It’s odd to see Democrats talking about a Biden “100 days” when Obama did nothing like that when he actually did have a mandate to do so that he ignored. Did they not get the memo that their blue wave didn’t hit the beach? It’s even odder to see Chuck Schumer affecting a Damascene conversion, particularly with respect to the student debt part of the scheme below:
Chuck Schumer to @AnandWrites:
argues for an FDR-like first 100 days.
Says they will focus on:
$15 minimum wage
infrastructure bill that will also employee ppl w/ prison records
student debt cancellation via executive order
— Alex Thompson (@AlxThomp) November 3, 2020
Neither Lambert nor I recall Schumer supporting the either Sanders or Warren student debt cancellation plans while they were Presidential contenders (although Schumer issues so many press releases, he could very well have made a nod.
Nevertheless, Schumer did team up with Warren on calling for the cancellation of up to $50,000 per person in student debt…..after the Democratic primaries, in September 2020, as another stimulus idea. This follows an earlier coronavirus proposal in March by Schumer, Warren, Sherrod Brown,and Patty Murray to suspend federal student debt payments and wipe out $10,000 per federal student debt borrower.
But the important part is that this part of Schumer’s remarks excerpted in Twitter are disingenuous, unless he’s secretly become a Trillion Dollar Platinum Coin convert:
….we believe Joe Biden can do that with the pen as opposed to legislation.
This is at best accurate on a technical level but substantively misleading.
Warren has argued that the Department of Education has the legal authority to manage student loans, including cancelling them. But even the sympathetic Journal of Higher Education implies that her sole authority for her claim is a report from the Legal Services Center of Harvard.
The report contends that the Secretary of Education has the power to modify “a debt,” which includes wiping it out to zero. The problem here is that the exemption of student lending from the appropriations process was that in theory, it doesn’t have any budgetary impact. And that is true in fact. The Feds profit from their student lending.
Warren and Sanders admitted up front that the student loan forgiveness plans each advocated during the primaries would have budgetary impact. Each stated how they intended to pay for them. Sanders estimated the cost of his comprehensive student debt wipeout at $2.2 trillion and would have funded it with a transactions tax. Warren’s scheme, which was means tested and limited forgiveness to $50,000 and therefore would cost only $640 billion, was to be funded by her wealth tax. The March Democratic senators’ call for $10,000 of forgiveness and Warren and Schumer’s September pitch for $50,000 of relief were both positioned as coronavirus stimulus measures, yet again admitting the budgetary impact.
And the truly disingenuous part of the “with a pen” claim is that that most assuredly does not extend to private student loans, are usually more expensive and have worse terms than federal loans. Finance sites recommend them only as a supplement to federal loans, meaning if the student can’t get borrow enough from federal loans.
In addition, private loans constitute roughly $130 billion of the total of $1.6 trillion outstanding. The Secretary of Education can’t wipe them out because they are not under his domain. The Federal government could eliminate them by offering to buy them out at market value or by cancelling them and paying market value to the lender (the Fifth Amendment prohibits the government from appropriating property without compensation). But it appears that Schumer and his allies are content to leave the borrowers with the worst loans stuck in debt slavery.
In other words, I can see the argument that the Secretary of Education has the authority to wipe out federal student loans…until it hits a level where it has budgetary impact. I’m not an expert on formalities, but I don’t see how the Department of Education can finesse hundreds of billions of principal losses and a former cash machine turning into a cost. Hence Congress will get involved via budgeting (which could also come via threatening to make up for the loan forgiveness cost through cuts elsewhere).
Right now, it looks as if the Republicans will win the Alaska and North Carolina Senate races. That means that even if the Democrats prevail in the two Georgia runoff races, the Senate will be split 50-50 with Kamala Harris breaking ties.
But fiscal orthodoxy is so deeply embedded in the Democratic party that one wonders how many would be leery of the sort of big spending envisaged by the 100 days plan above, particularly since it and the Biden Covid plan are missing what ought to be the most critical items: income support for people who’ve lost income due to Covid (and particularly if they can’t work due to any new lockdowns or quarantines) and programs to help tenants facing eviction. In other words, the “100 days” list looks as if it hasn’t been updated since January 2020.
Infrastructure sticks out as another oddity, unless this is really a private equity gimmie via “public-private partnerships”. As Obama found out during the crisis, there are surprisingly few “shovel ready” infrastructure projects, and the time it takes to scope and bid out sound ones means they aren’t great candidates for short term relief. That doesn’t mean the US doesn’t have a huge deferred maintenance bill that would be a win/win for job creation and productivity; it’s that putting it high on the priority list right now looks badly out of touch.
Now perhaps Schumer is trying to act like the Senate Majority Leader he hopes to be. Of course, he has to hope the great unwashed public didn’t take notice of recent moves like waving a bunch of Trump judges through so the Senate could go on vacation.
But could Schumer be feeling the need to improve his press clips? Recall Lambert’s find from yesterday:
I saw party consultants take over a Congressional swing campaign operation this year and was it wasn’t good.
The blind impulse to blame activists and the left both demoralizes a key constituency and distracts from asking real Qs & fixing serious operational issues.
— Alexandria Ocasio-Cortez (@AOC) November 7, 2020
What 2020 showed is that the Democrats’ model isn’t working. They failed to be all that much worried about the way they hemorrhaged representation at all levels of government in the Obama years. Worse, they appeared not to care that these losses meant they were grooming fewer people for high office, and that weak bench has been way too evident. In 2016, Hillary massively outspent Trump and lost. That was largely attributed to Hillary being so widely disliked and making herself even more so, and of course Russia. But 2020 say the Dems throwing money at Senate and House races, in many cases substantially outspending the opposition, and still losing. One of my contacts, a moderately wealthy Californian, says he gave to just about every Senate race of consequence and feels had by the Democrats.
Some of the consistent poor results may be over-reliance on an air war, as in TV ads, as well as being so disconnected from voters as to not know how to craft strong messages. And it’s the cost of TV that’s served as Team Dem’s excuse for its need to curry favor with rich corporate donors.Some as readers pointed out was not understanding the power and effectiveness of talk radio. But it’s also that from what I can tell, the party sees voter contact as “get out the vote,” as in late in the election cycle, and even some of that is outsourced to unions and churches.
Schumer is up for re-election in 2022. I don’t see anything in the New York statues on incompatible offices that would bar AOC from running both for her current seat and for the Senate in 2022, although that gambit might not sit well with her voters in NY-14. But if you see Schumer engaging in more Vichy Left gestures, it would bolster the idea that he’s worried about a primary challenge.
the great thing about electing progressives is that it does not take very many to put the fear of God into the rest of the party.
Are we talking about the same Democrat party? The current Democrat party caters to the pseudo-Republican Blue Dogs while making every effort to kick the AOCs of the world to the curb.
No matter which way the Senate falls, there are enough Blue Dogs in there to make sure nothing of substance gets passed, and the Democrat party enthusiastically helps those Blue Dogs get re-elected. They aren’t always successful (voters seem to prefer real Republicans to fake ones, so bye bye Doug Jones), but they sure do try. As opposed to supporting a primary opponent for AOC.
Well, fear of communism lead to the 50s early 60s bettering of worker’s conditions. If that gets things done..
I can’t see how Biden is missing the fiscal part of the CV plan, and IMO that’s something that everyone and their dog should put some pressure on Dems. It would even make sense politically, as at least some Trump voters might get second thoughts if they get a money package…
TBH, Biden could be very cynical on this, and promise to roll back Trumps corporate/rich tax favours to pay for this – well knowing he has no numbers to do so.
If Trump was smart, and not throwing hissy fits as a sore loser he is, HE would do that, to steal Biden’s thunder (assuming there was any), and having ammunition for 2024 run.
2024 is 4 years away. None of the polticians have any long term goals especially with the electorate always thinking short term.
Thanks for posting….very timely and important.
Let’s assume that all federal student loan balances up to $50,000 comes to a total of $800 billion. (total student debt is about $1.5 trillion).
The government collects payments on this total, plus it books interest on loans that are not in payment status yet. Also late fees and penalties for loans in default.
If all balances to $50,000 are just cancelled, then the government loses the current payments – maybe $50 billion, though I am guessing. By strict accounting the government also loses the future payments and future interest accruals — a much larger number.
Now personally I want this forgiveness and have written about it in this fine blog and elsewhere. It is a recognition that our policies have been deeply flawed.
But I cannot imagine that this can be done solely by executive order, unless one goes with full MMT.
Yes, I have no idea what the actual number is, particularly since a high percentage of loans are in forbearance (loans keep accruing interest, which is added to the principal balance until the student graduates or is no longer studying at least 1/2 time). So I used the Sanders and Warren numbers from the campaign as proxies. You could assume the $640 billion Warren figure less the $130 billion private student loans, for instance, as the Schumer scheme.
And by “full MMT” I assume you mean the trillion dollar platinum coin, which by all accounts is a legally valid route even though it would make a lot of heads explode.
That’s an appealing image. Thank you.
I believe as Alan Collinge will tell you and from what I have seen with various people who have student government student loan debt, and have experienced with forbearance amongst my own; no longer is the interest rolled into principal.
It is placed into a separate category. The gov requires all loan interest acquired during forbearance be paid first and before dollar one is applied to principal. If the loan is not recast, this would apply to penalties by commercial servicers also. If the servicer screws up and fails to add the interest in, discovers it later, they can still apply it at a later date,
The $10,000 or $50,000 would go to pay interest first. It raises a question, is there a need to pay penalties and interest on interest in forbearance first if the government cancels debt or can it just be applied to principal and normal interest? Cancel the penalties and the interest on the penalties and pay what was expected with loan forgiveness.
We are in loan shark territory with how student loans are administered and the commercial servicers are doing the sharking. Have we looked at lost productivity by students who are strapped with payments which for many will last a life time only to have SS garnished too? If you are in default for student loans, you are also ineligible for federal job programs. Demos had a nice pie chart which I sent off to Senator Stabenow in a letter showing 35% of student loan holders 40 or older will go into retirement still holding loans with no-escape.
I went to a garden party (no pun intended) in Michigan and as a Dem to hear Senator Stabenow speak. As you already know, I am an older person who is still active physically, and can be considered a safe bet to ask a question because of my appearance. She pointed at me. I asked what was the Senator going to do to grant relief for students besides, Repayee, etc. whiich are not working, to grant relief to students, who have large amounts of debt, in default, and lack the ability to repay? Furthermore, I reminded her she was on the Financial Committee (2005?) when a bill was signed into law which made it more difficult to pay back loans. I was told; “Dems are not in the majority today.” It has only gotten worse for younger people. And a U of M former lobbyist scurried his a** over to me signed he promoted this such bill.
I am not sure if the readers have read about SLABS or “Student Loan Asset-Backed Securities.” They appear to be similar to tranched CDOs. The average loan today is ~$38,000 so it is of a nice size to accumulate. These loans are assigned levels of risk and investors can buy into levels of them. I sense a rescue in the future as financial institutes will abuse this too.
Cancel the interest on interest gained and the penalties; then apply the $10,000 or $50,000 to the remaining principal. Sorry for the length of this. Also, Alan has a petition with 750,000 signature. he would welcome more!
Cancel the interest on interest gained and the penalties; then apply the $10,000 or $50,000 to the remaining principal.
now you’re talking, that’s a concrete benefit
I was told; “Dems are not in the majority today.” Ah, the Dems eternal ‘get of of
jailresponsibility free’ card.
An aside about loan sharking territory:
The states are getting fed up with payday loan companies. Nebraska became the latest state to pass a “usury law” — a cap on interest rates — this election. 36% annual rate is still very high, but lower than 400% annual rate. The worst payday outfits will probably pack up and leave the state. Good.
People are getting fed up with legal loan sharking. This applies to the student loan debt scams as well, imo.
Then why don’t they do it and instead insist on an egregiously unequal system that has resulted in the largest rates and numbers of incarcerated in the world (in peace time, in the richest and most powerful country on earth)? Are they incompetent?
I don’t see much benefit in minting a trillion dollar coin, since they would immediately give the trillion dollars to rich people just like they do with everything else.
The evidence you cite suggests they are very competent.
Just not at what they claim to be about.
I know they are competent. I am just trying to figure out what politics the MMT folks are hoping to advance and what expectations they have. So why don’t they do that already? Are they sadists and would rather have millions upon millions suffer? And I am not even gonna mention foreign policy. And that’s assuming the theory itself is correct.
“I don’t see much benefit in minting a trillion dollar coin, since they would immediately give the trillion dollars to rich people just like they do with everything else.”
But if MMT is correct, they are already doing it (because that’s just how it works, right?), they just don’t give it to you. And I am asking, why? And what do you do to make them give you some?
There is a key point missing from this conversation: The lending system is now catastophically failed by all reasonable metrics. The lending system is vanishing into a mist of popular illegitimacy before our very eyes, in fact.
Hear me out: According to Education Secretary Betsy DeVos last year, 75% of federal student loan borrowers were either unable to make payments on their loans, or were paying, but their balances were going up. Trump appointee Wayne Johnson, who ran the federal lending system until recently, told me that this was closer to 80% just before COVID-19 hit. Based on a longitudinal study from the Institute of Higher Educational Policy in 2012 which found that 63% of borrowers were not making payments, I would estimate that just before the pandemic hit, around 65% weren’t paying, and 15% were paying of this 80%.
Also, we now know that the class of 2004 are defaulting on their loans 40% of the time, but they were only borrowing a third of what is being borrowed today. So it is no stretch to say that we were looking at a default rate of 75% or higher for more recent borrowers. That is about four times higher than the default rate of sub-prime home mortgage loans. Again…this is before the pandemic.
So by all rational metrics, this lending system is beyond failed. It is catastrophically failed! Almost no one is paying on their federal loans right now, and if anyone here thinks that many, or maybe even any borrowers are going to resume making payments if/when the repayment suspension expires, the data screams otherwise.
The Secretary absolutely can cancel federally owned loans, btw. This is very clear in the Higher Education Act language. Critics saying this is not possible are on extremely shaky legal ground. Their argument appears to be that because Congress has passed laws creating various forgiveness programs in the past, this is proof that the President/Secretary must get approval from Congress. This is a nonsensical argument. The fact that the Secretary has not, to date, cancelled loans unitlaterally does not at all mean that they cannot do it. The Department, historically, has always been extremely averse to cancelling loans. Congress has had to pass legislation to force them to cancel loans, in fact. So the Secretary absolutely can cancel loans unilaterally.
Also, this would, indeed, require zero appropriation, and would add nothing to the national debt. Whether or not this would “cost” the taxpayer is a different (and loaded) question, but what I just said is abstolutely true.
But Yves raises a fair point: The consequences of this would probably be significant. Congress would be disinclined to fund the lending program going forward, I would suspect.
But…to me…is this really a bad thing? This lending system has turned into a nationally threatening predatory beast the likes of which the Founders (who were being screwed under debt to British banks and merchants) were VERY concerned about. That’s why they called for uniform bankruptcy laws ahead of the power to raise an army and declare war in the Constitution. Federal student loans are, of course the only type of loan in this country to be uniquely stripped of bankruptcy protections, so the Founders saw this one coming.
The Schumer/Warren proposal is a lame half-measure that perpetuates the lending system. Was sorry to see it be politicized and dumbed down, frankly. This lending system is toast. It needs to be taken to the bath, and drown in the tub (to quote G Norquist in a way he probably did not foresee).
We can far more efficiently fund higher education in this country. What that looks like is a question for another time, but at this point, there is no better opportunity than this pandemic- particularly as we are throwing out Trillions in stimulus, including hundreds of billions in PPP loans that don’t need to be repaid, and that all definitely DO need to be “paid for”, and which add to the national debt- to push the reset button, set 44 million people free to rebuild the economy, and come up with a far more efficient, fair, way to fund higher education in this country.
Given what I say at the top, this is really the only viable option. Returning bankruptcy protections at this late date will just make the death of the lending system slower, more painful, and less stimulative. Better sooner than later, I say!
Yes, well, I was thinking maybe Chuck read Stephanie Kelton’s “The Deficit Myth.”
It’s one thing to read a book. Comprehension is a completely different matter.
Prof Kelton’s book is so clearly argued that, IMO, one would have to be intentionally obtuse to not understand its argument.
Of course, one’s understanding of “what is true” might be at variance with what one wishes were true as the predicate of the policies one prefers.
My tentative interpretation is that the current sense that the Ds did not flip the Senate makes it basically safe for CS to make populist-sounding noises.
We’ll see how hard he pushes his conservative D colleagues if the Ds, against expectations, end up with a 50(+1)/50 or 51/49 majority.
Expect a few “whack a mole” (per the recent “Useful Idiots” podcast) D defectors on every important public-interest legislative item, so that the caucus can look good without actually accomplishing anything.
The Fed can buy out the student loan notes just like they’ve been buying corporate debt. Of course I realize that will happen right after we see pigs fly!
more than debate about what’s in the news cycle, it’s what’s never mentioned the news cycle.
how much blue chip debt has the Fed bought since Jan 1? (when conpanies like Apple can just tap credit lines or their own stashes of cash)
some/all of that money should have been used to buy part of the Government’s student debt portfolio.
But they would still be an asset on the Fed’s balance sheet. The Fed would collect principal and interest payments from individuals, just as it (via servicers) for the government-guaranteed MBS it bought during QE.
I think $50 billion per year is a pretty good estimate. I dug up the following from the Department of Education: https://www2.ed.gov/about/overview/budget/budget20/20action.pdf.
On page 8, you’ll see that the student loan program consumed $34 billion of subsidy dollars during the 2019 fiscal year. [Does this mean that certain senators are lying to us about the program making profits? Why does a profit-producing program need subsidies?] And during the 2020 fiscal year, when most loans were put on hold, the program consumed $77 billion of subsidy dollars. My guess is that the $43 billion difference is due to lost loan repayments.
Of course, that was only for part of the year. It might be an $80 billion difference for a complete year. But then if you only forgive portions below $50k, you might end up losing only $50 billion in loan payment revenue.
I read some rumour somewhere on Twittersphere that they might consider offering Gillibrand a job in the administration, and then appointing AOC to the vacant NY Senate to prevent her from challenging Chuck in a 2022 primary.
I don’t know whether this is a realistic option or just more politics fanfic. One suspects they would rather take their chances in a primary challenge (although maybe the Markey/Kennedy race has shown that this can’t be taken for granted)
I think part 2 of that plan must be to primary AOC out of the Senate in 2024, since she will have given up her House seat. That’s unlike 2022 where she can make a long-shot bid against Chuck and stay in the House if it doesn’t work.
Yeah, but that assumption is based on her desiring to run for the Senate. I’ve read nothing indicating that she feels that way. If she carries through on her threat to homestead/start a family, I don’t blame her. It will be the loss of a young, brilliant public servant, but Congress is such a corrupt cesspool. One has to have a hide of steel just to endure.
This post raises some complex but absolutely essential points about “cancelling” debt.
Taking the simplest first (and I’ll be doing a lot of simplification so apologies for inaccuracies which will inevitably result), private-label i.e. non-sovereign debt. As was rightly stated, the state can offer (note the word: offer) to buy back any private-label debt instrument. And while, in the final analysis, the state can force a sale (like any nationalisation), the strike price is still up for negotiation, unless you want to spook the debt markets that they might end up being in a position where a government, especially that of the large US debt market’s government, doesn’t establish he market clearing price but, rather, forces a price onto sellers.
This matters because the dynamic of this debt is, while the borrowers are being fleeced, the corollary of that is recipients of the coupon are delighted with the arrangement. They would have the greatest difficulty in replicating this cashflow and yield — at almost any price. There’s a reason there is a “dash for trash” and a search for yield going on right now: no-one can find it anywhere, be they CalPERS, me with cash in the bank in a CD, my pension fund or whoever. If they (the government) did buy back the private label debt, they’d have to offer the note holders the same “stuff their mouths with gold” deal they enjoy right now. The moral hazard is difficult to finesse away.
Government debt is more complex even though it may look simpler. Yes, the government can simply cancel the higher yielding assets and replace them with lower-yielding ones or even just cancel the debt outright. But someone, somewhere is relying on the current cashflow. This is the reason why, say, the UK government can currently borrow at zero of even negative rates, so why doesn’t it just buy up all the legacy gilts, yielding, say, 2-4%? Because this would bankrupt pension funds, insurers, annuity providers, local authorities etc. etc. etc.
This is not, I must conclude, an insoluble problem. There is much that could be done to alleviate the burden of extortionate student debt. But these are fiendish problems and have, by necessity, opaque and messy (you could say grubby) solutions.
Thank you Clive, too many think its a light switch.
Would only add the SDR thingy got covid’ed and hope they don’t rush the BW2 vax in haste to settle fear in the near term.
Actually, it’s not entirely true, but that depends on what one means by “cancelling”. Assuming we’ll go short of total repudiation (because, as you say, we can easily find that the student debt is stuck in places like Calpers directly or indirectly, and repudiation solves one problem while creating another).
I don’t know about the student debt, but normally in the contract ruling the debt there are conditions on which the issuer can buy the debt back. There are usually limitations, which depend ont he negotiations at the time of issuance, although subject to agreement of debt holders, of course any clauses can be renegotiated at any time before repayment (and often do).
That of course assumes that the state controls the issuer.
If the debt is purely private, then there are still options:
– acceleration (assuming there’s nothing that prevents acceleration in the student debt contract), where state lends the student to repay the student loan as acceleration, and then subsequently cancels the students’s debt (or restructures it so that it’s effectively cancelled).
– assuming of the debt – again, state can assume the debt (unless tehre are clauses that prevent it, which IMO would be rare), and the state would pay off the debtors in full.
– intermediation. The state just plaingly gives the students the money to pay the student debt, who then just passes it on. The payments-to-students may be structured in any number of ways.
The larger problem with student debt is that cancelling it can, and will be, considered unfair by a number of people who have paid their debt and struggled to do so (those who paid it of w/o any problems may not care as much). It’s likely that the number of people who paid all or a large part of their debt is larger than the number of people with outstanding debts, although I could be wrong here.
Unless you, in some way, molify these, you’re storing more problems for the future.
Yes, I only touched on some of the issues and you could write a book (well, a novella, anyway) on this.
For a real-world worked example of the (much more straightforward) task of recategorising private-label student loans as sovereign debt, here’s the U.K. Debt Management Office’s report on when the U.K. did this a couple of years back https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicsectorfinance/articles/newtreatmentofstudentloansinthepublicsectorfinancesandnationalaccounts/2018-12-17
A right old mess and there’s nothing in international accounting standards to offer definitive guidance.
For private loans, the government could also make something akin to a tender offer, offering to buy loans now at facial net present value and then forgiving the purchased loans as it sees fit.
I agree that much of the issue is fairly treating people who have already paid off their loans. The pragmatic reason is obvious. But I think there’s also a philosophical issue–to the extent that student loan relief is predicated on the injustice of unreasonably high prices (which, I think it’s fair to say, are in part caused by student loan availability), all student loan borrowers who paid more than they should have paid (and therefore borrowed more than they otherwise would have) are deserving of compensation.
When my son got sick, I took over all of his private school loans and paid them off, and It took a sizeable chunk of my retirement savings to do that. Will I consider myself unfairly dealt with if there is an executive order to cancel student loan debt? HELL NO! I understand that by allowing our younger generation to get out of debt and to be able to spend their money on other things, that it helps our economy – and that can only help all of us in the long run.
Remember when Elizabeth Warren laughed in the guy’s face in Iowa earlier this year when he stated during a “town hall” that he did a similar thing as you?
That is the rational result. Unfortunately, lot of people are not entirely rational when they believe they have been treated unfairly.
Trust me that Reps would be very good at bringing this point out + saying “and worse yet, not only you repaid _your_ loan, but you’ll repay _their_ loans from your taxes!”.
Never mind that backadate (or similar) the compensation in the current situation would be a pretty good economic stimulus too.
In my case it wasn’t really large, and not painful. IMO those most annoyed will be students who with great difficulty paid off their own debt. Parents are, after all, used to writing off their kids expenses.
Maybe offering such students say 10% of what they paid , say on the past 4 trump years, would mollify them… who dislikes free money?
Another approach is to simply eliminate all past and future interest, simply pay back the principal and penalties, with past interest credited to principal… I wonder what the fiscal impact of that would be.
The next question is what future expenses will be covered?
I don’t dislike means testing as much as some here do. We paid for our 4 kids, I see nothing wrong with that if you can afford it. Plus we live in a low tax environment… at one time marginal rate was 90%, now 33%? Never a better time than now for wealthier families to pay for their consumption.
I didn’t mention eminent domain. The Federal government, via our Fifth Amendment, is prohibited from seizing private property without compensating owners, and that’s been interpreted via a lot of case law as meaning at a fair price. The private student debt would almost certainly have been written as subject to state law. States also have their own version of eminent domain, and in some states, like California, the definition of how a fair price is determined is more favorable to property owners than the Fifth Amendment.
But someone, somewhere is relying on the current cashflow. Clive
Then create the cash and distribute it equally to all citizens – problem solved. This is Steve Keen’s solution (grossly simplified).
And to fund cash distributions long term (i.e. a Citizen’s Dividend) then levy negative interest* and yields on all future sovereign debt issued. It’s a disgrace anyway that they have positive returns since that constitutes welfare proportional to account balance.
*with a negative-interest-free account exemption up to a reasonable amount for citizens.
But I am (being only slightly facetious and trying to illustrate an important, if unpopular, point) entitled to more newly-created cash than you are. I’ve (cough, trying to keep a straight face, but by some measures it is a fact) “earned” it.
We’re moving now, in the direction you’re proposing, from redress to redistribution. Not necessarily A Bad Thing. But most certainly Not The Same Thing At All.
Arguably, the direction we should take is equal protection under the law – a principle that has been pointedly ignored wrt fiat creation and use and our banking model, a corrupt relic of the corrupt Gold Standard.
Huh? Those private loans are most likely in bond funds, owned by public pension funds or 401(k)s. You are proposing to take property from particular parties and distribute it to everyone. That’s flat out unconstitutional (see Fifth Amendment and state eminent domain laws).
Don’t see how you reach that conclusion.
I’m proposing that all NEW US sovereign debt be issued at negative nominal yields, not reneging on EXISTING US sovereign debt. So welfare proportional to account balance would linger for a while till all existing US sovereign debt was retired (30 years max, I suppose). It would be replaced with an equal Citizen’s Dividend and welfare according to need.
As for negative interest on fiat account balances at the Fed, aka “bank reserves”, that’s simply requiring large users/hoarders and non-citizens to pay for their use of a public utility while allowing ordinary citizens to use it for free to reasonable limits.
The CARES Act suspended payments and the like on all government-held federal student loans which run out December 31st which means that there will be a three week gap between this date and when Biden’s Presidency begin. This idea of Schumers may just be a way of getting ahead of an oncoming problem. If people think that Biden will help out here, they will let it slide for the next several weeks until after Inauguration Day. But the big tell will be who replaces Betsy DeVos as Secretary of Education. If it is just another Wall Street predator, then you can forget this idea.
Of course talking about forgiving student debt shifts the focus of the argument. Such as if student debt should be a thing in the first place. Certainly the way that it is organized at the moment cripples future consumer demand for things like cars, housing, etc. and leads to delayed families as they are unable to afford having children. Maybe they should get rid of the idea of having student debt not being extinguishable in bankruptcy altogether but as the main proponent of this idea will be assuming the Presidency soon, good luck with that. He and Schumer are more likely to make student debt inheritable when they get the time.
“Such as if student debt should be a thing in the first place.”
Aye. It angers me greatly that millions of people are desperately seeking relief from loans that were much too large for people so young and never should have been made in the first place. The US Department of Education is arguably running the largest predatory lending operation on the planet.
IMO the problem is two fold. First, what we term education has really two roles, which unfortunately we freely mix.
The first one is to get new skills – from simple, like reading and algebra, to complex, like how to do neurosurgery or particle physics.
The second is that education, especially the higher one, was used as a signalling device. I.e. in a lot of higher education, the “skills” you nominally learned were irrelevant to most practical aplications (or even research ones). But by grinding through the system, you were able to show that you were able to work diligently (even on stupid and meaningless tasks) etc. etc. – things that normally cannot be easily found about an employee until after you employ them.
Now, getting the first part to as wide part of population as possible is a pretty good thing (although we don’t really want everyone to be a neurosurgeon or particle physicist). Arguably, this sort of eduction should be free to anyone who wishes to get it IMO (well, in some cases, it may not be possible, as you training of tens of thousands neurosurgeons is not really practicable, but I hope you get what I mean).
The second part though is what was interesting to a lot of people, because the signalling meant that companies were willing to pay more money – not for the nominal skills (which may or may not have been useful really), but for the assumed (from the signalling) character traits/incidental skills (or just the social connections) that otherwise the company would have to spend time in teaching/identifying.
And now we’re getting to the second part. Unfortunately, some bright spark thought that correlation is causation, and hence decided that a degree – any degree – would be a good signalling. Unfortunately, that’s wishful thinking, espcially since if you have too large a population of people there, the signalling goes away almost by definition. Hence while there is still _some_ value to degree (because, mostly, you do get some skills), the filtering that the signalling provided dropped the value down.
Exept because you made people to believe that degree = much better long term income, they were willing to pay for it. The schools (old and new, but especially new) also figured out that if there is any increased income from a degree, they can capture major part of it in terms of fees (which is really MicroEcon 101).
So basically, focusing on the signalling (aka degree = higher income), the society managed to kill skill education while pauperising generations.
IMO, the only way to deal with this (and I’m not saying it’s perfect), is to provide the skill education as widely as possible for free. There’s a question whether it’s worth allowing signalling eduction as well, the problem there is that it can get easily corrupted by the social connections. But then, social connections will get into play regardless, so maybe making it at least some ways to open those more widely would be good (as long as it’s not atrophied as it’s now with Ivy and co, where alumni status beats anything else).
There once was a third role, critical thinking.
This was the basis of the Liberal Arts degree 50 years ago.
Now that degree is just another skills program, the skill being the manipulation of symbols for personal power.
Critical thinking IMO falls under the “signalling”, as in that used to be one of the skills that sucessfully doing a degree would equip you with. Not all signalling stuff was bad, in fact a lot of it was pretty good (which is why other people were willing to pay for it).
It’s just that there’s no point in trying to find a signal if >50% of your population shows it. It’s not a signal anymore.
I agree, Grumpy Engineer.
[For some reason, my earlier post didn’t take.]
Calling Michael Hudson!
I sense individualism is strong in Schumer. His constituents are probably looking to see him be more accountable/active/vocal? (as Dems across the board are going to experience with Biden in office) and this play lets him flaunt those virtues. The sad thing is … this is something a health insurance CEO would advocate for him to do as it deflects from the healthcare irony. Single-payer has aspects of each of those issues — young doctors have incredible amounts debt and yet they need 100K a year (on average — according to NC) to navigate the system..?!
Whats the inner-circle culture of the NY Senate Dems like? Also.. I thought Andrew Cuomo already created Free College. Aren’t we all saved by now?
Huh? Individualism? From a nebbish like Schumer? Lambert and I discussed that we could remember absolutely nothing policy-wise or statement-wise re Schumer and recall he is on his fourth term.
Canceling student debt wold be a great economic stimulus that would pay for itself many times over.These former students would no have extra disposable income.As a group I believe they would spend the excess income. Their purchases would resulting a boom to the economy.
The debts should be dischargeable in bankruptcy like almost all debt. Even payday loans are dischargeable in bankruptcy. That would be a good place to start if cancellation of student debt is an unwieldy morass. (Maybe CS — Dem, NYC, Wall St. — is deflecting from the legislatively easier bankruptcy issue.)
I still say if Trump is smart and vindictive he will mint enough trillion dollar coins to wipe out the deficit. And then watch the DemocratIc leadership panic. Sure heads will explode. But it destroys the “home budget” meme, kills the ability to Grand Bargain, eliminates most of the excuses of why things cannot be done and puts Biden and his administration on the hot seat. Plus it also extends a middle finger to the Never Trump Republicans.
But since that won’t happen, I am not sure what Schumer’s thinking. I do know that even if it isn’t AOC, it will be somebody. And his four years of ineffectual opposition both as minority leader AND as senior senator from NY should haunt the primary. Maybe if he poses enough NYers will forget.
Trump is not smart, yes he is a bully but to be “vindictive” you need to put yourself out there and he’s also a coward so he doesn’t do big things like that.
And the platinum coin concept is not only not on his radar, it’s not even in his universe. I would bet a platinum coin if I had one that he’s not even heard of such a thing. Although I do think that he instinctively lives the concept that money is just something people print, which makes the other 99% of his actions such a disappointment.
Deal with the Trump that is, not the one you’ve constructed in your head. I have to do it with this entire country every day, it sucks but reality quite often does.
I’ve known who Trump is for years. And I agree with you, he doesn’t know the mint the coin theory. Where we disagree is, I know he IS both sneaky and vindictive and would take a step that Would upset so many well laid plans and revel in the chaos it caused in a NY minute if could. Trump is the epitome of the Queens NY meme “family blog ME!?! No family blog YOU”.
If Trump had that kind of discipline to execute, we’d have M4A right now and he’d have won in a landslide.
That implies he was behind MFA and not just using it as bait for voters.
Trump has been remarkably effective at eliminating regulations, allowing private “development” of public properties in many directions, and with McConnell and Schumer’s help stacking the courts with corporate friendly judges. There are other ways his administration has used every lever possible to advance a deeply conservative but highly capitalistic agenda. His trade battles also show him to have real interest in globalization issues.
I despise the Obama administration because of what I thought it should be about, rather than about its real agenda. Obama advanced his real agenda quite well. He took very good care of the financial and tech sector, he saved the insurance sector, expanded the police state, and kept the MIC hopping. About the only thing he really failed at was getting the TPP passed before he was out of office. Oh and Democrats were decimated by his administration although I think that was not a concern. He provided little of what he seemed to promise voters, America suffered, but those that count thrived. He was effective and looked good being a force of destruction. Trump was equally effective on his real agenda, Main differences from Obama’s hideously effective terrible presidency being Republicans pretty much kept their seats and the media and half the public went nuts watching him do it.
And just to be ornery, if it hadn’t been for Covid, I think he would have won. It was still damn close for such a supposedly bad terrible President.
And he was a bad President, but to be fair I can’t think of one of the last six I wouldn’t call bad.
“If you want to know what a man’s like, take a good look at how he treats his inferiors, not his equals.” ~Sirius Black (J.K. Rowling)
I don’t think many ranking pols in either party pass the test. ;)
I don’t want to be a downer for everybody on this fine Monday morning so let’s NOT discuss why the cost of college has been running 3x CPI for the last 30 years and how cancelling student loan debt will not answer that question.
Thanks. Yes we should probably at least finish our first cups of coffee before regarding that horror.
The progressive winglet of the D party has recently been advocating no-cost public higher education. Those people are thinking about the larger systems problems and I reckon that they will gradually win more public support for themselves (the policies are already popular).
Doubtless there will be “war in heaven” as the powers try to resist the desires of the people.
Yes, but their numbers don’t add up. Per https://berniesanders.com/issues/free-college-cancel-debt/, a new Wall Street tax will raise $2.4 trillion over 10 years. $1.6 trillion to cancel all student debt (though I don’t know why we need to raise money to cancel debt that is owed to the government itself), and $0.8 trillion for free tuition.
Alas, we have about 20 million college students in the country, and $0.8 trillion spread out among them over 10 years works out to $4000 per student per year. You can’t educate college students for that little money. Heck, we spend $15000 per student per year for primary and secondary education. It’s probably closer to $25000 per student per year for higher ed.
So what is “no-cost” higher education going to be? 4 years of schooling in a cramped community college where costs are ruthlessly controlled, or 6+ years of schooling on ostentatious campuses where spending is completely uncontrolled?
Shiloh1’s question is extremely relevant here. Both to the subject of student loan forgiveness and the subject of free college.
Yes to your points and I’ll add this, I can find wild increases at institutions without the ostentatious campuses, too. Familiar with IIT in Chicago? It looks just like it did 40+ years ago. They charge “what the market will bear”, and the market is bastardized by the available loans in the first place.
The funding numbers offered by progressives may not add up; many of them have not yet openly embraced the fiscal policy freedom that US actually has, per MMT.
I think that part of the “problem” is “Baumol’s cost disease” — education by its nature is not as amenable as manufacturing to productivity improvements. The same might be true of medicine.
So some inflation in the cost of education with respect to an index of, say, commodity goods is to be expected.
That doesn’t make publicly funded education “unaffordable” to a monetary sovereign. The constraint is not “how much money does the government have?”, but rather “what real productive (or, in this case, educational) resources are available within the economy?”
Do we have a shortage of teachers? Of physical classroom space? Of textbooks and lab facilities? Or a shortage of the inputs and processes that could alleviate such shortages?
I’m not aware of physical and human resource shortages in these areas. The money cost is not an obstacle to US government funding of public higher education.
That isn’t to say that the current internal arrangements in the public universities are making optimal use of the available human resources to accomplish the educational mission (the problem of administrative bloat). Those could be changed if there were political will.
“Education” too has lost it’s meaning.
I got a great education in cheap old buildings where teachers minimized administrative time and cost because they preferred to teach and those few dedicated administrators were also teachers who wanted to deploy their resources on teaching. And this was just 40-50 years ago.
This is like the de-growth discussion, a great deal less could be done a whole lot better with existing resources.
I agree that under an MMT regime, the money cost wouldn’t be an obstacle. But do we really want to give colleges and universities a blank check to purchase everything they “need”? If uncontrolled, we’d eventually see them consume all spare resources in the economy. The educational sector would become as bloated as the healthcare sector. What if we need those resources for something else? Like housing or infrastructure or alternative energy?
No, cost controls are necessary, and all countries that offer free college have them. Some countries have very limited seating. If you don’t pass your entrance exams, you don’t get go to college. Ever. Other countries only let you go to college once. If you’re deeply dissatisfied with your current career and want to go back to school to pursue something new… Tough. Suck it up. And still other countries have very simple, austere facilities that are built and operated on the cheap.
This is what free college really means. And be warned, the administrators in charge of universities like having their budgets rise by 6% every year without fail. If we threaten to take over their funding and impose real cost controls… The blowback would be tremendous. Universities for GOP?
Agreed. There are second order/multiplier effects if too much money is injected into any sector. This is all entirely consistent with MMT thinking, which is concerned with real constraints on what monetary sovereigns can do.
MMT doesn’t solve all problems, but it does clarify what is within the power of the monetary sovereign to do.
The public universities are (notionally, I think; presumably there is some legal authority) under the governance of the public authorities. Cost controls are necessary and entirely feasible, in principle, at least in the public university sector. As you note, there is a large problem of political will.
And yes, I agree that “free” would not entail “everyone can enroll”; the capacity of the sector would still be finite. But “ability to pay” would not be the method by which services were rationed.
One of my kids is in college. She says the lectures on Abstract Algebra, which is hard, are much better on youtube because you can stop and repeat segments. She spends four hours on a one hour lecture. You Tube is excellent for language. You Tube is excellent for almost all lectures. I suspect a revolution is coming in higher education sooner or later. The only reason higher education became so much in demand was the claim that people made more money with a degree. It turned out that for 90% of the people they do not make more money and the 10% that do make tons of money……like lawyers, podiatrists, neurosurgeons, hospital administrators, firemen, police.
That is the main problem.. and would have to be answered with a restructurung of public universities and funding sources. Right now the emphasis on Admin bloat and the lack of oversight of these schools by the States is by design. You would need actual political pressure to reform the system on a state level, and then states funding it again like in the old days
Otherwise the costs are going to still increase 8 percent a year, and you have not addressed the real problems
Oh and if the University goes under, the debt should be 100% forgiven.
But “… why the cost of college has been running 3x CPI for the last 30 years” is the right question! It approaches the heart of the matter and reaches toward its root cause.
The root cause of rising college costs as well as for other rising costs for privatized excisions from the Commons and the many new varieties and extents of monopoly and monopsony in the US economy is Neoliberal philosophy applied to the US political economy. Student debt is but one of many symptoms of this worsening disease.
>They failed to be all that much worried about the way they hemorrhaged representation at all levels of government in the Obama years
>being so disconnected from voters as to not know how to craft strong messages
Pulling these out because they very smartly say pretty much the exact same thing. The newbies say “I’m and Ivy League/West Point graduate so I am going to run for Congress!” and the upper levels of the party think this is gonna work.
No. The only good thing I can say about Mayor Pete is at least he tried his hand in local government. Run there. Run for state lege. Learn what it takes to win small elections before asking people to pay you to run in big ones.
Unseating the Senator from Wall Street would send shock waves unheard of. If AOC had some sort of formula – like Bannon had with the Tea Party after Obama betrayed working folks on the economic front – for unseating Democratic incumbents like Schumer, it would be a game changer. Sanders proved money can be raised to fund such elections.
What Bannon did on the right couldn’t have happened with Obama, because he anesthetized so many on the left and he persued right wing policies, that any left revolt was too easily squashed (plus labeled that dreaded R word regarding race relations).
As an aside, mentioning terms like MMT, canceling student debt, debt jubilee may get your comments deleted (if they are even allowed past moderation) and banned at other sites focused more on finance.
Don’t worry about Chuckie… Election law can be changed to protect him. NY changed election law this year to basically exclude third parties from future elections. Ballot access now requires 150,000 votes in the previous state wide election, it had been 50k.
AOC could have good traction in upstate NY. Sanders carried most of upstate counties in 2016; I never saw the June 2020 results published. Schumer spends a LOT of time mugging for camera time up here. Statewide elections cannot be won without a strong campaign in upstate.
Yeah, but not allowing that would mean not being able to pull shenanigans like that which got Leticia James past Zephyr Teachout in the primary for AG. They might need someone to make a ghost run like Sean Maloney to strip upstate votes despite no having real interest in giving up his Congressional seat.
And can’t have us None of the above voters having a choice on the ballot.
It will take a while, but I’m sure it will eventually sink in. When she writes her memoirs, she’ll get to finally mention that if Trump had won a second term it would have driven a stake through the heart of the DNC and maybe we would have all been better off.
But then, we’d still need to kill it with fire.
If I am the “she” in your remark, you are asking to be banned. How dare you accuse me of advocating for Biden.
the fact that this story is about chuck schumer means this is just a mental exercise in futility. There is zero chance of democratic leadership DOING anything that will help regular people… but I could see another layer of debt being applied and paid for from people’s pockets… which would not be obvious to them. It would be added to the national debt, or some such agreement to fleece regular people as a group.
If people wanted to “go all MMT”
the first thing they would have to do is to adopt an actual legislative path forward to change the monetary system.
In the NEED ACT circa 2012… the parameters were already laid out how to extinguish the national debt, while opening an avenue for money creation to do things to benefit citizens like extinguishing student debt and paying for the conversion to a single payer healthcare system and infrastructure spending
If people want to “get real” they need to get real.
If people want to “go full MMT”.. they need to abolish the federal reserve act, and restore the role of the treasury, and begin the era of actually being monetarily sovereign.
And the #GreeningTheDollar monetary policy which is in the GPUS platform (and has been for years) is of a piece with HR2990.
Could this be a propaganda ploy intentionally directed at sabotaging the New Deal Democrat wing of the party, as embodied in Bernie Sanders’ love for all things FDR?
What I mean is simple. Whenever any economic program is proposed to help regular people (as opposed to the status quo modus operandi of only helping the aristocrats), it is typically labelled “Socialism” in the American media. Then people like my father faithfully do what the media has taught them to do, which is to offer the knee jerk response when reading the headline, “Didn’t we already try Communism and it didn’t work?”
Well, putting aside the obvious problem with my dad’s repeated mantra response, which is the US has never been a Socialist country nor elected a Socialist president… the goal is achieved. We’ve labeled any new economic program “Communism” and all the folks who grew up in the ’50s with Duck and Cover films can say it won’t work without ever trying it. Green eggs and ham – I do not like them Sam I am!
So what if Chuck is running the 100 Days Straight Outta FDR knowing full well none of it will be accomplished in 2021? Then the Democratic Talking Points to the younger generation can include “Well, we tried that FDR New Deal stuff and it didn’t work.” There is no alternative.
It’s called being broken on purpose. Y’all know the drill. Cockblocking is Demublican/ Repocrat Tactic 101:
Pretend to “do what Bernie said” without really having any intention of doing an Economic Bill of Rights and say “I told you so” when it fails. Then repeat this “We tried that. It doesn’t work” mantra in perpetuity.
I think this is what WTF Chuck Schumer is really up to. Then he can blame it on Republicans cockblocking the Democrats’ “altruistic” economic plan. Why bother to think up a new trick? What do you think?
Democrats are past masters of offering to do great things for the population that they know are not going to happen. This is why the Dems seem to greatly prefer being in the minority or at least in a gridlocked legislature, where they know their grand promises stand no chance. This is not unlike a drunk loudly threatening to start a brawl with another bar patron as long as the bouncer is looking on.
Yet, when they are actually in a position to do things, as during 2008 to 2010 when they controlled all three branches of government, the Dems become strangely timid and “realistic”. Rather than passing Medicare for All when they could have, they passed a GOP healthcare plan written by the insurance industry, and in such a way that it wouldn’t take effect for four years.
So I’m guessing Schumer is just talking it up now that the blue wave has fizzled and he is relieved to find he won’t he won’t be able to do anything.
Yes, exactly. This is the Dems MO. We’ve seen it over and over. Don’t waste your time speculating on how college debt can be cancelled (unless you enjoy these “what if” games). Schumer is just playing for the progressive gallery, sure in the knowledge debt cancellation won’t happen. Then comes the, we fought hard but failed, send us more money so we can try again. Lucy to Charlie Brown, kick the football.
“This is not unlike a drunk loudly threatening to start a brawl with another bar patron as long as the bouncer is looking on.”
Yeah, it is different. Paid a few bills in T-town as a bouncer during undergraduate school. That drunk would be roughly tossed out the door. Quickly. Knew other bouncers who’d tune him up a bit on the way out. Linebackers. Helpful when they are on your side.
Suddenly the Dems losing so many state lege seats and governorships starts to make sense: the rural/rustbelt/farming areas in flyover have mostly been the recipients of Wall St/tbtf banks unkindly “gifts”, unlike the east/west coast areas of concentrated finance and tech (thought rural areas in those states are hit hard, too). The rural/small manufacturer/farming areas in the late 1800’s were the place the last great populist strength came from, and for much the same reasons — Wall St/ railroads/tbtf banks. “The peope were being railroaded.”
If the Dem party styles itself as the party of the little guy (but really works for Wall St.), keeping Dems out of power in enough flyover lets the party keep the PR without much challenge to the branding at the national level. They can dismiss flyover and rural as deplorable. (Interesting to see some GOP state candidates in rural states and areas moving toward Main Street and away from the monopoly big Ag and tbtf banks.) My 2 cents.
And the more the Dem estab goes full crit race theory and wokeism, the more they feed the “they’re socialists!” fears of the GOP voter. interesting.
Thanks for the replies. This helps me clarify the underlying issue. I find it impossible to believe Schumer and Pelosi are sincere about any 100 Days of FDR or Green New Deal plans. They aren’t sincere and they’ll publicly tell you they aren’t having it.
Pelosi said, “The green dream or whatever they call it, nobody knows what it is, but they’re for it right?”
Pelosi controls the purse strings. The House is where these economic bills begin. She won’t allow anything sincere to pass. Therefore, what is the explanation for Schumer’s political theater?
To pretend for their voters they are trying to do something for climate crisis. The Democrats aren’t really doing anything significant. Instead, the Democrats continute pretend it is “easy peasy” to fix.
Republicans deny climate crisis is real and/or that it is “man-made” because only God can change the weather.
Democrats deny climate crisis will take any real effort to change. Just do some carbon tax or carbon capture. You know, a technological optimism scheme. No one actually has to change the way they live or the neoliberal economic paradigm leading us to extinction. We’ll let the God of Tech fix it. Just sent Tech God your money and watch Him fix it all…
So of course Lucy/Pelosi is going to put some kind of football out there and let Chuck Schumer/Brown pretend to kick it and fail. And of course they’ll blame the Republicans for their own failure, or maybe RUSSIANS DID IT ON FACEBOOK!
Because, you know, starting a war with Russia is the best way to fix the Anthropocene problem.
With the paying of student loans issue specifically, we know from the original passing of the ACA/ Obamacare/ Romneycare/ Heritage Foundation/ Mandatory Enrollment legislation the Democratic and Republican parties can cooperate long enough to shovel buckets of loot to the Insurance Companies, Big Pharma, the Harvard Hospital corporations etc while simultaneously subverting our “socialist” Medicare/ Medicaid programs. They could be at this “cooperation” while “fighting” thing again…
But I don’t see an obvous way to cancel student loans while simultaneously shoveling boatloads of profit to the Banking/ Finance industries. I’m no expert but it sounds like it would take a huge amount of legislative work to make this kind of scam fly with the finance lobbyists writing the actual bill.
Therefore, the Democrats may be making some sort of Trojan Horse bill to pretend to help students, but there is no way this is a sincere proposal. Any time we assume the Democratic party is sincere in helping the average person, we are making a huge mistake. So either it is a ploy to sabatoge the FDR/Sanders wing of their own party or it is a way to shovel money to banks… or maybe some combination of the two… or maybe something else new?
I have a hard time understanding what new scam the Democrats could have in mind because they are content with recycling the old New Democrat scams with Biden in office:
The main goal of the Democratic party is to remain status quo always pretending there is no alternative to neoliberal economics because HillBillary Clinton told them so. Therefore, any proposal they intend to pass must be some scheme to privatize student loans and get the government’s SallieMae fingers out of the pot completely.
This really solves NOTHING. It simply reloads the machine for the next debt cancellation a generation down the road. And no the answer is never free education. Something free has no value.
There are 2 easy steps that go a long way toward fixing the issues. First, years ago there was a website that allowed one to input their college major, where they planned to live after graduation and how much debt they would have. I input my oldest daughters major and a low cost midwestern metro. My daughter would be graduating without debt, but I input $8,000 just to see. The result was that my daughter could not afford to live in this low cost metro with $8,000 of student loan debt, with the average salary for her degree. When my daughter graduated a couple years later she asked my wife and me, “Why didn’t you tell me that people with my degree don’t make much money?” Every student loan advance should require the borrower (and any co-borrowers – private loans) to run the scenario and attest to its outcome. This is informed decision making.
Two, the income based repayment programs were only made more complicated by the Obama administration. Cut it down to 1 program with simple rules and provide a dot gov website that allows borrowers access to monitor their compliance.
Sure, you can try to solve the bigger problems too much government money for education has created, but lets start with these 2 simple things first. Debt cancellation is about creating winners and losers. The losers being those that responsibly saved and or worked to attend a institution of higher learning. When is this country going to stop penalizing the people who do the “right” thing?
The value of free education is recouped many times over by nations wise enough to educate their youth.
Thanks for the reply. I do respect your opinion and the goal I think you have for it.
However, I think what actually happens is you end up with more casual attendees. They may or may not have any real interest in advancing themselves. For them It is maybe a place to hangout for awhile after graduating high school and the parties are “better”. The larger class sizes create less opportunity for student – professor engagement. The less interested students bring down the emotional uplift associated with being an educator. I think it weighs heavy.
The big dollars going to education from the US Government, hence the debt and the discussion of its cancellation, have led to higher salaries in administration, higher levels of administrative staff, more luxurious on campus housing, etc. None of which necessarily contributes to better student outcomes. Sending more federal dollars via free education into this money pit does no good. I think it exacerbates the negative trends we see today.
I think the people advocating free education, possibly like yourself, project themselves into the vision. It is noble, but I don’t think that is the actual outcome that will be experienced.
I am opposed to bailouts. Debt cancellation is a bailout. Again, lets help these young people make better decisions. Every article I read about student debt and cancellation ultimately gets to the point where people want them to spend more money and go deeper into debt. Cancelling debt so someone can take on more debt really seems perverse to me. Also, do we really want them to use the cancelled debt to go out and buy a house at these prices? With a market that potentially has huge shadow inventory due to forbearance?
The rest of the story – My oldest daughter got a low paying job out of college. However, her employer paid for her continuing education. She took advantage of the benefit to get a masters degree in a better paying field. She remains at the employer in the lower paying job. She likes what she does and who she does it with. She is a good person. I am proud of her.
I picked my major a couple decades ago based on just this type of calculation and have benefitted economically ever since, but often have the nagging feeling I should have gone a different direction if I listened to my inner voice. I guess I still have time… Having grown up in the US and not rich, I viewed education as an investment for future income. My foreign born spouse however, who benefited from a free education (and contributes much in US taxes now), had a very different view and was frankly appalled at the types of materialistic calculations we make on issues that should just be fundamental in a healthy society (this includes health care and retirement). Education for the sake of education was the goal, an educated population was the goal, a rich and varied culture was the goal. I will note that while the education was free, it was very merit based with educators actively trying to weed people out (can you imagine that happening in a US classroom?!), so I think students were somewhat guided to fields or trades according to their abilities. This might be a way to deal with the issue of people ‘hanging out’ and coasting on the public dime. And naked capitalism has focused on the bloated administration in universities extensively. But this notion that only the pursuits that result in profits are worthwhile or admirable is stunting and damaging to a society in the long run. Perhaps for the larger picture what we need is to collectively, as a species sharing a planet, redefine what profits are. And then set up the economic incentives accordingly.
My wife and I knew my daughters degree would not pay well upon graduation. We didn’t tell her because she loved what she was studying. We knew if she changed her mind it wasn’t the end of the world. And for her it wasn’t. We knew that.
My point about the online calculator is to gain insight. If you can’t pay back the student debt it is better to know that upfront. If paired with a simple income based repayment plan you would be able to study what you love.
Yes, agree that type of transparency up front would be useful in the current environment. Your daughter is lucky in that it sounds like you basically served as her free education. Would that all students could have the opportunity to pursue what they love. Perhaps we are already there, but I fear that certain fields will come to be reserved for those who need not worry about the noose of indentured servitude. I know I was already worried about it, and the sum involved pales in comparison to what kids are faced with today. I don’t think we want only upper class philosophers.
The mba’s in the front office got sick of the shipping clerks having a good laugh about things the mba’s couldn’t grok? Grok? What’s a grok? Do you hear those guys out there? Seems like they’re having too much fun to me..:(
I think the way education is thought about precludes ‘help[ing] these young people make better decisions.’ There is a great difference between what people choose to believe about the education industry and its system, and how it actually functions. In the former case, it is treated as an unalloyed mystical good, like God’s grace or finding money in the street. In material reality, it is (as Vlade notes above) not just for the acquisition of marketable skills — a secondary concern — but as a test of one’s ability to labor and submit to corporate bureaucracy. Vlade also mentions ‘connections’ which I take to mean the very important role of education as a class filter, class being not only your money but who your parents and other relatives are, where you grew up, what kind of culture you absorbed, who you know. We can’t help people make good decisions without looking at what they’re making decisions about realistically.
Agree. I have sat on charitable boards that espoused the idea that every child should graduate high school. Where they lost me was their belief that every child should then go onto college. They saw college as you say, “an unalloyed mystical good”.
I hated group projects in college. I always wished the professor would just let me do the project on my own. Everyone knows the dynamic so I won’t cover that. What I learned much later than I should have is that life is a group project.
“Connections” are a reason I hear about, I guess I didn’t go to the right schools. Along the line of connections is a phrase I will steal from Wes Moore. He calls it “social capital” and it applies whether in school or not. I approached a regent at my undergraduate school about establishing a mentoring program at the college level. To me it is about helping the student successfully navigate the system through graduation. It is a big change from high school to college. Attrition doesn’t do the student or college any good. The mentor helps with the transition, but are also connected to the students field of study. At its best it is a means to transfer relevant social capital.
Although it was enacted for a different purpose, the post World War II GI bill benefited our economy and our Society immensely. How have we so completely forgotten?
That is a great point and one I thought of as I wrote. I think that was part of the deal. I would say they paid for it. I don’t see that as “free”.
I anticipated that idea of “paying for” a benefit. The GI bill was not “part of the deal”. Ask a World War I Vet!
Is it unfair to suggest you might be pleased by some form of blood-letting as a recompense for student loans matching the full impacts of the GI bill? What do current GIs need to do — if anything — to make their entitlements match the post World War II GI bill entitlements?
This seems like the basis for your entire post and is wrong on its face. The Linux kernel is both free and has immense value. So is healthcare in first-world countries. And public school.
My experience is that people don’t value things that are just given to them for free. I can point to about a dozen anecdotal instances, but they don’t add to the conversation. If someone can go to college for free and they are not motivated, either by the opportunity to make more money or study what they love, it will most likely mean as much as they paid for it. Nothing. However, taxpayers will pay the price and those monies will be wasted. We ration scarce resources. Price gets certain people not to buy.
The Linux kernel may be free, but Red Hat is not. Healthcare is not free anywhere. Somebody is paying the salaries of doctors, nurses, etc. Access is constrained in these systems and is a form of price. Public schools are free, but again someone is paying the bill, usually through property taxes. When I lived in NYC in the early 90’s the price of a private K-12 school was more expensive than tuition at NYU or Columbia. There is a price associated with NYC public schools to have that kind of differential.
The average undergraduate debt is well under the $50,000 number for cancellation mentioned in the post. A dated number is more like $27k. And the average is skewed higher by the $300k of student debt that paid for a PhD in trombone. Is there a cap for free education? There are people with 7-figure student loan debt. What is a reasonable amount, because if you place a limit it is constrained (price) and no longer free.
Again it is about where monies are best spent. Going to feed even higher administrative salaries, more administrators and even nicer student housing does not seem like sound outlays.
So in a world of free education will someone pay for my youngest daughter to go to Harvard Law School? [Don’t worry she declined the offer.] Can someone go to a for-profit tech school to become a BMW mechanic? Where is the line or is there none?
This would be another government subsidy that would lead to even greater inequality.
A suggestion for terminologies on this site — the word ‘post’ should refer to an essay by Yves or one of the other contributors to this site posted as text for our discussions in comments. The term ‘comment’ should refer to text submitted to posts or the Links or the Water Cooler using the comments box. The term ‘link’ should be used to refer to references linked to in the Links page or in Water Cooler.
I emphasize the word “suggestion” in the paragraph above. I cannot claim I am not pedantic, but oh well! I believe a little bit of pedantry would make writing comments more fluid. I am very open to other ideas and have copied their practice when I have noticed their presence.
By the way — I very strongly agree with your comment.
I’ll examine your arguments — and as I do — make response. You begin by arguing:
“This [canceling student debt?] really solves NOTHING. It simply reloads the machine for the next debt cancellation a generation down the road.”
I think there is some merit in this argument. Canceling student debt only solves the current problem of rising student debts. Canceling student debt is similar to mortgage and rent forbearance — though its a new generation of students that could be left holding the bag. There is still a piper waiting to be paid. I agree wholeheartedly with your argument that “income based repayment programs only ” … “made [things] more complicated”. Means testing has consistently made things more complicated, more expensive, and less effective in achieving their stated goals.
You begin your next argumemts with a flawed axiom: “Something free has no value.” That axiom should be restated as “Something free has no monetary cost” which is a tautology [a word I learned from study in an area completely unrelated to my major, just as unrelated to my practice of the disciplines I learned, and learning for which I paid a very modest amount of money — but a fair amount of effort — to learn]. The corollary you press out from you flawed axiom, that free education would have no value, uses reasoning that easily leads to many absurd conclusions unless I can conclude you live a strange and sad existence where every kindness, and every act of love is performed monetary quid pro quo — which I would be deeply saddened to learn.
But you can and do argue against free education without binding yourself to that absurd axiom which might be derived from the very heart of Neoliberal philosophy. I believe making education free might indeed induce more “casual attendees” to show up and turn lecture halls into a “place to hangout”. Are causual attendees really such an evil? The idea of lecture halls becoming a place to hangout — have you ever sat at one of the desks in a lecture hall? The idea that anyone would sit through lecture just to hang around or so they could go to “better” parties impresses me as strange. Do you believe there is some party host standing at the door inspecting student IDs? Maybe things have reached that point these days but back when I attended college the more the merrier and cute girls were always welcome.
Your concerns about “less opportunity for student – professor engagement” and “bring[ing] down the emotional uplift associated with being an educator” suggest it has been a very long long time since you attended college and … were you entirely ‘there’ when you did? When I attended college, too many decades ago, most professors office hours were seldom crowded and most of the professors were more concerned about making ten-year or landing grants and publishing papers than they were about the emotional uplifts of being an educator. For that, you need to look at grade school, middle school, and high school teachers and most Community College teachers [where would be professors who focused on their role as educators instead of on their role as grant winners and research paper generators end up], where being an educator was their Calling [in the old Protestant Ethic sense of the word]. If you are really concerned about the emotional uplifts of those who come to teaching as a Calling you might ask how they feel about the Neoliberal testing regimen and class sizes. Most of the college professors I interacted with — back-in-the-day — were looking for students to enlist as graduate students to do the often dull, heavy lifting required in supporting the professor’s areas of interest and hopes for grants and publication.
Your statement closing your initial comment, not really an argument: “When is this country going to stop penalizing the people who do the “right” thing?” Is far broader in its application and impact than you appear to realize. It strikes a cord in me … but not one on the keys and themes you have argued.
Cancelling debt does not solve the inherent issues that have led to the problem faced today. Once implemented and done, a small subset of the population will be better off financially. The mantra I read is that these people who have been made better off at taxpayer expense, will then go out and buy something really expensive. Incurring loads of debt. Will they make a better decision on the new hoped for debt than they made as students? I hope so, but having their student debt just cancelled – possibly not. [I just spoke to a real estate appraiser and long-time friend. He said buyers are stretching with no consideration as to how much upkeep and maintenance will cost. The larger homes they are now able to buy with lower interest rates mean more money. Two air conditioners and furnaces as opposed to one each, etc.]
There is nothing wrong with casual attendees. I hope to be one by auditing college courses in retirement. I will be engaged in the course. I won’t spend the time looking at my phone, showing up late, leaving early, talking or interrupting. If we could assume all would be so engaged there would be nothing wrong. From past experience and the experience of my children I doubt that will be the case.
I had some terrific professors and then the ones you describe. I would say I and my children were apparently lucky. We mostly had the former. There are a handful I would count among the best people in my life. I guess I am lucky.
Thanks for taking the time to share your thoughts.
“Canceling debt does not solve the inherent issues that have led to the problem faced today.” Indeed! You are very correct in that judgment — but I must hesitate as you continue. What mantra did you read? Instead of reading mantras try talking with a few students about their debt. Do you really believe all the students relieved of their student debt:
“will then go out and buy something really expensive. Incurring loads of debt.”? Really?
Your appraiser friend worried that home “buyers are stretching with no consideration as to how much upkeep and maintenance will cost”. I believe that. What has that to do with relieving student debts? It seems much more closely related to the insane inflation of the housing markets.
You intend to become a casual attendee of lectures. Do please make an effort to listen after class to those students who might talk with you. I learned a great deal just listening to students who opened to me.
As far as your worries about phone mesmerism — most of the students in the classes I took at a Community College were tied to looking at their phones … as a tool for capturing the content of the lectures. I am old and old-fashioned and took careful notes but I am not certain I did any better at capturing the lecture content than students with their phones. That became very apparent when I suffered at answering a pop-quiz easily handled by your phone huggers.
I will hold the penultimate paragraph to your comment as strong corroboration to my belief that remote learning and online-learning are very much less than what is best. I am pleased and envious that you and your children were so fortunate in their education as you describe. Most but not all of my professors were among the good people of my life. I fear few if any of my children’s’ teachers in high school, many years later than my times, might be counted among the fortunate and generous few you and your children enjoyed.
As for your thanks “for taking the time to share your thoughts”. My thoughts and my time are free. I am retired and hope never again to be bound by the whims of an employer. I thank you for expressing and well-defending your thoughts on this issue.
it also occurred to me that student loan forgiveness by executive order has an additional problem: under the Internal Revenue Code, forgiveness of indebtedness generally is recognized as income. (Specifically, and correctly from a purely income tax perspective, forgiveness of indebtedness is a species of “imputed income”–though the tax code doesn’t generally tax things construable as imputed income, as it otherwise would result in insane consequences, such as a homeowner being taxed on the fair market value of cutting his own lawn.)
An executive order cannot override the tax code, and therefore some students would probably be facing a substantial tax bill. Others might avoid the tax consequences in part or in full because there are rules to limit the taxable amount when the taxpayer is insolvent (probably the case in a good many student loan situations but not all of them). In any case, that’s additional tax preparation cost for many of the relief beneficiaries, as well as potentially appraisal costs.
“Some of the consistent poor results may be over-reliance on an air war, as in TV ads, as well as being so disconnected from voters as to not know how to craft strong messages. And it’s the cost of TV that’s served as Team Dem’s excuse for its need to curry favor with rich corporate donors.”
I’d like to know how many voters are still watching TV with ads. I’m in my mid 40s, and the only people I know who watch TV anymore are my parents generation (70s and 80s). Traditional TV with commercials basically doesn’t exist for my peers and my kids. However, I live in a city with fast internet service, which is obviously not the case for everyone.
I wonder how many people are still getting information primarily from TV, and how they compare to the rest of the US. I’m guessing it would be people who are poorer and more rural. It makes for an interesting strategy question, as AOC had twitter posts that criticized the Democratic party for not using online media effectively. Maybe that type of messaging won’t work for rural areas, as they don’t have the internet speeds to support the format.
This is an excellent thread.
Agreed that something must be done to prevent student debt from accumulating all over again.
My solution would be to double the size of Pell Grants, and make them available to far more students in the middle class.
Then stop making federal loans. Students with high-paying majors should be able to get private loans. Of course make bankruptcy available to any student debtor.
This action will cause a crash in liberal arts colleges and many of the for-profit University of Phoenix types. I sure won’t miss them.
“Something must be done to prevent student debt from accumulating all over again.”
Yes. This is one of my biggest beefs with proposals to deal with today’s student loan crisis by forgiving up to $50k in debt. I have a niece who’s a junior in high school, and her timing with these schemes would be maximally bad. Forgive a ton of debt in 2021, and then what? Wait until 2041 when the aggregate outcry becomes large enough and my niece has already had her early adulthood ruined?
Unless the plan includes provisions to prevent the crisis from happening again, I’ll definitely oppose it.
Allow debtors to clear their student debts through bankruptcy. Education will still be expensive in the US. Lenders will tighten up, but that might control inflation.
Access will decline in the short run and government might respond with increased subsidies. Either way, the public is paying which is an opportunity to put conditions and cut the fat on administrative costs.
How much has the finance industry collected as “stimulus” in the last six months along (even without the amounts handed over to keep their short-term loan process afloat)? Will they be paying that back anytime soon? If not, maybe they can agree to cancel student debt and call it even.
Are we missing the fact that a goodly portion of the loans were for fraudulent institutions ?
The likes of T***p U, Corinthian, And so on –
Should the borrowers be responsible for getting defrauded ?
Should the the government bailout simple fraud ?
Here’s what needs to happen –
1) Get rid of B. DeVos.
2) Follow the existing congressional mandates concerning student debt. In particular the whole process of supporting those public service professions.
3) Investigate and if warranted prosecute the fraudsters.
This can be done without Congress bailing out the fraudsters.
Then let’s talk about loan forgiveness.
I’ve been unable to find its source and exact wording – it sounds rather Lord Acton-ish – but it seems timely to cite: “the greatest enemy of a large reform is a small reform”.
Of course you are right there is a golden opportunity for real large reform and there should be. However the point I’m trying to make is that a new administration can take steps within the present framework without waiting for Congress to act.
The problem is how very large the needed reform has become. Casting off Neoliberalism is no mere large reform.
I think Chuck got his eyes opened via a little clock cleaning when they first learned they were not going to take the Senate, or gain in the House. That is the ONLY reason he is suggesting it. Oh, and there has to be a big plus for the Dems in investment opportunities, and loads of campaign cash. They don’t do anything unless they get a huge payoff for it. Attacking AOC, when she basically knelt down to Nancy, and Chuck, tossed off her original platform in order to fit in tells me they are going to shut her up for a long time. They will try to do the deals, but in their usual bassackward ways that do not actually solve problems, or help regular people. On the infrastructure issue of public/private, they,–both sides, having been chomping at the bit for decades to continue to remove public ownership of anything. Privatization is a gigantic pyramid plan for them.
I am not a believer in our present college of progressives in Congress and the Senate. Their beliefs bend too easily to forces I can neither see nor conceive of. I remain, perhaps unfairly, very skeptical of AOC and Bernie is a write-off.
The progressives have just started to grow their numbers. Change takes a while. It arguably took the republicans about 15 years after the Goldwater shellacking to rebuild their brand into kingmakers, and did so siding with money power. It’s going to be much more difficult to effect change when you are fighting forces aligned with money power……and broad media infrastructure reach that teaches American rubes to hate “socialism.”
In 15 years I might not be around to care — knock wood. I don’t believe it should take Bernie or AOC that long to NOT support the CARES Act. I don’t believe it should take that long for AOC to distance her “Green New Deal” from the Big Money efforts to harness the green ‘new’ deal for extracting money from the Government.
According to student loan expert Mark Kantrowitz, the for-profit college sector takes in around 15% of the government’s financial aid each year.
These debts are the most scandalous and cruel, perhaps, but they are not the majority. Graduate and professional schools probably account for most student debt.
Put another way, the young dentist who borrows $300,000 exceeds the 10 deluded young women who borrow $10,000 for cosmetology school.
I am not sure what drift you intend for your comment.
Have you considered how much the debts of recently graduating medical doctors and dentists play into the hands of the forces destroying what remains of “professionalism” in the medical and dental professions, and works to undermine, domesticate, and inCorporate what is left of private practice in these last professions?
My comment was not meant to praise the medical debts of doctors. I have advocated for full public funding of medical education, as a vital national resource.
I want no student debt for doctors and cosmetologists.
“Is Fear of AOC Why Chuck Schumer Is Pumping a Non-Starter “Cancel Student Debt by Executive Order” Scheme?”
Ab. So. Lute. Ly.
Include me among the mass of lefties on #Twitter who have quote-tweeted his typically vapid cheerleading with exhortations @AOC to primary his a**. He knows he’d lose in a landslide. He should actually resign and seek a revolving door to some cush’ think-tank. #CAP sounds about right.
What the DSA/JusticeDems have done this cycle has shone a bright light on the obsolescence (to use the term AOC did) of establishment Dems. To see them and the consent manufacturers on liberal TV screeching about “too left” is proof positive that a sound blow has been struck. AOC chose her words carefully, but the left must keep pounding relentlessly to further expose the impotent kleptocrats further.
If Chuck Schumer does not fear AOC and what she portends he is no politician. But what true progressive does not wonder about the extent that AOC could have been, might be, may be, or has been seduced by Big Money?
In politics actions speak … not words.
Runoff system seems to block emergence of third party. if margins are this razor thin in India, 3rd party which can swing the result would be added to the alliance by a big party. They would then get to put up candidates in some safe seats of the big party. That allows 3rd party to viable and build up their vote base.
Why have our neoliberal policymakers led us blindly into a financial crisis?
They only worry about Government debt and don’t look at private debt.
You know what neoliberals are like!
Private sector good
Public sector bad
Government debt bad
Private debt couldn’t possibly be a problem could it?
The economics doesn’t help.
The economics of globalisation has always had an Achilles’ heel.
The 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression. No one realised the problems that were building up in the economy as they used an economics that doesn’t look at debt, neoclassical economics.
Not considering private debt is the Achilles’ heel of neoclassical economics.
It didn’t happen in China because they saw what was happening by looking at private debt.
When you look in the right places it’s really easy to see.
At 25.30 mins you can see the super imposed private debt-to-GDP ratios.
Economies fill up with the banker’s debt products until you get a financial crisis.
1929 – US
1991 – Japan
2008 – US, UK and Euro-zone
The PBoC saw the Chinese Minsky Moment coming and you can too by looking at the chart above.
Davos 2018 – The Chinese know financial crises come from the private debt-to-GDP ratio and inflated asset prices
The black swan flies in under our policymakers’ radar.
They are looking at public debt and consumer price inflation, while the problems are developing in private debt and asset price inflation.
The PBoC knew how to spot a Minsky Moment coming, unlike the FED, BoE, ECB and BoJ.
The bankers did rather well during globalisation, didn’t they?
Bankers like neoclassical economics.
Not considering private debt is the Achilles’ heel of neoclassical economics.
That’s handy Harry!
I am a banker and my only real product is debt.
Who can I load up with my debt products?
With everyone using neoclassical economics the world is my oyster.