Dear Hillary…a Cheap and Popular Economic Stimulus Plan

Dear Hillary,

I’m sure when academics look back on this election cycle — a dark stain on America’s democratic process — they will groan and bemoan the discourse of public affairs. And this will be because the diatribe and divisive rhetoric has lowered the political bar, perhaps permanently, into nothing but a tasteless game of character assassination, lies and gotcha moments. While it may be exactly this type of technique which ultimately gets you elected, you should not allow this type of campaigning to define YOUR moment. Putting aside the historical significance of you being the first Woman to become a major political party candidate in the United States it is clear that you are highly qualified for the job. Not just because of your experience as First Lady, Senator or Secretary of State but because of your natural leadership skills, skillful crafting of policy and attention to detail. So in between condemning Don the Con make sure to spend at least half your time this campaign cycle devoted to defining the policies that will excite people to come to the polls and VOTE. Because it isn’t just about WHO. For those of us with half a brain who see through the personality cult of politics its mostly about WHY. What exactly does your Presidency represent besides a knight in shining armor to save us from Trumpageddon? Sure we will all breathe a heavy sigh of relief the morning after the election when we wake up and know that a sociopath didn’t swindle his way into the highest office in the land. However, what about the day after inauguration? Will our enthusiasm remain? What carrot will you dangle in front of the proverbial Donkey to guide the masses to the polls? Here is one suggestion:

What if I could tell you that you could put a few thousand dollars into the hands of millions of Americans cheaply and fairly? Witchcraft you say? Nay. Furthermore would you believe me if I told you that it would be politically popular among liberals and libertarians alike? That it would be fast, pragmatic and would fit perfectly into your “progressive who likes to get things done” narrative? Do I have your ear? I thought you might want to hear this.

As you are certainly familiar, much adieu has been made about student loans (and full disclosure I have about $70k in student debt that is in good standing so I am not without my own bias) this election cycle and with good reason. It has been an anchor, a burdensome encumbrance dragging the ocean floor on this voyage of the American economy as it has slowly navigated out of the petulant waters of the great recession. And it has been especially damaging to the younger generations. One needn’t to look any further than the reduced economic activity of people under 40 yrs to see why our recovery has been slow and underwhelming. My belief is that by and large — whether the result of deliberate actions or accidental negligence — that the policies of the last 36 years regarding higher education and student loan debt have resulted in a generation that is not living to the standards of the generation prior. I will submit that while it is true that popular culture among the younger audience does promote a less gaudy and wasteful lifestyle than yesteryear and the earning capacity of non-college-educated adults has dwindled for reasons separate to this argument, the reality of the modern status of the Great American Experiment, as it pertains to this issue, is that through state-level cuts in higher education budgets and federal laws allowing usury by lenders people ages 22–40 are either spending a disproportional ratio of their income throughout their 20’s and 30’s repaying education debts or are outright inundated with a bankruptcy-proof debt-obligation to the point of relative economic inactivity. To put it another way: student loan debt is turning an entire generation into apartment dwellers instead of home owners. They’re buying the KIAs instead of the Acuras. They’re shopping at Nordstrom Rack instead of Nordstrom (or possibly working at Nordstrom Rack…). A large problem; I know. However while we figure out a way to get our country back into the habit of funding education and embracing intellectualism rather than rejecting it there is one thing we can do to help those who are already “in the shit” as they say. Four words: Student Loan Interest Deductions.

Seeing as it has been a while since you’ve had to think about a student loan I will get you up to speed. Currently there is a $2500 maximum student loan deduction for itemized tax deductions — a number which has not increased since your HUSBAND’S administration. When taken at todays average market rates of 6% this level of interest would equal a total debt obligation of approximately $42,000. And while the average undergraduate has less than $50,000 in debt, some do — and most graduate/professional degree holders have that or (much) more. Do you know how much money it costs to attend law school or med school in 2016? It can cost upward of $200k. To cover these costs many people who attend law school and/or med school have to take out “Grad Plus” loans, which carry much higher interest rates upwards of 8–9%. So for example a new graduate of medical school with say, $200k in student debt carries around $16k-$18k debt obligation payments annually (just to cover interest, this doesn’t consider principle payments) yet can only deduct $2500 in tax obligation, all for the sake of an education. People can argue (correctly) that individuals with graduate degrees tend to make more money. However those who attended graduate school made an INVESTMENT. In addition to borrowing the costs of tuition and board they also had to give up 2–6 YEARS of income while earning those degrees in exchange for nothing more than the POTENTIAL to earn more in the future. That is both financial risk ventured and opportunity cost invested. So why cap the amount of student loan interest one can deduct from taxes and punish a successful career investment? It is completely antithetical to the capitalist ideal. There are no such caps on interest for business loans? For example your opponent this election wrote off $900M in losses for a single year due to poor real estate investments and was therefore eleviated from paying income tax for 20 years thereafter. Isn’t an investment into one’s personal education an investment into the business of self? And isn’t an investment in self, as part of a society — an organization described as a sum of the components that make up those demographics — therefore an investment into a functional cog within that society? So why the duplicity? After all, home owners can deduct all the interest on a home loan up to $1M in principle and that is an investment into a home and that transaction serves only the interests of the purchaser and not society at large (from a purely micro-economic vantage point. Obviously home ownership and a prosperous mortgage industry, construction industry etc create positive socioeconomic benefits but would anyone truly argue that having a more educated and highly trained workforce does not have its own virtuous effect on an economy and society? To make that argument would be a fool’s errand. And by the way, do not remove the mortgage loan interest deduction, I’m buying a house this month. Thanks! :).

And it would delight me to inform you that this was the end of the legislative hindrance on social mobility for the aspiring upper-middle class, but it isn’t. Enacted during President Obama’s administration was an additional stipulation that says if you make more than $65,000 per year the amount of student loan interest you can deduct is reduced until it reaches $0 at an income level of $80,000 per year (a little known stipulation nobody tells you about until you make more than $65k — a lesson I learned the hard way). To phrase this monstrosity another way — if you borrow a lot for school but don’t make a lot of money (say, working for a non-profit) the IRS puts a cap on the amount of student debt interest you can deduct, effectively screwing you. If you make “too much money” you can’t deduct any at all. So in essence we are creating an economic environment where a higher education is a prerequisite for more income yet in addition to paying higher income tax rates through a progressive taxation system at the federal and state level we are also creating financial barriers for taxation relief to doubly punish those who have “made it”. This is, in essence, a form of class warfare, because this “phase-out” period, as it is called, would only apply to those who don’t come from families of financial means. I say this for two reasons: 1) Upper income households with assets can borrow education loans against real estate and deduct interest on up to $1M in principle as mentioned earlier and 2) Upper income households simply borrow less money to attend college. Education and the promotion of education as a means of lifting oneself out of the lower economic strata is being tied to a system where rising educational costs are being subsidized by above-market interest rate loans with no bankruptcy protection and income tax deductions that are significantly less than the appropriate amounts required with a built in penalty for achieving an above-median income level. This, by any account, from a self-described world leader in economic mobility is simply unacceptable. The American people deserve better. The middle class deserves better. The working class deserves better.

So enough with the sob story. I’m sure you hear enough from the whining and bitter. I’m not writing to you for a shoulder to cry on. What I’m here to do is to present to you a solution; one that will not only rectify the inequities of the American tax code but also bolster your credentials as a progressive. Here is the Ace-in-the-Hole that will mobilize the youth that you so badly need to win. Here is my very simple plan:

Raise the cap on student loan interest that is tax deductible to $16,000. Aspiring physicians and attorneys will still have to pay off their debt, but interest should be tax deductible on up to $200k on “Grad Plus” loans. This will instantly put thousands of dollars back into the pockets of aspiring young professionals.
Eliminate the “phase-out” period. I don’t know who thought that was a good idea but that person clearly has no grounding in the real world. Many of the people who make more than $80k live in areas of high living costs and making that much is only about enough to survive. Did you know that the median income in San Francisco is $75k. That means that literally half of the population of San Francisco cannot deduct any of the interest from their student loan debt. This combined with an 9% state income tax and skyrocketing rental prices means we’re pretty much getting screwed from every angle.

In addition, from a political standpoint this piece of legislation I propose should be a slam dunk. The banking industry, with whom you do have significant inroads and contacts, will certainly lobby to support a measure that provides greater economic incentives to borrow higher dollar amounts for higher education. Progressives will also have to stand behind it as it directly benefits their base. Conservatives who constantly battle for lower taxation will have no choice but to support the measure lest they be made a hypocrite. The question becomes: what will it cost? From my calculations I believe it will cost approximately $8B — but that is $8B that goes directly back into the hands of a class of American consumer that LOVES TO SPEND. The Chamber of Commerce will certainly applaud this.

Will this proposal fix America’s student loan crisis in and of itself? No. Will it buy us a little time until we can solve it and help promote American economic growth? Yes. If young Americans had just a few thousand dollars more in their pocket that would lead to faster repayments of student debt, saving up for a down payment for their future home, squirreling a college fund away for their children, going out to dinner with their friends one more time a month, buying a slightly nicer automobile etc. — thus fueling the engines of industry. Student debt is a massive problem that requires a total rethinking of our approach and this solution will not fix the mess by itself. That will require difficult conversations on state allocation to higher education budgets, outlandish Chancellor pay and ultimately helping to raise the overall pay level of American workers. But as you continue to sell yourself as a “pragmatic progressive” you will need to continually fill your sales funnel with well-grounded, reasonable, common sense measures that will — piece by piece — chisel away at the multitude of issues facing the American public. And any sincere efforts on your behalf to help the young and aspiring will help solidify America’s rapidly increasing belief that you are not just America’s common-sense choice, but you’re our only choice.

Thank you very much for your time and attention. Best of luck in November!

Your Friend,

Charles C Ellis