“Consider that supposedly worker-centric trade policy. Biden has left in place many of the tariffs imposed by President Donald Trump, including the levies on aluminum and steel. By artificially hiking the price of imported steel, those tariffs are supposed to boost domestic production, creating more and better-paying steelworker jobs. But the cost of the tariffs rebounds onto every industry that uses steel to make other products. While about 57,000 Americans work in steelmaking jobs, more than 12 million are employed in manufacturing jobs that use steel. The tariffs hurt those workers.
Even steelworkers suffer from the tariffs, which raise prices for cars, appliances, and a host of other products. The Peterson Institute for International Economics, a trade policy think tank, estimates that repealing those tariffs would put about $800 back in the average family’s pockets this year.
Biden also has decided to extend tariffs on solar panels and their component parts, which were due to expire this year. In theory, those tariffs promote domestic manufacturing. In reality, they have cost more than 62,000 jobs in the four-plus years since Trump first implemented them by sharply cutting the number of solar panels available for installation and service, according to the Solar Energy Industries Association.”
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“Trade and labor policies should not be worker-centric or consumer-centric. They should be market-centric, because trade and labor are both parts of a market system that benefits Americans as workers and consumers.”
“Biden announced that he will—unilaterally, mind you, and for no apparent reason that I can see—extend the pause on student loan payments until the end of the year and forgive up to $10,000 for those persons making less than $125,000 a year. This generosity with other people’s money extends up to $20,000 for Pell Grant recipients.
As David Stockman, a former director of the Congressional Office of Management and Budget, reported recently, “Only 37% of Americans have a 4-year college degree, only 13% have graduate degrees and just 3% have a PhD or similar professional degree. Yet a full 56% of student loan debt is held by people who went to grad school and 20% is owed by the tiny 3% sliver with PhDs.”
Picture two young married lawyers who together earn just under $250,000 and are on their way to making even more mon ey in the future. They will be able to collect from Uncle Joe a nice bonus of $40,000, taken from the pockets of the many people who didn’t go to college—perhaps because they did not want to take on debt—and from those who have responsibly already paid back their debt.”
“colleges and universities will have even less incentive to lower costs. Economic researchers have often found that the government’s subsidized student loans cause educational institutions to jack up their prices for obvious reasons: If the feds cover the cost on the front end, no matter what it is, universities have every incentive to raise the sticker price. Forgiving student loan debt exacerbates this problem since it encourages more reckless borrowing. Indeed, the Committee for a Responsible Federal Budget estimates the cumulative student debt level will return to current levels in just a few years.
There are structural incentives that push students to borrow money that they can never hope to pay back, and the fact that so many people have fallen into crippling debt is a compelling reason to change these incentives. No rule says the federal government must lure people down a path that leads to financial ruin with some frequency. Congress can sharply limit, or even end, this practice.
A one-off cancelation of some level of debt held by borrowers who happen to be in dire straits at this specific moment does nothing to fix the underlying problems; on the contrary, it exacerbates them. It is a slap in the face to everyone who either paid down their college debt or made different educational choices to avoid accruing it.
If Biden wanted to make the strongest conceivable case for forgiving some college debt, this course of action needed to be paired with serious changes to the entire higher education system. Otherwise, he is simply engaged in a vast transfer of wealth, taking hard-earned money from those who did not fall prey to the federal government’s scam and awarding it to those who did.”
“Loan forgiveness may encourage reckless borrowing, if today’s college students think they won’t actually have to pay back their loans. And this, in turn, could lead to even higher college tuition rates. It could also be inflationary more generally, by freeing up income for tons of people who may then drive up demand for goods and, along with it, prices.”
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“The program amounts to a massive subsidy for middle-class Americans, as opposed to benefiting the most economically downtrodden or financially strapped. It provides a handout to many people for whom loan payments aren’t a problem now (someone making $125,000 per year can surely afford a few hundred dollars per month) or won’t be in the very near future (for instance, a doctor or lawyer on the verge of making big bucks who hasn’t quite gotten there yet). In short, the program “consumes resources that could be better used helping those who did not, for whatever reason, have a chance to attend college,” as economist Larry Summers put it on Twitter”
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“Certainly not everyone who had to take out student loans was lazy, irresponsible, or anything of the sort. And not everyone without student loan debt is responsible or hard-working; many just lucked into having parents who could afford to pay for college. But there are many people for whom avoiding student loan debt or paying it off promptly meant making all sorts of sacrifices. Biden’s loan forgiveness program says to them that this thrift, practicality, etc. may have been for nought.”
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“to simply write off existing student loan debt without addressing the source of the fast rise in college prices —which has a lot to do with the federal student loan program existing—is only ensuring ongoing problems.”
“tariffs of all kinds are regressive taxes that hike costs for consumers and make it particularly difficult for poorer households to afford basic goods.
Eliminating many tariffs that serve little purpose “would ease financial burdens in a small but real way for American low-income and minority workers and their families, helping to raise their living standards without intensifying competitive pressure””
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“Trump’s tariffs have contributed to inflation and helped to artificially inflate the cost of everything from appliances to housing. About two-thirds of all imports from China are now subject to tariffs when they enter the United States, with the average tariff being 19.3 percent. That’s six times higher than the average tariff on Chinese-made imports before Trump’s haphazard trade war began. That’s certainly not helping poorer Americans improve their standard of living.
But, as Gresser points out, other aspects of the U.S. tariff code are also to blame for imposing regressive taxes on poorer Americans. Under the “Most Favored Nation” (MFN) system of tariffs that are applied to imports from countries with which the U.S. does not have a specific trade deal, many common consumer goods are subject to higher tariffs than their luxury alternatives. Stainless steel spoons are tariffed at a much higher rate than far more expensive sterling silver spoons, for example, and cheap sneakers are charged a tariff more than five times higher than leather dress shoes.”
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“For months, we’ve been treated to headlines promising that the Biden administration is considering lifting Trump’s tariffs. In June, administration officials told The New York Times that lifting tariffs might reduce inflation by a quarter of a percentage point—even though independent studies suggested the effect could be greater. Yet nothing was done, even after Biden promised that corralling inflation was his “top domestic priority.””
“The federal government’s Paycheck Protection Program, which effectively paid businesses to keep workers on their payroll even if they temporarily closed during the COVID-19 pandemic, was a mess.
After quickly burning through its initial allocation of $349 billion, the Paycheck Protection Program was reauthorized a few times and ended up costing more than $820 billion, making it one of the largest components of the federal government’s humongous COVID relief effort. Despite being lauded by both Democrats and Republicans, independent analysis found that the program was a hugely expensive failure. Only about one-third of the program’s money actually went to workers who would have otherwise lost their jobs, according to a National Bureau of Economic Research study. Another study by the Federal Reserve Bank of St. Louis found that taxpayers paid roughly $4 for every $1 of wages and benefits to workers.”
“President Joe Biden announced that the federal government would forgive between $10,000 and $20,000 of student loan debt for qualifying borrowers who make less than $125,000 per year. But that wasn’t all: Biden also said that he would create a new income-driven repayment (IDR) system for college borrowers.
The IDR aspect of Biden’s plan attracted less scrutiny than the direct forgiveness aspect, which will cost at least $300 billion (and probably much, much more) in the immediate future. But in the long-term, this aggressive move toward an income-driven model of repaying college loans will probably have a bigger impact—and that impact will be catastrophic. In fact, unless the government does something to constrain colleges’ ability to set their own prices, IDR could break the entire higher education financing system and lead to skyrocketing costs for taxpayers.
There are some IDR programs available right now, but Biden’s approach would vastly expand this option. The existing plans require borrowers to pay 10, 15, or 20 percent of their income for two decades, at which point the rest of the loan is forgiven. Biden would make IDR much more appealing than it is currently; according to the Biden-Harris debt relief plan, borrowers will pay just 5 percent of their income (or 10 percent if they took out graduate student loans) for either 10 or 20 years depending on how much money they owe. The income threshold will be raised from 150 percent above the poverty line to 225 percent, and punitive interest rates will be eliminated.
All in all, this IDR model will be extremely appealing for a large number of borrowers, and we should expect the percentage of borrowers who are repaying via IDR to increase substantially in the coming years. But without further changes to the federal student loan program, this is going to be a huge problem.
That’s because both the borrowers and the universities will have increased incentive to bilk the people who actually make the loan: the taxpayers.
Under the current system, a prospective student needs a certain amount of money to pay for tuition at a university—say, $50,000—and borrows that sum from the government (i.e., the taxpayers). Later, the borrower pays it back, with interest. The university’s incentives are less than ideal; it might feel free to raise the price of tuition to $60,000, satisfied that the student really wants the degree, and will thus borrow more money, and deal with the consequences afterward. To the extent that the government loan program disguises upfront costs, it arguably contributes to rising tuition rates.
Under IDR, this situation gets much worse because the university and the borrowers have incentive to cooperate and screw the taxpayers. For the borrower, it doesn’t matter if tuition costs $50,000 or $5 million: The borrower will be repaying the same amount, 5 percent of income for 10 years, regardless of the size of the loan or the cost of tuition. Since it makes no difference to the borrower, the university might as well raise prices. This way, the university pockets more money, and the borrower doesn’t even have to pay it back.
Something close to this scheme already exists in law schools, which have Loan Repayment Assistance Programs (LRAPS). According to leftist writer Matt Bruenig, the arrangement is very likely to produce increased tuition as universities and students figure out that they can essentially cooperate in this game to beat the house”
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“Bruenig notes that Australia also uses IDR, but in Australia, the government prohibits universities from charging obscenely high tuition rates.
“If we are going to make the leap into an IDR-dominant college financing system, then we may need the government to also play a much bigger role in setting college prices, something it probably should have been doing even before the Biden policy change,” writes Bruenig. “Otherwise, we may very well see more unwanted cost bloat beyond what we already have.””
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“One solution would be for the government, at a minimum, to set tuition prices for public, state universities—which, after all, are public and paid for by taxpayers. If the state is going to confiscate wealth from taxpayers in order to maintain public educational institutions, those institutions should be generally affordable to those same taxpayers.
Another idea would be to move to a system in which students don’t take out loans at all; instead of paying tuition, they agree to pay a percentage of their income to the university for some length of time after graduation. This would be like IDR, but it would cut out the government as the middleman, and thus get taxpayers off the hook. Purdue University President Mitch Daniels experimented with such a system, though it was paused earlier this year due to implementation difficulties.
By encouraging students to take on even more debt, and then never expecting them to repay it, the Biden administration is creating a system where everyone involved in higher education has incentive to fleece the American people.”
“The American Civil Liberties Union (ACLU) last week applauded President Joe Biden’s plan to cancel student loan debt, which it describes as “a racial justice issue.” That puzzling position encapsulates how far the venerable organization has strayed from the mission reflected in its name.
Under Biden’s new policy, borrowers earning up to $125,000 a year will be eligible for $10,000 in debt relief or twice that amount if they qualified for Pell Grants as students. The 43 million or so beneficiaries include many affluent people who could readily afford to pay off their loans, while the cost, which is projected to be at least $300 billion, will be borne by taxpayers, including Americans of relatively modest means.
Some of the people picking up the tab never attended college, while others struggled to do so without borrowing money or have already paid off their loans. But in the ACLU’s view, that seemingly unfair redistribution of resources is what racial justice demands.”
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“it has nothing to do with protecting civil liberties. The 14th Amendment guarantees equal protection under the law, but it does not promise to eradicate racial disparities in educational or economic success.
As the ACLU sees it, however, any such disparities result from “centuries of structural inequities and racism.” The federal government therefore has a duty to ensure equal outcomes, which requires wide-ranging interventions, including welfare programs, education spending, job training, affirmative action, public housing, tax credits, and state-subsidized health care.
To give you a sense of how far afield that cause takes the ACLU from the defense of constitutional rights, the organization argues that “broadband access for all” is a racial justice issue because “people without broadband access are disproportionately Black, Latinx, Indigenous, rural, or low-income.” The ACLU describes the Patient Protection and Affordable Care Act, which it urged the Supreme Court to uphold, as “a great civil rights law” because “it is not possible to fully participate in the economic, social, and civic life of our nation without stable health coverage.”
If “stable health coverage” is a prerequisite for fully participating in “the economic, social, and civic life of our nation,” so is stable housing, stable employment, and a stable supply of food, clothing, and transportation. Such reasoning expands the ACLU’s mission to include pretty much any domestic policy issue.”
“I think it’s likely to have a modest downward effect on inflation, so directionally, I think it is likely to push downward on prices. But that’s unlikely to be the primary effect of the legislation, given how many specific policies there are.
Most of the impact on inflation and the broader economy from this legislation is likely to be medium-term, not felt in the immediate next few months, which is how households are thinking about inflation.”
“The regulation, which takes effect on Oct. 31, is meant to protect DACA by codifying the program and replacing a 2012 memo that first created it. The Obama-era program currently offers work permits and protection from deportation to more than 600,000 undocumented immigrants.”
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“Biden went on to directly call on Republicans on Capitol Hill to move for a legislative solution.”
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“the future of DACA remains uncertain after years of legal challenges.
The Trump administration tried to end the program for years but was eventually rebuffed by the Supreme Court. Ultimately, a federal judge in Texas struck down the program, finding it to be unlawful, just months after Biden took office last year.
Since then, the Biden administration has been blocked from approving new applications for DACA, which has granted work permits and deportation protection for its recipients. The 5th U.S. Circuit Court of Appeals could rule on the program’s legality any day now.
Homeland Security specified that the final regulation would apply only to DACA renewal requests as the current injunction still blocks the administration from approving new DACA applications.”