Economic Update: Reparations and Forgiving Student Debts

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[S9 E31]

Updates on economics of 2 million home health aides, extreme Uber inequalities, Alaska universities 41% budget cuts, Michigan governor during Flint Water Crisis says his critics are "uncivil," a British district's labor party proposes a worker-coop sector to UK Parliament using resources from our "Economic Update" programs. Major topics discussed: economics of reparations for African-American slavery and economics of Bernie et al proposal to cancel student debts.

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Welcome, friends, to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives. I'm your host, Richard Wolff.

I want to jump right into a remarkable story. I want to talk about people who don't get talked about enough. Two million Americans are what we call “home healthcare workers.” Mostly, these are women and people of color, and mostly, they serve older people. Ninety percent of Americans, when polled, say they want to age in their own home. They don't want to be put in an old-age home or anything like it. Those are people who've given their whole lives to raising families, doing jobs, serving their communities. We owe them something, don't we? But these 2 million people who are serving the elderly in our society are serving them at home, and you know what that does, in addition to meeting the needs of those old folks? It also saves money since it is vastly cheaper to care for those people in their homes than to pay for home healthcare in a professional or commercial home. So they're saving us all money doing something valuable. How strange that a society that has that function performed by 2 million people pays them, on average, less than $12 per hour.

And so, of course, slowly, painfully, they decided to unionize, to have a union in order to be paid better for the important work they do, the money-saving work they do for this society. But the Supreme Court last year in the Janus Decision said that these people really can't charge money to folks that are home healthcare workers to belong to a union. Why? Because they’re public employees, and the Supreme Court made the lovely decision that somehow because you're a public employee, you can't do, build, the union the way other people in the private sector can, and now the Trump Administration wants to go one step further. Since these home healthcare workers are mostly paid by Medicaid, they are not going to allow them to arrange, when they have formed the union, to get what's called the “weekly deduction,” a portion of the pay sent directly by the employer, in this case Medicaid to the union, so that the union can function. Holding dues back and giving them to union is a way to get more of the union's time and effort to serve their members, rather than raise money from them.

The hostility of the Supreme Court, the meanness of the Trump Administration, is extraordinary in view of the enormous, important, humane, money-saving service these 2 million people—and again, mostly women, mostly people of color. What a group to choose to penny pinch with! I had to tell you the story. It’s emblematic of what's going wrong in this society.

Well, here's another one. The Guardian newspaper, a British newspaper (you can see why it might happen there) reports on the Los Angeles mansion bought by a co-founder of the Uber car ride service. Here's what he paid: 72.5 million dollars for the house and the land. Why is this interesting? Well, around the world for the last year or more, Uber drivers have been demonstrating, striking, complaining that they're taking home ridiculously small amounts of money—five, ten, fifteen dollars an hour, and they’re lucky to get at the upper end of that range. We also just read this last couple of weeks that the police in Los Angeles are again rousting up the homeless from the little tent cities that they have established under the freeways. Yeah, that's America these days. Screw the worker, screw the homeless.

Why is that relevant? Because not paying Uber drivers so that they can't afford a home and have to live in a tent, or they can't afford a decent living, even if they have a home. That's what's necessary so that the Uber founder, the head of the company, can live in a seventy-two-and-a-half million-dollar mansion. Here's the economics to understand: If you paid those Uber workers a living wage (what is necessary to have a home and a car and to live a decent life) and if you provided housing for the homeless—you have the money, it's all there! It would just mean, and let's cry for a moment, that the founder, the co-founder of Uber would have to settle… I don't know… for a million-dollar house, so maybe even a two-million-dollar house if we want to reward him, but he couldn't have a 72-million-dollar house. That's the cost to him. And what's the benefit? Doing something for tens of thousands of Uber drivers and their families and more thousands of the homeless. You tell me what your ethics, your religion, and your morality suggest is the way to go here.

My next update is a shout-out about Alaska. Well, what is it about Alaska that draws my attention? On July first, the fiscal year in Alaska set in, and the great state of Alaska (and I mean that; it's a great state, remarkable place) did a very remarkable thing, but it's not a good one. It cut the university budget of the State University of Alaska by 41% in one year. This was done by the Republican-controlled legislature. Here's what they decided: They weren't gonna tax rich people in Alaska. They weren't gonna tax big, rich oil corporations like Exxon. You know, remember Exxon? That's the one who fouled the water off of Alaska. They weren't gonna tax corporations or the rich. Instead, they were gonna cut by 41% the quality and quantity of education provided to the 26,000 students and another several thousand employees of the University of Alaska. This is called shooting yourself in the foot.

The future of Alaska, like of any economy, has to do more than anything else with the quality and the quantity of the educated labor force available there, and who trains the educated labor force? You guessed it, the state university system. They don't have much in the way of private universities in Alaska, and in any case, the overwhelming majority of young people trained at the university and college levels in America are trained in public institutions. Savaging that university is hobbling and crippling the future of the Alaska economy. What kind of a society does that to its young people and its own future to save taxes for people already rich and already successful businesses? Again, I ask you to think what sense this makes.

The next update has to do with ex-governor of Michigan, Rick Snyder. He turned down an offer of a Harvard University research fellowship. Why? Seven thousand Harvard graduates of the Kennedy School there signed the petition organized by another graduate, Tiffany Bell. And the argument of the petition went as follows: When Rick Snyder was governor of Michigan, he presided not only over one of the worst water-quality crises in American history, the crisis of the Flint River—but let me remind you, that bad water, which was a political decision of how to use which water for the people of that area, Detroit, Flint, and so on, children died because of that water. People got sick because of that water. All kinds of medical problems were worsened because of that water.

Mr. Snyder not only helped cause these problems and prolong them, but he was remarkable in then just deciding to deny the delivery of free water to people who didn't want to use the polluted water. It was really too much for Tiffany Bell, and as the story percolated, all kinds of folks who had graduated from Harvard signed on. Harvard didn't withdraw the fellowship. He withdrew himself from consideration, and even that wouldn't have merited this story (gross as it is) had he not given his reason. This requires a comment. Here's his reason: He's withdrawing, he said, because of the lack of civility. You see, it's not civil for people to protest his behavior in the Flint water crisis that killed people. They should be polite, say nothing, allow that kind of behavior to go unchallenged, and uncriticized. In his strange mind, the people who signed the petition were not civil. He has nothing to apologize for.

My last update has to do with a little, I don't know, breast-beating. I want to say something to celebrate us. Here we are making this program Economic Update. Here we are the organization that produces this program Democracy at Work, producing all the work we do at our websites and all the rest that you're familiar with. So when we get a real recognition, I want to share it with you. This one comes from the New Forest East constituency. That's in the area inside Great Britain that is one of their areas that votes and sends a member to the British Parliament. It's called the East…excuse me, the New Forest East constituency, and the Labour Party, the second biggest party in England there, has produced a document. They sent us a copy, sent it to the British Parliament, everybody there, proposing that the British use what we do on Democracy at Work, what we do on Economic Update as the basis for British policy. You know, what they propose? That the British government fund the development of a worker co-op sector, a major part of the British economy that will be helped to make a transition from top-down corporate capitalist enterprises (you know, a small group of people run the business, the owners, the board of directors) and instead make a transition, the businesses run democratically, where all the workers together, one-person, one-vote, decide what to produce, how to produce, and all the rest; we talk about it on this program often. It's now being proposed officially to the British government. Thank you, New Forest East Constituency. Thank you, for all of you, for making it possible for us to do this work, which is now getting the kind of recognition I wanted to boast about.

We've come to the end of the first half of Economic Update. I want to remind you, please, to subscribe to our YouTube channel, to follow us on Facebook, Twitter, and Instagram, which you can do by going to our websites, R-D-Wolff (with two F’s) dot-com and Democracy-at-Work-dot-info. And of course, our deep and abiding thanks to the Patreon community for its ongoing and much appreciated support. Stay with us. We'll be right back.

Welcome back, friends, to the second half of today's Economic Update. In this second half, I want to give a little extra time to two important topics that are circulating these days, where I thought I might have something to offer, as you think about and decide what you feel about these subjects. The first one is reparations, and the second one is the forgiveness of student debt. Big questions, big ideas, lots of debate. Let's start with reparations.

The pressure here comes mostly from the African American community, and the argument runs roughly as follows: Unspeakable damage, including death, was visited upon the African American people, who were forced, often against their will, to leave their native Africa and come to the United States to serve their entire lives as slaves, where they were badly treated, badly fed, separated family members from one another—you know the story of American slavery. And so the argument is they are owed reparations. They suffered, they lost, and they demand (many of those folks) a reparations. And I want to talk to you about that, particularly the economics of it. First, where the injury suffered real? No question. Is there a need for some sort of restitution? In my mind, no question, yes. Are there examples in history? In other words, is this a new idea, or have there been reparations in the past that we might learn something from in assessing reparations now? And I think the answer there again is yes, and I want to briefly go over them with you so we’re all on the same page.

One of the greatest examples of reparations occurred after World War One, that's about a hundred years ago. Germany was accused of having initiated that war. Germany also lost that war, and in the aftermath of Germany's defeat, the allied countries (mainly, Britain, France, and the United States) assessed a reparations debt. In other words, the tremendous loss of life, tens of millions of people died in and because of World War One, the loss of life, the loss of property, the injury, the suffering, the misery… all of it seemed outrageous, and the Germans were blamed, and they had to pay reparations. So for quite a few years after the end of World War One in 1918, the German government taxed the German people for a huge amount of money that was not used to serve the German people but was used instead to pay reparations debts, chiefly to France and Britain (the victors in that war). But they, in turn, having borrowed so much money to fight the war (mostly from the United States), basically turned around and used the reparations Germany paid to them to repay their debts to the United States.

So here's the key question: Was restitution made by that money being paid by the Germans to the British and French and ultimately to the Americans? I don't think so. The people who suffered so little or no money out of any of this. Lots of banks did real well. Lots of government budgets were a little eased. Mostly, the Americans, as it happens, because of the money and the interest earned on their loans. But for the mass of people who suffered, not so much. Did this reparations serve to prevent another war? On the contrary, the Germans went right back to war a very few years later in World War Two, which was as horrific in its way as World War One had been.

So did reparations solve the problems of Europe? Not at all. Here's another example of reparations. After World War Two, the Holocaust that was visited on Jewish people, on gypsies, on homosexual people, on all kinds of folks, led to a reparations imposition again on Germany, which was blamed, and in this case quite rightly for many of these horrors. The money went to what well it went to many Jewish survivors, ironically in the case of the Jewish people. Those who had died obviously couldn't get the restitution, and many of those who survived got cash for a few years in various ways, but it didn't fundamentally alter much in the lives of those people. Some. It didn't change much in the world; anti-Semitism remains a problem according to many Jewish organizations. It sure didn't stop war, which has become literally endless.

So there really is a reason to ask the question: What is reparations for? What does it do? The slaves who suffered are gone. We can't compensate them, their descendants—well, if what we do is give them some money, will that solve the problems of discrimination that’s left since slavery, of unjust treatment of African American citizens? I kind of doubt it, and here's a serious problem. The reparations in Germany after World War One led to a bitterness in the Germans that Hitler could exploit. He made the Germans angry, as if their problems were due to the money that had to be given to others in reparations, which was never true. Their problems were much more systemic. And here, that’s a problem again.

Isn't the money better used to fundamentally change a system that works this way? If we just distribute money, we haven't changed the system, and that's gonna come back to haunt us. And if the average American white person pays an extra tax for reparations, can you imagine what right-wing politicians will be able to say and do? What kind of damage politically can be done to African Americans, as well as everybody else? The system needs to be changed that produces these horrors. It's like a person who goes to court when he's abused or she's abused on the job and gets a few thousand bucks, but the job situation is the same and the same horrors are perpetrated on others who didn't have the courage or the money to get a lawyer. Reparations opens the questions about a system, and that should not be brushed under the rug.

Then there's the question of student debt, and here I want to talk in particular about the plan offered by Senator Bernie Sanders. It is the most ambitious. It has been signed onto by several others, Representative Ilhan Omar of Minnesota, Pramila Jayapal of Washington, and others are supporting it. It basically says we're going to forgive one-and-a-half trillion dollars of debt owed by students for their education, and it's going to be a bill that also helps Pell Grants for other kinds of expenses, particularly helps schools that have special needs. But fundamentally it erases student debt. The cost of this is estimated roughly at 2.2 trillion dollars; it’s a lot of money. And Mr. Sanders and his cosigners of the proposed bill proposed that it be paid for by a tax on Wall Street speculation. That is, the money is to come from a specific part of our economy, the richest people, the richest banks, the richest stock operators, are going to have to pay a tax based on their revenue from serving the stock market and the players in it.

So my first comment as an economist answers the question, Is this a feasible way of going about the problem? There, the answer is an unqualified yes, of course. Is this is doable.? Yes! Would it solve the problem? Absolutely! Let's take a look.

One of the questions raised about it is—oh my goodness—this is going to impact the economy because money that is now in the hands of stockbrokers and bankers and all of the people who speculate on Wall Street, they won't have this money. Yes, that's true, they won't. But on the other hand, fifty to a hundred million Americans who have no longer a student debt problem will be able to use the money they used to pay in their regular monthly payments on student debt to buy goods and services, so the loss to one part of the economy is offset by the gain to another part. This is simple economics and ought not to be forgotten.

Here's another way of saying the same thing. You're taking away money from the top, so it doesn't trickle down, but you're giving an economic boost to the average American who has a student debt, and that money’s gonna be spent by that person no longer on paying that debt but on buying goods and services. That's money you might call “trickling up,” and the trickle-up offsets the trickle-down.

So if you want to argue about the student debt, let's be honest. It is a program, not surprisingly coming from a socialist like Bernie Sanders, that's good for the average American, the vast majority who either have student debt or face the burden of student debt if they want to help their kids get a college education. It helps them at the price of the one percent, or the five percent, at the top. One side benefits, the other side loses some. That just corrects what's been going in the last 40 years, where the reverse has gone on. Or to take a more recent example, the tax cut back in December of 2017 that enormously boosted the top, arguing that it would trickle down, which it didn't, rather than help the bottom, which is why Bernie and the others supporting his bill say we bailed out the people did, Wall Street back in 2008, [200]9, and [20]10. It's time for Wall Street to bail out the American student.

So is it economically feasible? Sure it is, but here's something to think about, because there are questions. First, what's the economics here? It's simple. You don't pay enough in America to the average family to pay for their college education for their kids. That's the problem. At the same time that you don't give people enough income, you charge more for education than they can afford. So they end up having to borrow if they're going to get the education. The solution to the problem is not to create these conditions, even if you forgive the existing date, you're not changing the conditions, which is why many countries—Germany, France, Italy, Finland, many countries in Europe charge next to nothing for higher education. I'm talking two or three hundred dollars a semester covers it. There is a political problem here.

There's also the question of other debts; we don't pay people enough to cover, the cost of their home, their car. That's why they go into debt for those things. You want to really deal with this problem, you've got to change who gets paid what, and what costs what, or else the debt is always gonna come and you're gonna have those angry people with home debt and car debt and credit card debt, asking why help the students and not me? Good for the students, but I want my debts relieved too, and the same economics would apply. Look, it's a fundamental system that has to change. These are systemic problems, those that led to slavery and those within capitalism that lead to unbearable and unsustainable debt. The system is the problem, and system change is the answer. Thank you for your attention, and I look forward to speaking with you again next week.


Transcript by Kate McGreevy

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Showing 2 comments

  • Byron Richardson
    commented 2019-08-13 22:42:29 -0400
  • Kurt Hill
    commented 2019-08-13 16:23:27 -0400
    I think that class-based, affirmative action programs for all Americans who need special help is a much better idea than reparations. It would be a “universal” program regardless of race or national origin, yet would benefit Afro-Americans disproportionately (since they are disproportionately at a disadvantage from the effects of slavery, discrimination, etc). Class-based programs are better than race-based programs and have more support…

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