Monday, June 24, 2019

Guess What! There's More Behind Bernie's College Loan Debt Forgiveness Than Pre-Debate Positioning

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The work that Bernie’s economic advisor, Stephanie Kelton, chair of the Stony Brooks economic department, did for Bernie on student debt cancellation last year— along with 3 colleagues— The Macroeconomic Effects of Student Debt Cancellation is probably too much to expect political journalists to read and grasp… so it’s a lot easier to go along with a narrative about Bernie competing with Elizabeth Warren. We’ll come back to that. First Dr. Kelton, who starts with some basic questions:
More than 44 million Americans are caught in a student debt trap. Collectively, they owe nearly $1.4 trillion on outstanding student loan debt. Research shows that this level of debt hurts the US economy in a variety of ways, holding back everything from small business formation to new home buying, and even marriage and reproduction. It is a problem that policymakers have attempted to mitigate with programs that offer refinancing or partial debt cancellation. But what if something far more ambitious were tried? What if the population were freed from making any future payments on the current stock of outstanding student loan debt? Could it be done, and if so, how? What would it mean for the US economy?

…Student debt cancellation results in positive macroeconomic feedback effects as average households’ net worth and disposable income increase, driving new consumption and investment spending. In short, we find that debt cancellation lifts GDP, decreases the average unemployment rate, and results in little inflationary pressure (all over the 10-year horizon of our simulations), while interest rates increase only modestly. Though the federal budget deficit does increase, state-level budget positions improve as a result of the stronger economy. The use of two models with contrasting long-run theoretical foundations offers a plausible range for each of these effects and demonstrates the robustness of our results.
A one-time policy of student debt cancellation, in which the federal government cancels the loans it holds directly and takes over the financing of privately owned loans on behalf of borrowers, results in the following macroeconomic effects (all dollar values are in real, inflation-adjusted terms, using 2016 as the base year):

The policy of debt cancellation could boost real GDP by an average of $86 billion to $108 billion per year. Over the 10-year forecast, the policy generates between $861 billion and $1,083 billion in real GDP (2016 dollars).
Eliminating student debt reduces the average unemployment rate by 0.22 to 0.36 percentage points over the 10-year forecast.
Peak job creation in the first few years following the elimination of student loan debt adds roughly 1.2 million to 1.5 million new jobs per year.
The inflationary effects of cancelling the debt are macroeconomically insignificant. In the Fair model simulations, additional inflation peaks at about 0.3 percentage points and turns negative in later years. In the Moody’s model, the effect is even smaller, with the pickup in inflation peaking at a trivial 0.09 percentage points.
Nominal interest rates rise modestly. In the early years, the Federal Reserve raises target rates 0.3 to 0.5 percentage points; in later years, the increase falls to just 0.2 percentage points. The effect on nominal longer-term interest rates peaks at 0.25 to 0.5 percentage points and declines thereafter, settling at 0.21 to 0.35 percentage points.
The net budgetary effect for the federal government is modest, with a likely increase in the deficit-to-GDP ratio of 0.65 to 0.75 percentage points per year. Depending on the federal government’s budget position overall, the deficit ratio could rise more modestly, ranging between 0.59 and 0.61 percentage points. However, given that the costs of funding the Department of Education’s student loans have already been incurred (discussed in detail in Section 2), the more relevant estimates for the impacts on the government’s budget position relative to current levels are an annual increase in the deficit ratio of between 0.29 and 0.37 percentage points.
State budget deficits as a percentage of GDP improve by about 0.11 percentage points during the entire simulation period.
Research suggests many other positive spillover effects that are not accounted for in these simulations, including increases in small business formation, degree attainment, and household formation, as well as improved access to credit and reduced household vulnerability to business cycle downturns. Thus, our results provide a conservative estimate of the macro effects of student debt liberation.


So how does a typically lazy journalist cover Bernie’s new student debt plan for an audience they would prefer to have it summed up in a paragraph? Jeff Stein gave it a swing for the Washington Post readership. He included lots of superfluous information— like Bernie’s a senator from Vermont, for example, something we all need to know, while leaving out what’s behind the plan. “Sen. Bernie Sanders (I-VT),” he wrote, “will propose on Monday eliminating all $1.6 trillion of student debt held in the United States, a significant escalation of the policy fight in the 2020 Democratic presidential primary two days before the candidates’ first debate in Miami.” That’s all most Post readers need to know; Bernie is escalating a political fight in front of the debate.
Sanders is proposing the federal government pay to wipe clean the student debt held by 45 million Americans— including all private and graduate school debt— as part of a package that also would make public universities, community colleges and trade schools tuition-free.

Sanders is proposing to pay for these plans with a tax on Wall Street his campaign says will raise more than $2 trillion over 10 years, though some tax experts give lower revenue estimates.

Sanders will be joined Monday by Rep. Ilhan Omar (D-MN), who will introduce legislation in the House to eliminate all student debt in the United States, as well as Rep. Pramila Jayapal (D-WA), co-chair of the Congressional Progressive Caucus, who has championed legislation to make public universities tuition-free.

Sanders helped popularize demands for tuition-free college during his 2016 presidential campaign run but did less to emphasize solutions for those who had already left school saddled with debt. Since then, liberal Democratic lawmakers have called for increasingly aggressive government solutions for erasing existing student debt, with 2020 candidates Sen. Elizabeth Warren (D-MA) proposing $640 billion in student debt forgiveness and former housing secretary Julián Castro introducing a more modest debt forgiveness plan.

These proposals have faced fierce objections, including from some moderate [at The Post they use the word “moderate” to denote the conservative Republican wing of the Democratic Party] Democrats, for giving taxpayer subsidies to educated Americans who, on average, have higher earnings than those with only a high school degree. [Would it silence them if Bernie also suggested a one-time-only payment of several thousand dollars toeveryione who has no student debt? I suspect not, but they’d find an different excuse to attack him.]

Advocates say the push reflects the growing recognition of the economic harm created by the nation’s soaring student debt burden, particularly on the millennial generation, which ballooned from $90 billion to $1.6 trillion in about two decades, according to federal data.

“This is truly a revolutionary proposal,” said Sanders, who is announcing the plan with the support of Rep. Alexandria Ocasio-Cortez (NY) and a handful of other House Democrats. “In a generation hard hit by the Wall Street crash of 2008, it forgives all student debt and ends the absurdity of sentencing an entire generation to a lifetime of debt for the ‘crime’ of getting a college education.”

Sanders is proposing to pay for the legislation with a new tax on financial transactions, including a 0.5 percent tax on stock transactions and a 0.1 percent tax on bonds. Such a levy would curb Wall Street speculation while reducing income inequality, according to a report by the Century Foundation, a left-leaning think tank, though conservatives warn it would stunt economic growth and investment.

Conservatives and moderate Democrats are likely to raise concerns about these student debt forgiveness plans. They have pointed out that Democratic presidential candidates, including Sanders, have pushed more than a dozen expensive federal projects— including Medicare-for-all, the Green New Deal and large infrastructure improvements— projected to cost substantially more than the $1.5 trillion GOP tax law approved in 2017, at a time of already high deficits.

“The cost will march toward $3 trillion and benefit a lot of wealthy families and future high-earners,” said Brian Riedl, an analyst at the Manhattan Institute, a libertarian-leaning think tank. “Of all problems requiring a $3 trillion federal expenditure, the college costs of middle- and upper-class college graduates seem lower-priority.”

A fierce debate has raged in left-leaning policy circles as well as over whether canceling student debt offers too much help to families with higher incomes. The top 40 percent of earners would receive about two-thirds of the benefits from Warren’s plan, according to Adam Looney, a former Treasury official under President Barack Obama who is now at the Brookings Institution, a center-left think tank.

That number is likely to be higher under Sanders’s plan, given that proposals by Warren and Castro do not call for wiping clean the debt of those earning over six figures. Warren has proposed forgiving up to $50,000 in student debt for those earning under $100,000, or about 42 million people. Under Castro’s plan, borrowers would not have to repay their loans until their income rose above 250 percent of the federal poverty line-- about $64,000 for a family of four-- after which it would be capped.

Sara Goldrick-Rab, a professor at Temple University who specializes in higher-education financing, said she had mixed feelings about plans such as the one proposed by Sanders that involve forgiving all student debt.

“There’s a piece of me that has seen how widespread the pain is, including among people you might say are financially fine,” Goldrick-Rab said. “But there’s a piece of me that knows what the pot looks like, and says, ‘That’s not the best use of the money.’”

Other experts say these criticisms miss the mark. If the plans are paid for with higher taxes on affluent Americans, they will ultimately redistribute resources down the income distribution, said Marshall Steinbaum, a former researcher at the Roosevelt Institute who was recently hired as an economics professor at the University of Utah.

Student debt forgiveness would also help stimulate economic growth by freeing borrowers to buy homes and improve their credit, while primarily benefiting racial minorities, according to Steinbaum and researchers at the Levy Institute, a left-leaning think tank. Omar, who has student debt, said in a statement that the plan would “unleash billions of dollars in economic growth.”

Additionally, poorer Americans would see the percentage of their income held in debt fall much more dramatically than that of higher earners under the plan, Steinbaum said. Steinbaum has also disputed Looney’s analysis, arguing it ignores people who have so much debt they cannot pay.

The difference in these plans may reflect a wider debate in the Democratic Party over how to tailor government programs.

Sanders has proposed universal government programs whose benefits also go to the rich and do not depend on recipients’ earnings. Sanders’s Medicare-for-all plan, for instance, would offer government health insurance to every American regardless of income, a break from Obama’s Affordable Care Act, which aimed to expand insurance primarily to low-income individuals.

Supporters say making government programs also available to the affluent makes them more politically durable, citing the popularity of programs such as libraries and K-12 public education, though critics contend such programs offer help to those who do not need it.

Warren, for instance, has proposed a child-care plan that would make child care free only for those earning up to $51,200, in the case of a family of four.

Her approach also makes her plans much less likely to require tax hikes on middle-class Americans. She has said she can pay for these programs with tax hikes on people with more than $50 million and on corporations with more than $100 million in profits— math that is made easier because her plans cut off those above a certain income bracket. Sanders has embraced higher taxes on the middle class, saying families will benefit overall by seeing other expenses reduced.

Critics are likely to say Sanders’s plans reflect his attempts to distinguish himself from Warren, who has risen in the polls during the past several months of the Democratic primary, sometimes overtaking Sanders’s No. 2 position in polling behind former vice president Joe Biden.

[This is a false narrative that corporate media has bought into. According to the RealClearPolitics polling averages— these are the national numbers:
Biden- 31.9%
Bernie- 15.0%
Warren- 11.9%
The Iowa numbers:
Biden- 25.0%
Bernie- 19.4%
McKinsey Pete- 11.8%
Warren- 9.8%
The New Hampshire numbers:
Biden- 29.7%
Bernie- 16.7%
Warren- 11.0%
The Nevada numbers:
Biden- 31.0%
Bernie- 18.0%
Warren- 14.5%
The South Carolina numbers:
Biden- 41.0%
Bernie- 13.5%
Warren- 12.5%
The California numbers:
Biden- 24.0%
Bernie- 17.5%
Kamala- 15.0%
Warren- 12.5%
The Texas numbers:
Biden- 25.3%
Beto- 17.7%
Bernie- 14.7%
Warren- 10.7%
The Massachusetts numbers:
Biden- 22.5%
Bernie- 16.0%
Warren- 12.0%
OK? Can we dismiss that false narrative now?]

Warren’s student loan plan would entirely clear student debt for more than 75 percent of borrowers. She also has embraced some universal plans, co-sponsoring Sanders’s single-payer legislation.

Like Sanders, Warren has crusaded against rising income inequality and released detailed proposals for taking on Wall Street and expanding government programs.

Sanders’s higher-education plan may reflect other ways he is attempting to stake out the left flank of the primary. For instance, his previous free-college-tuition plan in Congress would eliminate tuition and fees only at four-year public colleges for those making up to $125,000, the result of a compromise he reached with Hillary Clinton after the 2016 presidential campaign.

Sanders previously campaigned on free college tuition, regardless of income, in 2016.

His new plan goes further, calling for public four-year colleges and community colleges to be free for everyone, including tuition and fees. Sanders’s bill includes $1.3 billion a year for low-income students at historically black colleges and universities, and $48 billion per year for eliminating tuition and fees at public schools and universities.


The CNN coverage is even stupider, Ryan Nobles and Gregory Krieg reporting that Bernie “is set to stake out uncharted territory in the Democratic presidential primary, offering up a plan to completely eliminate the student loan debt of every American…The proposal goes further than the plan already unveiled by his Democratic primary rival Sen. Elizabeth Warren. Warren's debt relief package was subject to income eligibility levels to determine how much relief the average person would receive— parameters that Warren said were aimed at closing the racial wealth gap. Under the Sanders plan, if you have student debt of any kind it would be canceled the second the legislation is signed into law… With this latest, detailed pitch, Sanders is aiming to solidify his credentials as the most progressive candidate in a field that has largely embraced the priorities he brought to a national audience in 2016. The proposal is sure to invite new criticism from Democratic moderates, who have sought to cast themselves as pragmatic alternatives to Sanders' efforts to fundamentally remake the country's economic system. On the stump and in interviews, Sanders has long spoken about finding ways to relieve the burden of student debt, but this this is his most specific plan to date. He teased the announcement during an event in South Carolina on Saturday night… The plan is part of a more comprehensive "college for all" program that Sanders has already released in pieces and includes free tuition at all four-year public colleges and universities, as well as community colleges. The broader proposal also includes subsidies to reduce the cost of tuition and fees for low income students at private colleges that historically serve underrepresented communities.”

I asked a whole batch of congressional candidates and the first one to get back to me was Dary Rezvani, a Central Valley progressive running for the seat Devin Nunes occupies. Dary told me that this is his favorite topic for three reasons:
1. I had student loans; not to brag but paid them completely off two weeks ago.
2. Republicans seem to love the idea that they are more economically savvy when in reality this move would stimulate the economy more than any trickle down bullshit ever could.
3. Corporate liberals say "but I had to pay;” Please just stfu. 
Education is the foundation of society. The fact that we privatized our student loan system once again shows that politicians have no idea what they are doing. It is literally the basis of a publicly traded company to put shareholder interests first. In order to do that you must maximize profit. How could anyone be so stupid to think that you could have a socially successful system by privatizing the funding to further your critical thinking ability?

Once again it is a direct attack on the arts and humanities studies. We see the rhetoric today, "well maybe if you weren't an art major then you'd have a job." Uhhhh yea maybe but then how the hell would history or culture ever be passed on? We can even touch on how business is taught in the USA, it is constantly to maximize profit. The theory of business is taught that they should exist in perpetuity which when a business fails to innovate they cut costs in order to meet that standard. The highest costs? People. Which is why you see R&D is the first area that is cut during corporate mergers. These companies see them as "add ons" instead of fundamental parts of their business. The idea is to either increase revenue or increase profit margin. When you stop coming up with new ideas then the only way to stay viable is to cut costs to maintain a profit margin. It's all a ratio.

Student loans are one of the biggest scams ever perpetrated by the United States. Whether it be the different "editions" of the exact same textbook that your professors "require" you to buy or the companies like Nelnet only want their money and they will do whatever they have to to get it. They lie to people who call in order to collect more money and set them up with payment plans that make their lives more difficult.

Wiping all of the student debt would adversely impact like 3 companies that shouldn't exist to begin with and it would help millions of Americans. It is time for our government to get off its knees with privatization and corporations. Imagine millions of people with an extra $200-$900 in their pocket, EVERY MONTH. Or would that be too scary for banks because then people wouldn't have to put everything on their credit cards?

Everyone should have the opportunity regardless of financial standing to attend a university if for no other reason, to interact with people from various walks of life. You would be surprised to learn what you don't know after these interactions.

Centrists who want to "take it easy" on the debt forgiveness can just get out of the race now. This isn't their daddy's Democratic Party. This is my generation’s Democratic Party and we have no room for minced words or weak messages.



”You have to act as if it is possible to radically transform the world. And you have to do so all of the time.”
- Angela Davis

Briana Urbina is a young progressive attorney running for the seat occupied by corrupt establishment hack Steny Hoyer. Moments ago, she that me that "many Marylanders have the great privilege of attending the excellent universities in the 5th District and surrounding areas. Unfortunately, an overwhelming number of us end up leaving our universities with not only excellent degrees, but with crippling student loan debt. Instead of a bright, limitless future with their hard-earned education and credentials, many students are faced with depressed wages and increased costs of living in the place we call home. It’s a vicious cycle for our nation to emphasize the importance of higher education, yet saddle students with high interest rates and exorbitant debt to achieve it. I am interested in seeing the details regarding how Senator Sander’s bill can achieve total alleviation of existing student loan debt, and fully support the end goal of wiping away this outrageous financial burden to aid struggling students and families."





Shaniyat Chowdhury, the progressive candidate taking on corrupt conservative New Dem Gregory Meeks in southeast Queens, has a similar perspective and summed it up like this: “Wall Street executives were not held accountable for  the 2008 financial crisis. Millennials like myself had to carry their burden for years. Any opposition to Sen. Sanders’ legislation, from the GOP and conservative Democrats, will only continue the division between the rich and poor. We work hard, but we need financial freedom to participate in the economy for years to come.”

Like Shaniyat, Eva Putzova is in a primary battle with a conservative Democrat, in her case "ex"-Republican Blue Dog Tom O’Halleran, an austerity proponent. "When I finished my master's degree," she told me this morning, "I had no college debt because college was and still is publicly funded in Slovakia. I was free to start my life without the financial burden and stress that so many young Americans face. But it doesn't have to be that way. In fact, today's grandparents enjoyed college education that was nearly free. If you went to one of the state universities in Arizona in 1969, you could pay for your annual tuition by working a minimum wage job for one month over the summer. Today, to afford the same, you have to work for nearly seven months. If we could bail out Wall Street after the 2008 crash, we can bail out ordinary citizens with their college debt and tax Wall Street to ensure every young person in this country can have what their grandparents had-- an affordable college degree."


Goal ThermometerIf Kathy Ellis is elected to Congress from southeast Missouri she will, represent the reddest district held by a progressive Democrat in recent history. It’s probably going to either take a miracle or the folks who live their finding out that their right-wing, homophobic incumbent, Jason Smith, is a dishonest, conflicted closet case picking up young men on GRINDR. But none of that is what Kathy is thinking about. Student debt reduction is though. “Students,” she just told me, “can’t get ahead. For students in rural areas, this problem is made worse by a lack of well-paying job opportunities in the area. We need to cancel student debt and provide a path to debt-free college. I appreciate Senator Sanders and others in Congress bringing this issue to the front and for proposing a solution to a massive problem hurting our communities.”

Mike Siegel is also in a terribly gerrymandered red district— but he nearly won it in 2018 and probably will next year. “Canceling college debt will be a tremendous stimulus to the US economy,” he told me today. “Millions of Americans will be able to start businesses, take jobs they want, improve their mental and physical health, support their families, and live more productive and fulfilling lives. Unlike the tax cuts for the wealthy, which went toward stock buybacks and increased corporate profits, this will be a true investment in the people.”





UPDATE: Michael Owens Will Be Part Of The Solution

Dr. Michael Owens is running for a congressional seat in the suburbs south and southeast of Atlanta, currently wasted by a corrupt Blue Dog, David Scott. While Scott works with Republicans against the best interests of his own constituents, Owens is already figuring out what he can do to help Georgians if he wins the primary. “Student loan debt,” he told me this afternoon, “is creating a financial crisis for over 45 million Americans. Reps. Omar and Jayapal have introduced legislation that would completely eliminate all current student debt that has increased from $90 billion to $1.6 trillion in two decades. Other plans, including one by Senator Elizabeth Warren have offered up other solutions to the current debt crisis that would reduce or modify student debt burdens.”
This has opened up a critical debate on which path is most viable to giving relief to those millions of hard working families from a crushing financial burden. The one thing there seems to be consensus on is that a solution can and must be found.

I am lucky enough to hold a  masters and a doctorate degree. Yet, I am still paying off my student loans from undergrad degree when I had to take out student loans, in addition, to working at the Vet Center to pay for my food, transportation and clothes while still a teenager.

With that first hand knowledge of how student debt can be a struggle, my campaign for Congress is about representing the people of the 13th Congressional district who are dealing with this issues like this as well.  As congressman, I will jump into debates like this head first and working hard to find the solution that will improve the most lives. Here is what I know, every dollar we put back into the pockets of working people is a dollar that can be put towards the prosperity of their families. Interest debt is crippling to in a time when wages are stagnant and entry-level salaries for college graduates are low.

This debate matters a great deal to the people of the 13th CD. Being a minority-majority district with many immigrants and first time college students we need a Congressman that will not sit back and remain quiet while receiving thousands of dollars from the same financial institutions that are holding thousands of constituents in a financial  bind. Tens of thousands of our neighbors, would be uplifted from any of the policies being debated. I am running for congress because we need more people there putting the needs of the people before greedy corporations.

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1 Comments:

At 10:39 AM, Anonymous Anonymous said...


“...a dishonest, conflicted closet case picking up young men on GRINDR.” “ Dishonest” is the only relevant descriptor in this phrase!! The rest is just pure meanness.

 

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