Dear Bulwark readers. Many people are misreading what Biden announced. Par for the course. Number one, people will not get checks in the mail -- they will simply have less debt to pay. Hardly inflationary. Number two, there has been plenty of debt forgiveness of many other entities recently -- small businesses, congresspeople who filed c…
Dear Bulwark readers. Many people are misreading what Biden announced. Par for the course. Number one, people will not get checks in the mail -- they will simply have less debt to pay. Hardly inflationary. Number two, there has been plenty of debt forgiveness of many other entities recently -- small businesses, congresspeople who filed claims during covid, etc. Number three, the people this debt relief will help truly deserve the help. Pell Grants have been cut drastically -- they used to cover 80% of a college education; now it's 30% -- so what has happened since the 1980s is that the country's funding of higher education has been cut, wages have not kept up with inflation, and students and their families have been forced to take out more debt. Debt that hasn't always been fairly administered. Many of the people needing debt relieft HAVE been paying -- the problem is, their debt has not gone down. I think some of you are missing the story, and some of the Democratic senators are, too. It would help if you'd go into the fine print and if you would talk to some black women who have tried like hell to get on their feet and have been unable to do so because of debt.
Agreed, Beth. Linked below is an interesting article from this morning's Atlantic by Adam Harris.
"...the underling issue of college affordability can be addressed only if America once again views higher education as a public good. Belatedly canceling some student debt is what a country does when it refuses to support students upfront."
Most of the screams of outrage about this are from people who don't like it because it does not confer any benefit to them personally. IMO, an educated populace supports the common good, and in that way, it IS of benefit to everyone. Unlike every other developed country in the world, we don't believe that it benefits us to have systems like universal health care so people with chronic illnesses can continue to participate in the economy rather than declare bankruptcy because of huge medical bills, or have support for public universities to train the next generation of people who will make new medical discoveries, create and run businesses and engineer bridges and airplanes. It's all "me,me, me, and right now."
I take it the "they" in this sentence doesn't refer to taxpayers, who will now have more debt to pay so that the rich can become richer, all while exacerbating the problem for future generations.
The supposition that having attended college means you are rich beyond the dreams of Avarice is a terrible lie to sell to people. It leads people taking loans for higher education that they might not ever be able to pay for just because someone sold them a lie about what attending college can do.
Taxpayers are already on the hook for these loans as they are federally subsidized.
If you know anything about government accounting it's one part of government "paying" a different part of government. Basically, Treasury sends $10k to the Dept of Education. The pockets change but it's the same pair of pants.
Since the pause in April 2020, no one has been paying their student loans. That money is already factored into people's spending for more than two years. The inflationary effects are already built into our current inflation rate.
I wish I lived in a dream world where I got to save the $350 a month I'd have been paying. Instead they let me daughter go to preschool. ¯\_(ツ)_/¯
yeah I went hunting for poll data last night, and I didn't see any sign that this enraged anyone except the perpetually aggrieved Republican base. It doesn't fix the underlying problems in the US higher ed system and I think people recognize that, but it makes life better for a lot of people, and bolsters the image of Biden as a guy who gets things done.
I mean, the "oof" factor is really high here when Charlie is arguing that this policy isn't playing well with rank-and-file Dem voters and the first examples he reaches for are McArdle, Kraushaar, and The Dispatch.
I saw some of the usual Savvy Anti-Anti Crew really taking this up to eleven by referring to this as "The Republicans' Roe" which strikes me as an absurd example of motivated reasoning but even if it wasn't....pretty telling that "helping some people being strangled by debt" = "stripping bodily autonomy from half the population"
It absolutely is inflationary. Instead of making payments on debt, the beneficiaries of this program will have money to spend on consumer goods which will have the effect of bidding up prices.
Even if all 20 million people eligible for partial debt forgiveness received the full $20K - a wildly over the top scenario - it would amount to about 6.6% of the total federal budget. That's not likely to trigger an acceleration of inflation. It's a blip on the screen.
JVL has the cost at $360 billion. That's about 1.7% of current GDP. There is no offsetting revenue here to prevent this from contributing to inflation. Raising taxes to pay for this would spoil all the political fun, but it ought to be done.
Forbes is reporting today that the $400B in debt forgiveness [their estimate] could actually boost GDP slightly while having a similarly minor effect on inflation. IMO, the hair-on-fire response about this program is overblown. Intentionally. There's an election coming up.
They probably will spend the money on reducing other debt. Debt relief programs in the past have not been inflationary. See Dominque Baker, SMU. And if being able to keep up with rent increases, not go hungry, and maybe, just maybe, have the ability to search for a better job is inflationary, well, then, there's an underlying problem there, isn't there? I really can't see the bulk of people getting this relief, which are people earning less than $75,000 a year, and many earning less than $30,000 a year, increasing inflation much.
If the forgiveness actually is enough to "pay off" your loan, then obviously your payment goes away. If it is not enough to pay off your loan, then you are still making payments--the loan did not go away, you will just end up making fewer payments.
Well, that would definitely be a change to the inflationary angle. Not fully eliminating it, but certainly a driver pushing it further down the road vs. something that reduced payments of everyone getting it.
Yes, beneficiaries will have a small amount of extra money to spend each month. The sum total of this is negligible compared to the overall economy. Hardly a big inflation booster.
Agree and many have paused payments for some time freeing up money for the past year+. I think it will not really increase spending much. The spending increase already happened.
Over how long a period? $300B is a drop in the bucket of the overall economy. And, as has been pointed out, it's not as though people are getting mailed checks, they are merely seeing the balance they owe drop by $10K or $20K. No one suddenly has a lot more money to spend right away. Any inflationary effects that this will have will be so widely dispersed in both time and amount as to have no appreciable effect.
Not really, because the payments have been paused for nearly 3 years. That money is already being spent on consumer goods, so this is not introducing new money.
Paused is different from forgiveness. A person planning ahead to be able to resume loan payments will behave differently than a person who no longer has to worry about repaying a loan.
How many of the people receiving this no longer have to make payments on a loan? The majority of impacted borrowers will just have the distant day when they're done moved forward in time.
This is such an under considered point. For most of those affected, it just means that there may be a date in their lives they can realistically expect to finish paying off their loans instead of being bogged down forever.
As a consumer bankruptcy attorney with 1000 BKs under my belt, I can tell you many do not. As someone who did 1000 house refinances, I can also tell you everyone who got lower payments or refinanced debt already had plans to accumulate more as well. It's human nature.
I was just trying to make a very narrow point here. Purposely sidestepping the more important questions as to whether this is a good idea either as policy or politically.
Dear Bulwark readers. Many people are misreading what Biden announced. Par for the course. Number one, people will not get checks in the mail -- they will simply have less debt to pay. Hardly inflationary. Number two, there has been plenty of debt forgiveness of many other entities recently -- small businesses, congresspeople who filed claims during covid, etc. Number three, the people this debt relief will help truly deserve the help. Pell Grants have been cut drastically -- they used to cover 80% of a college education; now it's 30% -- so what has happened since the 1980s is that the country's funding of higher education has been cut, wages have not kept up with inflation, and students and their families have been forced to take out more debt. Debt that hasn't always been fairly administered. Many of the people needing debt relieft HAVE been paying -- the problem is, their debt has not gone down. I think some of you are missing the story, and some of the Democratic senators are, too. It would help if you'd go into the fine print and if you would talk to some black women who have tried like hell to get on their feet and have been unable to do so because of debt.
Agreed, Beth. Linked below is an interesting article from this morning's Atlantic by Adam Harris.
"...the underling issue of college affordability can be addressed only if America once again views higher education as a public good. Belatedly canceling some student debt is what a country does when it refuses to support students upfront."
Most of the screams of outrage about this are from people who don't like it because it does not confer any benefit to them personally. IMO, an educated populace supports the common good, and in that way, it IS of benefit to everyone. Unlike every other developed country in the world, we don't believe that it benefits us to have systems like universal health care so people with chronic illnesses can continue to participate in the economy rather than declare bankruptcy because of huge medical bills, or have support for public universities to train the next generation of people who will make new medical discoveries, create and run businesses and engineer bridges and airplanes. It's all "me,me, me, and right now."
https://www.theatlantic.com/politics/archive/2022/08/student-debt-relief-biden-loan-forgiveness/671223/
"they will simply have less debt to pay"
I take it the "they" in this sentence doesn't refer to taxpayers, who will now have more debt to pay so that the rich can become richer, all while exacerbating the problem for future generations.
I would not say those making under 125k fall into the rich getting richer category.
...Unless you are living in Greenbow, Alabama.
The supposition that having attended college means you are rich beyond the dreams of Avarice is a terrible lie to sell to people. It leads people taking loans for higher education that they might not ever be able to pay for just because someone sold them a lie about what attending college can do.
Taxpayers are already on the hook for these loans as they are federally subsidized.
If you know anything about government accounting it's one part of government "paying" a different part of government. Basically, Treasury sends $10k to the Dept of Education. The pockets change but it's the same pair of pants.
As far as the taxpayer goes nothing changes.
How about this:
Since the pause in April 2020, no one has been paying their student loans. That money is already factored into people's spending for more than two years. The inflationary effects are already built into our current inflation rate.
I wish I lived in a dream world where I got to save the $350 a month I'd have been paying. Instead they let me daughter go to preschool. ¯\_(ツ)_/¯
Plus, the government forgave a whole lot more money in PPP loans to a lot of the same people complaining about this.
Also, McArdle's complaints ring a bit hollow when you realize she has rich parents who completely paid off her undergraduate loans for her.
Actual polls say this is popular (see Forbes'). But why listen to them when you can listen to conservative cranks like McCardle and Kraushaar?
yeah I went hunting for poll data last night, and I didn't see any sign that this enraged anyone except the perpetually aggrieved Republican base. It doesn't fix the underlying problems in the US higher ed system and I think people recognize that, but it makes life better for a lot of people, and bolsters the image of Biden as a guy who gets things done.
Exactly.
Confirmation Bias, what is it?
I mean, the "oof" factor is really high here when Charlie is arguing that this policy isn't playing well with rank-and-file Dem voters and the first examples he reaches for are McArdle, Kraushaar, and The Dispatch.
I saw some of the usual Savvy Anti-Anti Crew really taking this up to eleven by referring to this as "The Republicans' Roe" which strikes me as an absurd example of motivated reasoning but even if it wasn't....pretty telling that "helping some people being strangled by debt" = "stripping bodily autonomy from half the population"
I didn’t catch this, but I don’t know whether to laugh or cry in response.
It absolutely is inflationary. Instead of making payments on debt, the beneficiaries of this program will have money to spend on consumer goods which will have the effect of bidding up prices.
Even if all 20 million people eligible for partial debt forgiveness received the full $20K - a wildly over the top scenario - it would amount to about 6.6% of the total federal budget. That's not likely to trigger an acceleration of inflation. It's a blip on the screen.
JVL has the cost at $360 billion. That's about 1.7% of current GDP. There is no offsetting revenue here to prevent this from contributing to inflation. Raising taxes to pay for this would spoil all the political fun, but it ought to be done.
Forbes is reporting today that the $400B in debt forgiveness [their estimate] could actually boost GDP slightly while having a similarly minor effect on inflation. IMO, the hair-on-fire response about this program is overblown. Intentionally. There's an election coming up.
This won't be hitting the economy all at once. Payments aren't changing and their loans all have different end dates.
They probably will spend the money on reducing other debt. Debt relief programs in the past have not been inflationary. See Dominque Baker, SMU. And if being able to keep up with rent increases, not go hungry, and maybe, just maybe, have the ability to search for a better job is inflationary, well, then, there's an underlying problem there, isn't there? I really can't see the bulk of people getting this relief, which are people earning less than $75,000 a year, and many earning less than $30,000 a year, increasing inflation much.
What money? They aren't being sent $10,000 checks.
Exactly. The only money they'll have is the money they would have been spending on debt payment.
And that's just if their loans are paid in full. Most will just have the life of their loan reduced, while still making the same payments.
Not to mention the increases in taxes they will pay because their annual salaries will be far higher when they have advanced degrees.
OK, I see what you're saying now.
The payments aren't changing.
Confused by this. If a loan is forgiven, in full or in part, the whole point is to change the payment, no?
If the forgiveness actually is enough to "pay off" your loan, then obviously your payment goes away. If it is not enough to pay off your loan, then you are still making payments--the loan did not go away, you will just end up making fewer payments.
From what I've read, and it could be wrong, is that the payments don't change. There will just be less of them.
Well, that would definitely be a change to the inflationary angle. Not fully eliminating it, but certainly a driver pushing it further down the road vs. something that reduced payments of everyone getting it.
Yes, beneficiaries will have a small amount of extra money to spend each month. The sum total of this is negligible compared to the overall economy. Hardly a big inflation booster.
Agree and many have paused payments for some time freeing up money for the past year+. I think it will not really increase spending much. The spending increase already happened.
I've seen estimates of $300 billion. If this is in the ballpark, it is not negligible. Possible that these estimates are wildly inaccurate.
Over how long a period? $300B is a drop in the bucket of the overall economy. And, as has been pointed out, it's not as though people are getting mailed checks, they are merely seeing the balance they owe drop by $10K or $20K. No one suddenly has a lot more money to spend right away. Any inflationary effects that this will have will be so widely dispersed in both time and amount as to have no appreciable effect.
If I understand the program correctly it's basically the government forgiving it's own loans. No new money is being sent to individuals.
Not really, because the payments have been paused for nearly 3 years. That money is already being spent on consumer goods, so this is not introducing new money.
Paused is different from forgiveness. A person planning ahead to be able to resume loan payments will behave differently than a person who no longer has to worry about repaying a loan.
Not really… not with the current price of gas, food, products.
How many of the people receiving this no longer have to make payments on a loan? The majority of impacted borrowers will just have the distant day when they're done moved forward in time.
I saw a graphic yesterday that showed this small bit would totally erase the debt of 53% of eligible borrowers.
This is such an under considered point. For most of those affected, it just means that there may be a date in their lives they can realistically expect to finish paying off their loans instead of being bogged down forever.
You assume people plan :-)
As a consumer bankruptcy attorney with 1000 BKs under my belt, I can tell you many do not. As someone who did 1000 house refinances, I can also tell you everyone who got lower payments or refinanced debt already had plans to accumulate more as well. It's human nature.
Many/most people don’t plan their finances. Yeah, that’s all I’m gonna say about that.
While true, it is also selection bias. You aren't encountering as many people who manage their money well in your line of work.
Yes. But the sheer quantity of them is more than I would have thought prior to this.
Sheer quantity of what, people needing bankruptcy help that a bankruptcy attorney runs into?
It's more than you would think by volume.
I was just trying to make a very narrow point here. Purposely sidestepping the more important questions as to whether this is a good idea either as policy or politically.
Largely. Both Team "conservative" isn't conservative, right? Not a real big team apparently.
Hell to the yes. THANK YOU!!