Safety Net

The Unexpected Cause of Water Crises in American Cities

While the water crisis unfolding in Flint is perhaps the most egregious example of austerity in recent memory, it is part of a larger emergency developing nationally. In 2014, Detroit became the first major American city to enact mass water shutoffs, with 46,000 poor households receiving disconnection notices that May. And in Pittsburgh, Baltimore, and other cities, consumers face steep price increases in their water bills. These shutoffs and rate hikes can be traced back to one common source: Wall Street.

Baltimore is one of the most visible examples of how dangerous financial deals with Wall Street can push a city over the edge into crisis. In April 2015, just days after Baltimore began shutting off water to households behind on their bills, Freddie Gray died from injuries sustained while he was in police custody. This set up a bitter irony: as activists drew attention to the routine dehumanization of black and brown bodies by law enforcement, the majority of shutoff notices went to homes in predominately black neighborhoods. By May 15, 1,600 homes had lost their water.

In addition to the shutoffs, residents of Baltimore and its surrounding suburbs have also endured rate hikes amounting to 42 percent in just three years. To justify the surge in cost to consumers, Department of Public Works Director Rudy Chow pointed to delinquent bills totaling $40 million, saying: “We want to make sure all of our citizens pay their fair share.”

But what Chow failed to disclose is that responsibility for this debt does not entirely lie with residents. In fact, Baltimore has given away much more than $40 million to Wall Street to pay for toxic interest rate swaps. These toxic swaps are complex financial instruments that banks pitch to government entities—often without proper explanation of the risks involved—as a way to save money on infrastructure projects. And so, facing both crumbling infrastructure and falling revenues (due in part to declining federal support for infrastructure projects), many water department officials signed on.

Baltimore punished vulnerable residents for a crisis they did not cause.

But in 2008, when Wall Street crashed the economy and the massive risks associated with these deals came to light, cities across the country found themselves owing banks millions of dollars. And because of termination clauses written into the contracts, local governments could not get out of the disastrous deals without paying high penalties to the very institutions that caused the crisis. Baltimore had used toxic swaps in conjunction with auction rate securities, a type of very risky variable rate bond. So, by the summer of 2015, Baltimore had paid banks nearly $56 million in interest payments just for water and wastewater swaps, and another $43 million in penalties. The grand total for all the city’s swaps, not including the huge losses on the city’s auction rate securities, came to nearly $200 million.

Even though only about $15 million of the $40 million in delinquent water bills were attributable to residential accounts, Baltimore shut off water to more than 3,000 residences, many of which were among the poorest in the area. In contrast, by mid-July, only two businesses had experienced shutoffs. And so, in adopting the traditional austerity rhetoric of “paying their fair share” and “shared sacrifice,” Baltimore punished vulnerable residents for a crisis they did not cause, leaving wealthy corporations unscathed and even free to profit anew.

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A year earlier, in 2014, Detroit began large-scale water shutoffs as the city’s bankruptcy case was working its way through court. Like Baltimore, interest rate swaps were also a contributing factor in Detroit’s financial crisis and to the struggles of the Detroit Water and Sewage Department (DWSD) in particular. After years of hefty payments on its swaps, DWSD ultimately had to borrow $537 million to pay banks in 2012 when expensive termination penalties in its water swap contracts were triggered. In addition, Detroit water customers have seen their rates spike by nearly 120 percent in the last decade; nearly half of their payments now go toward paying down the debt on the swap termination fees. In a city where nearly 40 percent of residents live below the poverty line, it’s not surprising that many have fallen behind on their skyrocketing bills.

In the austerity game, there are clear winners and losers. Because the DWSD borrowed money for the termination fees, ratepayers are paying not only for the banks’ payday, but also for interest payments to bondholders on the debt.

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There are other cities where the water crisis is playing out less visibly. For example, in 2007 and 2008, as Pittsburgh faced aging and leaking infrastructure, banks pitched Pittsburgh Water and Sewer Authority (PWSA) a deal pairing variable rate bonds with swaps. But, as was the case with other municipalities, these deals seemed to go wrong almost immediately. Between 2007 and 2014, PWSA paid nearly $113 million in net interest payments and termination fees on the swaps. By the end of 2014, it faced an additional $87 million in bank penalties to get out of the deals. These swaps continue to drain resources from PWSA.

Facing $780 million in debt, PWSA became a good target for austerity crusaders and privatizers who promise savings and “efficiency” to desperate city officials. Enter Veolia, a multinational corporation that secured a lucrative three-year management contract with PWSA in 2012.

In a city where nearly 40 percent of residents live below the poverty line, it’s not surprising that many have fallen behind on their skyrocketing bills.

Despite Veolia’s promises of cost savings and “efficiency,” ratepayers learned that their rates would go up by about 20 percent by 2017. Many customers say that they are also being charged unfairly by the corporation. As part of its contract with PWSA, Veolia began installing its own water meters throughout Pittsburgh, known as water meter interface units, or MIUs. But according to an ongoing lawsuit filed in May of last year, “these MIU systems have catastrophically failed and customers have received grossly inaccurate and at times outrageously high bills,” including spikes of up to 600 percent. The lawsuit also alleges that PWSA turned off water to households—even in instances when individuals had never received a bill in the first place. All the while, consumers are charged with paying the generous salaries of Veolia’s executives in addition to PWSA’s debts—including the swap interest rates, the termination fees, the bonds, bank underwriting fees, and millions of dollars in insurance payments. (Veolia did not respond to TalkPoverty’s request for comment at the time of publication.)

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This problem is not limited to these three cities. Water departments across the country, desperate to raise money to replace and repair deteriorating infrastructure, got entangled in highly risky deals that they did not completely understand. Now they’re stuck diverting resources from infrastructure improvements to bank payments and remain vulnerable to predatory companies dangling well-worn promises of cost savings.

Ultimately, this trend is not just about water. These examples are part and parcel of a cycle of destruction that is a key feature of “modern disaster capitalism.” This occurs when banks and other large corporations use their political clout to cut taxes, leading to big reductions in the revenue necessary to sustain vital infrastructure of all kinds. Elected officials and city staffs must then struggle to find ways to fund projects, becoming easily exploited customers for Wall Street’s risky and opaque financial deals. And when the deals fail and those responsible have collected their payday, there’s always another profiteering company ready with more promises of “cost savings” and “efficiencies.” The most vulnerable among us pay the highest price for their profits.

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Culture

Who Are the ‘Legitimate’ Poor?

Recently, I disobeyed a cardinal rule of the Internet and decided to read comments on an article I once published in the Missoula Independent. I had begun writing about raising my daughters on very little income, which opened me up to a lot of criticism. One comment in particular stuck with me: “Her writing at once presents her life as being self-determined and [resulting from] a series of purposeful choices while claiming the right to be looked at as a victim of circumstances, of the system.” Drawing upon common stereotypes, this commenter accused me of choosing to be poor, wallowing in it, and even capitalizing on it by writing about my experiences.

These commenters are representative of the all too common assumption that someone is choosing to stay poor because they are lazy. But being poor and qualifying for government assistance is not an easy life. I think that, given the choice, most if not all people would choose to have a job that supports their basic needs and affords them a vacation once in a while. This idea is borne out by the evidence; four out of five participants in the food stamps program are either working or not expected to work due to their age or because they have a disability.

It’s as if these legislators are looking only to help the poor person who fits an ideal mold.

Jumping through hoops to receive assistance is exhausting and further stigmatized by legislators who introduce laws that limit access to resources. For example, Kansas State Senator Michael O’Donnell—who successfully advocated for legislation to ban people from using cash assistance to see a movie or go to a swimming pool—is eager to take his place as an arbiter in determining which poor person is “legitimate.” Who is the “real” victim and who will turn around and take advantage of the assistance, using it toward, heaven forbid, a leisurely activity once in a while. Who has made poor decisions and who has found themselves without a home due to causes beyond their control. It’s as if these legislators are looking only to help the poor person who fits an ideal mold, the one most like Oliver Twist.

At Christmas time, the search for Oliver Twist goes into full gear. Many people get into the holiday spirit of giving and maybe tip their waitress a little more, drop some change in the bucket next to the Santa Claus outside the department store, or go as far as organizing food, clothing, and toy drives for needy families. But although a majority of Americans say the government should do “a lot” to fight poverty, many will confine this support to people they view as the “deserving poor,” like children or veterans. As a friend said to me recently: “You are probably a part of a small percentage of moms and dads who are legitimate in their need and how you are getting by.”

And in their rush to judge who is legitimate, other acquaintances have told me that I’m not “really” poor. They assume that since I’m white and educated, I’m broke but not living in poverty. And now that I am on my way to making a pretty decent living that is close to putting me over the federal poverty line, I’ve thought about this a lot as well. What is the difference between being impoverished and being temporarily broke?

Artist Toby Morris’s comic in The Wireless brilliantly illustrates this difference. Individuals who are “broke”—the archetype of the student from a middle-class family eating ramen noodles comes to mind here—can draw upon family assets or social capital to support taking risks or to mitigate economic hardship; by contrast, millions of Americans are impoverished by setbacks, like the loss of a job or a sudden illness, from which they lack the resources to recover. I was born into a poor family that had been living on very little for generations. My parents were 20 when they had me, and when I was in the eighth grade, my mom was the first in our family to graduate from college. I wasn’t able to participate in a lot of extracurricular activities, and my parents encouraged me to work and make my own money from a young age. The lack of money was a source of constant stress in our home.

Disadvantage accumulates over time. Over the years, I have not been able to turn to family or any hidden assets for support. My parents couldn’t afford to pay for my college education, and I had to take out loans in my own name to pay for it. So when I was faced with debilitating hospital bills in my early 20s, I had to declare bankruptcy despite working 12-hour days, six days a week. Ten years later, the bankruptcy has been wiped from my credit report, but the debt I accrued in college will still keep me from accessing the funds I would need to purchase a decent vehicle or a house.

In a country where we trumpet equal access to opportunity, poverty and the stigma that comes with it present barriers to self-actualization.

In a country where we trumpet equal access to opportunity, poverty and the stigma that comes with it present barriers to self-actualization. After trying to be a paralegal and a counselor, I chose to pursue my dreams of being a writer. But unlike my wealthier peers, I felt like I was hurling myself through college, spiraling wildly and uncontrollably into debt, in pursuit of a fantasy I’d had since I started writing at the age of ten. The guilt that comes with pursuing writing as a career is not necessarily shared by an upper- or even middle-class person. Writing and the arts in general are often reserved for wealthy people, who don’t blink at the costs of attending retreats or investing time to create something that is not guaranteed to generate a lot of cash. By contrast, to avoid judgment, the poor must be able to point to a steady paycheck to demonstrate that they are “legitimate,” meaning that they have in fact been working and contributing to the formal economy.

I have to wonder: who isn’t legitimate in their need for help? Take the act of parenting, which is difficult even in the best of circumstances. Parenting on your own, without family to fall back on or even a supportive co-partner, often feels impossible. I can’t think of anyone in that situation who wouldn’t be legitimate, yet it’s still a common reaction to blame people who are struggling for their circumstances.

People don’t choose to be poor. They are often handed a life that only affords them that.

Related

Safety Net

Why Seniors—Not CEOs—Deserve a Raise

Any conversation about tackling poverty in the United States should include protecting and expanding Social Security. The reason is pretty straightforward: Social Security is the most powerful tool available to lift people out of poverty. Nearly two-thirds of seniors depend on Social Security for the majority of their income, and millions more children and adults depend upon survivors and disability benefits. According to Center for Budget and Policy Priorities analysis of Census data, Social Security kept 21 million Americans out of poverty in the last year alone. All told, that’s more people than any other government program.

Social Security isn’t a luxury — it’s a lifeline.

Social Security works. No one runs out of benefits, and payments don’t rise and fall with the stock market. Despite scare tactics from Republicans in Congress, the facts are clear. Social Security has a $2.8 trillion surplus. If we do nothing, Social Security will be safe for the next 18 years, and after that will continue to pay three-quarters of benefits through the end of the century.

Of course, we don’t have to sit by and to do nothing. Since its beginning, Social Security has been adjusted from time to time, and that’s what we need to do now. With some modest adjustments, it is possible to keep the system solvent for decades more, even while increasing benefits.

For the millions of Americans who rely on Social Security, the situation got worse this year. For just the third time since 1975, seniors who receive Social Security—along with many who receive veterans’ benefits, Social Security disability benefits, and other monthly payments—aren’t receiving any annual increase from their cost of living adjustment (COLA). CEOs at the top 350 American companies received, on average, a 3.9 percent pay increase last year. But seniors and veterans? Not a dime more.

That’s why a group of us in Congress have introduced the Seniors and Veterans Emergency Benefits Act (SAVE Benefits Act). This bill would give a one-time payment of $581 to those people who aren’t receiving a COLA this year—a raise equal to the 3.9 percent pay increase the top CEOs received.

Social Security payments average only about $1,340 a month—and millions of seniors who rely on those checks are barely scraping by. A $581 increase could cover almost three months of groceries for seniors or a year’s worth of out-of-pocket costs on critical prescription drugs for the average Medicare beneficiary. That $50 a month is worth a heck of a lot to the 70 million Americans who would have just a little more in their pockets as a result of this bill. In fact, according to an analysis from the Economic Policy Institute, that little boost could lift more than one million Americans out of poverty.

This is about our values — about how we protect each other, our families, and ourselves.

For too long in Washington, Social Security has been under assault. We’ve heard over and over that we supposedly need to gut the program in order to “save” it. But for the 21 million Americans whose Social Security benefits are the only thing keeping them out of poverty, Social Security isn’t a luxury—it’s a lifeline. The absolute last thing we should do—at the very moment that Social Security has become so essential to millions of our seniors—is to allow the program to be dismantled inch by inch.

This isn’t just an argument about math, though. This is about our values—about how we protect each other, our families, and ourselves. In an uncertain world, protection against long-term disability and a guaranteed income for the families of survivors are core parts of the anti-poverty safety net that our Social Security system provides. And, equally important, after a lifetime of hard work, people deserve to retire with dignity—and that means protecting and expanding Social Security.

Media and Politics

Welcome to the New TalkPoverty

Right now, the mainstream media is shutting down people and programs that provide good reporting on poverty—witness the recent loss of Melissa Harris-Perry and other progressive voices on MSNBC, as well as the demise of Al Jazeera America.

Despite the clear calculation by corporate media outlets to move away from substantive, progressive coverage of Americans struggling in a broken economy, we know that there’s a hunger for this kind of content. That’s why we are proud to launch our redesigned website today, with an inaugural post by Senator Elizabeth Warren.

TalkPoverty’s growth in the past two years has exceeded the capacity of our original website. In retrospect, I’m not surprised. During my eight years working at The Nation—the final two as its poverty correspondent—there was a marked increase in anti-poverty activism. I saw it first with Occupy, and then had the opportunity to report on organizing by domestic workers, farmworkers, janitors and other low-wage workers. I saw it with the Fight for $15, too. The voices of people most directly affected by poverty and inequality began to gain greater traction in the media.

My experiences on the poverty beat—and learning from excellent reporters like Bill Greider and Chris Hayes, and editor Katrina vanden Heuvel—led to an idea: what if there was a website where people living in poverty and people working to dramatically reduce it could work together to cover the issue with a kind of range and thoroughness that one, two, or even ten poverty reporters wouldn’t have on their own?

Moreover, what if our contributing writers reflected the kind of diversity that is needed if we are to build a vibrant anti-poverty movement—including people with low incomes, policy professionals and scholars, activists and advocates, students and other young people, and elected leaders at all levels of government?

What if there was a website where people living in poverty and people working to reduce it could work together?

In pursuit of this mission, TalkPoverty has now published dozens of writers—many of them with low-incomes—exploring issues ranging from the effects of incarceration, to the relationship between poverty and disability, to representations of poverty in our culture, to solutions to inequality, and many other areas where poverty and public policy intersect. Our writers have also used the site to push back against high-profile individuals who propagate myths about poverty in America. And our weekly podcast, TalkPoverty Radio, offers us another opportunity to demonstrate what good poverty coverage looks like, as we did when we interviewed the journalist who originally broke the story of the Flint water crisis.

With this increasingly diverse content, we needed a redesign that would make it easier for people to see how all of the different things we do at TalkPoverty fit together: original reporting, in-depth data analysis, a weekly podcast, and story collection. It will now be much easier for you to find related content, so you can take a deeper dive into topics of interest. We’ve updated our data feature, so that it’s simple to access—and understand—poverty data for every state and congressional district. We’ve also made it easier for readers to share their stories, so that we can continue to feature the voices and experiences of people living in poverty, and the policy solutions that deeply affect their lives.

There is no way to replace the progressive voices we are losing from the national media landscape. But we can promise you this: TalkPoverty will continue its commitment to finding new ways to lift up the voices of people living in poverty, and showing you the progressive policy solutions that will make a dramatic difference in creating opportunities for all Americans.

In the comments below, please let us know what you think of the redesign and any thoughts you want to share about covering poverty in America.

Related

Media and Politics

What Super Tuesday Voters Need to Know Before They Cast Their Ballot

Today is Super Tuesday, the day that voters and caucus-goers in 14 states will make influential decisions—decisions that may determine which names appear on the presidential ballot this November and, importantly, which policy proposals are added to the national agenda.

As people in these key states head to the polls, they should take a hard look at the candidates’ plans to reduce poverty and increase economic opportunity for all Americans. As of 2014, nearly one in seven Americans lived below the official poverty level—roughly $24,000 a year for a family of four. The fact that 46.7 million Americans—including 15.5 million children—lived in poverty should come as no surprise, as rising inequality and stagnant wages continue to drive a wedge between poverty and prosperity. At the same time, the costs associated with key elements of economic security—such as child care, higher education, health care, housing, and retirement—rose by more than $10,000 between 2000 and 2012.

But this national picture masks tremendous disparities between the states. Today, families face vastly different chances of escaping poverty and moving up the income ladder depending on where they live. Children growing up in Alabama are more than twice as likely to be poor as children in Wyoming. In Massachusetts, well over half of young adults have been able to access higher education, compared to less than one in three in Arkansas.

If there is one lesson from states’ wildly different track records of reducing poverty and increasing opportunity, it’s this: policy matters.

With Congress in constant gridlock, state policymakers have stepped in to fill this legislative void, introducing a slew of recent policies—some innovative and commendable, others regressive and harmful—that affect struggling families in their states. Presidential candidates—and the voters who are deciding among them today—need look no further than our nation’s so-called “laboratories of democracy” for examples of both positive and preposterous policies.

In the new State of the States report, the Center for American Progress ranks states’ success in reducing poverty and improving opportunity, and highlights the good, the bad, and the ugly of policymakers’ recent decisions. For example, Texas voters face an uninsured rate that is more than five times that of Massachusetts. The Lone Star State ranks dead last in healthcare coverage, and is home to 20 of the country’s 30 worst counties in terms of health insurance coverage. Unsurprisingly, the state has the second-highest health insurance premiums in the country, as well as one of the highest teen birth rates. Yet Texas lawmakers continue their crusade against access to health care for residents by refusing to expand Medicaid, and imposing restrictive rules on healthcare providers that severely limit access to family planning services—particularly among low-income women.

Healthcare isn’t the only basic need that families struggle to meet today. Putting food on the table is all too often difficult for lower-income families—in some states more so than others. Nationwide, about 14 percent of households were food insecure between 2012 and 2014, meaning that they struggled to provide enough food for economic reasons. Three Super Tuesday states—Tennessee, Texas and Oklahoma—ranked among the bottom ten for food security. While the Supplemental Nutrition Assistance Program (SNAP) is designed to alleviate some of the economic stress brought on by food insecurity for lower-income families, some state lawmakers have erected barriers to this national program’s vital assistance. In 2014, eight states—including Texas, Ohio, and Kansas—reinstated harsh work requirements for nondisabled low-income adults, many of who struggle to find jobs in an unforgiving labor market.

Not all states have fallen behind the curve—some states have been pushing strong progressive ideas. That means candidates can turn to multiple states for innovative policy ideas that will improve opportunity and reduce poverty. For example, Minnesota was one of fifteen states to pass a minimum wage increase in 2014. Raising the minimum wage leads to higher earnings and reduced poverty rates among working families, without negatively impacting employment.

States have also taken the reins on paid family leave and medical leave in recent years. Decades after women began to enter the workforce in large numbers, they are still more likely than men to bear the brunt of caregiving responsibilities. Consequently, women are also more likely to experience a reduction in work hours or a disruption in work history, or to leave the paid labor force altogether—factors that explain about 10 percent of the gender wage gap. But states like Rhode Island have taken steps to mitigate this by enacting paid leave policies, which research shows will increase labor force participation and raise wages among women after childbirth.

Presidential candidates and Super Tuesday voters alike need only look to certain states for policies that strengthen American families and help them get ahead. At the same time, voters should hold their state’s policymakers accountable for decisions that damage families’ economic security and make sure presidential candidates learn from the states’ policies—the good, the bad, and the ugly.