Why Do People Think $10,000 of Student Loan Forgiveness Is a Bad Idea?, &
BRIEFLY NOTED: For 2022-08-30 Tu
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FIRST: Why Do So Many People Think $10,000 of Student Loan Forgiveness Is a Bad Idea?
The best thing on student loan forgiveness I have yet seen, from the learned and indsutrious Susan Dynarsky:
Susan Dynarski: Why I Changed My Mind on Student Debt Forgiveness: ‘I long thought that forgiving student loans was a crude and inequitable tool for fixing student aid. College graduates, after all, are the winners in our society. College certainly changed my life: My father was a high school dropout, but his daughter is a Harvard professor. My student loans (which I paid off just a few years ago) were absolutely worth it…. But today many of those who borrow for college do not graduate…. I now firmly believe that targeted debt cancellation is the best way to undo the damage done to millions of borrowers by a persistently dysfunctional system of college funding and student loan repayment. What changed my thinking? Decades of political paralysis around fixing that funding system. An unending increase in tuition prices and student borrowing. And a growing body of evidence showing harm to students who have borrowed to cover mounting college costs. College used to be nearly free…. A decade ago, we had only a sketchy portrait of how this debt affected borrowers’ lives…. It was the Obama administration that released more detailed data…. Contrary to the popular narrative, the huge run-up in defaults has not been driven by $100,000 debts incurred by students at expensive private colleges. Rather, they are driven by $8,000 loans at for-profit colleges and, to a lesser extent, community colleges. These are the borrowers who will benefit from the Biden loan forgiveness policy…
I confess that my attitude toward student loan repayment has long been a combination of:
Isn't there a better way to build the money to build capacity?
Isn’t there a more progressive way to improve the distribution of wealth?
Don’t we want to retard rather than accelerate the shift of power to the presidency and so keep the United States from being a semi-elective dictatorship for as long as possible?
But as for (3), I now think that it is too late. People talk about how “secret congress” can still work. But that requires that issues not be “partisanized”. And looking forward at the Republican Party of the future, it seems to me that nothing can be departisanized. The only hope for technocratic policy in the future is for a (Democratic) president to say “this is how things are going to be, but you can come along on the train and get some credit.”
(2) and (1) still hold. But I find myself sliding towards a different set of questions. The questions I find myself sliding towards are:
Is this a bad thing? (Answer: no.)
Will this stabilize a coalition that will make it easier to do good things in the future? (Answer: yes.)
Is there a better thing that this forecloses that would otherwise happen with high probability? (Answer: no.)
Given the answers to those questions, the only remaining question is whether the costs of an extra $35 billion a year of federal deficit are higher than the benefits of this not-bad thing. I strongly think that there are no net costs to an extra $35 billion a year of federal deficit as long as the Fed continues to hold to its 2%/year inflation target. The2%/year inflation target world is one in which “secular stagnation” remains likely. It is one in which the world remains desperately short of U.S. Treasuries, and so creating an extra $35 billion/year of U.S. Treasuries remains a no-brainer.
Could we spend the money doing better things? Yes, but what? Show up with a plan signed by 50 senators willing to use Reconciliation to accomplish it, and we can talk. Otherwise, I don’t think critics have much to say.
And, indeed, the fact that critics don’t have much to say seems to me to be proved by the LOUD! criticisms I hear:
Biden is giving $10,000 to women who majored in Lesbian Dance Therapy!
Biden should call it the “Inflation Acceleration Act”!
Biden should have put forward a plan for comprehensive higher education reform!
I do have a plan for higher-education reform: put some teeth in the inheritance tax and add-on a super-income tax bracket to have the federal government pay tuition for the first two years of state-run state and community college and training-apprenticeship programs. Build human capital capacity as we should have been doing for the past fifty years.
What’s that? You don’t have 50 senators on board?
Too bad.
Very Briefly Noted:
Takatoshi Ito: Japan’s Lessons for Taiwan
Brad DeLong: Slouching Towards Utopia — Friendly City Books: ’September 12 at noon…
Sarah Neville: The Growing Evidence that Covid-19 Is Leaving People Sicker: ‘The potential impact on heart and brain disease poses challenges to healthcare systems globally...
Paul Kedrosky: “With news today that Meta and Snap are doing layoffs, I am reminded that layoffs are accelerating in the U.S., especially in tech. Gonna be a lot of WFH transitioning to ?FH and wondering WTF they're doing in Coeur d’Alene…
Michael Pettis: China’s Overextended Real Estate Sector Is a Systemic Problem: ‘The problems affecting four rural banks in Henan and the subsequent mortgage boycott in parts of China… need to be seen not as isolated events but rather as signs of systemic problems that reveal a great deal about China’s finances and balance sheet…
Jerome Powell: Until the Job is Done: ‘The labor market… is clearly out of balance… While the lower inflation readings for July are welcome, a single month's improvement falls far short of what the Committee will need to see before we are confident that inflation is moving down…
Max Moran: Economists Outraged That Politics Is Hard, Actually: ‘If Furman and Kearney really want to pass legislation to end the student loan system and make college affordable for all — great! What’s the plan, guys?… These are two of the best-positioned people on earth to lead the charge for more substantive higher ed reform…
John Ganz: History—What Is It Good For? Absolutely Everything: ‘Part of me thinks history, which has its own muse on Mount Parnassus, is just one of humanity’s fundamental cultural practices, like music or art, and it really doesn’t need much further justification…. History… is abused and simplified to provide some capsule, Twitter-thread explanation of a present practice or event based on a single episode or idea…. As I get older I am more interested in particular things than in general rules…
Ross Barkan: You Don't Have a Mass Movement: ‘George Albro… said that Niou has a “mass movement behind her,” the type that could dislodge a Democratic nominee who only took about 26 percent of the primary vote. This is not true at all, though it sounds very nice…
Matt Levine: Musk Tries a New Way Out of Twitter
Matt Yglesias: The Student Debt Crisis as a Macroeconomic Phenomenon: ‘Graduate student debt… a pretty large number of programs that probably shouldn’t exis…. Undergraduate debt… we are looking at two things: a demographic bulge and bad macroeconomic policy that happened to collide in what amounts to a really bad coincidence…
¶s:
Remember the Thomas Friedman Unit: November 2003: ‘“The next six months in Iraqi—which will determine the prospects for democracy-building there—are the most important six months in U.S. foreign policy in a long, long time.” June 2004: “It might be over in a week, it might be over in a month, it might be over in six months, but what’s the rush? Can we let this play out please?” October 2004: “What we’re gonna find out, Bob [Schieffer], in the next six to nine months is whether we have liberated a country or uncorked a civil war.” November 2004: “This is crunch time…. Iraq will be won or lost in the next few months. But it won’t be won with high rhetoric. It will be won on the ground in a war over the last mile.” September 2005: “I think we’re in the end game now…. I think we’re in a six-month window here where it’s going to become very clear”…
Tim Miller: The Mystery of the Missing Republican Ad Money: ‘One Republican has been raking in the donations and siphoning dollars away from GOP candidates. It's just that this (former) guy isn't on a ballot this time around…. [So] Republicans are heading into the midterms at a significant financial disadvantage…. Ronna and Rick and Kevin don’t want to say [why] on the record because they live in fear that a crotchety, heavily made-up old-man will send a nasty RETRUTH about them on a scam social media site. The real answer to the question: “Where did all the GOP campaign money go?” It’s in the ball room with Colonel Mango and the classified documents…
Noah Smith: Decade of the Battery: ‘Batteries solve… problems… [of] mov[ing] energy around through both time and space…. When it comes to storage, batteries are not yet as good as fossil fuels…. For transporting energy, there are some ways in which batteries are qualitatively superior…. Most importantly, though, a battery doesn’t require a bulky combustion engine in order to extract the energy…. Your smartphone has a battery in it instead of a little gasoline-powered engine…. And as batteries continue to improve, their disadvantages compared to fossil fuels will decrease. We will develop batteries with longer life spans, greater power density, and so on…
If I remember correctly, Lawrence Friedman's Legal History of the United States says something interesting on the topic of loan forgiveness. When times are good, US laws tend to be pro-creditor, to encourage lending. When times are bad, the law thermostats to pro-debtor mode. It makes sense to me. (And if you think that creditors will price in the eventual switch to pro-debtor mode, I've got a whole bunch of Argentine bonds that I'd like to sell to you, along with my patrimonial stake in the Brooklyn Bridge. Creditors have animal spirits, too!)
Because they had rather talk about that than the contents of those boxes from Mar a Lago