Why You Should Know About Jerome Powell, Tapped as the Next Fed Chair

After much speculation, President Trump this month nominated Jerome H. Powell, 64, to be the next chairman of the Federal Reserve. Powell, nominated on Nov. 2,  is now next in line for what many consider the second-most-powerful position in the United States government, after the president himself.

If confirmed by the Senate, Powell will replace Janet L. Yellen, 71, who has been chairing the Fed for the last four years. Her term expires Feb 3. The appointment would make Yellen, who was the first female chairman of the federal bank, also the first serving Fed chair in nearly 40 years who was not reappointed by a new president for another term. The last time a first-term president removed the serving Federal Reserve chair was in 1978.

What does the chair do, anyway?

The Federal Reserve chair is the head of the Federal Reserve System, aka the central bank of the United States. The bank is in charge of things like conducting monetary policy in order to promote employment, keep inflation under control and moderate long-term interest rates — all of this in an effort to keep our financial system functional and stable.

Fed chairs serve four-year terms and are nominated by the president. If approved as chair, Powell will be in charge of carrying out the Fed mandate. The chair reports twice a year to Congress to testify on the Fed’s monetary policy and objectives. The chair also meets regularly with the Secretary of the Treasury Department, a member of the President’s cabinet. The chair’s actions influence employment, prices and interest rates.

Here’s another responsibility: The Fed chair is also the chair of the Federal Open Market Committee, which sets the federal funds rate. The funds rate is the benchmark interest rate for the nation, and when the funds rate rises, interest rates on short-term borrowing options like credit cards and personal loans tend to rise, too. For a complete primer on the fed funds rate and how it impacts your wallet, check out this explainer from our parent company, LendingTree.

For seven years following the 2008 financial crisis, the Fed held the funds rate  near zero to help curb inflation and encourage lending during the nation’s recovery. Then, in December 2015 the Fed raised the rate to between 0.25 and 0.50 percent. Since, the Fed has voted to raise interest rates four times as the economy has picked back up. The federal funds rate is now 1.25 percent, as Fed officials voted in June 2017 to again raise rates.

Who is Jerome H. Powell?

Jerome H. Powell is a current member of the Federal Reserve System’s Board of Governors. Powell, a Republican, was appointed to the position by former President Barack Obama, himself a Democrat, in 2012, and his current term was set to end in 2028.

Powell, though not an economist, has a rich background in financial markets. Prior to his appointment, Powell was a visiting scholar at the Bipartisan Policy Center in Washington, D.C. He also served in the George H.W. Bush administration as an assistant secretary and as under secretary of the Treasury.

Between his stints in Washington,  Powell led a career as a lawyer and investment banker in New York City. Powell served as a partner at The Carlyle Group from 1997 to 2005. He will be among the richest people to ever lead the central bank, according to The Washington Post.

According to The Wall Street Journal, White House officials say Trump chose Powell because he liked his combination of monetary policy acumen and business savvy. The president cited Powell’s “real-world perspective” as a positive trait, saying “he understands what it takes for our economy to grow.”

What we can expect from Powell as Fed chair

Powell is reported to be a centrist when it comes to monetary policy. Which is to say that as the next chair of the Federal Reserve System, hel is expected to stick to Yellen’s methodical approach to unwinding financial stimulus policies aimed at continuing recovery from the Great Recession.

Powell voted in favor of every policy decision made by the Board of Governors since he joined the Fed in May 2012. That includes all four federal funds rate increases. He also supported the Fed’s decision in June to begin reducing a $4.2 trillion balance sheet mainly consisting of U.S. Treasury and mortgage-backed securities purchased to lower long-term rates in recovery. Selling the securities takes money out of the market, driving down interest rates and inflation.

Investors expect Powell to keep the FOMC making quarter-percent raises through 2020. According to The New York Times, a survey of 144 investors conducted by Evercore ISI found investors expected that Powell would push rates modestly higher over time than Yellen. He is expected to conduct monetary policy so similarly, some are even referring to Powell as the ‘Republican Yellen.’

The one area where Powell may diverge from a Yellen-like monetary policy is in financial regulation.

The Fed is one of several federal agencies charged with regulating and supervising financial institutions. The Fed-enforced reforms in the wake of the Great Recession , often defended by Yellen, including new financial rules under the 2010 Dodd-Frank law.

“There is certainly a role for regulation, but regulation should always take into account the impact that it has on markets — a balance that must be constantly weighed. More regulation is not the best answer to every problem,” Powell said at an October meeting of the Fed-sponsored private-sector Treasury Market Practices Group.

Trump has stated several times that he he’s in favor of looser financial industry regulation, and the Trump administration further expressed the sentiment when it released plans calling for significant reductions in regulation in June. Just after the plans were released, Powell made clear he didn’t fully agree with the Trump administration’s plans at an appearance before the Senate Banking Committee, according to The Times.

Although Powell acknowledged there were some ideas he would not support, he said there were some ideas that would “enable us to reduce the cost of regulation without affecting safety and soundness.”

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Is Your 401(K) Tax Break on the Chopping Block?

Republican lawmakers are under pressure to put out new tax reform legislation by year’s end, but to make that happen, they need ways to pay for the hefty tax cuts proposed so far.

A proposal from President Trump calls for tax cuts for taxpayers at every income level, a reduction in the corporate income tax to 20 percent from 35 percent, and the end of the estate and alternative minimum taxes, among other things.

So far, implemented as is, the plan would add $1.5 trillion to the federal deficit, according to the Tax Policy Center. The deficit is the amount by which total government spending exceeds tax revenues for the fiscal year.

Such calculations have Republicans scrambling to figure out a way to achieve tax reform without adding to the deficit.

This week, Republicans lawmakers were rumored to be considering offsetting the cost of their tax cuts by reducing the 401(k) contribution limit for workers. (Trump swiftly denounced that plan on Twitter.)

At the moment, workers under 50 are able to contribute up to $18,000 in pre-tax dollars each year to a 401(k) retirement account. The amount is tax-deductible and reduces the overall amount the worker pays in annual federal income tax. The tax-deductible contribution limits are set to rise to $18,500 and $24,500, respectively, in 2018.

The Wall Street Journal reports Republican house leaders were considering a plan that would cut annual tax-deductible contribution limits on 401(k)s and, possibly, IRAs, down to just $2,400.

Workers would need to place any amount they’d like to save above that limit in a Roth IRA, which would be a boon to the federal government. Contributions made to Roth accounts are taxed immediately, not when the benefit is drawn out as with 401(k)s, so it would be one way to drive up tax revenue in the face of tax cuts.

On Oct. 23, Trump tweeted, “There will be NO change to your 401(k).”


Started by the IRS in 1978, retirement savings plans like the 401(k) and Individual Retirement Account (IRA) have been financial staples among middle-class families. And as pension plans have been phased out over time, defined contribution plans like the 401(k) plan have taken their place as a principal retirement vehicle for those families.

The proposed limit could prove costly to many Americans, as they are likely contributing above $2,400 annually to a 401(k) retirement account. According to Fidelity Investments, the average 12-month savings rate for 401(k) accounts in 2016 reached a record high of $10,200.

The notion of cutting back the amount workers can contribute, tax-free, to retirement accounts is understandably unsettling to many workers and members of the asset management community. That’s in part because, as Trump has noted on Twitter, 401(k) contributions allow many middle-class Americans a tax break.

Here’s how it works. For this example, we based our estimates on 2016 income tax brackets.

Let’s say Robin is  head of her household and drew a base salary of about $55,000 in 2016, placing her in the 25% tax bracket. She deferred 15% of her pre-tax income, or $8,250, to her 401(k) retirement account. Her $8,250 contribution reduces her annual taxable income to $46,750.

That newly calculated income not only dropped Robin to the 15% tax bracket, but she also saved nearly $1,700 in federal income taxes.

The administration’s tax plan reduces the seven existing tax brackets to just three — 12,  25 and 35 percent (with a possible fourth tax bracket for the highest-earning individuals). But the plan did not specify income ranges. As of this writing, it is unclear which incomes would fall into which bracket.

For the purposes of this example, let’s assume that Robin’s income would still land her in the 25 percent income tax bracket.

With a  401(k) contribution limit reduced to $2,400, she would have been taxed on $52,600 at a 25 percent tax rate. That would have increased the amount she paid in federal income tax to $7,297.50 from $6,350 in 2016.

Moving forward

It’s unclear if the new tax bill will actually include a reduction in 401(k) contribution limits. But one thing that is clear is this: If the tax-reform measures are to pass, funding for more than $1.5 trillion in lost revenue to tax cuts over the next decade has to come from somewhere.

The plan proposes to reduce the tax burden on middle-class Americans by doubling the standard deduction Americans can make when filing their federal income taxes to $12,000 for individuals and $24,000 for married couples filing jointly. However, it would eliminate the option to itemize deductions instead of using the standard deduction. The proposed plan would also increase the child tax credit — currently $1,000 — by an unspecified amount and create a $500 tax credit for nonchild dependents, like elderly family members. These and other tax cuts may translate to big losses in federal tax revenue.

An independent analysis by the Tax Policy Center, a nonpartisan think tank, claims the new tax plan would reduce federal revenues by $6.2 trillion over the first decade, while federal debt could rise by at least $7 trillion in the same period.

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New Trump Rules May Mean More Expensive Birth Control for Millions of Women

The Trump administration recently issued two new rules that may increase the cost of contraception for millions of American women. The issued rules allow more companies to opt out of an Obama-era mandate that companies offer insurance providing birth control for women. Now, any company can be exempted from the mandate on moral or religious grounds.

The rule went into effect on Oct. 6.

Previously, only religious employers like churches or nonprofit religious groups — like some schools or hospitals able to prove they have religious objections to providing contraception coverage — could opt out of the mandate.

The rules could affect the more than 62 million women who currently have access to no-cost birth control under the Affordable Care Act, according to Planned Parenthood. As of this writing, no appeals process was in place.

Since the health care law, a signature of the Obama White House, went into effect, out-of-pocket spending on prescription drugs has decreased dramatically. The majority of this decline (63%) can be tied to the drop in out-of-pocket expenses on the oral contraceptive pill for women, according to the Kaiser Family Foundation. After the mandate, more women have opted for more expensive, more effective, longer-lasting contraception options they otherwise wouldn’t be able to afford, like intrauterine devices (IUDs).

“It is going to be a significant problem for families around the country,” said Maggie Jo Buchanan, the Southern regional director for Young Invincibles, a nonprofit advocacy group for young adults.  “People will be living on pins and needles just trying to figure out what is covered under their plan.”

How many women could the new regulations affect?

In its announcement of the changes, cast as protections for Americans’ conscience rights,, the Trump administration claimed that most women — specifically, 99.9 percent of the 165 million women in the United States — would not be affected.

Some women’s rights advocates and legal experts have disputed that math.

“The claim that 99.9 percent of women won’t be affected is quite inaccurate,” said Erika Hanson, a women’s law and public policy fellow at the National Women’s Law Center, a nonprofit organization that advocates for women’s rights, as recent research suggests the regulations may affect health care costs for millions of women.

Now that any employer can opt out of coverage, American women on employer-provided health insurance plans are at a higher risk of losing no-cost contraception coverage. Kaiser Family Foundation has reported that roughly  57.5 million women — about 59% of women ages 19 to 64 — received their health coverage from their own or their spouse’s employer in 2015.

“We all agree that the First Amendment and freedom of religion is an important Constitutional protection in this country,” says Hanson. “But that right does not give one the ability to impose their religious beliefs on someone else, especially when someone else is going to be harmed as a result of your religious beliefs.”

At the moment, it’s difficult to determine exactly how many people will be affected by the new regulations. Since the Supreme Court’s 2014 ruling that closely held private companies could seek an exemption on religious grounds, only a few dozen companies have asked for exemptions, POLITICO found last year.

“We are hoping that companies worried about their bottom line will stand behind the birth control benefit and say, ‘We value our employees and are going to continue to provide this coverage,’” Hanson said.

How will I know if I am affected?

Since companies aren’t required to disclose to employees whether they have opted out, many women may not find out they are not longer covered until they get to the pharmacy counter.

“No companies or schools have dropped coverage yet. But also under the rule, we wouldn’t know” if they did, Hanson said. “They don’t have to do anything or tell anyone.”

12 Tips to lower your contraceptive costs

For those who are strapped for cash, losing no-cost contraception coverage may mean losing access to birth control altogether. Research shows that copays as modest as $6 may deter some women from purchasing contraception coverage.

Those affected by the rules will incur the costs of figuring out a way to afford birth control out of pocket.

Getting prescriptions directly from your doctor or OB-GYN may not be the most economical choice.  “If you can’t use your health insurance coverage, it’s typically very expensive to go to your normal primary care physician and get a birth control prescription,” says Hanson.

Here are some other suggestions:

Go to a low-cost clinic

Try going a federally qualified health center for more affordable services. Women can find one nearby through the Health Resources and Services Administration. The program is run by the HRSA, a subset of the Department of Health and Human Services, and offers services based on income, whether you have health insurance or not.

Go generic

Going with the generic brand of the birth control pill could help women save money. Generic brands usually cost less than the name-brand version, but use the same active ingredients. Women should ask their doctors about switching, however; some women may experience adverse side effects, or different effects than with the branded version.

Check here for a list of the name-brand contraceptive medications and generic versions.

Coupons can help

If someone is prescribed a more-expensive, name-brand drug, she may find savings through the use of coupons. Search online on websites like HelpRx or EasyDrugCard.com to find a coupon for contraception. Some brands, like Loestrin 24 Fe, offer discount cards. This product’s card — you can apply here —  can help you pay pay as little as $25 per one?month prescription fill or three?month prescription fill. You can also get discounts for Yasmin.

Speak with your doctor

Women may also save money by going to a physician or clinic that offers prescriptions on a sliding, income-based scale. Physicians can sometimes provide more affordable coverage if a patient speaks to them about their financial situation. The doctors may also allow  patients to bypass insurance and pay in cash.

Shop around

Women looking for savings can compare prices at different retailers to save money. Call around to check the price of your prescribed contraception at pharmacies in your area. You may be surprised at how much prices will vary, especially if you aren’t covered by insurance.

Try a long-term solution

Using a longer-term contraception method like the IUD may help women save money on contraception. The IUD may cost more upfront — between no cost and $1,300, according to Planned Parenthood — but women usually save more in the long-run an IUD lasts the longest compared with other methods. For example, the median price of the Mirena IUD, is effective for up to five years and is $1,111, according to the doctor-database site Amino. That would put the monthly cost over that time at about $18.52. Meanwhile, the birth control pill costs uninsured women up to $50 per month.

Source: Amino

Join a prescription savings club

Both insured and uninsured women may find significant savings by joining a prescription savings club like those offered through large national pharmacy chains like Walgreens, CVS or Rite Aid. Other companies, such as My Prescription Savings Card and Good Neighbor Pharmacy, offer savings programs consumers can use at various locally owned pharmacies or smaller pharmacy chains. There may be an enrollment or annual fee charged for a membership. Good Neighbor, for example, charges a $5 annual enrollment fee.

Use pretax dollars

If a consumer has a Flexible Savings Account or Health Savings Account through an employer, that means an ability to fund the account with pretax dollars and use it to pay for health-related expenses. This is a smart way to stretch funds.

Ask for three months’ worth of the Pill

You may be able to earn a discount if you purchase more of the Pill at once. You may pay the same copay if you ask for a 90-day prescription as opposed to a 30-day supply. This also saves consumers time, as it cuts back the number of trips they will need to make to the pharmacy.

Use the mail

Consumers can also save simply by ordering medication through the mail. If the insurer has a long-term prescription program, women may pay a lower copay if they choose to have a 90-day prescription mailed, as opposed to picking it up at a pharmacy.

Try enrolling in a government program

Several government programs provide free or subsidized contraception for low-income women, including Medicaid, Title X-funded centers and some state-funded programs. Women having a tough time affording contraception coverage should check to see if they qualify for enrollment in these programs, enabling them to receive low-cost or free contraception and other medical services.

Use condoms

If you’re not in a long-term relationship, don’t engage in intercourse with the opposite sex often or don’t need contraception for other medical issues, you may not need to pay for birth control pills or other forms of short-term contraception like the Depo Provera shot. Women in this situation can speak with a primary care physician about getting off the contraception they now use, in favor of condoms to minimize the risk of pregnancy.

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Here’s How Trump’s New Budget Will Affect Your Student Loans

Have a student loan? You'll want to read this.

The 43 million Americans with student loans — and the millions more who will take out their first college loans this fall — should pay close attention to President Donald Trump’s proposed 2018 budget. It requests dramatic changes to the help offered to borrowers, calling for an end to many benefits for lower-income students, and making life harder for those repaying graduate school loans. There’s a glimmer of hope, though, for those repaying undergraduate loans.

The budget, which was made public Tuesday, and is available on the White House website, is not set in stone — in fact, it’s more like a wish list the White House sends to Congress every year. Still, it will be used to frame discussion of student loan borrowing and repayment, so it demands attention.

Let’s break down what it could mean for you.

Lower-Income Borrowers Would Take a Hit…

Trump’s budget calls for elimination of the Stafford Loan program, which provides discounted loans to students with financial need. Stafford borrowers pay roughly half the interest rate of standard federal loan borrowers. These borrowers would also have to pay interest on their loans while in school, ending a long-time benefit. Students with standard federal loans don’t make payments while in school, but interest on their loans accrues and is capitalized, or added to their balance.

As Would Service-Based Loan Forgiveness…

The budget also calls for the end of the Public Service Loan Forgiveness (PSLF) program, which allows workers in some professions to see their loan balances erased after they make income-based repayments on their loans for as few as 10 years. The program began under the Bush administration, but under President Obama, the earn-out time was reduced to 10 years.

The program is already the subject of controversy, as the first crop of students eligible for 10-year forgiveness — about half a million graduates — will have that benefit kick in this fall. The Department of Education, under the leadership of Education Secretary Betsy DeVos, already has said it might not honor the forgiveness now. The Department of Education did not immediately respond to a request for comment about the program, or Trump’s budget.

Income-Based Repayment Plans Would be Reduced, But…

The biggest government savings in the budget when it comes to student loans, though, comes from reducing the number of income-based repayment plans made available to struggling graduates, according to a New York Times analysis. Currently, there are a series of complex offerings (explained in detail on the Department of Education website).

Plans with names like income-contingent repayment, income-based repayment, and “pay as you earn” are all designed to keep payments between 10% and 20% of the borrower’s income. Some offer payments as low as $5 per month, depending on income.

…Forgiveness Could Come Sooner

However, the Trump plan offers those using income-based repayment plans something Trump promised on the campaign trail. Monthly payments for undergraduate loan holders would increase slightly to 12.5% of income (from 10%), but would promise forgiveness on a shortened schedule — after 15 years of on-time payments. Currently, many plans require 20 years of payments.

Grad Students Would Be Hit Hard

On the other hand, those with graduate loans would face a tougher road. Graduate students would also have to pay more — 12.5% of their incomes — and would have to pay for 30 years instead of 25 years.

In other words, under Trump’s plan, a student who earned a graduate degree at age 25 would have to make on-time income-based repayments until age 55 to earn loan forgiveness, while someone with an undergraduate degree who graduated at 22 could earn forgiveness by age 37.

Those who plan to stop school after college might cheer the proposal, but an analysis of the student loan problem published by Credit.com shows that the majority of borrowers with oppressively large loans accumulated their balances in graduate school. While the average college loan balance for a 2016 graduate is about $37,000, one quarter of all grad degree earners had borrowed more than $100,000, according to a paper published by the New America Education Policy Program in 2015.

The New America paper also found that 40% of America’s outstanding $1 trillion-plus student loan balance is owed by those who earned a graduate degree. Trump’s budget essentially uses savings from cutting help to graduate school borrowers to offer help to undergraduate-only borrowers.

Whatever your student loan situation, keep in mind that missed or late payments can end up impacting your credit scores, which can hinder your borrowing ability in the future. You can see how your loan repayments are affecting your credit by checking your two free credit scores right here on Credit.com.

Image: Geber86

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6 Ways Trump’s Budget Proposal Could Affect Your Bottom Line

President Trump's proposed budget would reduce services to the poor and elderly. Here are the programs that stand to be hit hardest.

Do you commute to work, have a family member who’s out of work or know anyone who’s ever lived in a flood zone? If so, you should be paying close attention to that most Washington of annual rituals — the making of the federal budget. President Donald Trump’s dramatic budget has one clear winner (defense) and a long list of losers so you don’t want to ignore his proposals until it’s too late to influence the final outcome. So here’s our guide to some of the 80 or so programs that are targeted for deep cuts or outright elimination by Trump’s accounting.

Before we start, it’s important to understand that the federal budget process is a marathon, and we’re only at mile marker one. The White House has only released the so-called “skinny” budget. Many of the cuts it describes are not yet specific, and there’s a more detailed budget to come, followed by Congress’ own ideas about how to spend Americans’ money.

Still, there are enough programs called out specifically by Trump’s budget that one can imagine how America, and your community, might change were the budget to pass as is. The Trump administration did not immediately respond to request for comment on how the budget proposal would affect taxpayers. (On the note of budgets, here are some helpful tips for getting control of your personal budget.)

Changes for Train Travelers

If you like train travel, you might want to get your trips in now. Trump’s budget directly calls for the elimination of long-haul routes on Amtrak. These are largely used by tourists and have often been criticized as money-losing and unnecessary, particularly when the busy Northeast Corridor between Washington D.C. and Boston is overcrowded and profitable. So people who tour by train may need to spend their money on other travel options, like road trips or air travel. The good news for east coasters is some of those savings are being directed to improve service on the nation’s busiest rail line.

The Trump budget actually calls for a 13% overall cut at the Department of Transportation, which will impact local rail projects, too — like Seattle’s decades-long effort to get a light rail system off the ground. The proposed budget cut would actually half its funding. Some 70-such projects around the country are on the chopping block. So is a program named TIGER, which helped local governments pay for so-called “multi-modal” projects — often bike trails.

“Future investments in new transit projects would be funded by the localities that use and benefit from these localized projects,” the proposal says.

How Floods Could Cost More

Do you live near a flood-prone area or care about someone who does? Your life could get more complicated under Trump’s budget, which eliminates the Flood Hazard Mapping Program.

Flood maps are controversial because when they change — and change always means “expands,” because development almost always expands — they require more homeowners to buy flood insurance. On the other hand, the consequences of failing to update flood maps can be devastating, which America learned the hard way during Hurricane Katrina. People buy homes thinking they are safe from floods, and a developer may build on unsafe land. (And if you have flood insurance, it’s important to know what it does and doesn’t cover.) And when a flood comes, recovering from it without insurance assistance can be really expensive.

The budget says Trump’s administration will “explore other more effective and fair” ways to pay for new maps. Detractors oppose anything that makes flood insurance premiums more expensive, however, as that might lead to folks dropping flood insurance, creating another long-term headache.

Need a Lawyer? It’ll Cost You

If you’ve ever had a dispute with a landlord or a domestic partner and turned to a non-profit legal aid service for help, you might have been helped by the Legal Services Corp. Since 1974, Legal Aid has provided access to America’s otherwise expensive court system through a network of 133 independent nonprofit legal aid programs in 800 offices around the country. The program is targeted for elimination in the Trump budget. Some 1.9 million Americans used legal aid in 2014, the last year for which data is available, the organization says.

“Our nation’s core values are reflected in the LSC’s work in securing housing for veterans, freeing seniors from scams, serving rural areas when others won’t, protecting battered women, helping disaster survivors back to their feet, and many others,” said Linda Klein, bar association president, in a statement supporting the LSC. “The LSC embodies these principles by securing the rights of the least fortunate among us.”

Military Base Cities, Cyber-Warriors & Veterans Will Benefit

Trump’s budget calls for a huge increase in defense spending, with general guidance suggesting cities and companies that support nearly every branch of the military would benefit. The budget calls for fresh spending on munitions, warships, F-35 Joint Strike Fighters and a “fully equipped” Marine Corps. It also calls for large investments in cyber security, which appears under several budget items, including a $1.5 billion program within the Department of Homeland Security to “protect federal networks and critical infrastructure from an attack.” If you work in these fields, this budget could be good news for you.

The Department of Veterans Affairs also gets a sizable budget bump of 6%, including $4.6 billion to improve VA health care and “patient access and timeliness of medical care.” The funds will help continue the Veterans Choice program, which lets vets choose private providers when seeking care.

Out of Work? There’s Less Money for Retraining

Unemployed Americans, particularly older Americans, who seek retraining help may have a harder time under Trump’s budget. The Labor Department, which funds many such programs, is targeted with a 21% cut. Federal funding for local job training programs would be decreased, “shifting more responsibility” to local authorities. Specifically, Trump’s budget eliminates the $434 million Senior Community Service Employment Program, a community service and work-based job training program for older Americans that prioritizes help to veterans. Trump’s budget specifically calls out the program as “ineffective,” saying as many as one-third of participants fail to complete it, and only half of those get jobs.

Vouchers & Charters Win, After-School Programs Lose

For fans of charter schools and other open-enrollment public school initiatives, Trump’s budget includes a lot of new money and support. There’s $250 million for a new school choice program, $168 million more for charter schools, and $1 billion more for voucher-style programs that let local funding “follow the student to the public school or his or her choice.”

Trump’s budget eliminates $1.2 billion spent on 21st Century Community Learning Centers, which funds after-school and summer programs for 1.6 million kids around the country. The budget says the program “lacks strong evidence of meeting its objectives.” Both increases and cuts in spending in these areas could affect what families budget for education and child care.

Image: ginosphotos

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Why the CFPB Is in Danger of Getting Trumped

The Trump administration has taken a concerted effort to destroy, defang and scrap the Consumer Financial Protection Bureau. Here's why it's wrong.

Just beyond the Trump swelter of the hour, lawmakers have been busy concocting plans to dismantle key achievements of the Obama years. Among those accomplishments currently targeted is a concerted effort to destroy, defang, scrap (feel free to select the word) the Consumer Financial Protection Bureau.

The CFPB was created to protect consumers from the kinds of predatory practices that played a big part in the financial meltdown of 2007 to 2008. The idea was simple: Create a federal agency to be, to quote Sen. Elizabeth Warren, “the cop on the beat” in the financial sector. The CFPB was to have the ability to take decisive action to shut down questionable practices. The CFPB was designed to be the regulatory safeguard against future financial wipeouts. (Think: Batman.)

It’s Populist!

Given the populist nature of Mr. Trump’s ascent to the White House, it remains for me a real head-scratcher as to precisely why the CFPB is on the chopping block.

The agency is tasked after all with policing financial products (and practices) that specifically take advantage of consumers. It has jurisdiction over a host of consumer “favorites” like credit reporting agencies, payday lenders, debt collectors, debt settlement companies and student loan servicers, as well as banks, credit unions, credit card companies and many other financial services organizations operating in the United States.

With the power to ban financial products deemed “deceptive, unfair or abusive,” the CFPB also possesses the authority to impose significant penalties on financial predators.

What kind of penalties are we talking about? More than $5 billion so far, including a record $100 million against Wells Fargo in 2016 ($185 million all in). The CFPB has helped nearly 30 million consumers recover several billions of dollars in remedies from financial companies. All this, and in 2016 the CFPB, experiencing a huge amount of growth both in programs and staff, stayed $67 million under its budget cap.

So, if the CFPB hasn’t been too expensive for the federal government to run, what’s the problem? Follow the money.

Conservatives argue that the Dodd-Frank Wall Street Reform and Consumer Protection Act (aka Dodd-Frank, the law that authorized the creation of the CFPB) has cost businesses more than $24 billion in compliance-related expenses and 61 million paperwork hours. It’s also a federal agency, and it has a fairly big budget. This is what the Republicans are focused on.

You can almost hear President Trump: “So, why are we spending so much money on this thing? It’s sad, really.”

It’s Under Attack

Rep. Jeb Hensarling, chair of the House Committee on Financial Services, cited what he calls “the avalanche of regulations that smother the U.S. economic system” in his latest rally to kill the Consumer Financial Protection Bureau. This so-called “avalanche” was in response to an economic event that nearly destroyed the world economy.

Hensarling seems to be motivated primarily by conservative ideology, a central tenet of which being that too much centralized power is a bad thing. “The CFPB is arguably the most powerful, least accountable agency in U.S. history,” Hensarling wrote in a recent Wall Street Journal opinion piece. “CFPB zealots have the power to determine the ‘fairness’ of virtually every financial transaction in America. The agency defines its own powers and can launch investigations without cause, imposing virtually any fine or remedy, devoid of due process.”

In an Oct. 11, 2016, decision, a federal appeals court ruled that the president should have the authority to fire the director of the CFPB other than for cause. The agency is currently appealing the court’s decision. “Other than the President,” Judge Brett Kavanaugh wrote for the 2-1 majority, “the Director of the CFPB is the single most powerful official in the entire United States Government, at least when measured in terms of unilateral power.” Anticipating the popular response, Kavanaugh added, “That is not an overstatement.”

The reason I say the attacks are mainly ideological is complicated, but in essence it seems like pressure from financial sector lobbyists plays a big part in the pushback against the CFPB and that the focus on centralized power is really just putting sheep’s clothing on an influence-buying wolf.

I don’t know how else to view the willful misunderstanding of what the CFPB actually does, which is simple: It demands accountability from financial institutions. The idea that, as Hensarling said, the CFPB “requires lenders essentially to read their clients’ minds, know and weigh their clients’ comprehension levels, and forecast future risk” is absurd.

Consider, if you will, the various ways consumers got screwed by the Wild West years in the finance world that led to the Great Recession. There is no mind reading required, but plenty of policing is needed.

It doesn’t matter if it’s the latest SNL sketch or Trump’s policy man Stephen Miller proclaiming that the new administration accomplished more in three weeks than most presidents achieve in four or even eight years — a claim that was quickly quashed — though I suppose he was right if you consider chaos an accomplishment. What matters is that we’re getting distracted from assaults on real progress made since 2008.

Killing the CFPB is an ill-advised and dangerous move, and one that will backfire on Republicans in the long run. As we as consumers filter through the latest, greatest Trump outrage (or triumph), and as we focus on the news cycle, huge things are happening behind the scenes. This one might be a doozy, making America unacceptably vulnerable again.

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

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How to Protect Your Money Under Trump’s Financial Regulation Changes

An executive memorandum signed by President Donald Trump on Feb. 3 is aimed at consumers’ retirement accounts and will impact a majority of Americans almost immediately. The memo might delay, potentially forever, the so-called “fiduciary rule” that would have legally bound financial advisers to give retirement savers the best advice possible.

Critics lashed out, claiming the memo was a gift to Wall Street, as it threatens to roll back rules designed to protect Americans’ retirement accounts instituted in the wake of the financial crisis, when some savers saw their account balances drop by 25% in a single year, according to an estimate from Hewitt Associates. But supporters say those rules were flawed, and that this cure for the financial crisis was worse than the disease.

Investors’ Best Interests Could Take a Back Seat

If you are looking for a bottom line, here it is: Financial advisers could be let off the hook from higher standards that were about to be placed on the advice they give investors. Those standards would have opened up advisers to lawsuits if they gave advice to clients that put their own commissions above their clients’ best interests.

But at least some of the intended effect of the rule may still happen. Because the rule was years in the making, and just weeks away from taking effect, many brokerages have said they’ve already implemented the changes it required. Some are even using the moment as a marketing opportunity.

In practical terms, the new rules discourage advisers from offering commission-based products to buyers, so some firms, like Merrill Lynch and JP Morgan Chase, were moving away from commission-based IRAs. That change will probably continue.

For now, the memo also means consumers must be vigilant and ask financial advisers, “Are you getting a commission?” when taking their advice.

Consumer advocates spent years working to get the federal government to enact a rule that targets these potential conflicts of interest. They finally made progress in 2010 when the Labor Department, which regulates some retirement accounts, initially proposed a fiduciary rule. After years of bickering with the financial industry, the Labor Department finally settled on the rule in April 2016. It was set to take effect this April.

Only retirement accounts were to be covered by the rule; normally taxed brokerage accounts were not. The rule would have covered certain financial advisers who use titles like wealth manager, investment consultant or broker; certified financial planners are already required to meet the fiduciary standard.

Many consumers don’t realize that current rules mean some advisers can legally steer clients into high-commission products when better, cheaper options exist. The Obama administration, which supported the Labor Department rule, issued a report last year claiming that less-than-best advice to savers costs Americans $17 billion annually in retirement funds.

Undermining Consumer Protections?

A second financial-related executive action signed by Trump last week may have even farther-reaching consequences, but they won’t happen right away. That order called for a review of financial reform legislation known as “Dodd-Frank,” which passed after the housing bubble burst. Its numerous protections included tighter monitoring of the stability of banks and creation of the Consumer Financial Protection Bureau. Trump’s order calls for the Treasury Secretary to review the law and recommend changes within 120 days.

Advocacy groups said that taken together, the two orders threaten to undermine a host of new rules put in place to protect consumers.

“President Trump’s comments and executive order today suggesting rollback of financial regulations would violate his campaign promises to hold Wall Street accountable and to help everyday American families,” said Christine Hines, Legislative Director of the National Association of Advocates, in a statement. “We must never forget that the reckless behavior of big banks and predatory lenders and the lack of safeguards to hold them responsible for their actions caused the Great Recession, leaving millions of Americans without jobs, wiping out their savings, and causing devastating loss of their homes.”

A draft of the fiduciary rule memo called for a 180-day delay of the rule and a review by the Labor Department. The order actually signed by Trump omitted the language calling for immediate delay, but that’s still a likely outcome. Acting U.S. Secretary of Labor Ed Hugler made that clear in a statement:

“The Department of Labor will now consider its legal options to delay the applicability date as we comply with the President’s memorandum,” it read.

The memo was cheered by some on Wall Street. Discouraging commission-based products hurts smaller investors who don’t like paying up-front fees, they argued.

“Americans are going to have better choices and Americans are going to have better products because we’re not going to burden the banks with literally hundreds of billions of dollars of regulatory costs every year,” said National Economic Council director Gary Cohn to the Wall Street Journal. “The banks are going to be able to price product more efficiently and more effectively to consumers.”

But consumer advocates were unanimous in their condemnation of the review, saying it could remove a critical tool for protecting unsophisticated retirement savers.

“If the Department of Labor follows through on this threat and delays and repeals the rule, brokers and insurance agents will be free to go back to putting their own financial interests ahead of the interests of their clients, recommending investments that are profitable for the firm but not the customer,” the Consumer Federation of America said in a statement. “And they will be permitted to do all this while claiming to act as trusted advisers.”

Sen. Elizabeth Warren (D-Mass.), said in a statement that the review “will make it easier for investment advisors to cheat you out of your retirement savings.”

“Donald Trump talked a big game about Wall Street during his campaign — but as President, we’re finding out whose side he’s really on,” she said.

Retirement savers should know that the immediate effect of the Trump memo means advisers can continue to give out bad advice that’s compromised by commission structure; the rule that remains in effect now requires only that the investment is “suitable.” That might sound like a small distinction, but John Bogle, the man who popularized low-cost index funds, put it in context in an interview with Business Insider at the end of December:

“Fiduciary means putting the client first, and as I have observed in the past, the only other rule we have is the client comes second,” Bogle said.

The Trump administration did not immediately respond to requests for comment on how the actions would affect consumers.

How You Can Protect Yourself

Before making any investment decision based on an adviser’s recommendation, always ask if he or she will earn a commission. When picking an adviser, ask if their firm accepts fiduciary responsibility. Even if it’s not legally required, advisers can voluntarily accept the fiduciary standard. But make sure you get that in writing.

It’s also wise to monitor your financial goals, like building and maintaining a good credit score, which you can do for free here on Credit.com.

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Trump’s Executive Order to Limit Regulations: What It Means for Your Business

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Just 10 days after taking office, President Donald Trump continued to check items off his campaign promise list as he signed his latest executive order on limiting regulation of small businesses.

The executive action, titled “Reducing Regulation and Controlling Regulatory Costs” was signed Monday morning after President Trump met with small business owners. The four-page document outlined two key changes to current government operations. First, any new regulation an agency enacts must be met with two regulations that will be eliminated. And second, there will be a cap on the cost of new regulations for the federal government, which will be $0 for fiscal year 2017.

The action gives substantial power to the Director of the Office of Management & Budget, who has yet to be confirmed. Rep. Mick Mulvaney (R-South Carolina) is currently up for that position and Senate hearings were held last week as part of his confirmation bid. The Director, under Monday’s executive order, would determine the incremental costs allowed for each agency as well as how the costs of regulations would be measured.

Experts on governance echoed skepticism at how the executive action would actually be implemented.

William Gale, a fiscal policy expert at the Brookings Institution, told the Washington Post, “The number of regulations is not the key. It’s how onerous regulations are. This seems like a totally nonsensical constraint to me.”

What Does This Mean for Your Business?

Levi King, CEO and Co-Founder of Nav, is concerned about the implementation of the action, but the spirit behind it is a step forward for small businesses.

“If small businesses are focused on paperwork and licenses, if half their money’s spent satisfying government regulations, they won’t be in business long,” King said. “I support smart regulation, but eliminating bureaucratic rulemaking that stifles innovation and discourages new jobs and growth would be a welcome development. On the other hand, as we saw with the airport chaos this weekend, major policy changes require a thoughtful, measured approach.”

While the executive action does a lot to limit the cost of additional regulation for the federal budget, the decreased cost to small business owners is yet to be seen. In the NSBA survey, nearly 40% of respondents said new regulations had a “very significant” impact on their plans to grow or expand their business.

Streamlining and simplifying government regulation of small businesses was a major topic of last week’s Senate confirmation hearings for Linda McMahon, Trump’s nominee to head the Small Business Administration, with Republicans and Democrats urging that there were necessary changes needed to make sure small business understand regulations and are also getting more access to government contracts. (You can read more about the hearing here.) So, it should come as no surprise that limiting regulations is a focus of the new administration.

President Trump was surrounded by small business owners as he signed the executive order Monday, but the law itself mostly pertained to limiting the cost of regulatory oversight on the federal government. A recent survey on small business regulations from the National Small Business Association found that small business owners reported spending an average of $12,000 a year on regulations and 58% of owners said federal regulations where the most burdensome source. The Internal Revenue Service, Environmental Protection Agency and Department of Labor were cited as the federal agencies with the most burdensome regulations in the survey, with the IRS dominating the vote.

For many small business owners, $12,000 a year is the difference between profit and loss, especially if you’re in your first few years of business. And when margins are tight, taking out business loans to finance a new hire to help you become compliant or to pay for legal expertise to help you navigate the regulations can get expensive fast, especially if you have a bad business credit score.

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Are Huge Budget Problems on the Way With Trump?

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Q. Is it wrong to think we should also expect huge budget problems and less aid to the states from decreased revenue? Given Trump’s penchant for borrowing and record of bankruptcies, “volatility in the markets” may be an understatement.
— Looking ahead

A. We’re still waiting to see the depth of the new president’s plans, and exactly what he’ll pursue in terms of policy.

President Trump’s inaugural address can be summed up in two words: “America First.”

He vowed that every decision on taxes, trade, immigration and foreign policy would be made with U.S. interests first, Altair Gobo, a certified financial planner with U.S. Financial Services in Fairfield, New Jersey, said.

“It will be interesting to see if his campaign rhetoric will mirror his actions as our 45th president,” Gobo said. “In other words, he has talked the talk, but will he be able to walk the walk?”

Gobo said most of the policies and plans Trump has spoken of have not yet been presented, and even the ideas presented could change drastically before they are finalized.

He said the United States is much larger and more complex than one or a few of Trump’s business entities, with more checks and balances preventing Trump from running the country as he would one of his businesses.

Also, Gobo said, even with the Senate, House and presidency held by a Republican majority, it doesn’t mean they’re all in agreement when creating policy.

“One major positive component is that Trump has worked with governments and businesses around the world so he may have rare, practical insights into international economics and trade above and beyond the typical politician,” Gobo said.

The Economic Pros & Cons of a Trump Presidency

Gobo offered a list of pros and cons.

The Pros

  • The Senate, House, and president should all agree on pro-business policies which can lead to growth in the economy and more jobs, Gobo said.
  • New infrastructure investments could be additional fuel for this growth.
  • Trump didn’t get to his current state by making uneducated decisions “and he certainly will not do anything to sabotage growth now,” Gobo said.
  • Wishes to open up state lines and promote competition among healthcare companies could lower costs for the average American, Gobo said.

The Cons

  • Gobo said there are concerns over immediately and fully enforcing immigration laws as Trump has said he will do. This could cost the federal government revenue, shrink the labor force, and possibly reduce the real GDP by $1.6 trillion, Gobo said, sourcing the American Action Forum, a right-leaning policy institute in Washington, D.C.
  • Trump’s healthcare idea may not garner the savings he intends, Gobo said, because policy in states may not translate to the same access to networks that local providers can contribute in-state.
  • Trump made many promises to the American people that may be a challenge to deliver, Gobo said.
  • And then there’s Twitter. “Combine Twitter with an impulsive personality and he has the ability to effect reputation or policy perception very quickly,” Gobo said.

Then there are taxes to consider.

Gobo said among the pros: Lowering taxes should create incentives to work and spend, many believe lower taxes are also a catalyst for growth, many believe the current tax policy is archaic and too complex, and lower corporate tax rates may bring corporate tax money back to the US.

But on the con side, Gobo said, what if growth does not occur after tax cuts are made? And the Trump plan, according to the Tax Police Center, would require spending cuts to avoid adding about $1.1 trillion to the federal debt by 2025, Gobo said.

Policy takes time to implement and the effects of new policies take time to present themselves, Gobo said.

“The true effects will be unknown for some time and we should not be eager to adjust strategies based on the multitude of `what if’ scenarios being presented at this time,” he said. “What we should do right now is follow the plans we have made for ourselves for the next 10, 20, or 30 years and not get caught up in the unproductive nature of short-term ideas that we can’t control.”

Your financial plan should allow enough flexibility to make any necessary adjustments based on any new tax or policy changes that may be enacted, Gobo said.

Editor’s note: Staying on top of the aspects of your finances that you can control can help you feel more certain in uncertain times. Managing your credit well is one of those things. You can get your two free credit scores, plus a snapshot of your credit report details, updated every 14 days, absolutely free on Credit.com.

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The Issue With Nixing the Affordable Care Act That No One Is Talking About

Without a replacement, millions Americans will lose health insurance — and that creates a moral hazard. Here's how.

Never mind his crowd-favorite pledge to build the Great Wall of Mexico with a “big, fat door,” President Donald Trump’s cornucopia of campaign promises included many a forgettable vow. But you had to be whale-spotting from a lily pad on Loon Lake to miss the president’s pledge to repeal the Affordable Care Act (ACA).

What may not be as obvious is the effect that such a move could have on crime — specifically medical identity theft.

Promises are often downgraded to “ideas” post-victory, but now that Candidate Trump is leader of the free world, it’s time to revisit this major pledge. One of the first things our new president did Friday was sign an executive order urging his administration to fight the ACA.

The executive order has no teeth. It simply states the Trump administration’s position, and, sure, that carries with it all the heft brought to bear by the Oval Office. But what is worrisome for proponents of the ACA is that the executive order follows current legislative efforts in Congress to obliterate the centerpiece of President Barack Obama’s legacy. With a newly installed majority, Republicans are poised to dismantle the historic law that helped 20 million uninsured Americans get affordable healthcare. Most recently, in a 227 to 198 vote, members of the House approved a budget that would kill major provisions of the ACA.

“This is a critical first step toward delivering relief to Americans who are struggling under this law,” House Speaker Paul Ryan said last week.

It’s hard to say exactly how many Americans would lose their health insurance should Obamacare go away, since Republicans have yet to outline a plan to replace it. However, a recent study from the non-partisan Congressional Budget Office (CBO) found a straight-up repeal would leave about 18 million people uninsured the following year.

It goes without saying the majority of those affected will not resort to a life of crime in order to acquire healthcare. In fact, it is unlikely, but should Congress, in concert with the Trump administration, repeal the ACA without providing a viable alternative, the sheer number of uninsured people will create a moral hazard — crimes will become a possibility where they would not have been — and this can only result in an uptick in the medical identity theft numbers.

What Is Medical Identity Theft?

As I explain in my book, Swiped: How to Protect Yourself in a World Full of Scammers, Phishers and Identity Thieves, medical identity theft is widespread, and potentially deadly.

While there is a long and sordid history of organized crime running healthcare-related scams whereby crooked doctors and garden-variety crooks team up to defraud insurers or get prescriptions for controlled substances that are then sold for recreational use, the theft of one person’s healthcare by another is a very real thing, and it can be life threatening.

Your medical records provide information that can be used in a variety of ways. For instance, once a criminal has your personal information and insurance details, he or she can use it, or enable another person to use it to gain access to the healthcare system in your name, and the result could be the contamination of your medical records with his or her co-mingled information.

Nothing is more dangerous than going to a hospital and having “your” medical records, as used by an identity thief or his/her “customer,” reflect an inaccurate blood type, medical history, or the existence or absence of certain allergies when you are receiving medical care, particularly in an emergency situation.

Another result of medical identity theft can be denial of service. If an impostor uses your insurance to gain access to healthcare, it can affect your own ability to access care: Many insurance plans have annual caps on certain types of procedures and treatments — and obviously no insurance company is going to pay for one person to have an appendectomy twice. An identity thief with access to your insurance could drain your coverage before you even know it’s happened and leave you in the lurch when you need it.

How to Prevent Medical Identity Theft

There are ways to defend against medical identity theft. Most involve proactive monitoring of your medical files. Many larger medical providers permit you to review your medical records by way of a secure website. If your doctor doesn’t offer such a service, you should sit with him, her or their staff at least once per year and review your files to confirm their accuracy. In addition, you should intently review any correspondence you receive from your health insurer, particularly Explanation of Benefit Notices, which will be the most immediate way to discover theft of services.

You should also review your credit reports at least once a year at AnnualCreditReport.com to make sure that all information is accurate. If you notice anything involving medical debt or a collection relating to a medical bill that is news to you, confirm its accuracy and that it’s not an indication you are a victim of medical identity theft.

You might also wish to keep track of your credit scores. Any sudden, unexplained drop could indicate a problem, and that issue might stem from medical identity theft. (You can view two of your free credit scores, updated every 14 days, on Credit.com.)

As for threats to the ACA, nothing has happened … yet. Lawmakers are still trying to figure out how to approach their stated goal of repealing Obamacare, and it won’t be easy. If you have concerns, you can call Speaker Ryan and other lawmakers who have vowed to do away with the ACA. As for the stated goal of repealing the ACA: An ounce of caution may be worth a pound of cure.

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

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