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How Poor Are America’s Poorest? U.S. $2 A Day Poverty In A Global Context

August 28, 2014 Comments off

How Poor Are America’s Poorest? U.S. $2 A Day Poverty In A Global Context
Source: Brookings Institution

In the United States, the official poverty rate for 2012 stood at 15 percent based on the national poverty line which is equivalent to around $16 per person per day. Of the 46.5 million Americans living in poverty, 20.4 million live under half the poverty line. This begs the question of just how poor America’s poorest people are.

Poverty, in one form or other, exists in every country. But the most acute, absolute manifestations of poverty are assumed to be limited to the developing world. This is reflected in the fact that rich countries tend to set higher poverty lines than poor countries, and that global poverty estimates have traditionally excluded industrialized countries and their populations altogether.

An important study on U.S. poverty by Luke Shaefer and Kathryn Edin gently challenges this assumption. Using an alternative dataset from the one employed for the official U.S. poverty measure, Shaefer and Edin show that millions of Americans live on less than $2 a day—a threshold commonly used to measure poverty in the developing world. Depending on the exact definitions used, they find that up to 5 percent of American households with children are shown to fall under this parsimonious poverty line.

These numbers are intended to shock—and they succeed. The United States is known for having higher inequality and a less generous social safety net than many affluent countries in Europe, but the acute deprivations that flow from this are less understood. A crude comparison of Shaefer and Edin’s estimates with the World Bank’s official $2 a day poverty estimates for developing economies would place the United States level with or behind a large set of countries, including Russia (0.1 percent), the West Bank and Gaza (0.3 percent), Jordan (1.6 percent), Albania (1.7 percent), urban Argentina (1.9 percent), urban China (3.5 percent), and Thailand (4.1 percent). Many of these countries are recipients of American foreign aid. However, methodologies for measuring poverty differ wildly both within and across countries, so such comparisons and their interpretation demand extreme care.

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It’s the Family, Stupid? Not Quite…How Traditional Gender Roles Do Not Affect Women’s Political Ambition

August 21, 2014 Comments off

It’s the Family, Stupid? Not Quite…How Traditional Gender Roles Do Not Affect Women’s Political Ambition
Source: Brookings Institution

Following Chelsea Clinton’s pregnancy announcement in April of 2014, media outlets speculated whether the future grandchild to Hillary Clinton would impact her potential presidential campaign in 2016. In this research paper, Jennifer Lawless addresses the question of whether family roles and responsibilities affect a potential candidate’s political career. Lawless analyzes both female and male candidates and finds that traditional roles and responsibilities have little influence on candidates’ decision to run for office.

Lawless conducted a study that examined the relationship between family arrangements and political ambition, looking specifically at whether being married, having children and having other household responsibilities affects the desire to run for office. She found that none of these variables had significant impact on candidacy considerations. While women’s numeric under-representation in politics is glaring, regardless of the level of office studied and the gender gap in political ambition among potential candidates is as large now as it was a decade ago, Lawless concludes that none of these disparities are influenced by family roles.

Iraq: Understanding the ISIS Offensive Against the Kurds

August 12, 2014 Comments off

Iraq: Understanding the ISIS Offensive Against the Kurds
Source: Brookings Institution

Caveat: As I have noted in previous assessments, it is always difficult to assess the dynamics of an ongoing conflict. It is probably the case that even the U.S. government, with its vast array of intelligence collection systems, has an imperfect grasp of the situation in Iraq. Outside military analysts without access to that information must accept an even greater degree of uncertainty. Consequently, what follows should be seen as little more than informed speculation based on limited and potentially unreliable evidence.

Colorado’s Rollout of Legal Marijuana Is Succeeding

August 12, 2014 Comments off

Colorado’s Rollout of Legal Marijuana Is Succeeding
Source: Brookings Institution

In November 2012, Colorado voters decided to experiment with marijuana, passing a constitutional amendment legalizing recreational cannabis. It was a bold move, but it also required quick, bold, and unprecedented action on the part of the state government to implement the policy. Colorado needed to set up a legal, regulatory, and tax system so that product would be available in dispensaries by January 1, 2014. As part of an examination of Colorado’s implementation and rollout, Brookings’ John Hudak spent a week in Denver interviewing elected officials, regulators, industry officials, and others playing a variety of roles and including supporters and opponents of legalization policy.

Hudak reports that the state of Colorado has largely succeeded in rolling out a legal marijuana system, and its early implementation efforts have been impressive. This report details what has been successful, how Colorado has achieved an effective rollout, and what challenges remain.

Increasing Turnout in Congressional Primaries

August 11, 2014 Comments off

Increasing Turnout in Congressional Primaries
Source: Brookings Institution

Elaine Kamarck argues that the best way to lessen political polarization and increase voter turnout is to establish a national primary day. This paper is a wide-ranging look at how to reform the primary nominating and electoral system so as to alleviate today’s increasing polarization and subsequent governance stalemate.

A Real Fix for Credit Ratings

August 8, 2014 Comments off

A Real Fix for Credit Ratings
Source: Brookings Institution

The failure of credit ratings agencies to do their job – warn investors of the true risks entailed by the subprime mortgage securities they rated – was at the heart of the financial crisis. Policy makers since have wrestled with how to “fix” the ratings process going forward. Although the Securities and Exchange Commission has required the agencies to disclose more of their methodology, the ratings process is still less than transparent. The issuer-pay rating agency business model has been criticized as a central cause and new agencies designated by the SEC after 2008 moved away from this model, though they have since moved back. Various additional ideas to fix the system have been put forward but none has been adopted: randomizing the choice of ratings agency, or replacing private ratings with those of a public agency, such as the Securities and Exchange Commission.

Faulting the issuer-pay model for the Crisis, which has been in continuous use for more than 40 years cannot explain the sudden explosion and subsequent collapse of the securitization market, which occurred over a much shorter period. We offer a different approach here: by showing how the absence of a single, numerical, public structured credit scale to serve as a yardstick of structured credit quality in the U.S. debt capital markets provides a more plausible explanation for the problems in structured finance in particular. Transparent, numerical benchmarks of credit risk relating to structured credits should not only fix structured finance going forward, and ideally help resuscitate the market but in a more sensible fashion. In addition, we will argue that such benchmarks also are a necessary component to a prudent system of capital regulation and for accurately informing investors of true credit risk, just as speed limits are a necessary component of vehicular traffic regulation.

Source of Weakness: Worrisome Trends in Solvency Regulation of Insurance Groups in a Post-Crisis World

August 8, 2014 Comments off

Source of Weakness: Worrisome Trends in Solvency Regulation of Insurance Groups in a Post-Crisis World
Source: Brookings Institution

The regulation of insurer financial strength in the United States historically has focused on a fundamental principle: that the premiums and capital of any insurer are meant to pay the claims of that insurer’s policyholders and not to be drawn on to rescue a failing affiliate within the same group. This is a customer-centric approach, based on the individual insurance contract that is issued by a separately capitalized insurer for a specific period of time, in which the premiums charged are regulated based on that issuer’s solvency position and the risk assumed under that contract.

Since the financial crisis, however, international financial bodies, including the EU, have been pressing U.S. policy makers to adopt the EU’s very different approach toward insurance regulation for globally and systemically important insurers, and potentially for all insurers, borrowing from the banking industry the notion of “group capital” regulation. This latter approach ignores the legal separateness of the different entities belonging to the same group and makes all parts of a banking group financially responsible for each other, through the so-called “source of strength” doctrine for holding companies and “cross-guarantee” requirements for bank subsidiaries. In effect, group capital regulation is creditor-centric, and potentially ignores the specifics of individual insurance contracts.

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