February 3, 2020--Vetting Bernie

Elizabeth Warren has been put through the ringer ever since she revealed details about how she was proposing to pay for her version of Medicare for All.

As she should have been. As all the leading candidates should have been. We need to know if they are offering pie in the sky or policies that make sense and are affordable.

This sort of scrutiny comes with the territory when running for president. Especially when taxpayers assess the highlights of a candidates' domestic agenda that would cost us tens of trillions in additional taxes or increased debt.

Warren was second or third in the national polls when she showed voters her numbers; but since getting into the budgetary weeds about her plans she has slipped. She's now locked in fourth place as her numbers continue to slide.

The main political beneficiary of her descent is the other most progressive candidate--Bernie Sanders. Depending on the poll, he has moved solidly into second or even first place. Tied with or ahead of Biden.

In spite of his rise Bernie has not been seriously vetted. He got this far on a pass. It might be good to wonder why.

For example, according to Steve Rattner, though Warren disclosed her health plan would cost tens of trillions of dollars more than currently being spent on Medicare, the additional cost to taxpayers for Sanders' Medicare for All proposal over ten years, rarely discussed, could be as much as twice that.  ($30-40 trillion versus her $20.5 trillion).

Looking at the cost of some of their other plans Bernie's continue to be much more expensive--

For the Green New Deal, Warren would spend $3.0 trillion more than we currently budget for environmental  programs whereas Sanders' additional spending would reach $16.3 trillion. More than five times as much.

For free college tuition, Warren budgets $610 billion while Bernie would spend less--"only" $480 billion.

To eliminate student debt, Warren would allocate $640 billion, while Sanders would increase the budget by $1.6 trillion. Four times as much.

When asked to explain how they would pay for these and other programs they both talk about instituting wealth taxes. When one looks at the numbers, however, Warren's increased taxes on the very rich would yield $3.75 trillion while Bernie's would net just a little more--$4.35 trillion.

In both cases additional trillions would be required to make their proposals revenue neutral. Good luck with that.

We all know that if any of these programs could be approved by Congress their cost would be added to the federal debt. The same place where Trump's trillions in tax cuts for the mega-rich fester.

If we want to defeat Tump at the polls in November we had better do some of own vetting before Trump and his henchmen do it for us.

April 12, 2107--Free Tuition

In cost-benefit terms the best social policy investment the United States could make would not be to spend a trillion dollars on infrastructure (though we need to do that too) but to deploy that $1.0 trillion to wipe out all outstanding student loans.

There are 44 million who borrowed money to help pay the cost of their college educations and they owe on average about $37,000. Of these borrowers, more than nine million are in default.

Those in default and those struggling to pay back what they owe are trapped in a tsunami of debt and collapsed FICO scores at a time when it is difficult for young people to find employment that pays enough to make repaying manageable. As a result record numbers continue to live with their parents well into their 30s or are reluctant to take chances to switch career paths or start their own businesses. This in turn, in macroeconomic terms, dampens growth and interferes with the traditional churn of the free market.

There are no direct correlates, no lessons from history that we can turn to as models of federal fiscal policy that would be helpful in making the case for this radical suggestion. And, to balance the debate, there are no large-scale examples on the other side of the argument that have credibility.

That is except for those times in America's history when the government stepped in to prop up or even bail out imperiled institutions. We did this in the 1930s during the Great Depression to help rescue the country from a a precarious economy and dramatically, more recently, when we did a version of the same thing to help get us through the Great Recession.

On a less dire note there was the GI Bill that was passed in 1944, toward the end of the Second World War, to provide various sorts of assistance to men and women who volunteered or were drafted to serve in the military.

The GI bill is best known for the support it provided to veterans who enrolled in various forms of education, from vocational training to college and university studies. It paid the full cost of tuition and even offered a monthly subside to help offset living expenses.

It was a massive program: 8.8 million GIs used the educational benefits with a full quarter of them (2.2 million) enrolling in post-secondary education. This not only benefitted those attending but contributed to the dramatic expansion of educational opportunities and facilities that served the nation well in subsequent decades, even after veterans completed their studies. By 1960, only 15 years after the end of the war, a new community college was founded each week, fully 50 a year for over a decade. Now there are 1,200 two-year colleges serving 7.4 million degree-seeking students.

Even those fiscal conservatives who resisted the federal government's involvement in education funding could not help but be impressed. The die was cast--higher education became a virtual right as a result of the GI Bill and its longer-term reverberations. For the first time in world history higher education became fully democratized. Not perfect, but impressive.

And those who study these matters have retrospectively found that the accrued benefits to the nation, in monetary terms, more than offset the direct costs of subsidizing this expansion of educational opportunities. There was unprecedented economic growth between 1947 and 1975 and a significant narrowing of economic inequality. The poorest 20 percent of the population saw their incomes rise at a rate higher than that of any other population cohort.

In other words there was no better engine for economic growth than offsetting the cost of offering these higher-educational opportunities.

To put it simply--better educated people, college graduates especially, earn more over their lifetimes than people with only a high school education and as a result pay more in taxes. Enough in taxes to more than cover the subsidized costs of tuition and even the monthly stipends.

Thus it is exciting to note that the New York State Legislature, pressed by 2020 presidential candidate Governor Andrew Cuomo, just this past week passed a bill to make all public colleges in the state for families earning less than $250,000 a year tuition free.

"Tuition free" is a wonderful oxymoron and one can expect to see over time some of the same economic benefits that were the result of the GI Bill.

Think, then, what a positive jolt to the nation's economy would result from wiping out all accrued student debt. This obviously would be complicated to do (forget for the moment what conservatives would say!) but it is worth thinking about and running the numbers to quantify what a benefit it would be. Increased tax revenues, among other things, would be sufficient to pay for the renewal of much of out failing infrastructure.

Governor Andrew Cuomo

May 29, 2014--The $ of a College Education

Back in 1976 I wrote a book about the history and then current state of higher education--Second Best. The "second best" referred to how the system favored the affluent at the literal expense of the less fortunate.

One chapter was devoted to the financing of colleges and universities, especially the redistribution of assets from the working poor and lower middle class to the upper middle class and wealthy.

Studies that I cited showed that since the system disproportionately encouraged the enrollment and graduation of these latter students, tax money and other forms of assets flowed upward from those at the bottom to those at the top. The best evidence at the time showed that college graduates over their lifetimes earned about 50 percent more than those with only high school diplomas and even "some college," with some college including community college students who never went on the earn bachelors degrees.

I hoped the book, which was widely reviewed and discussed, would contribute to the debate about this unfairness and contribute to efforts to close these gaps in educational attainment and economic outcomes.

But from recent evidence it is clear that I and many others were less than effective.

This may come as something of a surprise since there is so much casual talk currently, supported by anecdotal stories, about how recent college graduates can't find jobs and are therefore moving back home, holed up again in their old bedrooms.

Friends have been telling me for years that they know this brilliant young person who graduated with honors from Georgetown or a talented student from the University of Michigan who has been looking unsuccessfully for work for the past three years. Or had to take a part time job.

From this one might suspect that the income gaps at least have narrowed and that unemployment among college grads would have risen.

But a recent study cited in the New York Times by the Economic Policy Institute, using Labor Department data, shows that the unemployment rate among college graduates is only 3 percent (while for those with "some college" it is more than 25 percent) and that the earnings gap is even more pronounced than in the past.

Five years ago grads earned 89 percent more than non-graduates, ten year ago it was 84 percent more, back in the early 1980s it was a 64 percent premium, and as my research showed it was "only" 50 percent more in the mid-1970s.

On the other hand, the most recent data reveal a shocking 98 percent advantage in earnings for college graduates when compared to those with either a high school diploma or a year or two of college. This translates to $1.0 million more in earnings over a working lifetime.

It may be true that a percentage of employed college graduates feel they are underemployed or are working in fields that do not align with their interests or aspirations; but the anecdotes, which confirm predetermined presuppositions about the state of things, do not represent the truth.

The truth however, is mixed--it is good news that college graduates are doing so comparatively well (though it is not good news that the average graduate is $25,000 in debt); but it is little comfort to think about those falling further and further behind. That was true in 1976 and, sadly, it is even more so today.

May 13, 2013--Student Debt

I know this idea is going nowhere; but, if we want to spend a trillion dollars wisely, we should forgive all undergraduate student debt.

It totals one trillion and the average debt burden for college gradates is $24,000. Typically, those fortunate enough to have well-paid jobs and thus able to pay back what they owe, take at least 15 years to do so. Of the 37 million former college students who have amassed debt, fully 11 million of them are between 30 and 39.

To make matters worse, unless Congress acts (and how likely is that?), interest rates on these loans will double July 1st to 6.8 percent. At a time when a mortgage rates are only 3.0 percent and banks can borrow money from the Fed for less than one percent (actually, about 0.75 percent). Senator Elizabeth Warren has proposed legislation that would set the student loan rate at the same level as the bank-borrowing rate. But we know where that is going--down the filibuster chute.

In the meantime, young people, overwhelmed by debt, are not marrying, not having children, not buying houses, and generally not spending money. They don't have any. And as a result, the economy, which continues to falter, is missing the boost that young people's spending would provide.

To forgive student debt, yes, would be by definition unfair. Why let these all of these young people off the hook while not doing very much to help, say, those with under-water mortgages? Unless we want to set up a big bureaucracy to means-test whose loans should be forgiven and who should pay (which in itself would cost a fortune) some who can pay would get away with a taxpayer subsidy they don't need or deserve.

But for once, about something this important, why don't we just do the right thing, and, forgetting all the caveats, get this mammoth problem out of the way and in the process release recent graduates from this usurious burden and help them get on with their lives and, in so doing, become taxpayers rather than dependents holed up, living in their childhood bedrooms or their parents' garages.

A final thought--who would be the "losers"? Who would have to "eat" the nearly $1.0 trillion in forgiven debt?

Basically, the banks who did the loaning. The same banks which for decades made hundreds of billions in interest that was guaranteed by U.S. taxpayers. The same taxpayers who will have to assume the cost of any unpaid interest if students default on paying back what they borrowed. Which, again because of the stalled economy, is more and more common. The banks that taxpayers bailed out a few years ago after they caused the Great Recession. All they would need to do would be to write off this debt the same way they write off foreclosed mortgages.