Broad student loan debt cancellation via executive order is good economics and politics. A thread (with lots of data). 1/
First, it’s important to remember that *a lot* of people have student loan debt -- 45 million or so. For context, 25 million people benefit from the EITC and 38 million people get SNAP. Fundamentally, one of the benefits of debt cancellation is that it helps a lot of people. 2/
Canceling student loan debt has positive income effects. The median borrower making payments has a monthly payment of more than $200. Canceling debt could reduce or eliminate those payments -- which is like sending those people a check every month. 3/
Student loan debt cancellation also has positive wealth effects. Student debt loads are part of the reasons we’re seeing declining home ownership and small business formation rates. Canceling the debt will have mean more jobs and growth. 4/
One study has found that canceling all debt would have a big stimulative effect. The impact would be less if less debt were canceled, but debt cancellation one of the relatively few ways to really stimulate the economy without Congress. 5/
Won’t people be taxed on their canceled debt? No, there are several ways to avoid that, including:
-Deem forgiveness as a disaster payment relating to Covid under IRC 139
-Deem it a qualifying scholarship under IRC 117
-For insolvent taxpayers, exclude under IRC 108 7/
For those concerned about “targeting” student debt cancellation, you can vary the amount of debt cancelled by income level, should you want to. If you’re concerned it won’t help people who never attended college, you could pair it with executive actions that do that. 8/
Some say debt cancellation isn’t well-targeted. Compared to what? Other approaches to provide big stimulus will require Congress, and if that requires negotiating with a R Senate, debt cancellation is likely to be more targeted than the package emerging from those talks. 9/
For example, is it better to do $1 trillion in debt cancellation via executive order or do $500B in child allowances (good!) with another $500B in regressive tax cuts (bad!) to get Republican support? That’s the relevant comparison. 10/
Finally, the politics. First, recall that Trump was so freaked about the popularity of broad debt cancellation that he directed his staff to come up with his own plan. 11/
Trump’s panic is borne out by polls, which shows strong majority support for debt cancellation -- including from those who’ve never had student debt. (Perhaps the average American is less resentful than the median Twitter commentator.) 12/
And here’s polling data by demographic. Debt cancellation has the highest approval among people making under $50k/year and among people who don’t have a college degree (many of whom have debt because they didn’t complete college or because they're co-signing for their kids). 13/
The bottom line is that broad debt cancellation via executive order is popular, economically potent, and -- most importantly -- life-changing for millions of Americans struggling through this crisis. We can’t let the perfect be the enemy of the good. END
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🚨THREAD: In the coming weeks, the Fed and Treasury could choose to deny the Biden Administration more than $1 trillion of potential aid to small businesses and local governments.
We need to push them to do what's best for American workers and not cut off this aid. 1/
Under the CARES Act Congress passed in March, the Treasury and Fed created a small business lending program (the Main Street program) and a state and local lending program (the Municipal Liquidity Facility). Together, they can provide up to $1.1 trillion in credit. 2/
So far, these programs have provided only a few billion dollars in loans. But with changes -- changes a Biden Administration could try to make -- they could do much more to help.
There’s a catch, though: the programs are set to expire at the end of the year. 3/
In April, I expressed concern that the Fed had made changes to its Main Street program specifically to help oil and gas companies. I pressed the Fed on that at our August hearing.
Now a new report shows 15% of the Fed's new loans were for that industry.
Here were my questions for the Fed about this in August. The Fed should not be changing its lending programs just to help out companies that President Trump happens to favor.
On clean energy, $15 minimum wage, raising taxes on the rich, reducing the influence of money in politics — and more — the progressive agenda is America’s agenda.
We don’t need to be in a defensive crouch on this stuff — the public is already with us.
This isn’t just nationally. It’s also true in important electoral college states. For example, 70% of Florida voters support raising the minimum wage to $15 an hour.
The Fed continues to offer contradictory rationales for treating state and local governments worse than private companies. The truth is that nothing is stopping the Fed from offering more help and saving jobs -- it’s just choosing not to. 1/
Fed: All programs that use CARES Act money must include a penalty rate, which is why we charge state and local governments so much in interest.
Also Fed: Our CARES Act facility for corporate bonds purchases them at market price. 2/
Fed: Under the CARES Act, we can only act as a lender of last resort for state and local governments. We are a backstop, and just want private markets to function.
Also Fed: Our CARES Act program for midsize companies actively encourages banks to make loans to businesses. 3/
NEW: The latest Oversight Commission report is finally out. As the @NYtimes reported last week, Republican foot-dragging has delayed the report’s release for weeks. So what didn’t Republicans want you to see? 1/
The report reflects broad support for expanding the MLF (the Fed’s state and local lending program):
✅Extend the MLF into 2021
✅Lower rates
✅Lengthen repayment term
✅Expand # of eligible borrowers
✅Offer flexibility on loan use
✅Create secondary market facility 2/
Three of the four expert witnesses at our recent hearing backed these changes -- including one of the Republicans' own witnesses. Which witness didn’t? It was this gentleman: 3/
Let's take a look at the actual text of these executive orders.
Here's the heart of the one on evictions. As you can see, it doesn't create an eviction moratorium. It asks certain federal agencies to see if they can maybe do something on evictions.
Here's the payroll tax one. It's a deferral. That means either employers will continue to withhold your payroll taxes and you won't see any difference, or they won't withhold (unlikely), and you'll have it all withheld from your paycheck when the deferral expires at year-end.
Here is the key part of the unemployment insurance one.
*To be clear, the legal authority to do this is highly dubious.*
But, at best, it's a $300/week federal contribution redirecting money that, by my estimate, would cover about 4 weeks for the currently unemployed.