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Is Fear of AOC Why Chuck Schumer Is Pumping a Non-Starter “Cancel Student Debt by Executive Order” Scheme?

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Is Fear of AOC Why Chuck Schumer Is Pumping a Non-Starter “Cancel Student Debt by Executive Order” Scheme?

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It’s odd to see Democrats talking about a Biden “100 days” when Obama did nothing like that when he actually did have a mandate to do so that he ignored. Did they not get the memo that their blue wave didn’t hit the beach? It’s even odder to see Chuck Schumer affecting a Damascene conversion, particularly with respect to the student debt part of the scheme below:

Neither Lambert nor I recall Schumer supporting the either Sanders or Warren student debt cancellation plans while they were Presidential contenders (although Schumer issues so many press releases, he could very well have made a nod.

Nevertheless, Schumer did team up with Warren on calling for the cancellation of up to $50,000 per person in student debt…..after the Democratic primaries, in September 2020, as another stimulus idea. This follows an earlier coronavirus proposal in March by Schumer, Warren, Sherrod Brown,and Patty Murray to suspend federal student debt payments and wipe out $10,000 per federal student debt borrower.

But the important part is that this part of Schumer’s remarks excerpted in Twitter are disingenuous, unless he’s secretly become a Trillion Dollar Platinum Coin convert:

….we believe Joe Biden can do that with the pen as opposed to legislation.

This is at best accurate on a technical level but substantively misleading.

Warren has argued that the Department of Education has the legal authority to manage student loans, including cancelling them. But even the sympathetic Journal of Higher Education implies that her sole authority for her claim is a report from the Legal Services Center of Harvard.

The report contends that the Secretary of Education has the power to modify “a debt,” which includes wiping it out to zero. The problem here is that the exemption of student lending from the appropriations process was that in theory, it doesn’t have any budgetary impact. And that is true in fact. The Feds profit from their student lending.

Warren and Sanders admitted up front that the student loan forgiveness plans each advocated during the primaries would have budgetary impact. Each stated how they intended to pay for them. Sanders estimated the cost of his comprehensive student debt wipeout at $2.2 trillion and would have funded it with a transactions tax. Warren’s scheme, which was means tested and limited forgiveness to $50,000 and therefore would cost only $640 billion, was to be funded by her wealth tax. The March Democratic senators’ call for $10,000 of forgiveness and Warren and Schumer’s September pitch for $50,000 of relief were both positioned as coronavirus stimulus measures, yet again admitting the budgetary impact.

And the truly disingenuous part of the “with a pen” claim is that that most assuredly does not extend to private student loans, are usually more expensive and have worse terms than federal loans. Finance sites recommend them only as a supplement to federal loans, meaning if the student can’t get borrow enough from federal loans.

In addition, private loans constitute roughly $130 billion of the total of $1.6 trillion outstanding. The Secretary of Education can’t wipe them out because they are not under his domain. The Federal government could eliminate them by offering to buy them out at market value or by cancelling them and paying market value to the lender (the Fifth Amendment prohibits the government from appropriating property without compensation). But it appears that Schumer and his allies are content to leave the borrowers with the worst loans stuck in debt slavery.

In other words, I can see the argument that the Secretary of Education has the authority to wipe out federal student loans…until it hits a level where it has budgetary impact. I’m not an expert on formalities, but I don’t see how the Department of Education can finesse hundreds of billions of principal losses and a former cash machine turning into a cost. Hence Congress will get involved via budgeting (which could also come via threatening to make up for the loan forgiveness cost through cuts elsewhere).

Right now, it looks as if the Republicans will win the Alaska and North Carolina Senate races. That means that even if the Democrats prevail in the two Georgia runoff races, the Senate will be split 50-50 with Kamala Harris breaking ties.

But fiscal orthodoxy is so deeply embedded in the Democratic party that one wonders how many would be leery of the sort of big spending envisaged by the 100 days plan above, particularly since it and the Biden Covid plan are missing what ought to be the most critical items: income support for people who’ve lost income due to Covid (and particularly if they can’t work due to any new lockdowns or quarantines) and programs to help tenants facing eviction. In other words, the “100 days” list looks as if it hasn’t been updated since January 2020.

Infrastructure sticks out as another oddity, unless this is really a private equity gimmie via “public-private partnerships”. As Obama found out during the crisis, there are surprisingly few “shovel ready” infrastructure projects, and the time it takes to scope and bid out sound ones means they aren’t great candidates for short term relief. That doesn’t mean the US doesn’t have a huge deferred maintenance bill that would be a win/win for job creation and productivity; it’s that putting it high on the priority list right now looks badly out of touch.

Now perhaps Schumer is trying to act like the Senate Majority Leader he hopes to be. Of course, he has to hope the great unwashed public didn’t take notice of recent moves like waving a bunch of Trump judges through so the Senate could go on vacation.

But could Schumer be feeling the need to improve his press clips? Recall Lambert’s find from yesterday:

What 2020 showed is that the Democrats’ model isn’t working. They failed to be all that much worried about the way they hemorrhaged representation at all levels of government in the Obama years. Worse, they appeared not to care that these losses meant they were grooming fewer people for high office, and that weak bench has been way too evident. In 2016, Hillary massively outspent Trump and lost. That was largely attributed to Hillary being so widely disliked and making herself even more so, and of course Russia. But 2020 say the Dems throwing money at Senate and House races, in many cases substantially outspending the opposition, and still losing. One of my contacts, a moderately wealthy Californian, says he gave to just about every Senate race of consequence and feels had by the Democrats.

Some of the consistent poor results may be over-reliance on an air war, as in TV ads, as well as being so disconnected from voters as to not know how to craft strong messages. And it’s the cost of TV that’s served as Team Dem’s excuse for its need to curry favor with rich corporate donors.Some as readers pointed out was not understanding the power and effectiveness of talk radio. But it’s also that from what I can tell, the party sees voter contact as “get out the vote,” as in late in the election cycle, and even some of that is outsourced to unions and churches.

Schumer is up for re-election in 2022. I don’t see anything in the New York statues on incompatible offices that would bar AOC from running both for her current seat and for the Senate in 2022, although that gambit might not sit well with her voters in NY-14. But if you see Schumer engaging in more Vichy Left gestures, it would bolster the idea that he’s worried about a primary challenge.

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