Americans are drowning in debt. Let’s forgive everything.
In 1770, novelist Oliver Goldsmith observed, In addition to this, you will need to know more about it.“Evil goes to the earth, to hasten the evils a prey, where wealth accumulates, and men degrade. Modernize the language, and he could have written about the situation in the United States today.
The pandemic has exacerbated a debt epidemic that has been brewing for decades. Some Covid-19 patients have accumulated astronomical medical bills who often run into the thousands of dollars, as many are dismayed to discover. Uninsured patients and their families, on the other hand, are often wrongly accused, even if the CARES law theoretically covers the Covid bills of uninsured patients. While $1,200 stimulus checks temporarily improved the financial situation of many workers in the spring, now close to 8 millions of people fell into poverty.
Layoffs and cuts in working hours and paychecks decimate workers’ budgets, sparking unprecedented crisis peak of hunger, mostly among the children. About 26 millions of people now I don’t have enough food. Widespread income cuts are also forcing people to withhold utility payments and rent: 12 million tenants will owe an average of $5,850 back rent and charges at the beginning of 2021. This rent arrears is a ticking time bomb: it threatens to create a wave of evictions and homeless people after the federal moratorium on evictions expires in December 31.
Small businesses are struggling and many are on the verge of closing. All this even as American billionaires have inflated their fortunes by $931 billion since March. It’s a dark picture. As we grope towards a post-Covid future, the dire economic situation of millions of working class people – and the continued enrichment of billionaires at their expense – demands a radical solution: universal debt-for-rent cancellation , medical debt and student loans. The federal government wields immense power and could immediately write off public student loan debt and pay off all other debts, giving ordinary Americans a chance to start over. This debt relief could easily be financed by taxes on the wealth and income of the rich.
Such a debt jubilee may seem unnecessarily drastic, but Americans’ debt burden is enormous – and weighs heavily on the economy. The $2 trillion stimulus plans adopted in March allowed people to pay off credit card balances, leading to lower credit card debt and other debts. Despite this temporary respite, Americans now hold a $4.13 trillion of total debt excluding housing, 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 leading cause of personal bankruptcy, spawning around 530,000 bankruptcies annually, even for those with health insurance. In 2018, 137.1 million Americans suffered financial hardship related to medical bills – no surprises in a system where people are struggling with six-figure bills.
Conservatives and individualists might worry about personal responsibility, moral hazard and the cost of such a huge relief program. But in an America where billionaires and big business evade taxes at a massive scale, receive huge government grants (the 2017 Trump’s tax cuts cost $1.5 one thousand billion; Bush’s tax cuts are costing $5.6 trillion) and pay almost nothing in taxes, concerns about rising national debt and getting out of the woods on their own appear to be anti-worker claptrap. Seeing debt in a judgmental way and asking why people are not living within their means is intuitive, but wrong. Poverty is a vicious circle with hidden costs this prevent people from making their way. Debt is expensive. Compounds of interest. As interest increases, people fall behind on payments and credit scores, an inability to rent and save, and bankruptcy are often looming. Debt is the enemy of freedom. It forces people to make unsavory choices in a vain effort to escape the hole they find themselves in. Imprisoning people with no way out in debt is immoral. Releasing them from debt is the epitome of morality.
We are experiencing the worst economic crisis since the Great Depression. Job growth is slow. The economy is plagued by a level of inequality worse than start of the American Revolution. The road to recovery is uncertain. What is clear is that we will need a lot more stimulus if we want a full recovery. Universal debt cancellation would be an extremely effective boost to economic recovery. This would eliminate socially unproductive interest payments while saving people from eviction, homelessness and the downward spiral that follows. It would free people from overwhelming insecurity, allowing them to spend with confidence and support depressed consumer demand. This would allow many to finally save for their retirement. Unlike the Republicans’ beloved tax cuts, which benefit plutocrats and do nothing to increase the investment in the real economy, debt cancellation would promote real economic growth. And there would also be political advantages. Although he did not win the Democratic nomination, much of Bernie Sanders’ political appeal came from his advocacy at the top of your lungs of end student loan debt and overdue medical debt.
It is promising that calls for President-elect Joe Biden to write off student loan debt are gaining traction. But that alone won’t be enough given the looming avalanche of rent arrears, utility payments and medical debts. In a time of unprecedented economic upheaval, it is time to a debt jubilee, which clears the slate, stimulates the economy, and frees working-class Americans to pursue their dreams unhindered by debt.