Marketplace of Ideas
Check out these stories from the week’s economic news:
- FICO is changing the way it calculates credit scores. The Wall Street Journal reports that about 64 million U.S. consumers have unpaid medical bills on their credit report. Those collections will no longer impact FICO scores. Neither will formerly past-due accounts that have no remaining balance. That will affect about nine million consumers. The Consumer Finance Protection Bureau studied repayment patterns of five million people over two years and found that those with medical debt repaid other obligations at the same rate as those without. They concluded that medical debt was biasing credit scores lower by 10 to 22 points. VantageScore, a competitor to FICO, already excludes paid medical debt from its scores. The Los Angeles Times reports that higher credit scores will lower borrowing costs for many, though the changes will likely take a while to be felt. Higher scores will also increase the pool of potential borrowers without increasing the risk rating on lenders’ stock of loans. The latest loan officer survey from the Federal Reserve shows that banks continue to ease standards for all types of loans, unwinding the massive tightening that followed the recession. Mortgages saw the most significant easing of standards yet. Demand for consumer loans is up, too, after a soft start to the year. The Economist says that the consumer deleveraging that has prevailed since the recession appears to be over.
- We’ve heard a lot recently about “inversions,” when U.S. companies move offshore to avoid taxes. Now Marketwatch says there are good reasons for American retirees to follow suit: Lower tax rates and health-care costs, the ease of communicating with family at home using internet technologies, and the buying power of the dollar abroad. The weather might be nice in Florida or San Deigo, but you’ll get more bang for your buck in Ecuador or Panama. International Living, a resource for people looking to retire overseas, reports that nearly half a million Americans collect their social security benefits abroad. A recent study by the Federal Reserve finds that one in five people approaching retirement have no savings. But that’s not necessarily due to poor planning. According to the Fed, “Many respondents, particularly those with limited incomes, indicated that they simply have few or no financial resources available for retirement.
- How does TV depict poverty? NPR ran a story this week considering whether viewers look down on the circumstances and actions of the poor people and families depicted in shows such as Here Comes Honey Boo Boo and The Wire or empathize with them. The Guardian has called such shows “poverty porn,” suggesting that they “divide rather than unite a fractured society.” David Simon, creator of The Wire, says that his show, which is set in inner-city Baltimore, illustrates “something legitimate” about the “America that got left behind.” But he also says that television has three currencies—sex, violence, and laughs. Poor people can fill that bill just as well as the better-off. In Salon, Jared Yates Sexton says the problem is when the quest for laughs leads TV shows to make poverty look “like a party,” or suggests that ignorant or inarticulate people somehow deserve to be poor. Meanwhile, Bloomberg reports this week that the top 1% “may be richer than you think”—“literally rich beyond measure.” Recent research by the ECB and the London School of Economics finds that because the super-rich are able to use tax shelters and other techniques to hide their wealth and income, they may be much wealthier than previously calculated. Marketwatch shrugs at the outraged response to those findings: “Breaking news: The rich are rich, and the poor are poor.”