With the collapse, at least for now, of the Republican plan to repeal and replace Obamacare, the political focus in Washington has shifted to “tax reform.” Of course, when the GOP controls the government, tax reform means one thing— huge tax cuts for the wealthy.
Unfortunately, the debate over the economic effects and the fairness of such destructive tax policy too often focuses on the statistics of rising inequality. But sometimes, we’re confronted with the faces of those whose lives are made infinitely more difficult by the effects of such policies.
I had one such moment back on March 2, when I took part in a day-long “Big Ideas” conference at the Rockefeller Foundation in Manhattan. It was organized by the London-based newspaper, The Guardian, and the two dozen journalists they invited were mostly Guardian staff from the UK, the United States, and Canada. They also invited three journalists who work outside the coastal media bubble, one from Oregon, one from Kentucky, and me, to talk about inequality. The Rockefeller Foundation paid for the travel and accommodations.
It was an engaging day of discussion, but it got very real when, in the late afternoon, we got onto the topic of student debt. It was sparked by a young black man from the Crown Heights neighborhood of Brooklyn who had been invited to stop by to talk to the group about work he was doing in youth empowerment in the projects where he lived. He was incredibly sincere and he had, like so many young people, followed the advice of his elders and believed that higher learning would provide the path out of poverty. So he took out student loans, earned a bachelor’s degree and later a master’s degree. He had credentials, to be sure, but he found out after graduating that his options were still limited by his environment. As he put it, it was basically a choice between McDonalds, or working a street corner.
He opted to begin doing charitable work in his community through his church, which barely put food on the table. He said he had no idea what he would do in two months when his deferment on repayment of his student loans ended. Here was a kid who grew up with nothing and after earning two degrees he was still without a decent-paying job, had no real prospects in his community, and was now facing repayment on student loans in the six figures. That’s right… six figures. It was easy to see his predicament as penance for being black and believing in the American Dream.
But this young man, it turned out, wasn’t alone. Katie Martin, who served as media spokesperson for the former British Labor Prime Minister Gordon Brown, who was leading our discussion, asked those of us in the room how many had student debt of their own.
It was a youngish crowd (I was a comparative fossil), with most of the journalists in their thirties or early forties. Close to a third of the hands in the room went up and we got to hear some of their stories. Mostly, they were tales of lives put on hold, options foreclosed, and futures in doubt. Many continued living with parents even as they pursued their careers, simply to try to pay down some of their debt, much of which comes with shockingly high interest rates of anywhere from six-to-nine percent. And these are loans guaranteed by the government in most cases, which cannot legally be discharged through bankruptcy. These are, in many cases, nearly permanent millstones that we have placed around the necks of an entire generation of our most motivated people.
Student debt now hovers collectively around $1 trillion, and its impact on the economy borders on catastrophic. Economists have observed that younger adults tend to spend much less on consumer goods than previous generations. They delay marriage. They’re less likely to buy their own home. They buy fewer furnishings, fewer new cars, and have fewer kids. And they do so because, on paper, most of them are underwater financially.
The Guardian is a left-leaning newspaper, but even in a room filled with their journalists, there was a general sense in the discussion that the current situation was just part of a natural evolution of modern society.
I called “bull” on that line of thinking, noting that the situation that so many young people face today is the direct result of a bipartisan policy shift that began in the Reagan years where the country opted to substitute debt for taxes.
Prior to 1980, the top marginal tax rate on the wealthy in America varied within the range of 70-92 percent depending on the year. Reagan came in and slashed that rate to just 35 percent. In the roughly 35 years since “low taxes on the wealthy” become official policy of both Republicans and most Democrats, the national debt has risen from $998 billion to nearly $20 trillion and the GOP budget plan calls for adding another ten trillion dollars to that over just the next ten years.
Prior to 1980, the higher taxes assessed on corporations and the wealthy paid for the things that made America great, including higher education in our public universities. Student debt wasn’t an issue when I entered the University of Minnesota back in 1979, because taxes paid the vast majority of the expense of operating the state’s public colleges and universities. My first annual tuition bill was about $825, a sum I could earn in about six weeks on the farm where I worked summers. When I told that story in that room full of journalists, jaws literally dropped. They had no idea how drastically things had changed.
These days, a year at the U will cost the typical student about $14,250 just for tuition, which is many times the rate of inflation during that period. Add in a room in the dorm, books, and fees, and the yearly price tag is over $26,000. Good luck earning that over the summer, especially with those unpaid internships offered to so many students these days.
Instead of taxing the wealthy to help pay to educate the next generation, we now force our young people to borrow from the wealthy at high interest rates, and the taxpayers guarantee repayment. And we wonder why inequality continues to grow?
Rising inequality isn’t some natural phenomenon. It’s occuring in the United States because it is official government policy— don’t kid yourself otherwise.
And the tax “reform” the Republicans hope to inflict on us will only make things worse.
It is such realities that are helping to foment the pushback against the status quo, and continue to fuel the enthusiasm for leaders like Bernie Sanders, who polls now show is by far the most popular politician in America. While Donald Trump promised to Make America Great Again®, he only meant that for rich, white people.
Sanders unabashedly calls for raising taxes on the wealthy and corporations, to bring back the America that once really helped lift all boats and that built the world’s most prosperous middle class. You accomplish that by investing our tax dollars in the future, including educating our young people. We have to stop saddling them with decades and decades of debt.