Signs of corruption

60 years ago, my grandparents grew up in working class families, with limited income in California. The schools were good in practically any neighborhood, and when they graduated from high school they were able to go to college with no college debt as young people from families with limited means.

Now in many parts of the United States, this was not true, but California made investments in their people, and grew one of the largest highly educated work forces the world has ever known. After my parents were born in the 1960s there was the large population of young highly educated people who had no debt in the world was in California, and these individuals were able to take out business loans and take risks.

Now, California had been the home to significant military installations since it was first colonized by the United States. There was a naval research station in the San Francisco Bay area for many decades before my grandparents were even born, but it was only in the post-1945 economic boom and massive increase in education investment that Silicon Valley started to grow. California had a good business climate, a massive population of young highly educated workers who were able to take on substantial risks, and with this political and economic climate, combined with the Bay Area successfully protesting the demolition of their infrastructure during the American Streetcar scandal which absolute decimated Los Angeles, the Bay Area had the infrastructure, educated population, and easy business climate which allowed it to grow.

In my office I have raspberry pis, a System76 laptop, an Apple M1 Mac Mini, and a desktop, and I have a desktop at work which runs AMD. The processors of all of these computers have one thing in common. They were all designed in Silicon Valley.

Northern California in the post-war era had the perfect situation to expand opportunity to everybody willing to invest in themselves, and today it has the 7th highest median household income in the United States.

Not to say everything is perfect in California today, the era of massive investment in higher education is over. It is far more difficult for someone out of college to get an initial job compared to when Silicon Valley was expanding. Housing prices have skyrocketed along with the rest of the country for a myriad of factors, and California is a destination for homeless people due to good weather and being less horrible than many other states towards its homeless population. More obviously needs to be done nationwide to help those who have not had access to the opportunity this country has, and this is a national issue. But when you look at almost every quality of life metric aside from cost of living, California does better than almost every other state. This is a direct consequence of the investments the state made in the middle of the 20th century.

The expansion of higher education expanded opportunity to families who had never had such opportunity before, and this massively improved the state.

As any observer of the United States knows, this situation did not last.

In the 1960s we saw laws passed which forbid discrimination in most aspects of American life. This is obviously a very good thing, and as a consequence opportunity opened up to minorities where opportunity did not exist before. We saw a massive increase in educational attainment by people of all races. This is a remarkable achievement of public policy and investment.

https://www.census.gov/content/dam/Census/library/publications/2016/demo/p20-578.pdf

However, over the last decade, the amount of public funds being invested in public education has declined, and this has moved the cost of tuition from the public to the individual. This is where student loans become a really big problem. The cause of stagnating public assistance to educate America comes from several sources, one is declining state revenues. Most states have a regressive tax system, and when the middle class doesn’t increase its income, those states end up with declining revenues. Another issue is the rising costs of health care, as health care becomes more expensive, state governments burden a lot of that cost because of employee benefits which almost always include health insurance, and increasing costs to government health care programs. With stagnating wages for the middle class, combined with very low tax rates for the top 1% of households, state budgets have taken a serious hit. One of the places where they felt they could cut spending without increasing taxes on millionaires was on higher education, , so that is what almost every state government did.

The consequence of this becomes very serious when you take into account intergenerational wealth. White families have significantly higher income than Black families on average. Brookings Institute and this means that middle class families (who are mostly white) were able to take on the burden of higher costs of college due to having savings. For low income families, who are more likely to be people of color, they tend to have little to no assets which means that they are not able to cover the costs of higher tuition. If young adults from such families cannot qualify for student loans (for which there can be many reasons, not everyone gets approved), and they do not qualify for low income college aid for whatever reason, they are unable to go to college. Without a blanket coverage of the costs of college, there are Americans who are going to be buried in student loans. Having student loans makes it less likely that someone will be able to Buy a house, historically one of two main ways American families have accumulated wealth, along with IRAs. You are less likely to save fore retirement, and this creates a real problem. People from families which do not have much wealth will be more likely to take on student loans (because their families are unable to cover them) or if that person is discriminated for their family for whatever reason (maybe their family is homophobic or ableist for instance) and they don’t receive aid to go to college, those individuals are going to have a much more difficult time to succeed than straight, able bodied white people from families which have money.

This is a form of extreme corruption in post-Reagan America. When fewer people are able to graduate from college without debt, fewer businesses will be created. Fewer businesses being created means less demand for labor, which means lower wages, which increases the relative power of those who have significant resources. People of color in particular will have a harder time getting on the property ladder, significantly harming them financially in a way which cannot be easily rectified. It harms our economy because it means fewer people qualify for small business loans, and it obviously increases inequality. Those who already have resources will be able to horde more resources, and there will be less opportunity. With lower taxes because of the reduction in government investment in our human capital, those who already have significant resources will be able to horde more wealth which will further increase inequality, which is bad for society. This closing of opportunity for millions who are not from privilege increases the power of those who are already wealthy, and that is corrupt.

The solution is simple. President Biden needs to excuse student loans up to $50,000, and use the bully pulpit so that we can abolish the filibuster and make other big structural changes to our economy which will significantly improve American society in so many ways.

He has the authority to do this, and he should do this for the economy and the social health of the United States. It will reduce corruption in America, make a positive impact on equality, and make us a stronger healthier society.

Mr. President, if you want to be more than a footnote in an American history textbook and do something which will significantly help millions of Americans, it’s time to pardon student loans.