Populism Sidelined

Open Markets Institute's Matt Stoller, who does not likemonopolies and may like President Barack Obama even less, prefers Bernie Sander's college debt proposal to that of Bernie Sanders:

Bernie is right about this. Pushing people with high debt loads to Wall Street and fancy hospitals is a bad idea. https://t.co/SGEzBBbqfQ

— Matt Stoller (@matthewstoller) June 24, 2019

Huffington Post explains that the Vermont senator's program

which was shared in advance with HuffPost, goes further than what Sen. Elizabeth Warren (D-Mass.) ― who, along with Sanders, occupies the progressive lane in the 2020 race — has proposed. While the two will be on different nights for this week’s first Democratic presidential debates, it introduces a key difference in approach on a prominent policy issue.

The Sanders bill eliminates all student debt, whereas Warren’s plan ― while still substantial ― covers $1.25 trillion for 42 million people. The difference is that Warren’s plan has caps.

Warren’s proposal forgives $50,000 in student loan debt for every person with a household income of $100,000. People between $100,000 and $250,000 in household income would have a portion of their debt forgiven, and people above that amount would get no cancellation.

(Video below is from 11/14.)

Both Sanders are proposing progressive taxation to pay for their plans. wherein

Sanders, along with Rep. Barbara Lee (D-Calif.), has already put forward legislation to pay for the plan, by imposing a small tax on the trades of stocks, bonds and derivatives, which would generate, they estimate, up to $2.4 trillion over 10 years.

“In 2008, the American people bailed out Wall Street,” Sanders said. “Now, it is Wall Street’s turn to help the middle class and working class of this country.”

Warren would cover her plan through her ultra-millionaire tax ― a 2% annual tax on the 75,000 families with $50 million or more in wealth.

Warren is expected to release her college debt plan legislation in the coming weeks, with a companion bill in the House introduced by Rep. James Clyburn (D-S.C.), the highest-ranking African-American member in Congress.

Consider four individuals who have recently graduated from college after racking up considerable debt.   One has graduated from Harvard University, annual tuition $47,730, and the other from StanfordUniversity, annual tuition $52,857.

The other two have graduated from two reasonably prestigious public universities: the University of Georgia, whose annual tuition is estimated at $12,080 for in-sate students and $31,120 for out-of-state students; and Purdue University, at which the comparable numbers are $9,992 and $28,794.

Don't fret that the two groups are not exactly comparable because the first two colleges are considered the best (aside from MIT) in the nation while the latter two are only reasonably well-respected public institutions.

That's just the point; some students go to wildly respected colleges, anticipating their earnings will eventually more than compensate for their choices. Others go to fine, reputable colleges and are likely to receive a good education. They may have selected the institutions because they couldn't afford the likes of Harvard or Stanford, or their qualifications ((e.g., grade average, standardized testing, high school activities) were solid but unexceptionable.

That, too, is the point. Their earning potential is not as good as that of the graduates of the most prestigious schools, but at least they've avoided paying exorbitant fees for their education, a social good in not pushing the cost of education even higher than it is.

Under Senator Sanders' plan, their debt would be paid for. So, too, would the debt of those students who made a different trade-off: greater costs now for much greater return later. And, curiously for someone so progressive and populist, Senator Sanders does not want to pay off an equal amount of debt of these students. He wants to pay off what is likely to be much greater debt of the Harvard and Stanford graduates. (Alternatively, the latter somehow may not have much student debt, in which case their family probably was particularly well-off.)

This simply makes no sense, at least in a party which prides itself in helping most those whose need is the greatest. It makes no sense in terms of equity and in Sanders' case, makes no sense politically. If nominated, he would have to explain why students who attended a less expensive school will be rewarded less than those who attended a more expensive school, especially when the latter individuals were more likely of an upper-class background.

Stoller's reasoning fails for an additional reason .  Most likely, a majority of the hypothetical graduates of Harvard and Stanford will gravitate to "Wall Street and fancy hospitals" even if their debt is paid by the federal government. If they do not, they will presumably be competing in the fields favored by other, less privileged, students, thus putting downward pressure on wages in those industries.

Competing, as the Democratic presidential candidates have, for the most progressive policies on a range of issues probably will have a positive effect on the next administration, if it is a Democratic one. Failing that, the candidates may at least be moving the Overton window. That can still be done while imposing caps on college debt cancellation, both a superior policy and wiser political strategy.

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