Spring Forward, Fall... Asleep
Hello friends,
Happy Thursday afternoon! Or evening. Is it even Thursday? As you can see I’m still struggling with the change that daylight savings time brought to us over the weekend. Hope you’ve fared better than me. Anyway, let’s get to it.
Here’s what I’ve had to say lately:
Advocates for student loan cancellation are being called upon to explain why the existing safety net falls short, and rightly so. Accordingly, a recent report from a borrower advocacy organization has sought to undermine public support for the existing set of programs by pointing out that the program has had, to date, relatively few beneficiaries. Unfortunately, that’s not an indication that the programs aren’t working (though there is plenty of room for improvement, as I write about here). Rather, it’s evidence that the programs are working as designed. In a nutshell, the reason for the small number of loans being forgiven is that few borrowers have been paying long enough to be eligible to have their balances forgiven. If you want the nitty gritty on the flaws of this analysis, check out this smart Twitter thread from my friend, Carlo Salerno.
The stimulus bill brought a big change for the efficacy of the student loan program. I argued that it’s an important step. Forgiveness of federal student loans will no longer be considered taxable income. To my mind, this change was long overdue. In fact, I’ve often wondered if the original exclusion of this provision was simply an oversight, though a more likely explanation is that the can was kicked down the road due to the revenue loss it would create. Taxing student loan forgiveness (especially when done through income-based repayment) would be akin to taxing food stamps; it undercuts the intention of the program. The only downside is that it seems to be laying the groundwork for student loan cancellation through executive action. That’s unfortunate, but shouldn't get in the way of this necessary change.
I’ve done a lot of complaining recently about popular higher education proposals, so it was nice to lend my approval to a bill that was introduced in the Senate this morning. The REPAY Act, which is being reintroduced after its initial debut in 2015, takes on the task of streamlining the repayment system for federal student borrowers. It does this by eliminating the menu of repayment options and leaving borrowers with just two options: a newly defined income driven repayment plan or a standard plan. There’s a lot more to be done here, but this is an important first step that a bipartisan chorus of experts have been requesting for years.
What I’ve been thinking about:
The push for a $15 minimum wage. As a conservative economist, I’m inherently critical of this effort. While a hike in the minimum wage would increase take-home pay for workers who keep their jobs, we’d likely see many employers have to cut positions to stay afloat (or in the process of shutting their doors.)
It’s never fun to be the one arguing that we shouldn’t give things away that, at least superficially, would seem to make people better off. In light of this, I really appreciated the points that Jeff Miron, of Harvard and the Cato Institute, made in a recent episode of the NYT podcast “The Argument.” He clarified that arguing against a minimum wage isn’t an argument against a safety net and went on to endorse a universal basic income as a superior alternative. His argument was that implementing a safety net through private enterprise, by requiring businesses to pay a “living wage,” would be both unfair (since the impact would be felt unevenly by individuals and communities) and inefficient (because it distorts incentives for businesses,) which makes the whole economic “pie” that’s available for redistribution smaller. It’s pretty basic economics, but he does a nice job laying out the argument and it was really compelling to me.
Another NYT podcast, The Daily, had a great explainer episode on the issue with Ben Cassleman. He’s more dismissive of the concerns about how a minimum wage hike would affect employment than I would be, but he breaks down the arguments nicely. Check it out if the debate around increasing the minimum wage has also caught your attention.
That's all I’ve got for you today. Thanks for reading and please do let me know if you have comments or suggestions.
Take care and be nice to each other!
Beth
Author of Making College Pay (May 2021)