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Unsanitized: The COVID-19 Report for Nov. 16, 2020

Student Debt Cancellation Now an Anti-Austerity Measure

Plus, Moderna has great news on its vaccine

 

The government can prevent the resumption of student loan payments.
(Thomas Wells/The Northeast Mississippi Daily Journal via AP)

First Response

Since the election, the Prospect has been getting a certain degree of
attention for a series we did last fall called the Day One Agenda
. In it we posited a number of
things a Democratic president can do without having to pass new
legislation, comprising a full and robust agenda of tangible progress.
Considering that Joe Biden may face a hostile legislature as president,
with control of the Senate in the hands of Mitch McConnell, the Day One
Agenda has taken on new importance.

One of the more high-impact (and controversial) of these measures is the
Education Department's ability to cancel student debt under something
called "compromise and settlement authority." The federal government
directly issues almost all student debt, and has the discretion to
reduce balances completely, or anything short of that.

Since Chuck Schumer and Elizabeth Warren

have been calling for student debt relief by executive authority, it
appears that the powers that be are getting nervous about something
actually potentially happening, as they're fashioning a list of
reasons to shoot it down. Former Obama administration top economist
Jason Furman is taking the lead on this. He started by insisting that
student debt forgiveness would be taxable
, which...
no
.
There's a long history here
, but
suffice to say that the government forgives student debt all the time
without making it a taxable event, and the IRS has every discretion to
follow its past rulings (and remember this will be Biden's IRS) and
say that student loans are a non-taxable scholarship.

Undaunted, Furman admitted "some ambiguity
" with his
claim (which I guess is the new way of saying "I was wrong") but
nevertheless stated that student loan forgiveness wouldn't be worth it
because it would only be a "small positive" multiplier from an
economic standpoint. "Give someone $10 a year for 10 years and they
won't spend $100 more today," he wrote.

Now, there are a million reasons to cancel student debt that aren't
economic in nature. Student debt acts like a medieval indenture
and
if we have the power to eliminate it we should. But on the economic
point, what we've done with student debt during the pandemic (which
maybe Furman doesn't know about?) makes it more urgent that
cancellation proceed on the first day in office.

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Furman's kernel of truth here is that there wouldn't be a lot of
economic "stimulus" from student loan forgiveness, in the sense that
it wouldn't immediately circulate more money into the economy. He's
ignoring the "wealth effect" that would come from balance sheet
repair. If a student loan borrower suddenly didn't have that burden,
their credit score would improve, and they would feel more unburdened to
engage in big-ticket purchases like cars or home loans. We already know
that student debt causes people to be less likely to make such purchases
, so
lifting it should have that effect.

That wealth effect is probably low in the short-term, so what of the
case for stimulus? I think that looks at things the wrong way, because
student debt payments have been on pause for the past eight months.

The Trump administration put that pause in effect back in
March-there's that executive branch power flashing again-meaning
that 33 million Americans have not needed to make student loan payments
since then. This has been an unsung part of the economic effect of
coronavirus relief: taking hundreds dollars a month (the average payment
is $393
)
off the books of 33 million people really improves their budget
.

But this is coming to an end
.
Last week the Education Department started informing borrowers that the
freeze on payments ends December 31. At one point President Trump said
he would extend it, but that was before the election was RIGGED and all
non-spiteful governing stopped. So 33 million Americans will have the
sudden shock of an additional large bill, with many of them out of work
and having exhausted their pandemic assistance and even unemployment
benefits
.

Yes, there are income-based repayment plans that would not take large
chunks from the unemployed, but not everyone is enrolled in them. Just
managing the restart again is going to be a huge logistical hardship
.
And even for the employed, there would be a significant loss of
discretionary income relative to the past eight months if payments
resume, at a time when the economy is on the verge of locking down again

from the outbreak.

We Can't Do This Without You

Seen in this way, cancelling student debt is not just a nice theory, but
an imperative, to prevent a snap-back that is sure to crush household
balance sheets. The last thing we need with the fledgling recovery is
another $13 billion or so flowing out of the economy every month.
(That's the average $393 payment multiplied by 33 million; the real
number might be lower but not by much.) Biden has already vowed to
cancel $10,000 in student debt for every borrower and all of it for
those who attended public colleges and make under $125,000 a year. So
he'd not only be saving the economy but fulfilling a campaign promise.

There are those who will preach about the unfairness of it all, that
those who didn't go to college or paid off their loans get nothing.
This pitting of people against one another is bad even in the best of
times. (There are also plenty of executive actions you can pair with
this to make it broad-based; seizing drug patents

to lower prescription prices, for example, or high-road contracting that
would force all federal contractors to pay a $15/hour minimum wage.) In
the worst of times like right now, it's downright stupid. Forcing
billions in payments back would hurt everybody. The family that has to
pay again will eat out less, or put off that new piece of furniture they
wanted. The entire economy will get socked.

Because Trump likely won't budge, we're going to have a chaotic
three weeks (absent Congressional action) when student loan payments are
back. Biden can make this significantly better in a very visible way.
And he can do it by himself.

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What's Cooler Than Being Cool

Moderna's announcement today

that preliminary results show their coronavirus vaccine to be 94.5
percent effective is significantly better than Pfizer's announcement
earlier in the month. That's not because there's much of a
difference between 94.5 percent and 90 percent, Pfizer's claimed
effectiveness rate. It's because the Moderna vaccine, according to the
company, can survive in a regular refrigerator for up to a month. It
also can be permanently stored at minus 20 degrees Celsius, which is a
common temperature for vaccines like chicken pox. Pfizer's vaccine has
to be kept at minus 75 degrees Celsius and can only survive in a
refrigerator for five days.

This means that the standard methods for shipping and storing vaccines
can work for Moderna's, whereas new infrastructure would have to be
built for Pfizer's. There was a thought that dry ice could be used to
keep the Pfizer vaccine cold, but there's actually a dry ice shortage

that would slow down the rollout. But that problem becomes moot with the
Moderna vaccine. We have to wait for the safety results, but this is
truly great news.

Days Without a Bailout Oversight Chair

234
.

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Today I Learned

* Zeynep Tufekci is right; lock yourself down

while we await the vaccine. (The Atlantic)

* State-level restrictions starting to roll out
;
more on this tomorrow. (Vox)

* An Ohio State University poll shows 40 percent of Americans

will be at a large gathering on Thanksgiving. See above, this is a
really bad idea! (UPI)

* Eric Levitz has more hope than I do

that a bad winter will force Republicans back to the table on stimulus.
(New York Magazine)

* Doctors are quitting the profession

because of the stress from coronavirus. (New York Times)

* Hospitals at capacity in North Dakota
.
(Grand Forks Herald)

* Minnesota GOP only sent an alert about one of its members contracting
COVID to its side of the aisle
.
Disgusting. (Minneapolis Star-Tribune)

* The vaccine could rise and fall on the strength of this vial
.
(Wall Street Journal)

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