Team Liz Warren Or Team Betsy DeVos? Gee, That's A Stumper!
Remember how the coronavirus pandemic led to huge layoffs and a shutdown of the economy earlier this year, and Congress responded by passing the CARES Act? There were HUGE problems with how a lot of the money went to big companies instead of small businesses, but the money really did help prevent the economy from falling off a cliff, especially the cash payments to individuals and the emergency unemployment benefits. Also too, the interest-free temporary freeze on student loan payments, which allowed as many as 33 million Americans to take a break from monthly loan payments, freeing up hundreds of bucks a month for groceries, rent, and such toilet paper as they could find. Unfortunately, that provision, like most of the CARES Act, will expire on January 1, and Republicans in Congress have no interest in passing a new stimulus bill any time soon.
Fortunately, as Sen. Elizabeth Warren (D-Massachusetts) has been pointing out quite insistently this week, when Joe Biden takes office on January 20, he has the power to relieve federal student loan debt by executive action, regardless of whether Democrats retake the Senate in the Georgia runoff elections. She discussed the economic effects of relieving student debt with Federal Reserve Chair Jerome Powell in Senate testimony yesterday. Give it a watch!
As David Dayen 'splains at the American Prospect, Biden could use his executive authority to wipe out student debt through the Education Department's "compromise and settlement authority." That basically means that since the government issued the debt, it has the discretion to erase the debt in part or even in full. Warren and Democratic leader Chuck Schumer have introduced a resolution calling on Biden to forgive $50,000 in student debt per borrower, which, again, he can do without having to negotiate anything with Congress.
Powell wouldn't take a specific stance on whether Biden should do that, but Powell did agree that student debt is definitely a drag on people's ability to get through this mess. I think it's worth quoting at length, because this isn't just about individual borrowers, it's about the larger economy:
Powell: Certainly, people who are weighed down by debt in a situation like this, where they may be unemployed, or unemployment is very high among, for example, low-wage workers. That can weigh on economic activity. Yes.
Warren: Fair enough, but I think we started with economic stimulus 101. Two hundred bucks is two hundred bucks that could be spent in the economy. Now, Mr. Chairman, you've also noted that student loan debt has another impact on a struggling economy and that is that student loan debt makes it harder for people to qualify for mortgages, to buy homes, to start small businesses. You've noted that those things drag our economy down. Do you still feel that way?
Powell: Yes. [...] Over longer periods of time people who take on student debt in an effort to make their lives better and brighter, and if it doesn't work out that way, they drag that debt down through their economic lives, and it can get in the way of their credit history, of course, and their ability to own a home, and their whole economic life for many years.
Warren: Right, and then that has an overall impact on the economy in terms of home sales, or in terms of business startups. Is that right?
Powell: Yes. In effect, those people are unable to participate, perhaps in the economy, to the full extent that they might be able to, which would weigh on the economy
So while of course we need a wider stimulus (hell of a lot more doable if Democrats can retake the Senate), a great big loan forgiveness order would result in an immediate stimulus to the economy, plus stronger long-term growth going forward. And since lower and middle-income folks spend their money on stuff instead of socking it away in investments, it also grows the economy more directly.
Not surprisingly, outgoing Education Secretary Betsy DeVos, a devotee of giving taxpayer money to private schools, thinks debt forgiveness is a terrible idea, because it's just not "fair." At a conference on financial aid at the Education Department yesterday, DeVos cried bitter tears about the prospect of the government forgiving student loans, or what she called "the truly insidious notion of government gift giving," which is pretty fucking rich for someone whose life's work is all about siphoning government funds into for-profit schools.
We've heard shrill calls to cancel, to forgive, to make it all free. Any innocuous label out there can't obfuscate what it really is: Wrong.
As any fool knows, governments are established to shower taxpayer funds on the corporate interests that pay to elect those governments. It's right in the Declaration of Independence if you look at it through billionaire-tinted glasses.
DeVos also hit the usual bullshit claims that forgiving student debt would be unfair to people who didn't go to college or who already managed to pay off their loans, back in the days when that was actually feasible. She insisted it's "fundamentally unfair" to ask the "two-thirds of Americans who don't go to college to pay the bills for the mere one-third who do."
That sounds impressive and all, until you consider that the government regularly spends trillions on stuff that isn't distributed equally — I certainly haven't gotten my share of any F-35 fighter jets or oil subsidies, and I feel cheated. And of course, DeVos also ignores the substantial public good that would come from making it possible for millions of Americans to own homes and buy stuff. You want to help people who didn't go to college? Great, let's help them too instead of dividing middle and lower-income Americans with this petty bullshit. The class war needs to be directed elsewhere.
DeVos was also unhappy about Biden's plan to have the government pay for the first two years of community college, public vocational school, or public universities, because she said it's "socialism," which, again, ignores the very real benefits of having an educated citizenry. She claimed it would result in "rationing" of higher education, as if it were currently available to everyone now, and warned that colleges and universities would "begin to resemble a failing K-12 school, with the customer service of the DMV to boot." (Considering how efficient the Idaho DMV has gotten, that doesn't really scare me a lot.)
In any case, I'd have to say I'm with Warren on this point.
Because we were all just dying to know what the unqualified billionaire who made this problem worse thinks about he… https://t.co/JJjrcWsAnN— Elizabeth Warren (@Elizabeth Warren)1606869160.0
Happily, Betsy DeVos will be out of a job really soon, hooray.
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Doktor Zoom's real name is Marty Kelley, and he lives in the wilds of Boise, Idaho. He is not a medical doctor, but does have a real PhD in Rhetoric. You should definitely donate some money to this little mommyblog where he has finally found acceptance and cat pictures. He is on maternity leave until 2033. Here is his Twitter, also. His quest to avoid prolixity is not going so great.