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Current Affairs

A Magazine of Politics and Culture

Debt is a Form of Social Control

To be indebted means to lack freedom. That’s why elites melt down in response to Biden’s new plan to forgive $10k of student debt. They don’t want you to be free.

Elites love certain government handouts for the rich.

Nancy Pelosi’s husband, Paul Pelosi, trended recently on Twitter after pleading guilty to drunk driving. Many people have scrutinized how this case was handled to see if he received any preferential treatment, which is understandable. We all know that we live in a world in which the rich and powerful get to play by different rules than everyone else. Now, it seems like Pelosi’s case was treated normally. But while everyone was focused on the Paul Pelosi drunk driving case, the real Pelosi corruption story was not in the West Coast vineyards where he was arrested, but back east. In the swamp.

Multimillionaire Paul Pelosi benefited from one of the $12 million Paycheck Protection Program loans that were issued in 2021. And he won’t be paying back a dime. Pelosi owns an 8 percent share in a restaurant-based company called EDI, which will not have to repay two loans worth a total of $1.7 million. Both loans were completely forgiven, along with loans taken out by such notable small business owners as Khloe Kardashian, Tom Brady, and Reese Witherspoon.

And that’s not all. According to analysis by NBC, 25 loans valued at $4 million went to businesses and properties owned and rented out by the Trump Organization and Trump son in law Jared Kushner. And even though PPP money was supposed to go to making sure people were able to keep their jobs through the COVID lockdowns, fifteen of the Trump-related properties that received loans said they retained one job, at most. And that’s if they reported numbers at all.

Meanwhile, most small business owners saw little to no benefit.

One percent of PPP borrowers got over one-quarter of the loan money. And, according to a study by economists in the Journal of Economic Perspectives, only about 25 percent of PPP funds went to workers that would’ve lost their jobs. The rest, despite the attempt of pundits like Ben Shapiro to insist that recipients were just paying their workers, went to business owners, shareholders, creditors and the like.

Now, if you’re wondering when we, as a political community, debated the standards for PPP forgiveness—how companies should prove they used their PPP to actually retain workers, and whether PPP should be means tested to keep people like Billionaires Jay-Z and Kanye from benefiting—the answer is: we never did. As is often the case with policies intended to bail out the reckless elites that exacerbated the supply chain crisis by moving jobs overseas for cheap labor, or who caused the housing crisis by gambling with our mortgages, there was no public conversation about their fiscal responsibility.

No, the only time elites have a problem with bailouts is when it’s time to bail out ordinary Americans. Many of us haven’t forgotten the cruelty of 2008, when under the Troubled Asset Relief Program, or TARP, banks largely ignored the authority they were granted to extend loans to help families stay in their homes. Meanwhile, AIG was bailed out with multiple lines of credit totaling about $182 billion. Did leaders learn from this mistake? No. In response to the COVID shutdowns, $500 billion of taxpayer money went to bail out corporations. Elites helped themselves in 2008, and they’re doing the same thing now. It’s not a Republican issue or a Democratic issue. Pelosi is as culpable as Kushner. In fact, back in 2008, both the Trump family and the Pelosi family were both Democrats. It was never about left right but top down. It’s a big club, and you’re not in it.

Given this backdrop of enormous bailouts for the rich, implemented with little to no public debate, the conversation around student debt cancellation raises some huge red flags.

I want to start by saying this: by no means is student debt the most corrosive form of debt. I can imagine any number of other debtors who are caught up in situations more dire, who comprise a poorer, less advantaged class, and who need a bailout more than those with student loan debt. But we’re talking about student debt now for two reasons: One is that unlike other kinds of debt, student loan debt can be canceled by the government; and unlike the case with other anti-poverty measures, Joe Biden can cancel this debt without congressional approval. Because most of student debt is federally held—the result of a policy intended to encourage Americans to go to college—Biden can, by executive order, cancel the debt by simply not demanding repayment. It’s the same mechanism that Trump used to begin the student loan pause that’s been ongoing since the early days of COVID, and which has been saving the average American borrower from paying about $300 extra a month in student loans. The other reason we’re talking about student debt right now is because Joe Biden ran on a promise of canceling at least $10,000 of student debt for everyone making under $125,000 a year, and to cancel all student debt for graduates of historically Black colleges and universities.

I want to be very clear: student debt cancellation isn’t an unreasonable left-wing demand. While I support full cancellation, the conversation happening right now is about holding Biden accountable to his campaign promises, whether or not you agree with them. 

That all being established, I have to ask: does the elite pundit response to student debt cancellation strike you as, well, out of sync with its silence on the bailout for the wealthy?

College For Elites, Not For You

Forty-five million Americans carry federal student loan debt. This debt has affected the economy (and people’s lives) in myriad negative ways, including lowering millennial child birth rates and our willingness to enter the housing market. According to the New Yorker, “In 2015, more than 200,000 student debtors over the age of fifty had their Social Security garnished” to pay for student loans.

Unsurprisingly, student debt cancellation is popular. Sixty-four percent of Americans support some cancellation.

But you wouldn’t know it from listening to elite pundits, most of whom had parents who were rich enough to pay for their college out of pocket. Jason Furman, the son of a shopping mall developer, who went to Dalton (an elite New York private K-12 school which costs nearly $60,000 a year) before attending Harvard (like his father before him) and the London School of Economics, insists that student loan relief would be paid for by the masses. But student debt cancellation is not “paid for” by new tax revenue. Just like the PPP loans for elites were cancelled without fanfare, so could these loans to American students. The government will miss out on some profits in the form of interest payments made by students—interest payments that are often as high as 8 percent. But I happen to think that making students pay interest rates that are sometimes double the rates homeowners are asked to pay is a little perverse. Still, even if you disagree, you have to ask yourself: is Paul Pelosi more deserving of loan forgiveness than your child?

Matt Yglesias, the founder of Vox media (and another graduate of Dalton and Harvard), is another student debt cancellation detractor. In a recent tweet he asked: “What is the plan for the day after universal debt cancellation when masters programs raise tuition and tell prospective students not to worry about it because debt will be cancelled down the road?”

But that’s not an argument against canceling student debt today. That’s an argument for creating a plan to make education affordable. Personally, I backed Bernie Sanders’s plan to combine debt cancellation with a plan to fund free public colleges and universities. In addition to funding free public college, Bernie’s plan below would cap student loan interest rates going forward at 1.88 percent.

We cannot overstate how important these interventions would be in preventing this same debt crisis from reemerging five, 20, or 15 years after cancellation. After all, this $10,000 of cancellation amounts to merely one year of interest for millions of borrowers, and it will be right back on their balance sheets in no time flat if interest rates as high as 8 percent aren’t taken care of. That’s exactly why the loan servicing industry lobbied for the loan cancellation amount to be $10,000.

People who point out that student debt cancellation is a short-term solution that doesn’t get at the root of the problem are absolutely right. So instead of poo-pooing student loan cancellation, Matt could argue that Biden’s plan doesn’t go far enough. But he doesn’t. And in doing so, Yglesias makes a strong case for why Harvard (his alma mater) as an institution should go the way of the dinosaur. Instead of having a federal loan program, we would be better off spending public funds to create strong public institutions that can educate Americans for free. Yes, indeed: let’s avoid federally backed loans that have contributed to higher and higher college costs. But Biden won’t, and possibly can’t, pursue that given the composition of the Senate and lobbying efforts to maintain the status quo. So I put this to Yglesias: Wouldn’t public funds be better spent on canceling student debt, than on forgiving the more than $400,000 PPP loans your employer, the Niskanen center, received? When will Matt find time to complain about that as “regressive”?

Running Cover For Biden

But let us not give Biden too much credit for his recent announcement that he would cancel $10,000 of student loan debt.

After all, he is trying to solve a problem he is partly responsible for creating. Because of a 2005 Republican bill backed by Joe Biden, student loan debtors were stripped of bankruptcy protections, causing the amount of student debt to triple as a consequence. As a 2019 Guardian article notes, “it was a huge giveaway to lenders at the expense of indebted student borrowers.” But it passed with the support of 18 Democrats, including Joe Biden. And this is unsurprising. Remember: Joe Biden was known as “the senator from MBNA,” the credit card servicing company now known as Bank of America. Biden’s nickname pointed to the fact that as the Senator from Delaware, Biden was one of, if not the, most corporate-friendly senators in congress. Politicians from Delaware make their political bones by pandering to the banks which headquarter there due to corporate-friendly tax policies. And that means siding with big banks, even when those banks interests were against the interests of Biden’s constituents.

Because of Biden, if I buy a $1 million house or a Lamborghini and cannot afford to pay, I can declare bankruptcy, as Donald Trump has done repeatedly following poor business decisions. But education debt? That will follow you until the day you die. 

Student loan servicers and banks profit handsomely from the administration of millions upon millions of student loans. And they spend millions lobbying to ensure that politicians like Biden let them suckle at the teat of American’s students. Biden was the top recipient of contributions from student loan companies, followed by Donald Trump. We live in a world where lobbyists are literally writing legislation. But even worse? Working people are being used by bad faith actors to whitewash that effort.

Many people in very elite media positions have argued, ironically, that it is elitist and unfair to working people to cancel student debt. They argue that poor people are somehow paying for it, even though it costs nothing, and any revenues the government isn’t able to collect by cruelly charging 18-year-olds 8 percent interest rates could be easily collected by implementing a tax on billionaires: a policy with strong bipartisan support, but which faux populists never seem to bring up.

So I’m confused. Is it truly elitist to create a world where your ability to be a doctor or teacher or an engineer or a nurse is based on your interest and ability, not on whether mommy or daddy can write a check for you to go to school?

One Newsweek columnist wrote:

“If they are so committed to canceling debt, why not push for car loan forgiveness, or medical debt forgiveness, which would help more classes of people … ? … Progressives are not rallying for those causes because they don’t focus on who progressives really care about: highly educated elites.”

Of course, we progressives are for the cancellation of other kinds of debt. Here is Bernie advocating for medical debt cancellation. (A policy which would only have cost $81 billion before the pandemic, which is the same as about two Ukraine aid packages.) Here are AOC and Bernie advocating for credit card interest rates to be capped. And here’s The Debt Collective, the organization that’s been leading the push for debt cancellation by fighting for bail debt cancellation, tenant debt relief, and medical debt relief.

In fact, The Debt Collective uses its limited resources to buy up debt for pennies on the dollar from servicing companies and pay it off. According to their web site, the Collective has established a “Rolling Jubilee, a mechanism for purchasing portfolios of people’s debt on secondary debt markets—and canceling it. Using crowdfunded donations, the Rolling Jubilee abolished more than $32 million of medical, student, payday loan, and probation debt.”

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Now, I hate to impute bad faith to people, but those of us who are sincerely invested in working class and poor people’s movements know this: bringing up other forms of debt cancellation right now is a pretty transparent attempt to deflect from the fact that Biden only has the executive authority to cancel one type of debt, student debt. Hold the Springsteen track. Running cover for the Senator from MBNA is elitist behavior no matter how much you want to feign concern for the working class.

The only question you have to ask yourself is this: a rich person and a poor person each have a child with great grades and an interest in being a doctor. Should ability and interest drive whether they get to go to college and on to medical school? Or should their parents’ income determine that? Rich gatekeepers are paying millions to make sure America’s students aren’t bailed out but millionaires like Kanye, Kushner, and Paul Pelosi are. It’s corruption, plain and simple.

Debt Cancellation is Good, Which is Why Elites Melted Down in Rage

Biden’s cancellation of some student debt is a good thing. Of course, bare-minimum Biden didn’t live up to his campaign promises—he failed to cancel all student debt for public school graduates making less than $125,000 a year. He failed to cancel all student debt for HBCU graduates under that same income threshold. But he did announce a plan to cancel $10,000 of debt for all student debtors earning under $125,000, as well as $20,000 for recipients of Pell grants. (Pell grants, of course, are federal grants awarded only to undergraduate students who display exceptional financial need.) 

I have a lot of complaints about Biden. But it was, dare I say, based when he replied to a reporter who asked “is this unfair to people who paid their student loans or chose not to take out loans?” with the following (before walking away): “Is it fair to people who, in fact, do not own multi-billion-dollar businesses if they see one of these guys getting all the tax breaks? Is that fair? What do you think?”

Biden’s right. The logic articulated by those reporters—that someone helping out some people is unfair because … other people exist—is so anti-solidaristic, so anti-worker, so anti-community, that it deserves the scorn he served up. Should childless people pay for those with children? Should people who don’t have special needs pay for families with kids who do need more support? Should non-drivers pay for roads? Should people without homes support all the mortgage subsidies that have been pitched to “good wholesome middle class Americans” for years? Truly, what is the difference here?

But even though Biden did less than what he campaigned on, elites who desperately want American workers to be deeply indebted—to have no social mobility, no ability to start their own businesses and get out from under the thumbs of Wall Street control—wet their collective pampers in response to the announcement.

House minority leader Kevin McCarthy tweeted: “Who will be forced to pay for Biden’s debt transfer scam? Hard-working Americans who already paid off their debts or never took on student loan debt in the first place.” (Podcaster Bryan Tyler Cohen replied aptly: “Your party added $2 trillion to the debt to give permanent tax handouts to billionaires and major corporations. And you’re mad that President Biden is taking some action to help relieve a generation of working Americans from mountains of debt?”)

South Carolina Senator Tim Scott tweeted, “President Biden’s plan to cancel student debt is no compassionate ‘freebie’ for Americans. It’s a $300 BILLION economic burden placed on lower and middle class families in the midst of a recession.” $300 billion? That’s nothing compared to the $700 billion in PPP loans that were forgiven, the overwhelming majority of which went to millionaires or billionaires. Mitt Romney, famous for being so rich that he has an elevator for his cars, and who founded Bain Capital, an investment firm that, according to Rolling Stone, “staged an epic wealth grab, destroyed jobs, and stuck others with the bill,” had the audacity to tweet: “Sad to see what’s being done to bribe the voters. Biden’s student loan forgiveness plan may win Democrats some votes, but it fuels inflation, foots taxpayers with other people’s financial obligations, is unfair to those who paid their own way & creates irresponsible expectations.” 

Bribe? Now it’s a “bribe” to do something to help the middle class or the lower 60 percent of earners who will benefit from this policy? It seems that conservatives want to divide Americans up into “makers” and “takers,” not to reward middle class makers who did the quote-unquote right thing and went to college, but to excuse their choice to do nothing for anybody. 

And Senator Rick Scott, Republican from Florida, tweeted from a yacht in Italy:

“Democrats’ push to ‘forgive’ student loans won’t solve the problem. We need REAL solutions that don’t create an added burden on taxpayers. My #COLLEGEAct will actually hold universities accountable for student outcomes & force them to answer for sky-rocketing tuition costs.”

Scott, of course, famously got 100 percent of the purchase price of superyachts written off as bonus depreciation in the 2017 Tax Bill. Julián Castro’s communications strategist Sawyer Hackett summarized Scott’s out of touch sentiment beautifully: “‘Pay off your own debt!’ says a generation of pundits that went to school when classes were $100 and the minimum wage could finance a mortgage on a 2-bedroom home.”

And he’s right. College costs have skyrocketed over the last 30 years.

Source: Visual Capitalist Datastream

Let’s give Rick Scott credit for acknowledging the student debt crisis is real, and offering something in the way of a policy solution. But his plan is a band aid that does nothing to move us toward what should be the goal here, what progressives and conservative populists alike should be using this movement to springboard to: free public college.

They Don’t Want You To Be Free

This is a moment where momentum is building. The bullies who want government handouts and elite education for the rich and a miserable, precarious life for the 99 percent are losing ground. Things have become so painfully unequal that it’s difficult for even conservatives to justify the present situation. It’s why we see states like Florida voting for a $15 minimum wage. It’s why we see conservative states like Kansas voting to defeat ballot initiatives that would amend the state constitution to ban abortion. This is a moment where the people can start making government work for us again. But it won’t happen if we can’t put aside petty partisan fighting that’s often triggered by elites who want nothing more than to protect that status quo in which they thrive.

Why is it that elites are so invested in keeping us indebted? Why do they support tax breaks for homeowners and families even though those often target middle income folks, not the poor? Why are elites in both parties mad at student debt cancellation for targeting the middle class, when the “middle class” is usually considered to be the most “politically deserving” group?

Well, elites of both parties have a deeply vested interest in preventing mobility for working people. Homeownership and childbirth are prioritized because both serve big business. None of it is about supporting a cultural desire for family. It’s about keeping people in debt and maintaining an economic status quo. Once you’ve bought a house, once you have kids, once you have student debt, your options to leave your job, start a business, move, or become free are limited. That’s why the government will tell you—or even force you—to have a child but won’t help with childcare.

They don’t want you to be able to work from home. They don’t want you to be free from the yoke of employer-based healthcare (which is hardly a handout as policies are becoming increasingly unaffordable). No. They want you in the office, with less free time than anyone in the free world. Because when people have time to think, to innovate, to start a business of their own without fear that they’ll get sick and go bankrupt from medical bills, they are no longer under corporate control. Without the threat of student debt and medical debt, how could they get you to join the military and fight in their wars? As Sparky Abraham of the Debt Collective puts it: “Debt is a form of social control.”

Sound conspiratorial? Look at the evidence. Liberal lion Malcolm Gladwell, who has waxed poetic about how he loves to write his bestselling books from cafes, lectured normal folks to get back to work. “What have you reduced your life to?” he asked the commuting masses. Democrats bragged about halving child poverty with the child tax credits, but despite being overwhelmingly popular, these policies quickly went back on the chopping block. We can’t let parents have enough money so that one can stay at home, or work one fewer job. The market demands a desperate labor force, not a happy one.

Recently, Ken Klippenstein and Jon Schwarz at the Intercept broke news that on an earnings call, the president of Douglas Emmett Inc., a real estate corporation worth over $3 billion and based in Santa Monica, California, said a recession could be “good” “if it comes with a level of unemployment that puts employers back in the driver seat and allows them to get all their employees back into the office.”

A recession could be good? Employers back in the driver’s seat? That’s code for “able to exploit their employees without their employees having any recourse.”

That’s the whole game. The reason so many elites hated the stimulus checks is not because they drove inflation. You see, they don’t tie the PPP checks for billionaires to inflation in the same way. Or Trump’s tax cuts for the rich, which added more to the deficit for absolutely no reason than anything that’s happened before or sense. And they aren’t talking about the supply chain crisis or the war in Ukraine, two key causes of inflation. 

No, they talk about spending because they don’t want working people to have options.

When working people have options, they can demand higher salaries. When workers have options, they can bargain for a bigger piece of a pie. This is why union organizing is so important. It gives workers, who individually have very little power, the power of collective bargaining, the power to withhold their labor together and force employers to share profits more equitably. In the golden age of labor, the 1950s and ‘60s, CEOs earned about 30 times more than their employees. Wanna guess what that ratio is now? It’s over 300 to 1. And this is while workers are working more hours with less to show for it.

COVID relief unexpectedly empowered labor, and now elites are trying to put a lid on it in whatever way they can: restarting student loan payments, canceling support for families with children, and intentionally driving up unemployment

We need to recognize this and use this student debt victory to continue to pull together as a community of working people and keep demanding more. In the richest country in the history of the world, education should be free. Yes, even for rich kids. Just like public high school is free for the rich should they choose to attend. Just like libraries. And the services of firefighters. 

It’s our country, and we get to make it work for us. 

Let’s follow through on legitimate concerns that student debt relief is only a partial solution and finish the job. Let’s make America great again by establishing a well-educated, able workforce we can be proud of. One that can build semiconductors and make doctors and plumbers and invent medicines and fix our roads and bridges and create clean energy solutions. One that can compete on a global stage without relying on the power of American imperialism. I truly believe we can do all that. And free public college is a solid first step.

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