Managerial scolds and free market evangelists have, once again, been exposed. They have long been claiming that pandemic unemployment payments are keeping workers idle at home. But states that ended emergency jobless benefits early have not enjoyed a spike in hiring. The coercive effect of terminating benefits was evidently washed out by a dip in demand resulting from states depriving people of meager income, many of whom can't work at the moment due to health concerns or because they're assuming childcare duties. Despite its cruelty, capital appears stuck with higher than normal wage growth for the time being.
But there appears to be relief for the property-owning class on the way. Living expenses are going to increase substantially on September 30 for millions of Americans in the prime age labor force, when the moratorium on student loan payments ends. Borrowers are going to struggle to readjust. Two-thirds of student borrowers told Pew Charitable Trust in a survey published on July 15 that they would have “difficulties” making payments again, portending more desperation on the supply-side of the labor market.
The Pew survey also found that fifty-nine percent of those who did stop making payments have used money saved by the moratorium for “needed expenses (e.g., food, rent, mortgage, utilities),” while twenty-seven percent have used the opportunity to “pay down other debt (e.g., credit card debt, medical debt, auto loans).” There are 45 million student loan borrowers who owe $400 per month, on average. Students from families that make more than $120,000 are far less likely to finish their undergraduate degrees without debt than their lower-income classmates. It's hard seeing the resumption of these payments without heightened labor market discipline.
Making matters worse, the end of the student loan payment moratorium is set to come after the termination of other pandemic social safety net enhancements. The CDC eviction moratorium expires on July 31. Pandemic unemployment benefits in all states run out on Sept. 30, the same day that an emergency 15-percent-increase in food stamps is set to end. Foreseeable, avoidable suffering will be compounded by reduced aggregate demand and more downward pressure on wage growth, on top of the downward pressure that comes with increasing desperation for wage labor.
If the Biden administration has any intention of avoiding this, it doesn't show. The eviction moratorium expires Saturday. Democratic lawmakers have urged the White House to extend it, citing rising Delta variant case numbers, and the fact that the administration has only disbursed a small fraction of aid for renters already authorized by Congress. On Tuesday, however, White House Press Secretary Jen Psaki only promised “ongoing discussions about how we can continue to help renters.”
Meanwhile, a number of prominent Senate Democrats, including Majority Leader Chuck Schumer, are calling on President Biden to extend the student loan moratorium and to use his presidential authority to cancel up to $50,000 of individuals' student debt. But these Senate Dems don't even appear to have the support of their counterparts in the lower chamber.
“People think that the President of the United States has the power for debt forgiveness. He does not,” House Speaker Nancy Pelosi claimed on Wednesday. The top House Democrat, one of the richest members of Congress, also offered a moralistic argument. “Suppose…your child just decided they, at this time, [do] not want to go to college but you’re paying taxes to forgive somebody else’s obligations. You may not be happy about that,” she said.
However, many who don't owe a penny in student debt may not be happy about the resumption of financiers sucking billions of dollars out of the economy every month in the provision of a commodity, education, that benefits everyone. They might similarly be unhappy when colleagues lose bargaining power by facing a higher cost of living. But at least the people signing their checks will be happy.
Update (11:13 a.m.): The White House said on Thursday morning that President Biden supports an extension of the CDC eviction moratorium, but that it needs to be authorized by Congress.
In a statement, Psaki pointed to a Supreme Court ruling from last month, which held that “clear and specific congressional authorization (via new legislation) would be necessary for the CDC to extend the moratorium past July 31.”
The White House issued its statement with roughly 37 hours before the expiration of the eviction moratorium.
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