveling the Midwest on a new bus purchased by the Secret Service. The vehicle is painted all-black with tinted windows and appears to be the size of a standard Greyhound bus. Inside, we can assume that it’s tricked out with the latest in high-tech security gear and telecommunications and designed with a kitchen, shower, bedroom and lounge area.

Given its purpose, the price tag must be enormous.

Actually, it’s not. It was purchased for $1.1 million. A typical light rail car in Portland costs $4 million.

Regular transit riders might want to ponder that. A light rail car has hard seats, no headrests, minimal legroom and no on-board internet access.

The Presidential bus can go on any road in America, while light rail is limited to just a small part of the Portland region.

The proposed Milwaukie light rail project will cost $1.5 billion. If we cancelled the project, we could buy an entire fleet of presidential buses and run them to Milwaukie, with free coffee and donuts for everyone, and we still couldn’t spend as much as TriMet plans to spend on one mile of light rail.

Maybe transit customers would like to try the Presidential bus for a few months before we waste $1.5 billion on a slow train to nowhere.

Read Blog Detail

Germany’s Energy Mistake of Nuclear Proportions

By Gordon J. Fulks, Ph.D.

“Quem deus vult perdere, dementat prius ― Whom the gods would destroy, they first make insane.”

Germany’s precipitous decision to shut down eight nuclear power plants last March and the remainder by 2022 is curious coming from a German chancellor with a doctorate in physics. Under pressure from Greens who exploit scientific illiteracy and promote fears they find useful, Chancellor Angela Merkel has become a pure politician. Nuclear power evokes many fears in Germany. As in the English-speaking world, irrational perceptions about technical matters from nuclear energy to alternate energy to global warming transcend all reason.

The German political situation started to melt down after the most powerful earthquake and tsunami in modern times struck Japan in March: More than 24,000 people lost their lives, and the Japanese nuclear power installation at Fukushima made ominous headlines for weeks. With reports of radiation leaking from three reactors and large evacuations of the local population, European Energy Commissioner Gunther Oettinger of Germany declared the nuclear incident to be an “apocalypse.” Three reactors out of 11 in the Fukushima area were destroyed, resulting in large economic losses and a long, complex cleanup. But the widespread devastation elsewhere was the real tragedy.

Of the huge death toll, not a single death was attributed to nuclear radiation. Two workers at Fukushima died from drowning and one from a heart attack. Although two other workers received non-life-threatening radiation burns from standing in highly radioactive water, no one died from radiation sickness. The large amount of dangerous iodine-131 initially released has largely decayed away.

Long-term effects attributable to radiation exposure should be minimal, even among those workers who received the largest doses as long as established procedures to limit total exposure were followed. In the far worse Soviet Chernobyl accident in 1986, where the reactor burned and workers were unprotected, 57 died from direct effects and 500 in the local population from telltale thyroid cancer. But the vast majority of the population escaped unharmed.

The rational response to major industrial accidents is to carefully understand what went wrong and make improvements to existing procedures and infrastructure to minimize the chance of a recurrence. Because Germany uses far better reactor designs than the Soviets had and experiences few giant earthquakes and tsunamis like those in Japan, these disasters are not particularly pertinent to them. Moving toward more wind and solar power was the politically expedient decision for Merkel, but it has huge practical and environmental drawbacks. Because windmills and solar arrays produce very erratic electricity, backup from new turbine power plants burning natural gas is necessary. Leaving conventional steam plants running as “spinning reserve” is hugely wasteful.

That raises the inconvenient question: Why not just build advanced and highly efficient gas turbines and forget about expensive alternate energy? Wind and solar installations typically fail in 20 years, just as they have paid back the energy and cost of their construction. In other words, they produce little net energy, making them very inefficient. Their erratic nature also means that they reduce the reliability of the grid.

Germans are likely to get the additional natural gas they will need from their present supplier, Russia. Why? Because Germany also has a phobia about the shale-gas revolution that is sweeping the rest of the world. Germany has meager gas reserves, but friendly neighbors like France and Poland now have huge reserves.

If Germans want to avoid shipping the remainder of their industry to China and shivering in the dark when the sun is not shining and the wind is not blowing, they will have to choose between viable sources of electricity: nuclear, natural gas and coal. The smart move for Merkel would be to get full value out of Germany’s existing nuclear power plants during their design life and then consider environmentally friendly gas turbine replacements.

Although nuclear power has many advantages and new reactor designs coming from places like Oregon State University show great promise, natural gas appears to be the most competitive solution for advanced industrialized societies needing clean, reliable power in coming decades. Is Germany still capable of making rational decisions? Very recent news suggests that they may restart one nuclear reactor to avoid power shortages this winter. They are also talking about using millions of euros from a fund for promoting alternate energy to encourage new coal and natural gas power plants. These are steps back from the abyss.


Gordon J. Fulks holds a doctorate in physics from the University of Chicago, Laboratory for Astrophysics and Space Research. He is an Academic Advisor at Cascade Policy Institute in Portland and lives in Corbett.

Read Blog Detail

Cascade Requests Congressional House Committee to Delete Funding for Milwaukie Light Rail

Portland, OR – Today Cascade Policy Institute sent a letter to Rep. John Mica, Chairman of the Congressional House Committee on Transportation and Infrastructure, requesting that he delete all $750 million in federal funding being requested by TriMet for the Milwaukie light rail project.

Noting that the recently-signed Budget Control Act of 2011 requires Congress to reduce federal spending by $917 billion over the next 10 years and that Rep. Mica has released a draft six-year transportation spending bill forecasting a 35% cut in federal highway/transit spending, Cascade President John A. Charles, Jr. stated that the price tag of $205 million per mile for Milwaukie light rail was “indefensible” and should be terminated.

Cascade sent a second letter to Gov. John Kitzhaber, informing him of the letter to Rep. Mica and asking that he intervene to terminate the Milwaukie project, but implement a low-cost alternative concept with the following elements:

  • Finish the new bridge over the Willamette River
  • Cancel the light rail portion
  • Connect the streetcar loop
  • Offer more “express” bus service to Milwaukie

Charles stated, “The Milwaukie project offers no new transit service, forces the relocation of 68 businesses and 20 residences, and degrades current bus service to Milwaukie. We can improve service while saving about $1.3 billion, and that plan would free up about $600 million in local dollars for other civic improvement projects.”

For the letter to Rep. Mica click here.
For the letter to Gov. Kitzhaber click here.
For a summary of the low-cost alternative plan for Milwaukie light rail click here.

 

Read Blog Detail