Americans Are Drowning in Debt. Let’s Forgive All of It


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Source: In These Times

In 1770, the nov­el­ist Oliv­er Gold­smith observed, ​Ill fares the land, to has­ten­ing ills a prey, where wealth accu­mu­lates, and men decay.” Mod­ern­ize the lan­guage, and he could have been writ­ing about the sit­u­a­tion in the Unit­ed States today.

The pan­dem­ic has exac­er­bat­ed a debt epi­dem­ic that’s been fes­ter­ing for decades. Some Covid-19 patients have racked up astro­nom­i­cal med­ical bills which often run into the thou­sands of dol­lars, as many are dis­mayed to dis­cov­er. Unin­sured patients and fam­i­ly mem­bers, mean­while, are often being wrong­ly charged, even though the CARES Act the­o­ret­i­cal­ly cov­ers unin­sured patients’ Covid bills. While $1,200 stim­u­lus checks tem­porar­i­ly improved many work­ers’ finan­cial sit­u­a­tions in the spring, now close to 8 mil­lion peo­ple have fall­en into poverty.

Lay­offs and cut­backs in work hours and pay­checks are dec­i­mat­ing work­ing peo­ples’ bud­gets, pro­vok­ing an unprece­dent­ed spike in hunger, espe­cial­ly among chil­dren. Around 26 mil­lion peo­ple now don’t have enough food. Wide­spread income reduc­tions are also forc­ing peo­ple to with­hold util­i­ty pay­ments and rent: 12 mil­lion renters will owe an aver­age of $5,850 in back rent and util­i­ties by the begin­ning of 2021. This back rent is a tick­ing time bomb: it threat­ens to cre­ate a wave of evic­tions and home­less­ness after the fed­er­al evic­tion mora­to­ri­um expires on Decem­ber 31.

Small busi­ness­es are strug­gling, and many are on the brink of clo­sure. All this even as America’s bil­lion­aires have swollen their for­tunes by $931 bil­lion since March. It’s a grim pic­ture. As we grope toward a post-Covid future, the dis­as­trous eco­nom­ic sit­u­a­tion for mil­lions of work­ing-class peo­ple — and bil­lion­aires’ con­tin­ued enrich­ment at their expense — demands a rad­i­cal solu­tion: uni­ver­sal debt for­give­ness for rent, med­ical debt, and stu­dent loans. The fed­er­al gov­ern­ment holds immense pow­er and could imme­di­ate­ly for­give pub­lic stu­dent loan debt and pay off all oth­er debts, giv­ing ordi­nary Amer­i­cans a chance to start fresh. This debt relief could eas­i­ly be fund­ed by wealth and income tax­es on the rich.

Such a debt jubilee might sound unnec­es­sar­i­ly sweep­ing, but Amer­i­cans’ debt bur­den is stag­ger­ing — and a mas­sive drag on the econ­o­my. The $2 tril­lion stim­u­lus pack­age passed in March enabled peo­ple to pay down cred­it card bal­ances, lead­ing to a drop in cred­it card debt and oth­er debts. Despite that tem­po­rary respite, Amer­i­cans now hold a stun­ning $4.13 tril­lion in total non-hous­ing debt, which includes $861 bil­lion in cred­it card debt and $1.55 tril­lion in stu­dent loan debt. Even before the pan­dem­ic hit, med­ical debt was the biggest cause of per­son­al bank­rupt­cy, spawn­ing about 530,000 bank­rupt­cies annu­al­ly, even for those who have health insur­ance. In 2018, 137.1 mil­lion Amer­i­cans suf­fered some med­ical expense-relat­ed finan­cial hard­ship — no sur­prise in a sys­tem where peo­ple are being sad­dled with six-dig­it bills.

Con­ser­v­a­tives and indi­vid­u­al­ists might fret about per­son­al respon­si­bil­i­ty, moral haz­ard, and the cost of such an immense relief pro­gram. But in an Amer­i­ca where bil­lion­aires and large cor­po­ra­tions evade tax­es on a mas­sive scale, receive enor­mous gov­ern­ment sub­si­dies (the 2017 Trump tax cuts cost $1.5 tril­lion; the Bush tax cuts cost $5.6 tril­lion), and pay next to noth­ing in tax­es, con­cerns about increas­ing the nation­al debt and pulling one­self up by their boot­straps come off as anti-work­ing-class clap­trap. View­ing debt moral­is­ti­cal­ly and ask­ing why peo­ple don’t live with­in their means is intu­itive, but mis­tak­en. Pover­ty is a vicious cycle with hid­den costs that pre­vent peo­ple from claw­ing their way out. Debt is expen­sive. Inter­est com­pounds. As inter­est grows, peo­ple fall behind on pay­ments and decreased cred­it scores, an inabil­i­ty to rent and save, and bank­rupt­cy are often just around the cor­ner. Debt is the ene­my of free­dom. It forces peo­ple to make unsa­vory choic­es in a vain effort to escape the hole they’re in. Impris­on­ing peo­ple in debt with­out a way out is immoral. Free­ing them from debt is the epit­o­me of morality.

We’re liv­ing in the worst eco­nom­ic cri­sis since the Great Depres­sion. Job growth is slow. The econ­o­my is plagued by a lev­el of inequal­i­ty that is worse than at the start of the Amer­i­can Rev­o­lu­tion. The path to recov­ery is uncer­tain. What’s clear is that we’ll need far more stim­u­lus if we want a full recov­ery. Uni­ver­sal debt for­give­ness would be an extreme­ly effec­tive impe­tus to eco­nom­ic con­va­les­cence. It would elim­i­nate social­ly unpro­duc­tive inter­est pay­ments while sav­ing peo­ple from evic­tion, home­less­ness, and the down­ward spi­ral that fol­lows. It would lib­er­ate peo­ple from over­whelm­ing inse­cu­ri­ty, allow­ing them to spend with con­fi­dence and buoy depressed con­sumer demand. It would enable many to final­ly save for retire­ment. Unlike Repub­li­cans’ much-beloved tax cuts, which ben­e­fit plu­to­crats and do noth­ing to increase invest­ment in the real econ­o­my, debt for­give­ness would pro­mote gen­uine eco­nom­ic growth. And there would be polit­i­cal ben­e­fits, too. Although he didn’t win the Demo­c­ra­t­ic nom­i­na­tion, much of Bernie Sanders’ pol­i­cy appeal came from his full-throat­ed advo­ca­cy of end­ing stu­dent loan debt and over­due med­ical debt.

It’s promis­ing that calls for Pres­i­dent-elect Joe Biden to can­cel stu­dent loan debt are gain­ing some trac­tion. But that alone won’t go far enough giv­en the impend­ing avalanche of back rent, util­i­ty pay­ments and med­ical debt. In an era of unprece­dent­ed eco­nom­ic upheaval, it’s time for a debt jubilee, one which wipes the slate clean, boosts the econ­o­my and frees work­ing-class Amer­i­cans to pur­sue their dreams unfet­tered by debt.

 

Scott Remer received a master’s degree in polit­i­cal thought and intel­lec­tu­al his­to­ry at the Uni­ver­si­ty of Cam­bridge, with a spe­cial­iza­tion in the polit­i­cal phi­los­o­phy of the Frank­furt School. He grad­u­at­ed Yale Uni­ver­si­ty sum­ma cum laude in Ethics, Pol­i­tics, & Eco­nom­ics and wrote his the­sis on Occu­py Wall Street and the his­to­ry of Amer­i­can social move­ments. He blogs at soulof​so​cial​ism​.word​press​.com.

1 comment

  1. avatar
    maryellen December 14, 2020 8:03 pm 

    Rereading Graeber’s Debt: The First 5000 Years. Highly recommended. #debtjubilee

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