Millions of Americans are going to die poor: Something to talk about at the Jackson Hole Economic Symposium

 About six months ago, I received a letter from the Social Security Administration informing me that it had miscalculated the amount of my monthly Security check for the past six years. I had been overpaid, the feds said, and it would not send me any more monthly checks until it collected the entire amount the government said I owed.

Meanwhile, a Baton Rouge strip club received a Payroll Protection check for more than a million dollars. And the press reported that more than a thousand Louisiana prisoners received enhanced unemployment checks totaling $6.2 million. 

I will survive the loss of a couple of Social Security checks, but not every elderly pensioner could take the hit.  For me, this incident is just another sign that our government does not care about the elderly.  

The U.S. Department of Education, for example, garnishes the Social Security checks of thousands of elderly student-loan defaulters, driving many of them below the poverty line. Congress could pass a bill to stop this cruel practice, but apparently, it is too busy to address this outrage.

A great many Americans are entering old age with no savings, no pensions, and no assets.  These people will die poor.

And it is going to get worse. Inflation is on the rise, and inflation--it is often observed--is one way the rich rob the poor, including poor people who are elderly.

Jerome Powell and Janet Yellen assure us that the recent uptick in inflation is transitory, but that's bullshit. Our national debt is $29 trillion, and yet the government keeps printing money. The price for just about everything is going up--including food. Five bucks for a loaf of bread?

In one of his plays, Tennessee Williams observed that you can be old or you can be poor, but you can't be both. Unfortunately, that's not true. America is about to see millions of impoverished old people as inflation heats up.  

How much time did the financial fat cats spend talking about poverty at the Jackson Hole Economic Symposium last August?  I would guess not much.  After all, there aren't many poor people in Jackson Hole.

I have a suggestion for next year's economic summit meeting. Instead of holding it in Jackson Hole, book it in Anadarko, Oklahoma--my hometown.  Lot's of poor people there. 

But attendees should book their reservations early. The Budget Inn has only a limited number of rooms, and it would be unseemly for Paul Krugman, Janet Yellen, and Jerome Powell to bunk together.

Anadarko's Miller Theater: A great venue for next year's Economic Symposium

Betsy DeVos is shilling for debt-collectors and for-profit colleges: The destruction of Americas's middle class

The New York Times published an editorial this week strongly criticizing Secretary of Education Betsy DeVos, whom the Times accurately describe as a "shill" for the student-loan industry.

As the Times reported, DeVos' Department of Education has issued a new policy statement that says federal law can preempt state consumer-protection laws aimed at curbing abuses in the loan-servicing and debt-collection business.  DeVos' Department argues that state consumer-protection laws can undermine uniform administration of the student loan program.

The Times also criticized the Republican-sponsored bill to reauthorize the Higher Education Act. This bill, if it becomes law, will preempt the right of the states to regulate the student-loan business--including student-loan debt collectors and loan servicers.

Betsy DeVos' craven and servile pandering to the student-loan industry is a scandal; and DeVos--not the Russians--should be the focus of Democratic attacks on the Trump administration.  DeVos' behavior belies all the blather coming out of the White House about how Trump policies benefit the middle class. DeVos apparently hopes to remove all restraints on the venal and corrupt student-loan business, which is doing a pretty good job of dismantling the middle class.

In fact, the federal student-loan program is a disaster, with millions of casualties as student borrowers are pushed into default or into long-term repayment plans that never pay off borrowers' loan balances.

Here's what can be done to stop DeVos' mad-dog scheme to line the pockets of her debt-collector cronies:

1) The state attorney generals should sue Betsy DeVos and DOE every time they attempt to dismantle the states' proper role of protecting consumers from fraud.  As the Times noted, this is what the state AGs are doing.

2) Other states should follow the example of the Massachusetts Bar Association and the Massachusetts Attorney General  and organize teams of volunteer lawyers to represent distressed student-loan debtors in the bankruptcy courts.  If just a few more state AGs joined the Bay State--California, Florida, Illinois, and Texas, for example--I believe the bankruptcy courts would begin revising their harsh attitude toward college borrowers in the bankruptcy courts.

3) The Democrats should take every opportunity to question Trump administration officials under oath about the activities of the student-loan guarantee companies who act as DOE's debt collectors. Why do four of these agencies--nonprofit organizations--individually hold $1 billion in assets while they hound elderly debtors in the bankruptcy courts.  Let's see a breakdown of the attorney fees these agencies are paying to hire asshole lawyers to crush student-loan debtors.

Everyone of good will should take heart at Fed Reserve Chair Jerome Powell's candid admission that he could not explain why the Bankruptcy Code treats student-loan debtors so harshly--basically putting them in the same category as criminals.

As someone once said, when a thing can't go on forever, it won't. The abuses of the federal student loan program can't go on forever. More than 40 million borrowers collectively owe $1.5 trillion in student loans (including private loans); and about half of these borrowers will never repay their debt.

The Federal Reserve Bank of New York and other agencies have documented that student-loan debt is hurting the economy--preventing people from buying homes and saving for retirement.

The time has come for American society to decide: Do we want to continue enriching a bunch of crooks in the for-profit college business and the debt-collecting racket or do we want a middle class?

We know Betsy DeVos' answer: she wants to enrich her corrupt buddies even if she helps destroy the middle class.


References

The Student Loan Industry Finds Friends in Washington. New York Times, March 18, 2018.

Robert Shireman and Tariq Habash. Have Student Loan Guaranty Agencies Lost Their Way? The Century Foundation, September 29, 2016.

Fed Chairman Jerome Powell says he can't explain why student loans can't be discharged in bankruptcy: An astonishing admission that the emperor wears no clothes

Federal Reserve Chairman Jerome Powell made an astonishing admission at a Senate Banking Committee hearing last month.  He said he could not explain why federal law does not allow distressed debtors to discharge their student loans in bankruptcy.

"I think alone among all kinds of debt, we don’t allow student loan debt to be discharged in bankruptcy," Powell said. "I'd be at a loss to explain why that should be the case."

Powell also acknowledged that mounting student indebtedness could injure the American economy. "It’s not something you can pick up in the data right now," Powell told the Banking Committee, "but at this goes on, and as student [debt] gets larger and larger, it absolutely could hold back growth." 

Fed Chairman Powell is not the first senior Washington official to admit that the student loan program could hurt the American economy. Former Fed Chair Janet Yellen made a similar observation in 2014. "The [student] debt loads certainly are high enough that they may play a role in, for example, making it hard for people to buy first homes, to build a down payment,” Yellen said at a hearing of the Senate Budget Committee.  

But Powell's remarks last month is the first time a senior federal official has candidly admitted that he cannot explain why the Federal Bankruptcy Code makes it very difficult for overburdened college debtors to discharge their student loans through bankruptcy.

In essence, Chairman Powell's surprisingly candid remark is very much like the children's story about the emperor who wore no clothes. Everyone knew the emperor wasn't wearing clothes, but no one was brave enough to state the obvious until a child explained: "The emperor is naked!"

I think Chairman Powell's frank observation may be just the nudge our government needs to honestly address the fact that millions of Americans who took out student loans in good faith simply can't pay them back.

How can the Chairman's remarks be exploited?

I. Alert the bankruptcy judges to the Fed Chair's remarks

First, all student debtors who attempt to their discharge student loans in bankruptcy should notify the bankruptcy judge--either in the complaint itself or in a pleading--that a top economic official in the federal government cannot explain why honest student debtors are barred from shedding their burdensome student loans through bankruptcy.

Powell's observation stands in stark contradiction to the stance taken by the Department of Education and the student-loan debt collectors that have fought bankruptcy relief for almost all student debtors.  For example, DOE opposed bankruptcy relief for a quadriplegic debtor in the Myhre case, and Educational Credit Management Corporation (ECMC) fought Janet Roth, an elderly woman in poor health who was living on less than $800 a month, all the way to the Ninth Circuit Bankruptcy Appellate Panel.

How can DOE and ECMC defend their heartless behavior when the Chair of the Federal Reserve says he can't explain why our government puts onerous restrictions on bankruptcy relief  for insolvent student debtors? Powell's remark might be just the piece of evidence bankruptcy courts need to begin discharging student loans in bankruptcy under more humane standards than currently prevail.

II. Powell's statement should spur a bipartisan effort in Congress to amend the Bankruptcy Code

Second, Powell's admission should prompt Republicans and Democrats to join in a bipartisan push to amend the Bankruptcy Code to remove the "undue hardship" provision in 11 U.S.C. sec. 523 (a)(8). Representatives Katko and Delaney have filed a bill to remove the "undue hardship" clause from the Bankruptcy Code, but so far the bill has gone nowhere.  Senators Warren and McCaskill have introduced a bill to stop the federal government from garnishing Social Security payments to insolvent, elderly student debtors, but that bill too has gone nowhere.

Surely Powell's statement should be all the encouragement Republicans and Democrats need to revise the Bankruptcy Code so that student loans are dischargeable in bankruptcy like any other consumer debt.

Fed Reserve Chair Jerome Powell

References

Joseph Lawler. Federal Reserve chairman: Mounting student debt could hold back economic growth. Washington Examiner, March 1, 2018.

Joseph Lawler. Janet Yellen warns student debt may be holding back housing recovery. Washington Examiner, May 8, 2014.

Representative John Delaney press release. Delaney and Katko File Legislation to Help Americans Struggling with Student Loan Debt. May 5, 2017.