Despite a strong economy and higher wages, many Americans continue to feel worse off than before the COVID-19 pandemic. One reason is that though the consumer price index has dropped from 9.1% in June 2022 to 3.1% in February 2024, consumer purchasing power has declined by one-fifth over that same period.
To help Americans make ends meet, the Biden administration has launched a Junk Fee Initiative, designed in large part to illustrate that government is working on the citizenry’s behalf to combat hidden charges — all the little line items that aren’t mentioned when a company tries to hook a consumer — but that consumers are compelled to cover when the final bill comes due.
Broadly overlooked in the initiative, however, is the reality that private businesses aren’t exclusively responsible for these annoying fees Americans pay — nonprofits, in particular colleges and universities, are often just as guilty. And if the Consumer Financial Protection Bureau, charged by the White House with running the initiative, wants to burnish the government’s reputation with its Junk Fee Initiative, it should take a hard look at what America’s institutions of higher learning charge students and families beyond the rising cost of tuition.
A MINORITY POINT OF VIEW: One of the big questions about the big tax negotiation of 2025, perhaps somewhat counterintuitively, is how narrow it might be.
That’s because Republicans largely want to preserve all of the individual provisions from their 2017 tax law, while President Joe Biden repeatedly has vowed not to raise taxes on any households making less than $400,000 a year.
Other Democrats haven’t really pushed to dissuade the White House from that position, though it’s clearly also quite possible that Donald Trump will be in the Oval Office for those 2025 talks.
In any event, Ben Ritz of the Progressive Policy Institute is out with a new paper arguing that Democrats should get rid of that pledge, even if it means that more middle-income people pay more in taxes.
There are fiscal reasons for that, according to Ritz, who argues that deficits currently at an unsustainable path, with long-term mismatches between spending and revenues that will require higher taxes on more than just the wealthiest.
But it’s not just a numbers issue either, Ritz maintains — a government where the very few end up providing the money to pay for a wide range of services just won’t work over the long haul, because those who aren’t providing the resources won’t care enough about whether those services are needed or well run.
“Pragmatic progressives must pressure the Biden administration to soften the president’s misguided tax pledge heading into a potential second term. They must start making the case to voters why progressive programs are worth paying for,” Ritz writes.
The aftermath of the COVID-19 pandemic and the combination of advancing technology have brought about a major shift in the workplace. Between February 2020 and August 2023, the number of employed Americans with disabilities soared by 33% or 1.9 million. By comparison, the number of employed Americans without disabilities rose by only 1%, or 1.5 million. In other words, workers with disabilities account for 57% of the increase in employment since the beginning of the pandemic.
Today, the Progressive Policy Institute (PPI) released a new report “Disability and Changes in the Workplace,” analyzing available data and discussing how the changing environments from the pandemic allowed workers with disabilities to find job opportunities that are a good match for their needs.
Report author Dr. Michael Mandel, Vice President and Chief Economist of PPI, describes how the rapid adaptation of businesses to “work from home” during the pandemic allowed workers with disabilities to operate from a more congenial or accommodating environment. At the same time, advancing technology has also lowered the barriers for Americans to access forms of independent, flexible work, like gig-economy delivery and ride-sharing platforms, that can be better suited to workers with unpredictable challenges such as those related to fatigue, chronic pain, or mental health issues.
“The United States is experiencing a major change in the workplace — leading to increased opportunities and careers for Americans with disabilities,” said Dr. Michael Mandel. “Policymakers and employers alike have an important role to play to ensure that work can remain flexible and accessible for all Americans, and continue to find novel ways to approach working.”
Read and download the full report here and read more about how remote work has fueled the surge in jobs for workers with disabilities in The Messenger.
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org. Find an expert at PPI and follow us on Twitter.
After his election as House speaker, Mike Johnson said one of his top priorities was the creation of a bipartisan commission to tackle the national debt. It’s a good idea that nearly 70% of voters in both parties support. In September, Reps. Scott Peters (D., Calif.) and Bill Huizenga (R., Mich.) introduced the Fiscal Commission Act of 2023, and 198 House Republicans voted for it as part of a government funding bill. Here’s why Democratic congressional leaders and the Biden administration should join the push:
Deficits are undermining the Biden economy. In the past year, the real federal budget deficit more than doubled, from $933 billion to $2 trillion. Democrats rightly argued that spending borrowed money was a critical economic support during the Covid pandemic. But the unemployment rate the over past year has been consistently lower than any point since the 1950s.
Economists, even those on the far left who subscribe to “modern monetary theory,” agree that increasing deficits in a tight labor market fuels inflation. Voters’ frustrations with inflation and the interest-rate hikes implemented to bring it under control exceed their appreciation for low unemployment, fueling disapproval of President Biden’s economic record. Deficit reduction is more important than it has been at any other time in the 21st century.
Debt-service costs crowd out progressive priorities. Annual interest payments are already at their highest level as a percentage of gross domestic product since the 1990s. By 2028 the government is projected to spend more than $1 trillion on interest payments each year—more than it spends on Medicaid or national defense. Worse, the U.S. may be entering a vicious circle whereby higher deficits increase debt and fuel inflation, which the Federal Reserve must combat by raising interest rates, causing debt-service costs to balloon further.
This week, the Progressive Policy Institute (PPI) hosted an event celebrating the release of PPI’s annual report “Investment Heroes 2023.”New Democrat Coalition Chair, Representative Annie Kuster (NH-02) provided closing remarks on the importance of investing in America’s workforce.
“New Dems believe that American businesses are the key to providing the jobs and opportunities necessary to strengthen our economy and improve hardworking families’ lives,” said New Democrat Coalition Chair Annie Kuster (NH-02). “It’s heartening to see the work U.S. companies are doing to support their workers, create opportunities, and grow the economy. In Congress, New Dems are committed to continuing our work with the private sector to address the challenges facing our nation and to build a better economy for all communities.”
Prior to Representative Kuster’s remarks, Taylor Maag, Director of Workforce Policy and the New Skills for a New Economy Project at PPI, hosted a panel featuring Simone Drakes, Managing Director of Calibrate at United Airlines; Sandy Gordon, VP of People, Experience, and Technology at Amazon, and Ryan Keating, Director of Government Relations at Duke Energy. The panel spoke on the importance of upskilling and investing in the economic advantage of American workers, providing additional training opportunities for current employees, and how to recruit and retain a diverse workforce.
“Employers like Amazon, Duke Energy and United Airlines demonstrate the importance of private sector investment in human capital — especially workforce development. These three companies, all on PPI’s Investment Heroes list, are investing not only in their current workers but in future workers to ensure they are building strong talent pipelines to in-demand jobs. It’s clear these industry leaders are committed to not only maintaining their competitive edge but ensuring more workers share in the economic opportunities their companies have to offer,” said Taylor Maag.
Investment Heroes is an annual report published by PPI since 2012 and analyzes publicly available data to identify the top 25 U.S. companies investing in America, powering job growth, and raising living standards. The theme of this year’s Investment Heroes report is the recovery of the U.S. capital investment from the shock of the COVID-19 pandemic and the benefits these investments provide to workers.
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C., with offices in Brussels, Berlin and the United Kingdom. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.
Today, the Progressive Policy Institute (PPI) released its annual report “Investment Heroes 2023.” The report, published annually since 2012, analyzes publicly available data to identify the top 25 U.S. companies investing in America, powering job growth, and raising living standards. The theme of this year’s Investment Heroes report is the recovery of U.S. capital investment from the shock of the COVID-19 pandemic and the benefits these investments provide to workers.
Eight of the top 10 companies on this year’s ranking are in the technology, broadband, or ecommerce industries, with Amazon leading the list, investing $46.5 billion in the United States in 2022. Report authors, Dr. Michael Mandel, Vice President and Chief Economist at PPI, and Jordan Shapiro, Director of the Innovation Frontier Project at PPI, analyzed capital spending in “high-investment” sectors and compared the spending levels for the same companies in 2019. Their analysis found that the great majority of companies on the Investment Heroes list have high and growing levels of domestic capital investment, compared to before the pandemic.
“Since our first Investment Heroes report in 2012, the companies featured on the list have drastically changed. Back then, only one out of the top 10 companies was in the tech/internet sector. Fast forward to 2022, and we’ve seen new companies rise to the top of the list because of innovation and growth,” said Dr. Michael Mandel. “The dramatic evolution of the Investment Heroes list shows the ever-changing competitive nature of the U.S. economy.”
PPI’s analysis found that capital investment is associated with massive job creation. Between 2019-2022, our high-investment sectors added 1.3 million net new jobs, more than the entire rest of the private sector put together. Not only that, but many companies are investing back into training and education for their employees and new workers.
“The 2023 Investment Heroes list and analysis show it is important to recognize not only what companies are investing in America, but also what companies are investing in workers,” said Jordan Shapiro.
The 2023 top nonfinancial companies by estimated U.S. capital expenditure:
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C., with offices in Brussels, Berlin, and the United Kingdom. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.
The theme of this year’s Investment Heroes report is the recovery of U.S. capital investment from the shock of the pandemic and the benefits for workers. Every year, the Progressive Policy Institute (PPI) analyzes the financial reports of large U.S. companies and ranks them by their capital investment in the United States. Eight of the top 10 companies on this year’s Investment Heroes list are in tech, broadband, or e-commerce industries. Amazon is at the top of the list, investing $46.5 billion in the United States in 2022, according to estimates by PPI. Next comes Meta, Alphabet, AT&T and Verizon, followed by Microsoft, Intel, Walmart, Comcast, and Duke Energy.
All told, the 25 companies in the Investment Heroes list invested $324 billion in the U.S. in 2022 (Table 1).
But it is not simply that the companies on the list invest the most in the U.S. — they also show faster recovery from the pandemic. Since 2019, domestic capital expenditures by the 25 companies on this year’s list has risen 38%, without adjusting for inflation. By comparison, overall nonresidential investment as measured by the Bureau of Economic Analysis rose by only 15% over the same period, also without adjusting for inflation.
And while this report focuses only on U.S.-based companies, the difference was not being made up by money from abroad. New direct investment by foreign companies in the U.S. actually fell by 20% from 2019 to 2022.
The domestic capital investment by the companies on the list is the lifeblood of the economy, producing job and income gains, and setting the country on a path to a greener future. It ranges from e-commerce fulfillment centers employing thousands of workers at good wages, to data centers supporting small businesses across the country, to 5G and broadband networks linking rural areas, to factories building batteries for the next generation of electric vehicles, to new fabs, to new fuel-efficient planes.
It should be noted that the financial data we use for our list focuses mainly on spending on structures and equipment — what’s known as tangible investment. But the government’s definition of investment includes key intangibles such as software and research and development. Very few companies report software spending, and not all companies break out their R&D expenditures. But the ones that do tend to show big gains. For example, Alphabet boosted its spending on R&D by more than 50% from 2019 to 2022, compared to a 32% gain in overall private R&D spending. Apple showed a 62% increase in R&D spending from FY 2019 to FY 2022. General Motors increased its R&D spending by 44%. Such increases fuel new product development and innovation, which shows up as faster growth going forward.
From the perspective of policy, it’s worth comparing the U.S. capital investment performance during the pandemic years with Europe’s. Europe has consistently adopted a more aggressive regulatory stance. Has it paid off in the form of higher investment?
The short answer is no. When the European Investment Bank (EIB) did its comparison of U.S. and European investment spending in a February 2023 report, it focused on a measure called “non-construction investment” — basically machinery, equipment and intellectual property assets such as software and R&D. Using the EIB’s methodology, we calculated that nonconstruction investment in the United States rose by 20% from 2019 to 2022, compared to only 12% in the European Union. Overall, the EIB study finds a widening gap between the US and Europe in terms of productive investment.
Before we dive into the details of this year’s study, it’s worth taking a long-run perspective. Our first Investment Heroes report, released in 2012, tracked 2011 domestic capital spending. Five out of the top ten companies that year were energy companies. The only tech company in the top ten was Intel. Google and Apple were 24 and 25 on the list, respectively, and Amazon was nowhere to be found. Neither was Microsoft or Meta. It was a completely different list.
Figure 1 shows the full history of aggregate capital spending of the Investment Heroes list on a year-by-year basis (right axis), plotted against annual U.S. nonresidential investment (left axis). From 2011 to 2017 the two figures rose by the same amount, 36% without adjusting for inflation.
But after 2017, the situation changed. The companies on the Investment Heroes list began driving national capital expenditures. From 2017 to 2022, domestic capital expenditures by PPI’s Investment Heroes rose by 75%, compared to 29% for the BEA’s nonresidential investment figures.
The key leader was Amazon. In the five years ending with 2022, the company invested the staggering sum of $162 billion in the United States, creating hundreds of thousands of jobs in the process and creating massive gains in consumer welfare.
But it wasn’t simply Amazon. Table 2 sums our 2022 Investment Hero estimates into seven economic sectors: tech/ internet; broadband/ wireless; ecommerce/retail; energy distribution; energy exploration; transportation; and automotive. We call these the “high-investment” sectors. We then compare capital spending in those sectors with our estimates of domestic capital spending for those same companies in 2019.
For six out of seven economic sectors, we find significant growth in domestic capital spending from 2019 to 2022. In other words, the companies on our Investment Heroes List typically have high and growing levels of domestic capital investment compared to before the pandemic.
In addition, our analysis shows that capital investment creates jobs and raises wages. Between 2019 and 2022, the high-investment sectors on our list added more net new jobs than the entire rest of the private sector put together. We calculate this number by looking at the employment in domestic industries corresponding to the seven sectors in Table 2, as reported by the BLS. (We use industry data because domestic employment data is not available for all companies. The industry-level data also accounts for broader impacts of investment).
By our estimate, the high-investment sectors added 1.3 million net new jobs between 2019 and 2022, accounting for 55% of private sector job creation. Employment in the high-investment sectors grew by almost 5%, compared to a 1% gain in the rest of the private sector.
The leader was the ecommerce/retail sector, which added more than 800,000 jobs between 2019 and 2022, as job gains in ecommerce fulfillment and delivery more than made up for any losses in brick-and-mortar retail. Next was the combined tech/internet/broadband/wireless sector, which added almost 500,000 jobs.
What about pay? Real wages per worker in the ecommerce/retail sector rose by 7% from 2019 to 2022 (using QCEW data from the BLS and the PCE deflator). Overall, real wages per worker in the high-investment sectors rose by about 6%, a slightly larger gain than the rest of the private sector.
We also note the importance of investment in human capital — the training and education of workers. Companies are not required to report spending on training and education, but it’s more essential today than ever before.
Basic economics tells us that when demand goes down, suppliers must reduce costs, cut supply, or lower prices to survive. That is the choice facing many U.S. colleges and universities starting in 2025, when the so-called “enrollment cliff,” begins. Between 2025 to 2029, undergraduate headcount will drop by over 575,000 students (15 percent) and, if recent history is an indicator, many schools will end up closing their doors rather than streamlining their operations.
The reason is that most institutions of higher learning are dependent on tuition revenue for survival. While a handful of elite universities (think Harvard, Stanford, Princeton) have endowments large enough to cover the cost of attendance for any student in need, the rest require undergrads to borrow on average over $30,000 to earn a bachelors.
In the past, when faced with funding shortfalls, colleges and universities attempted to “grow their way” out of the problem by opening up new sources of revenue. Many launched new graduate programs, including terminal master’s degrees (no doctoral option) and certificates. Others increased their online offerings to expand their access to part-time students beyond the gates of their campuses. And almost all opened their doors to international students who could afford to pay full price.
But unlike Purdue University—who used this new source of revenue to hold undergraduate tuition flat for a decade—most schools went on a hiring spree; one that massively expanded the ranks of all types of employees, with one notable exception—full-time faculty.
This week on Facing the Future, we hear from Ben Ritz, Director of the Center for Growing America’s Future at the Progressive Policy Institute, and one of our more frequent show contributors.
Ben has written several interesting pieces including one where he asserts that the Fitch rating agency’s recent downgrade of the federal government’s credit rating should be a wakeup call for all those concerned about the budget and our national debt. So we talk to Ben about that and also, how is the federal government doing about investing in scientific and technological research and innovation a year after Congress passed the Chips and Science Act.
Earlier this year, 31 House Republicans released a proposal to replace virtually all federal taxes with a 30% national sales tax. As other analysts have noted, a sales tax would be easy for companies to dodge and difficult for the government to enforce — meaning that to avoid revenue losses, the proposal would require a significantly higher tax rate, possibly as high as 60%.
The bill has also been criticized for being regressive. In tax terminology, a tax is “regressive” if it takes a higher share of income from the poor than from the rich; “flat” or “proportional” if it takes the same share of income from everybody; and “progressive” if it takes a higher share from the rich than from the poor.
The Republicans’ overall bill is certainly regressive and should be rejected on that account. But its core idea — taxing consumption rather than income — is not inherently regressive if properly designed. Much public commentary has mistakenly concluded that a national sales tax would fall predominantly on low-income Americans. But as this analysis demonstrates, taxes on spending fall on everyone roughly equally, and certain elements of the Fair Tax — such as its universal child payments — are actually progressive. While the Fair Tax ought to be rejected due to its regressive tax cuts and poor enforceability, two elements of it are worth keeping: its flat per-child cash payments and its emphasis on taxing spending rather than saving.
The Federal Reserve recently announced it was skipping another interest rate increase for the first time in 15 months to assess the impact of its efforts to quash inflation.
Apparently, one of the reasons for the pause was disagreement among the 12 members of the Federal Open Markets Committee about what to do next. The hawks—who want to raise rates at least twice more this year—argue that inflation is still above the Fed’s target of 2% to 3%, and that core inflation (sans volatile gas and food prices), remains stubbornly high at 5.3% year-over-year.
Other committee members want to leave things where they stand for now. They point out that consumer prices rose a modest 4% in May from 12 months earlier—the smallest increase in more than two years—and that the full impact of the central bank’s 10 previous rate hikes is still not known.
But despite their differing views on interest rates, both the hawks and the doves on the FOMC think the Fed has the economy heading for a soft landing, in which inflation levels are reduced without sending the economy into a tailspin.
Just decades ago, the internet was an entirely new concept, but it’s become second nature for billions of people and is now embedded into daily life across the world. While the internet is old news, there are recent technologies like blockchain, artificial intelligence (AI), and the cloud that have gone from niche, specialized roles in the global economy to the mainstream. This rapid and widespread digitalization has changed the nature of work, and as a result, digital skills are now regarded as essential for the modern workforce — across Europe and the U.S., job requirements for digital skills have gone up by 50%.
While this transformation has been underway for decades, the pandemic accelerated it. Not only did the crisis change how businesses operate and the way we work, but it also influenced people’s reliance on technology. Individuals and businesses were suddenly dependent on the internet, their smartphones, and their mobile applications for critical daily activities like work, shopping, and communication with loved ones. A 2022 report from PPI found that the App Economy became an increasingly indispensable part of the U.S. economy during the pandemic. Existing mobile applications were able to respond to soaring demand without significant outages and app developers were also able to quickly create new apps to meet the human and economic needs.
Additionally, this year’s World Economic Forum Jobs report — which lifted up perspectives from 803 companies that collectively employ more than 11.3 million workers across 27 industry clusters and 45 economies across the world — found that technology adoption will remain a key driver of business transformation for the next five years, with over 85% of organizations identifying that increased adoption of new and frontier technologies and broadening digital access will be priorities for their organization. Eighty-six percent of companies surveyed also stated that digital platforms and apps are the technologies most likely be incorporated into their operations in the next five years.
It’s clear the reliance on technology from individuals and business is not going away anytime soon and will continue to grow as emerging technologies and solutions are developed and adopted. To keep pace with this demand — while also ensuring business has the skilled talent to remain competitive — digital and tech-related skills will be increasingly necessary for workers to succeed in the global labor market.
While demand for digital skills is growing, unfortunately supply is lower than it needs to be. Workforce shortages persist across the tech industry with employers struggling to find skilled talent that is prepared for digital roles. And this gap continues to widen. A 2021 Rand Corporation report found that the global digital skills gap was widening due to the following factors: tech talent outpacing an already short supply (in fact, 54% of American workers believe technology will advance faster than workforce skills); high costs and disorganized approaches to traditional education that increase barriers to learning; access to digital infrastructure and skills limited by socio-economic status (76% of global workers don’t feel they have the resources needed to learn digital skills).
These findings highlight the barriers confronting workers who want to acquire digital skills. The report also estimates that because of digital skills gaps, 14 of the G20 countries could miss out on $11.5 trillion in cumulative GDP growth. Policymakers around the world need to tackle this problem, both to ensure their industries and businesses can keep pace with the rate and scale of technological innovation, but also to ensure current and future workers will have more opportunities to develop the skills needed to succeed in changing labor markets.
As crypto assets have gained mainstream popularity, most industry leaders have been vocal about the need for a defined regulatory framework for decentralized finance in the United States. Now, in lieu of a successful legislative effort from Congress, the SEC has taken matters into its own hands. Crypto exchange platforms Coinbase and Binance are both facing lawsuits filed by the SEC as of last week, with the agency alleging that the companies are guilty of operating unlicensed securities trading platforms in the United States.
The suits represent a sort of regulation by enforcement, penalizing exchange platforms that have struggled to find where they exist in the current financial system. It is the responsibility of the SEC to protect investors where necessary and, with a robust history of fraud, the industry has not done its credibility any favors. However, considering the dynamism of still-developing crypto markets, the SEC must ensure that their aggressive enforcement efforts, absent clear laws or guidance from Congress, don’t throttle the entire crypto industry, effectively punishing good actors alongside the bad ones while paralyzing innovation.
The cases against Coinbase and Binance rest on a hotly disputed question: Do crypto assets qualify as a security under U.S. financial regulation, and if so, which ones? The SEC seems to think yes in many cases, with Chair Gary Gensler leading the charge toward defining them as such. But even in the eyes of the SEC not every crypto asset is a security, and the lack of clear legal definitions makes it impossible for exchanges to ensure complete compliance laws not written with crypto in mind.
In the past, courts have applied the Howey test, a common framework for determining whether an asset is a security, to crypto assets. The test has four basic requirements. A security is defined in instances in which there (1) must be investment of money, (2) in a common enterprise, (3) with reasonable expectation of profit, (4) derived from the efforts of others. Under this test, it is generally agreed upon that Bitcoin and Ethereum are decentralized enough — meaning that they are detached from any collective effort or organization promoting them — that they are not considered securities. But in other cases, such as Balestra v. ATBCOIN LLC, courts have determined that certain crypto coins do in fact qualify as securities, because the model of the organization behind the coin acted more like a centralized investment fund than a decentralized system.
Though they have lost momentum since the last congressional session, efforts have been made to codify the differences between an asset’s classification as a security or commodity. Senators Lummis and Kirsten Gillibrand’s Responsible Financial Innovation Act, for example, established that under the Howey test some assets should qualify as securities based on their level of decentralization. But the bill did not pass–and without clear lines being drawn by Congress, it has been up to companies and the SEC to provide their own guesses as to which is which. While the SEC’s stance has been made clear, there is also currently no way for crypto exchanges to register with the SEC, meaning these companies couldn’t avoid these suits even if they happen to independently arrive at the same conclusions as the agency.
Within this uncertain environment, Coinbase has been adamant that based on the Howey Test crypto assets are not securities, as explained in their February 2023 blog post on the matter. This is consistent with the company’s many statements insisting their compliance with the law to the best of their abilities, though this a moot point if their legal interpretation doesn’t match the one now touted by regulators.
With legislation stalled in the United States and slow rollout of regulation in the European Union, the recent filings by the SEC represent some of the first widespread attempts for a government to act on defining crypto assets around the globe. As such, the SEC should do so in a way mindful of the impact it will have on crypto’s ability to innovate in U.S. markets. Without policy changes, crypto exchanges will be left with three options if the SEC finds success with its recent filings: shut down crypto exchanges in the US entirely, find another legal avenue to register with the SEC, or only allow trading of coins which have been accepted as being decentralized enough to not qualify as a security–likely excluding everything but Bitcoin and Ethereum.
The crypto space has not been without its problems, but current efforts by the SEC may undermine the ability for an honest, robust industry to thrive in the United States. Though crypto trading platforms should be held to a high level of scrutiny to protect investors, the SEC must balance this with an approach that still allows Congress to move forward with legislative efforts to regulate the industry in a way that both provides guidance and preserves crypto’s innovative potential.
In August of last year, President Biden announced an ambitious plan to wipe out more than $400 billion of student loan debt for the nation’s borrowers. Individuals with incomes below $125,000 (and couples with combined incomes below $250,000) could receive up to $10,000 of loan forgiveness, with former Pell Grant recipients receiving up to $20,000. Speaking about his plan less than a week before the midterm elections, the president made it clear who he was trying to help.
“I want to state again who will benefit most: working people and middle-class folks,” he declared in a speech at Central New Mexico Community College (CNMCC).
Given the skyrocketing costs of higher education, some borrowers — particularly those with low incomes and those who were scammed by for-profit colleges — genuinely need assistance. But portraying student loan forgiveness as a working-class issue is highly misleading. In fact, data on student borrowing shows that debt relief benefits few working-class families, most of whom never attended college in the first place.
This paper dives deeply into the evidence on the economic impact of student loan forgiveness. As the paper shows, proposals from political progressives to forgive all student loan debt (or large amounts such as $50,000 of debt) overwhelmingly benefit affluent Americans. President Biden departed from these more elitist proposals, yet his decision to forgive even a more limited amount is still puzzling. At a time when the economic returns to education are rising and the Democratic Party is losing noncollege voters, it makes little sense to target government aid to people who attended college.
The noncollege workers who do not benefit from the President’s plan are certainly in greater need of support than student loan borrowers.
The paper goes on to examine the question of why the Democratic Party — traditionally the party of working-class people — has become so focused on canceling student loans. One possibility is that Democratic lawmakers are ensconced in a D.C. bubble. The nation’s highest student loan balances are found in Washington, and these borrowers would benefit more from President Biden’s forgiveness plan than borrowers in 49 out of 50 states. In short, many in the party establishment seem to be conflating the problems of highly educated college graduates — an elite class of Americans — with those of working-class people.
This is not to deny that the cost of college has become a significant problem in recent decades. Over the past 19 years, consumer prices have risen 59%, and per capita personal incomes have doubled (in nominal dollars). By contrast, prices for college textbooks have risen 122%, and college tuition (net of grant aid) has gone up 124%.6 This means that a typical family would have found it more difficult to finance a college education in 2022 than in 2003. Some students understandably forego college entirely, while those who attend are stuck with high bills.
Unsurprisingly, many households have turned to the student loan system. Between the first quarter of 2003 and the fourth quarter of 2022, student loan debt held by consumers increased from $392 billion to $1.6 trillion (in inflation-adjusted dollars).7 Student loans also rose from 3.3% of all consumer debt to 9.4% over the same period.
However, the financial burdens of college do not justify widespread student debt relief. If funded through higher taxes, the costs of student loan cancellation will be borne by taxpayers; if funded through higher borrowing, loan cancellation will increase economic demand, thereby raising prices for consumers. Either way, the cost of student debt cancellation will fall on members of the general public, most of whom do not have four-year degrees.
There are better ways of helping working-class Americans. As the Progressive Policy Institute (PPI) has advocated, the government should invest more in apprenticeships, job training, and career pathways for noncollege workers, who generally have lower wages than college-educated workers. Lawmakers should also dramatically increase the size of the Pell Grant (thus helping students from low-income families) and craft policies aimed at reducing administrative bloat at universities (which would reduce expenses and thus tuition). These policies would boost the employment and wages of noncollege workers while also making college more affordable for ordinary families.
It’s no secret that Democrats have lost support among working-class voters in recent elections. Forgiving student debt only reifies the image of Democrats as beholden to the interests of the educational elite. Until the party puts forth pragmatic solutions to the pocketbook issues facing ordinary people, they are likely to continue losing ground among the exact voters Democrats claim to support.
In the single generation since the launch of the internet, a generation’s worth of scientific research and technological innovation, infrastructure deployment, and generally good policymaking has taken a small set of computer networks operated by academics, business researchers, and government scientists, and turned into a global digital world of 5.3 billion people. Associated with this has been an enormous leap forward in individual liberty, in global prosperity, and in new policy challenges. Looking ahead with its allies and partners last year, the Biden administration helped produce a vision of the future. This is the “Declaration on the Future of the Internet,” which, in a brief two and a half pages, illuminates a possible version of the next the digital world: one of freer flows of information, higher-quality consumer protection, enhanced economic growth, and liberty preserved.
Their vision is right, but it is highly contested — in part by authoritarian governments seeking to restore or strengthen controls over their publics (or even, at least in part, other countries’ publics), and in part by often friendly countries mistakenly believing that their own technological leadership might depend on diminishing that of the U.S. tech industry. The administration can help achieve its vision, and in doing so contribute to the realization of the Declaration’s vision, through four steps:
1. An idealistic and ambitious approach in the 15-country “Indo-Pacific Economic Framework” (IPEF), that provides a future vision more attractive than authoritarian alternatives resting on free flows of data, opposition to forced localization of server and data, strong consumer protection, non-discriminatory regulation, anti-spam and anti-disinformation policies, cyber-security, and broad-based growth through encouragement for open electronic commerce.
2. A strong response in the U.S.-EU Trade and Technology Council (TTC) to European Union attempts to create discriminatory regulations and taxes targeting American technologies and firms.
3. Defense of U.S. values in the U.N., WTO, and other venues against “digital sovereignty” campaigns by China and others that endanger the internet’s multi-stakeholder governance, normalize large-scale censorship and firewalling, and generally place the political fears and policy goals of authoritarian government above the liberties of individuals.
4. Supporting responsible governance of technology and politely but firmly pushing back on attempts either at home or internationally to demonize technological innovation and American success.
Ben Ritz, Director of the Progressive Policy Institute’s Center for Funding America’s Future, released the following statement on the reported agreement-in-principle to raise the debt ceiling:
“Congress should immediately pass the debt limit increase and budget compromise negotiated by President Biden and Speaker McCarthy.
“On the one hand, this package does not represent our ideal policy. The decision to freeze spending only on domestic discretionary programs is backwards. This part of the budget funds critical long-term public investments in infrastructure, education, and scientific research. Meanwhile, taking both increased revenues and any cuts to other programs that comprise 85% of non-interest spending off the table in negotiations leaves our budget on a clearly unsustainable path. It is, at best, a punt on tackling our fiscal challenges.
“But on the other hand, this compromise is currently the only plausible way to take the threat of defaulting on the national debt off the table for the remainder of President Biden’s first term. Congress must pass it now, and in the future, lawmakers should seek out a better mechanism for encouraging fiscal discipline without calling into question our government’s constitutional obligation to repay its debts.”
PPI has consistently condemned the GOP’s efforts to take the full faith and credit of the United States hostage to extract ideological policy concessions. It has also supported the bipartisan Responsible Budgeting Act to end debt limit brinkmanship and create more sensible mechanisms for encouraging fiscal discipline.
PPI’s Center for Funding America’s Future works to promote a fiscally responsible public investment agenda that fosters robust and inclusive economic growth. It tackles issues of public finance in the United States and offers innovative proposals to strengthen public investments in the foundation of our economy, modernize health and retirement programs to reflect an aging society, and transform our tax code to reward work over wealth.
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C., with offices in Brussels, Berlin and the United Kingdom. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.
