Middleboro Review 2: POLITICO NIGHTLY: Biden’s invisible debt-forgiveness policy

Saturday, June 4, 2022

POLITICO NIGHTLY: Biden’s invisible debt-forgiveness policy

A box is filled with dollar bills. | Mark Lennihan/AP Photo

THE BRIGHT SIDE OF INFLATION — Everyone hates inflation. The runaway price hikes of the last several months — to four-decade highs of over 8 percent — torpedoed Americans’ feelings about the economy and crushed President Joe Biden’s poll numbers.

Numbers this high are brutal and unsustainable long-term. They crush spending power as consumers are forced to spend more of their money on essentials like gas and food. That’s why the White House and the U.S. Federal Reserve are scrambling to bring prices down.

But there is at least one good thing that happens with inflation: the burden of existing debt drops.

It seems weird to suggest, especially now, that some inflation can be helpful to millions of Americans carrying student loan, housing, credit card and other kinds of debt. But it can.

It can also make public debt — including the roughly $30 trillion owed by the U.S. — less troubling. (No, the U.S. doesn’t owe anyone that full $30 trillion but let’s not get bogged down.)

It’s an easy economic phenomenon to understand. Well sort of easy. Americans still have enormous debt. But inflation — and the fast growth rates since the pandemic waned — mean that debt actually dropped as a percentage of the total U.S. economy over the last year, according to the Fed.

It’s not because Americans are paying off more or borrowing less. We aren’t. Total household debt in the U.S. rose to nearly $16 trillion in the first quarter of this year, up 1.7 percent from the same period last year driven by a $250 billion increase in mortgage debt, according to Fed data.

But $16 trillion ain’t what it used to be. So in what economists call “real” dollars, the debt is smaller.

We are paying those debts with money that is worth less now than when we borrowed it. Put differently, there are more dollars in the system now, and they are worth less than when much of the debt was accrued.

This quiet, hard-to-notice method of debt forgiveness is among the reasons that more progressive-leaning economists (and some people in the White House) want to see the central bank tap the brakes but not slam them down.

“We want to see job growth that’s sustainable, and we obviously want to see costs go down,” Joelle Gamble, chief economist at the Department of Labor, said Friday on a Twitter Spaces chat hosted by POLITICO. At the same time, she suggested we shouldn’t move too fast to tamp down growth: “There are gains that have been achieved that we do not want to lose.”

Inflation also slices into the percentage of federal debt as a share of the economy, a key metric that investors follow to judge a country’s fiscal health. And that’s happening in the U.S. now: Inflation has reduced the value of outstanding debt as measured in current dollars from when Biden took office.

That happened even as the federal government firehosed trillions of dollars into the economy for Covid relief programs.

But this brings us to the “careful what you wish for” problem. As interest rates go higher, so does the cost of servicing existing debt. So while some inflation can be good for private and public debtors, too much of it is a nightmare.

Welcome to POLITICO Nightly. Reach out with news, tips and ideas at nightly@politico.com. Or contact tonight’s author at bwhite@politico.com or on Twitter at @morningmoneyben.

DON'T MISS DIGITAL FUTURE DAILY - OUR TECHNOLOGY NEWSLETTER, RE-IMAGINED: Technology is always evolving, and our new tech-obsessed newsletter is too! Digital Future Daily unlocks the most important stories determining the future of technology, from Washington to Silicon Valley and innovation power centers around the world. Readers get an in-depth look at how the next wave of tech will reshape civic and political life, including activism, fundraising, lobbying and legislating. Go inside the minds of the biggest tech players, policymakers and regulators to learn how their decisions affect our lives. Don't miss out, subscribe today.

ON THE HILL

DOJ INDICTS NAVARRO — The Justice Department has indicted Peter Navarro, a former trade adviser to Donald Trump, for contempt of Congress after he defied a subpoena from the Jan. 6 select committee, write Kyle Cheney and Nicholas Wu.

After Trump’s defeat in the 2020 election, Navarro became an early advocate for the former president’s false claims of widespread election fraud and spearheaded efforts to overturn the election. He’s been charged with two counts of contempt, each of which carries a maximum sentence of one year in prison.

The committee subpoenaed Navarro in February and he tersely refused to comply, claiming sweeping executive privilege over his efforts. Navarro did not immediately respond to several requests for comment.

The indictment marks the first criminal charges related to the Jan. 6 investigation against a person who was serving in Trump’s White House during the former president’s attempts to overturn the 2020 election results. Steve Bannon, who left the White House in 2017 and similarly refused to comply with a select committee subpoena, was charged last year with two counts of contempt. He is set to go on trial in July.

WHAT'D I MISS?

— Fetterman had a previously undisclosed heart condition: John Fetterman, Pennsylvania’s lieutenant governor, released a letter from his physician that said he was diagnosed with “a decreased heart pump” in 2017 after he came in because his feet were swelling. The Democratic Senate nominee said in a statement: “As my doctor said, I should have taken my health more seriously. The stroke I suffered on May 13 didn’t come out of nowhere. Like so many others, and so many men in particular, I avoided going to the doctor, even though I knew I didn’t feel well. As a result, I almost died. I want to encourage others to not make the same mistake.” His physician said Fetterman is “well compensated and stable” and “if he takes his medications, eats healthy, and exercises, he’ll be fine.”

— More cases of monkeypox expected: The Centers for Disease Control and Prevention warned today that monkeypox may be spreading person-to-person in the United States, after the agency confirmed three cases in individuals with no recent links to international travel. The public health agency has confirmed 20 monkeypox cases in 11 states. Most of the patients have traveled internationally and were likely exposed overseas, the CDC said, but three did not, and either may have had contact with a known case or didn’t know how they were infected.

— Special Olympics reverses vaccine requirements: The Special Olympics reversed its Covid-19 vaccine mandate for upcoming competitions in Orlando after Florida threatened event organizers with a $27.5 million fine over the requirement. The Special Olympics issued a statement today saying it will lift its mandate as directed by state officials on May 27 “based upon the Florida Department of Health’s interpretation of Florida law.”

— Hiring stays strong: After months of robust hiring, U.S. employers might have pulled back slightly in May, to levels that would still be consistent with a healthy job market, despite high inflation and rising borrowing costs. Economists have estimated that the nation added a solid 325,000 jobs last month, down from 428,000 in both March and April, according to forecasts compiled by FactSet, a data provider. If so, that would snap a record-breaking streak of 12 straight months in which job growth had topped 400,000.

— West Point may have to remove Robert E. Lee portrait: For 70 years, the slave-owning Confederate general Robert E. Lee has stared down at West Point cadets from a massive portrait in the academy’s library, a slave guiding his horse in the background. But that portrait could be coming down. The commission that was established to rename military bases that honor Confederate generals is expected to recommend that West Point remove the 20-foot portrait of Lee in his gray Confederate uniform, according to two people familiar with the group’s deliberations.

STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president’s ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.

FROM THE TECHNOLOGY DESK

FEDERAL PRIVACY LAW BEING DRAFTED — For decades, Congress has tried and failed to pass a law to protect Americans’ data privacy. A bipartisan draft bill suggests lawmakers in both chambers are finally close to making it happen, according to multiple people who’ve viewed a draft text, Rebecca Kern writes.

A bipartisan group of leaders of key House and Senate committees have drafted a bill that compromises on two of the biggest sticking points in federal privacy negotiations, according to four individuals who are familiar with the draft bill that is being circulated among legislators, industry and privacy advocacy groups.

Such a bill would provide a uniform national standard on what data companies can gather from individuals and how they can use it. The current situation is a patchwork of state and sector-specific privacy laws like a 1999 law that protects financial information, a 1996 law that protects health information and a 1974 law that protects information gathered by the government.

NIGHTLY NUMBER

$400,000

The amount of money the Everytown for Gun Safety Action Fund — the nation’s leading gun violence prevention group — poured into a weeklong ad campaign across a dozen states urging senators to reach an agreement on a range of firearms measures.

PARTING WORDS

WHAT WAS REALLY AT STAKE IN THE DEPP-HEARD TRIAL — Katelyn Fossett writes in Women Rule:

Jurors delivered a verdict Wednesday in the defamation case that actor Johnny Depp filed against ex-wife Amber Heard. The seven-person jury sided with Depp, awarding him $10 million in compensatory damages and $5 million in punitive damages, while also awarding Heard $2 million for one instance of defamation by Depp against her.

At its outset, most people couldn’t have understood how the trial would grow into a significant cultural moment, swallowing social media feeds and launching countless accounts dedicated to trashing Heard and celebrating Depp. It also has now become the latest event by which we measure the progress of #MeToo. Some recent takes have argued that the verdict is a lethal blow to the movement. On the other hand, some argue that not every individual case dealing with gendered abuse presents an existential threat to a broad, popular social movement.

But it’s now very difficult to argue that the trial, which unleashed the kind of misogyny we previously saw during such moments as Gamergate, is inconsequential — particularly for anyone hoping to understand the current state of backlash to #MeToo. I called Mary Anne Franks, a law professor at the University of Miami who focuses on the First Amendment and technology, who made a case not just that the trial is a big deal, but that ignoring it actually made all of the misogyny it unleashed even worse. “I’ve just seen so many people bragging about how they weren’t paying attention to it, as if that was some kind of badge of honor,” she said. “But the issues are pretty serious.”