Wednesday, August 23, 2023

August 22, 2023 HEATHER COX RICHARDSON

August 22, 2023

AUG 23

Law professor Bruce Mann’s 2002 book on the early history of American debt, Republic of Debtors, explained how early Americans redefined bankruptcy to excuse defaulting on commercial debt as a result of the volatility of market forces, while retaining the old idea that defaulting on personal debt was a moral failing. Their argument was that commercial debtors could not avoid economic risk because they engaged in market activity, while farmers, tradesmen—ordinary people—should order their affairs so that they did not take on debt they could not repay.

Mann pointed out that this new understanding was “an oddly narrow understanding of economic risk, excluding as it did the hazards and chance that could rain economic ruin on farmers, tradesmen, and other nonmerchants. Moreover, it treated noncommercial debt as somehow avoidable and hence nonpayment” as a moral failing.

The difference between the willingness of right-wing lawmakers to afford debt relief to business owners—often including themselves—through the Paycheck Protection Program and their staunch opposition to the Biden administration’s student loan relief programs suggest that a perceived difference between commercial debt and personal debt in the United States is alive and well.

Rising costs of college and cuts to government support for education mean that more than 45 million people across the country owe more than $1.6 trillion in federal loans, an amount equal to the size of the Australian economy. That debt absorbs money people at the lower end of the economic scale would otherwise invest in homes, consumer goods, and so on, and the Biden administration has made it a priority to relieve some of that debt.

When she was the California attorney general, Vice President Kamala Harris took on predatory for-profit colleges and won $1 billion for defrauded veterans and students, and when he ran for office, Biden promised to forgive federal student debt for those earning less than $125,000.

Since the Supreme Court on June 30, 2023, rejected the administration’s plan to forgive more than $400 billion in student debt borrowed through government programs, the administration has turned to other approaches.

In April it began to fix the administrative errors that had kept borrowers from receiving relief through income-driven repayment plans and the Public Service Loan Forgiveness program under which they borrowed the money. Those plans were always intended to offer a way to eliminate student debt, but the Government Accountability Office in 2022 found that poor record keeping meant that that promise had not been honored. On July 14 the administration announced that fixes to those programs would relieve more than 800,000 borrowers of more than $39 billion in student debt.

At the time, Biden did not mince words. “Republican lawmakers—who had no problem with the government forgiving millions of dollars of their own business loans—have tried everything they can to stop me from providing relief to hardworking Americans. Some are even objecting to the actions we announced today, which follows through on relief borrowers were promised, but never given, even when they had been making payments for decades. The hypocrisy is stunning, and the disregard for working and middle-class families is outrageous.”

Since then, the administration has provided relief to others caught in the system as well, including relief of $45.7 billion for 662,000 public service workers, $10.5 billion for 491,000 borrowers with a total and permanent disability, and $22 billion for nearly 1.3 million borrowers who were cheated by their schools, saw their schools close, or are covered by a related court settlement.

Today the administration released the Saving on a Valuable Education (SAVE) plan, a new repayment plan to bring order and relief to federal student borrowers. It is an income-driven repayment plan that is based on a borrower’s income and family size rather than their loan balance, prevents the balance from growing because of unpaid interest, and forgives the remaining balance after a number of years. “The benefits of the SAVE plan will be particularly critical for low- and middle-income borrowers, community college students, and borrowers who work in public service,” the White House said.

Relieving student debt helps those at the lower end of the economy, which will boost economic growth, but there is also a political payoff in these efforts for the administration. As Democratic strategist and pollster Celinda Lake and documentary filmmaker Mac Heller pointed out in the Washington Post in July, in the eight years between the 2016 and 2024 elections, 32 million Americans have become eligible to vote. In the same eight years, as many as 20 million older voters have died.

Lake and Heller note that younger Americans are focused on issues, rather than individuals, and skew progressive (prompting some Republicans to talk about raising the voting age to 25). Fulfilling a campaign promise that overwhelmingly benefits those under 50—parents as well as students—is good politics, blending in with the members of Gen Z (the generation born between the mid to late 1990s and early 2010s) forming political PACs of their own and running for office.

A new legal filing from prosecutors from special counsel Jack Smith’s office will likely be less good politics for Republicans. Prosecutors today explained to Florida-based U.S. District Court Judge Aileen Cannon why they had continued to investigate the case of the national security documents Trump took, refused to return, and then hid at the Trump Organization’s property at Mar-a-Lago even after they filed indictments against Trump and his aide Walt Nauta.

Prosecutors said that a key witness in that case had retracted false testimony after replacing his Trump-funded lawyer with a public defender. That new testimony implicated Trump and another aide in the attempt to cover up Trump’s retention of the documents, and that new testimony was behind the superseding indictments released in that case in late July.

Prosecutors say that witness is expected to testify against Trump and his aides.

Former federal prosecutor Renato Mariotti called this “a very significant development. Trump already faced overwhelming evidence in the Mar-a-Lago case. But this flipper may change the calculus for Trump’s co-defendants. They are much younger than Trump, and they face the prospect of years in prison if convicted.”

If politics is rocky these days, everyday life is less so thanks to the vote of 86% of the members of the Teamsters union today to approve their new 5-year contract with UPS, heading off what would have been a bruising strike.

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Notes:

Bruce H. Mann, Republic of Debtors: Bankruptcy in the Age of American Independence (Cambridge: Harvard University Press, 2002), p. 208.

https://projects.propublica.org/coronavirus/bailouts/

https://www.supremecourt.gov/opinions/22pdf/22-506_nmip.pdf

https://www.nytimes.com/interactive/2022/08/26/your-money/student-loan-forgiveness-debt.html

https://www.nytimes.com/2023/06/30/us/student-loan-forgiveness-supreme-court-biden.html

https://studentaid.gov/announcements-events/idr-account-adjustment

https://www.whitehouse.gov/briefing-room/statements-releases/2023/07/14/statement-from-president-joe-biden-on-new-student-debt-relief-actions/

https://www.ed.gov/news/press-releases/biden-harris-administration-releases-state-state-data-39-billion-loan-forgiveness-804000-borrowers-result-fixes-income-driven-repayment-plans

https://www.gao.gov/products/gao-22-103720

https://www.bloomberg.com/news/articles/2023-08-20/student-loan-forgiveness-biden-wipes-out-39-billion-in-debt-under-idr-programs