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Daily Kos - October 2, 2014, by Laura Clawson - Pennsylvania's charter schools are rife with fraud and mismanagement, as anyone who reads local newspapers knows. But a new report from the Center for Popular Democracy, "Integrity in Education, and Action United" details just how big the problem is. Pennsylvania charter school enrollment and funding is growing rapidly and without adequate oversight, and according to the report, there's been at least $30 million in fraud by charter school officials since 1997. For instance:

In 2012, the former CEO and founder of the New Media Technology Charter School in Philadelphia was sentenced to prison for stealing $522,000 in taxpayer money to prop up a restaurant, a health food store, and a private school. Media coverage of parent complaints of fiscal wrongdoing initially uncovered the fraud. Nicholas Tombetta, founder of the Pennsylvania Cyber Charter School, has been indicted for diverting $8 million of school funds for houses, a Florida condominium, and an airplane. In 2005, a former business associate of Tombetta surfaced allegations of fraud, which led to the investigation. Dorothy June Brown, founder of Laboratory, Ad Prima, Planet Abacus, and Agora Cyber charter schools, will be retried this year for allegedly defrauding the schools of $6.5 million and conspiring to conceal the fraud from 2007 to 2011. Two administrators plead guilty and testified against Brown in her first trial. In 2009, the Pennsylvania Department of Education conducted an audit of Agora after receiving complaints from parents of Agora students.

You'll notice that in each of those cases, it was complaints from parents or a tip from a business associate that led to investigations. Pennsylvania should be doing more to uncover wrongdoing before it's so blatant that parents are screaming about it. In Philadelphia, there are 86 charter schools and only two auditors. What's more, charter school auditors in Pennsylvania don't actively look for fraud; the report calls for expanded local audit authority, fraud risk assessments for all charter schools in the state, and targeted fraud audits. The report's authors also call for a moratorium on new charter schools until these oversight goals are met.

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My path as an activist had been fairly conventional. After law school, I represented low-wage Latino workers in Queens who had been victims of wage theft, and I helped write New York City’s groundbreaking paid sick days law. Later, I created a campaign called Fed Up, urging the Federal Reserve to use its economic tools to focus on raising wages and creating jobs, not just minimizing inflation. I didn’t think of myself as a direct beneficiary of these policies: I was an upper-middle class white man with elite degrees, a bright future and financial security. I could focus on empowering others.

Read the full article here.

 A coalition of community and labor groups known as “Fed Up” said 39 members planning to stay at the hotel hosting the Federal Reserve’s prestigious annual retreat in Jackson Hole, Wyoming, were unfairly singled out when their 13 room reservations were canceled.

The group, which is pressing the U.S. central bank to appoint more minorities and women to its leadership, said most of its attendees would have been black and Latino. It has filed a complaint with the U.S. Department of Justice and other government officials. The group believes it lost the rooms because of “specific targeting of the Fed Up coalition.”

Fed Chair Janet Yellen is the first woman to lead the U.S. central bank and it remains under pressure to become more diverse. Democratic presidential nominee Hillary Clinton joined calls for reform in May and the central bank has taken fire from Republicans, who warn its low interest rate policies risk inflating another asset bubble.

The Fed Up coalition, which wants rates to stay low to boost hiring and lift wages, has discussed its concerns with Fed officials, including Esther George, president of the Kansas City Fed, which hosts the annual Jackson Hole monetary-policy conference in late August.

Faced with criticism that it doesn’t look out for the interests of poorer Americans, the Fed has been making efforts to change. The Kansas City Fed said on Thursday that it will hold a conference on the challenges low- to moderate-income communities face on Sept. 7-8 at its headquarters.

Booking Error

Alex Klein, vice president and general manager of Grand Teton Lodge Company and Flagg Ranch, said the reservations were canceled because “an error in the booking system” resulted in the Jackson Lake Lodge being oversold by 18 rooms. “We worked proactively and diligently with guests to relocate them to our nearby Flagg Ranch property,” he said in a statement.

The Kansas City Fed has a contract to provide rooms for guests at the symposium and “has no input regarding any decisions that the Lodge makes outside of its contract with us,” said bank spokesman Bill Medley.

The symposium, which gathers policy makers and economic-thought leaders for a three-day retreat in the heart of the Grand Teton mountains, is probably the most important event of its kind on the central-banking calendar. Yellen will attend and plans to address the conference on Aug. 26. This year’s meeting, which is invitation only, is focused on the topic “Designing Resilient Monetary Policy Frameworks for the Future.”

The hotel, while remote, is open to the public and Fed Up representatives have made the trip for the past two years. In 2015, Fed Up held an alternative conference at the Lodge which was addressed by Nobel-prize winning economist Joseph Stiglitz.

By Steve Matthews & Jeanna Smialek

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KIM BROWN, TRNN: Welcome to the Real News Network. I’m Kim Brown in Baltimore.

Interests rates will remain unchanged. That coming out of this week’s meeting of the Federal Reserve in DC. The official word from the feds, per their own statement, was that job gains have been “solid”, that household spending has been growing strongly, and inflation is running below expectations. But does this mean that the economy is actually doing well or are we still in a recession dressed up to appear better than what it actually is?

Joining us today from New York City is Jerald Epstein. Jerald is the co-director of the Political Economy Research Institute. He’s also professor of economics at the University of Massachusetts at Amherst. Jerald welcome back.

JERALD EPSTEIN: Thanks a lot Kim.

BROWN: Jerald let’s start with the basics and then we can delve a little bit deeper. If the economy is showing the signs of strength as the Fed has indicated, then why didn’t they raise interest rates now and do you think that they are likely to do so at all this year?

EPSTEIN: Well I think Janet Yellen who’s the chair of the Fed, is aware that even though it’s been showing strength and the economy has been growing moderately for several years now, that there’s still much more room to go. That is that wage growth has gone up a tiny bit more than inflation recently, it’s still pretty stagnant, pretty flat line and she knows there’s still a number of workers out that who are so discouraged that they haven’t joined the labor force. So Janet Yellen is concerned about the labor force and the growth of wages but the problem is twofold. First of all, it’s always dangerous to raise interest rates around election time. So traditionally the federal reserve, they’ll try not to do that, move interest rates right around an election. So that’s one factor leading them not to do anything.

The second factor leading them not to do anything is that keeping inflation under control is one of their main mandates. They have two. Maintaining inflation at a low rate and they have a 2% target, and reaching high employment. Inflation is still below 2%. There’s really no signs of inflation going up. So there’s no compelling reason from the point of view of the macro economy to raise interest rates.

BROWN: It’s funny that you mention that the Fed is less likely to raise interest rates or even mess with the interest rate around election time because the Republican nominee for president, Donald Trump has already accused Chairwoman Yellen of keeping the interest rates unchanged in order to appease the Obama administration. She of course has denied this. What are your thoughts?

EPSTEIN: Well I don’t think she did it for Clinton or Obama. But it is I think a tradition and it’s common for Federal Reserves not to raise and certainly change interest rates right before an election. So she is in sort of a tradition of what the Federal Reserve typically does. And it’s also typical especially recently for politicians to make the Federal Reserve the whipping boy or girl for political reasons. Sometimes there’s good reasons. For that.

But there was something kind of unusual for this meeting. In the recent meetings it’s been unanimous to keep interest rates the same or to mostly do what the Federal Reserve has done. But this time it was quite contentious. There were actually 3 people on the federal open market committee, the ones who make this decision who voted to raise interest rates.

This is kind of challenge to Janet Yellen’s leadership in this regard and it also shows what kind of pressure the Federal Reserve is under, particularly from the banks and the mutual fund industry, the insurance industry because with interest rates being so low, it’s very difficult for them to eek out much of a profit. And is typically the case when interest rates are very low for a very long period of time. Some sectors and very powerful important sectors of the financial industry push very hard for interest rates to be raised and they usually get a pretty good hearing at the Federal Reserve [be]cause the Federal Reserve has traditionally done pretty much what the banks have wanted them to do.

BROWN: Jerald it seems as if there’s not enough agreement between the Federal Reserve and among every day Americans on how well this economic recovery is going. So let’s unpack some of the elements of this. Starting with Chairwoman Janet Yellen’s comments on labor markets.

JANET YELLEN: We’re generally pleased with the progress of the economy and the decision not to raise rates today and to wait for some further evidence that we’re continuing on this course is largely based on the judgement that we’re not seeing evidence that the economy is overheating and that we are seeing evidence that people are being drawn in in larger numbers than what I would’ve expected into the labor market and that that’s healthy to continue.

BROWN: So the unemployment rate was under 5% in August and the caveat to that is more Americans are working part-time jobs. Plus, the gig economy is one way that people are surviving and supplementing their income. So is unemployment published monthly by the Bureau of Labor statistics, giving us an accurate figure on the number of Americans who are out of the labor force?

EPSTEIN: They don’t have an accurate number. They have estimates and I think it’s true that there’s still quite a few so called discouraged workers who are out of the labor force. It’s also the case like we said in the beginning that wage growth has been stagnant. Look, the Federal Reserve has a real dilemma here. On the one hand and this is typically the case with Janet Yellen who I think does want to indicate that their policies have had some effect, otherwise nobody will want them to continue these policies. And she thinks that they have had some positive effect on employment and I think they have.

But on the other hand their policies cannot turn around the long run decline of our economy. We need much different kinds, much bigger, much more radical policies in terms of public investment to generate jobs, hiking the minimum wage to a living wage, providing much more in a way of a safety net for workers, protecting pensions and other investments. So the list is very, very broad and very deep. And the Federal Reserve has been pretty reluctant to go further down that list.

The Federal Reserve could do more. They could use different tools to invest directly in the economy. There’s a group called Fed Up which has proposed that they do this. But Janet Yellen and her committee want to stay pretty close to their broader toolkit that they’ve developed and are really afraid to, I think take more radical action which they plausibly could take.

But in the end it really raises questions of the Federal Reserve’s legitimacy. Can they take some kind of really radical action without the broader government saying go ahead and do it? And until the political stalemate we have is resolved, I’m afraid the Federal Reserve can’t do much more and that means this kind of stagnation in wages and so forth is going to continue.

BROWN: Jerald you raise an excellent point about wage stagnation and how wages have largely remained flat going back 20, 30, and even 40 years depending on who you ask. But new census data this month says that household income jumped over 5% which is the largest such gain in decades but that top 1% of Americans saw an increase of around 7% rise in their income. If most of the economic recovery gained since the great recession of 2007, 2008--if most of these gains have gone to the top1%, does it still count as a recovery if it’s not being felt by the majority of Americans?

EPSTEIN: No it does and this has been a very lopsided so called recovery and yes there have been some modest gains for the middle class and some working class people. So the Federal Reserve actions have had some positive effect. But until you really change the structure, change the tax policies so that the wealthy have to pay more of their taxes so the multinational corporations can’t park their earnings overseas and not pay any taxes like Apple and other corporations have been doing until you have much more aggressive jobs programs to bring about a Green transition and many other things. We’re not going to have a real recovery. These kind of very small sorts of gains which are gains but aren’t enough are going to be the best we’re going to see.

BROWN: Jerald what’s keeping inflation in check right now? Is it cheap oil prices?

EPSTEIN: It’s several things. First of all, cheap oil prices and other commodity prices are one thing. But they’re also partially related to the headwinds in the global economy against economic growth. China’s not growing as much so they’re not demanding as much oil and other commodities. Many other developing countries aren’t growing so fast. Europe isn’t growing hardly at all.

So this really dampens the demand for all of these commodities and with these prices going down that does keep inflation in check. The other thing is, all of the forces that are keeping wages in check. That is, imports from China, the union busting that’s been going on, the threat of multinational corporations to move abroad. All of these factors plus more are making it very difficult for workers to have their wages go up. Wages are a cost so that to some extent keep inflation in check as well.

And finally you have the retail industry that’s subject to loss of competition that just keeps squeezing and squeezing and squeezing workers more and more. Until we get big increase in the minimum wage, until we get policies to put workers back to work at well-paying jobs, we’re not going to see real wages go up and we’re also not going to see prices go up very much at all.

BROWN: And lastly Jerald, the wealthiest Americans, the top 1% of Americans are fairing very well and we are experiencing income inequality probably at the largest gap since the Gilded Age. We have seen so many sickle economic bubble burst over the past 20 years with the tech bubble bursting in the late 90’s and the housing bubble bursting in the mid 00’s. Are we at risk of another such economic bubble burst on the horizon any time soon.

EPSTEIN: Yes, we’re always at that kind of risk. It’s hard to see where exactly the bubble would come from. There are little bubblets going on all over the place that don’t seem so broad and connected up with debt and the financial system that it seems as so we’re going to have a kind of bubble burst the way we saw in 2007, 2008 but we might have bubblets burst in the high tech industry and so forth. What’s more likely is this slow burn of stagnation and increases in distress effecting so many people in the United States except for the wealthy who will continue to do very well. Not only income inequality at all-time highs, wealth inequality, how much assets people own has grown and grow and grow and grown. If you look for example, if the net wealth, that is assets minus liabilities, minus debt of African Americans in this country. A report recently came out that said, the median net wealth of African Americans is zero. There’s no net wealth. So this system cannot continue to go in this form. It helps to explain a lot of the political disorder that we’re seeing. The political fighting up we’re seeing and it’s just going to keep going unless we have some fundamental changes in the economy.

BROWN: Indeed. We’ve been speaking with Jerald Epstein. Jerald is a co-director of the Political Economy Research Institute. He’s also professor of economics at the University of Massachusetts at Amherst. Jerald as always, we appreciate you joining us here on the Real News.

EPSTEIN: Thank you very much Kim.

BROWN: And thank you for tuning in to the Real News Network.

End

DISCLAIMER: Please note that transcripts for The Real News Network are typed from a

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