Elizabeth Warren’s New $640 Billion Student Debt Cancellation Plan

Plus, Social Security's costs will exceed its income starting in 2020

Elizabeth Warren’s New $640 Billion Student Debt Cancellation Plan

Democratic presidential candidate Elizabeth Warren (D-MA) on Monday rolled out a proposal to eliminate billions of dollars in Americans’ student loan debt and make public colleges tuition-free.

In a post on Medium, Warren called for the cancellation of $50,000 in student loan debt for those with a household income under $100,000. The debt relief would then phase out gradually for those with incomes between $100,000 and $250,000. The canceled debt would not be taxed as income. Borrowers with more than $250,000 in household income would not be eligible for debt forgiveness.

Warren says her plan would erase some debt for more than 95% of the nearly 45 million Americans with student loans — and would completely wipe out student loan debt for more than 75% of Americans who carry it.

“We got into this crisis because state governments and the federal government decided that instead of treating higher education like our public school system — free and accessible to all Americans — they’d rather cut taxes for billionaires and giant corporations and offload the cost of higher education onto students and their families,” the senator wrote in her post.

Warren is also proposing to eliminate tuition and fees at every public two-year and four-year college in the country. Her plan would have the federal government split those costs with states, and boost Pell Grants by $100 billion over 10 years.

Warren’s debt cancellation plan would cost $640 billion, and the free college proposal would add another $600 billion or so, bringing the total federal price tag for her education proposals to about $1.25 trillion over 10 years, she says. She noted, though, that returns on the investment will help boost the economy and lower the ultimate cost. “Experts find that my debt cancellation plan will create an economic stimulus, and study after study shows that investments in higher education provide huge returns for every dollar,” she writes.

Warren says that the costs of the proposals would be fully covered by her proposed “ultra-millionaire tax” — an annual tax of 2% on wealth above $50 million, with an additional 1% tax on fortunes above $1 billion.

Social Security’s Costs Will Exceed Its Income Starting in 2020, Trustees Say

Without congressional action, Social Security’s costs will exceed its income starting in 2020 — and they’ll stay that way indefinitely, forcing the program to fall back on its nearly $3 trillion trust fund to cover benefits, according to the annual report released Monday by the Social Security and Medicare trustees.

By 2035 — one year later than projected last year — the program’s combined trust funds will be depleted, leaving it able to pay only 80% of scheduled benefits. By 2093, the program would only have enough revenue to pay 75% of promised benefits.

Social Security encompasses two programs, one for retirees and one that provides disability benefits. Considered separately, the fund for retirees is now expected to be depleted in 2034, the same as in last year’s report, while the disability insurance reserves run out in 2052, or 20 years later than projected a year ago. The large change in the disability insurance projection is the result of a continuing decline in new applications and total beneficiaries, the trustees said.

Maintaining Social Security’s solvency for 75 years would require raising payroll taxes by almost 22%, cutting benefits by about 17%, reducing new benefits by 20% or some combination of the approaches.

The report also warned that Medicare’s hospital insurance trust fund, otherwise known as Medicare Part A, would be depleted by 2026, unchanged from last year’s projections. The program would then be able to cover 89% of costs, with that figure falling to 78 percent by 2050. (Medicare Parts B and D, which cover outpatient services and prescription drugs, will stay solvent indefinitely because they are paid for by patients’ premiums and general tax revenue.)

As a share of the economy, Social Security’s annual cost is projected to grow from 4.9% this year to 5.9% by 2039. Medicare’s costs are projected to climb from 3.7% of GDP in 2018 to 6% by 2043.

Last year’s report said that Social Security would be forced to tap into its reserves in 2018 for the first time since 1982. In the end, though, the program’s total income was $3 billion higher than its $1 trillion cost.

Why it matters, part 1: The numbers overall may not be all that different from last year, but the clock is ticking — and time matters. Monday’s report notes that lawmakers “have a broad continuum of policy options that would close or reduce Social Security's long-term financing shortfall” and adds that making changes “sooner rather than later would allow more generations to share in the needed revenue increases or reductions in scheduled benefits.” But President Trump and Congress are focused elsewhere. “Social Security and Medicare are massive programs, heading toward potentially massive fiscal problems,” PBS Newshour correspondent Lisa Desjardins tweeted Monday, noting that the two programs represent 45% of federal spending. Yet lawmakers and the president are expending most of their energy on issues like money for a border wall.

Why it matters, part 2: The new Medicare numbers are also bound to be a flashpoint in the ongoing debate over Medicare for All and whether, or how, the country can afford such a revamp of the health care system. “That fact that we now can’t guarantee full benefits to current retirees is completely unacceptable, and it should be cause enough for every policymaker to rally around solutions to restore solvency to those programs,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “Certainly we should be focused on saving Social Security and Medicare before we start promising to expand these programs.”

Poll of the Day

From Morning Consult:

Numbers of the Day

1.4 million: A report released last week by the Congressional Budget Office estimates that the number of Americans without health insurance rose by 1.4 million from 2016 to 2018, going from 27.5 million to 28.9 million. “Even without repealing Obamacare, it appears that the Trump administration is still having a tangible impact on insurance sign-ups — and fewer Americans are getting the coverage they used to,” Vox’s Sarah Kliff noted.

$1.5 Billion: President Trump’s tariffs on imported washing machines cost U.S. consumers about $1.5 billion a year, according to a new research paper written by economists at the Federal Reserve and the University of Chicago and highlighted by The Wall Street Journal. The price of washers rose by nearly 12%, while the price of dryers — which were not hit with tariffs but are often bought together with washing machines — went up by roughly the same amount. “You would have seen near double the price increase for washers” if not for the increase being spread to dryers, one of the researchers told the Journal.

$73 billion: The world’s priciest weapons program just got even more expensive. Bloomberg News reports that the estimated total price for research and procurement at Lockheed-Martin’s F-35 jet program has increased by more than $22 billion, according to an annual assessment released by the Pentagon, with those acquisition costs rising from $406.2 billion to $428.4 billion. The overall estimate for operating and supporting the F-35 over its lifespan of more than six decades went up by almost $73 billion. The new price tag for the program: $1.196 trillion.

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Are the GOP’s Pre-Existing Conditions Bills About Politics or Patients?

Congressional Republicans have introduced several bills that they say would protect people with pre-existing medical conditions. “But patients with cancer, diabetes and H.I.V., for example, would have significantly less protection under Republican proposals than under the Affordable Care Act,” The New York Times’ Robert Pear writes. He adds that the bills “do not specify what benefits must be provided. They do not prohibit insurers from charging women more than men, as insurers often did before the Affordable Care Act. And they would not ban annual or lifetime limits on benefits.”

Read the full piece at The New York Times.

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