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Peter Van Doren

An important insight offered by libertarians is that attempts to suppress market forces through policy often result in illegal underground markets accompanied by corruption. The libertarian policy insight is to legalize the suppressed trade.

The New York Times recently described evidence in support of this claim: corruption in Los Angeles. The FBI and the United States Attorney’s Office have investigated “a wide-ranging “pay-to-play” scheme in which developers bribed Los Angeles city officials to secure official acts to benefit their real estate projects.” 

A previous blog post as well as an article in Regulation have described proposals to allow developers to pay localities to alter their zoning constraints. Such proposals recognize that zoning rules have become de facto property rights. Currently, the negotiations between developers and politicians about zoning change are behind the scenes. The payments go to facilitators and politicians rather than neighboring property owners who suffer welfare losses from development.

Allowing local governments to convert the current in-kind, opaque, underground market for zoning change into an explicit legal exchange of cash for density would facilitate development and eliminate corruption.

David Inserra

On August 31, Brazil’s judiciary blocked X from being available in the country due to X’s refusal to secretly censor important political content. This includes content from accounts outside Brazil and even sitting legislators. More radically, the rogue justice Alexandre Moraes ordered app stores to block various virtual private networks (VPNs) and created a brand new penalty for Brazilians who managed to access X through a VPN.

While the original order to block VPNs was rescinded, a panel of the Brazilian Supreme Court upheld the banning of X and the new fine. At around $9,000, the fine is approximately equal to the income of the average Brazilian. The Brazilian court obviously holds X responsible for its failure to obey their censorial orders. But levying such a punishing fine on Brazilians for merely speaking their mind online shows how far authoritarians must go to effectively ban a speech platform.

Brazil’s judiciary didn’t stop there. Moraes also froze the bank accounts of Starlink, the company dedicated to providing internet via satellite. Since Elon Musk had closed X’s Brazilian office, Moraes felt it necessary to go after one of Musk’s other unrelated companies. It’s bad enough to see legal authorities plundering other companies to satisfy their grudge against Musk, but to make matters worse Starlink isn’t completely owned by Musk. He owns about half of Starlink, which means that Brazilian authorities are also going after the half of the company that belongs to other investors.

In response, Starlink initially refused to block X on its internet services, before eventually capitulating to Brazilian demands. Had Starlink refused, Brazil’s authorities could have banned Starlink and its service to over a quarter-million Brazilians. While Brazil’s authoritarians can’t quite get their hands on Starlinks’s satellites, they could have tried to seize the ground terminals in a move that would have significantly harmed internet availability in Brazil, especially among users in its vast rural areas.

Silencing political speech that is critical of the current government, threatening one’s citizens with massive fines for merely posting online, freezing the assets owned by international investors, being willing to cut off the internet to hundreds of thousands—these are not the actions of a liberal democracy but of tyrants. Even prominent supporters of the Brazilian judiciary’s censorial tactics believe these new actions have crossed the Rubicon.

Moraes and the courts more generally have seized new powers to act as the victim, prosecutor, judge, juror, and executioner. Their orders go against the clear letter of Brazilian law and constitutional protections for speech, and lack any real sense of due process, often being issued in secret and with little explanation for what law the targeted content or individuals violated.

Unfortunately, the response to such lawlessness from the US has been nonexistent. The Biden administration has not issued a statement on the attacks on American companies, investors, and principles in Brazil. The same is true in response to the assaults on US companies coming from the European Union and other nations. The absence of a formal response to such aggression is being felt by American companies and citizens as a growing number of nations take aim at free expression and the technology companies that enable it.

Even more disquieting is the support such censorship is receiving from some American elites. Democratic commentator Robert Reich, for instance, wrote an op-ed in The Guardian calling for international regulators to “threaten Musk with arrest if he doesn’t stop disseminating lies and hate on X” and for the US government to stop contracting with Space X and use the FTC to sue Musk because his speech rights aren’t in “the public interest.” Keith Ellison, the attorney general for Minnesota Gov. Walz, explicitly posted in support of the Brazilian censorship. Similarly, too many politicos have praised or collaborated with the EU’s regulatory morass to protect societies from hate speech and misinformation. 

The New York Times, in its otherwise worthwhile story on the situation, summarized this view of the conflict with the following choice. “Do too little and allow online chatter to undermine democracy; do too much and restrict citizens’ legitimate speech.” 

This idea that allowing free people to engage in “online chatter” undermines democracy is flat-out wrong. Free expression is what allows people to rule themselves by debating policies and who their leaders are. Yes, often that process is ugly and contains various falsehoods, half-truths, and offensive speech from all sides. But the government cannot be an arbiter of what is true and false or what is good or bad. That is left to the democratic process and free, liberal inquiry. To do otherwise is to somehow pretend that we can advance tolerance, freedom, and democracy by being intolerant, suppressing freedom, and cutting off democratic debate.

Brazil’s suppression of X, its citizens, and international investors ought to be met with a pro-expression response from the US. A formal diplomatic repudiation should be easy enough. And while there are plenty of programs that deserve to be cut from the US’s foreign aid budget, the current situation in Brazil calls for Congress to scrutinize and cut taxpayer dollars going to Brazil.

Failure to push back against a growing tide of censorship will only result in a future that is less free and prosperous. 

James Bacchus

One of the few issues our two major political parties appear to agree on is their mutual embrace of protectionism in international trade. They are both increasingly committed to raising barriers to trade while ignoring the global rules that make freer trade possible. Yet a recent national survey by the Cato Institute shows that, with some quibbles and qualifications, a solid majority of the American people favor more trade.

What explains the stark inconsistency between what the people say they want and what the Republicans and Democrats, and especially those who wear those party labels in elected and appointed office in Washington, seem determined to give them?

According to the national survey, 66 percent of Americans believe global trade is good for the American economy; 64 percent believe it has increased material abundance in their own lives by increasing the variety of the products they can buy; 58 percent say it has improved their standard of living; 63 percent want to increase trade with other nations; 57 percent say doing so is good for their communities; and 53 percent have a favorable view of free trade.

Seventy-five percent of Americans worry that tariffs are raising consumer prices. Two-thirds of them, 66 percent, would oppose paying even $10 more for a pair of blue jeans due to tariffs—even if those tariffs are meant to help US blue jean manufacturing. In addition, three-fourths, 75 percent, worry that special interest groups are lobbying the government to impose tariffs or other restrictions on trade.

Virtually none of this is reflected in the current trade policies of our major political parties. Under the thrall of Donald Trump, Republicans have largely abandoned their longstanding historical support of free trade. Likewise, the decades-long struggle between free traders and protectionists for ascendancy in the Democratic Party has apparently ended in triumph for anti-trade protectionists. Although some Democrats are hoping Kamala Harris would step back as president from the most trade-restrictive and trade rule-scoffing of the policies of President Joe Biden—which are basically the same as those followed while in office by former President Trump—these wistful hopes seem mainly to be founded on wishful thinking.

Instead of pursuing the generally pro-trade sentiments of most of the American people, as demonstrated in the Cato survey, Republicans and Democrats alike are headed in the opposite direction. Trump is doubling and tripling down as “Tariff Man” with ever-evolving proposals for higher and higher tariffs on worldwide imports. The Democrats have had a hard time keeping up with his tariff-happy tweets, but they, too, are imposing and promising more regressive taxes on the American people in the form of tariffs.

Neither party seems to think trade is good for the American economy, neither appears to want to increase trade, and neither is trying to conclude or is committed to concluding more international trade agreements. Worst of all, Republicans and Democrats are united in ignoring international laws on trade and in impeding and undermining the World Trade Organization and its rule-based trade dispute settlement system.

Why this disjunction between the two parties and most of the people on trade? Put simply, both parties have been captured by minorities with minority views. Neither party is representing the broadest measure of their membership or the broadest extent of the American people. Both are responding mostly to their political “base,” which ignores a lot of other Americans—more moderate and centrist members of both parties and the independent voters who comprise a growing portion of the American electorate and are likely to be more favorable to more trade.

The Pew Research Center has found that only six percent of Americans and 12 percent of Democrats are of the “progressive left,” which is leading the charge against trade within the Democratic Party. The Republican Party has been captured by Trump and other anti-trade tribunes of economic nationalism, but there remain millions of traditional Republicans who, though exiled from Republican decision-making, nevertheless are still within the American electorate. Moreover, Gallup polling shows that a record 49 percent of Americans “see themselves as politically independent—the same as the two parties put together.” These many millions of Americans have been pushed aside in the policymaking of American politics.

In all their policymaking, both parties are now pulled by their “base” to the extremes. Republicans are pulled to their political right, where trade protectionism and other manifestations of the economic nationalism of Donald Trump prevail. Democrats are pulled to their political left, where progressivism is increasingly equated with protectionism and other forms of economic nationalism. The embrace by both parties of different versions of an interventionist and trade-discriminatory industrial policy by the federal government is one consequence of this pull to the extremes. With trade and numerous other issues, the center is not holding in American politics because, except in periodic general elections, it is not present and so is not heard in policymaking.

In the US House of Representatives and in many state legislatures, this hollowing out of the American political center is a result of gerrymandering in drawing the lines of congressional and legislative districts, which empowers the political extremes at the expense of the political middle in the electorate. This gerrymandering by both parties diminishes the political legitimacy of our democratic republic while advancing minority views that are translated into policy, including in international trade. Meanwhile, the vast center of the American electorate is increasingly left unrepresented. Where both parties once competed to be responsive to the political center in the country, now they often seem to ignore it, especially in their legislative and executive decision-making.

Instead, as the voters surveyed by Cato rightly fear, policymakers and decision-makers who should be pursuing the public interest increasingly hear and heed the voices and the views of self-seeking private interests. In trade, this includes those labor unions with workers in trade-challenged declining industries in politically pivotal states, and threatened businesses in those industries in those states that cannot—or will not—meet the challenge of global competition and thus seek to be sheltered from such competition behind protectionist trade barriers. Because these key states, such as Pennsylvania, Michigan, and Wisconsin, are crucial to the outcome of presidential elections and to control of Congress, popular calls for more openness to trade from other sectors in other states go unanswered.

Among the quibbles and qualifications to the overall desire of most Americans for more trade, as evidenced by the Cato survey, is the fact that most Americans want to make certain that trade policy benefits Americans. A majority of Americans, 56 percent, support putting tariffs on goods from foreign countries if those countries impose restrictions on goods from the United States.

This support plummets, however, if these retaliatory tariffs increase domestic prices, decrease innovation and US business growth, or decrease jobs in other American companies that rely on the imports affected by the tariffs (Figure 1). Overall, 61 percent of Americans believe US businesses must “learn how to become strong and compete globally without any government handouts or taxpayer subsidies” (Figure 2). Despite this, both parties are increasingly addicted to subsidies and other handouts, including protectionist tariffs.

Another qualification to the support of most Americans for more trade is the question of trade with China. Few Americans—only 15 percent—think that China has acted fairly in trade with the United States. Not surprisingly, both parties have “get tougher” policies on trade with China. However, 81 percent of Americans surveyed by Cato overestimated the share of imports the United States receives from China. (The correct answer is about 15 to 16 percent.) If the broad middle of the American electorate were better heard in American policymaking, a more temperate—and less bellicose—view might be evidenced in policymaking on China trade, perhaps leading to mutually beneficial solutions that have eluded the two trading partners thus far.

Like the overall support of most Americans for trade, these and other nuances in this majority support are blurred in the broad brush of pure protectionism that is manifested more and more in the trade policies of both parties. Hence the widening gap between what the American government, and the politicians who populate it, are saying and doing on trade and what most Americans seek in trade.

On trade policy, those who are leading us, and those who would lead us, are not giving voice to the views of the majority of the American people who generally support trade. Unless this changes, the result will be an American economy and an American future smaller than what they would be if the majority views were heard and reflected in US trade policy.

Eric Gomez and Benjamin Giltner

August 2024 was a very active month for arms sales with 22 new Foreign Military Sales (FMS) cases announced. However, the Taiwan arms sales backlog was unchanged from last month with no new sales announced or deliveries completed. Taiwan is waiting for $20.5 billion of US weapons. Although none of the new FMS cases directly affect the Taiwan arms backlog, it is worth taking a look at how these sales overlap with the sales that Taiwan is awaiting.

Figures 1 and 2 show how the backlog is divided between munitions, asymmetric capabilities, and traditional capabilities. Table 1 shows an itemized list of backlogged capabilities.

According to the Defense Security Cooperation Agency’s archive of major arms sales announcements, which goes back to April 2008, August 2024 was the busiest month for new FMS cases. Of the 22 sales announcements, 10 overlap with the Taiwan backlog. Table 2 shows all the August 2024 sales, with check marks indicating sales that overlap with capabilities that have been sold but not delivered to Taiwan. The dollar value of the 22 August FMS cases comes to $32.6 billion.

The United States has seen a significant increase in FMS cases since Russia invaded Ukraine in February 2022. According to the Department of Defense, “In fiscal year 2023, the US did more than $80 billion in business through the foreign military sales system. That is a record.” In fiscal year 2022 this figure was $51.9 billion. Conflicts in Europe and the Middle East and growing concerns about China’s military power are prompting this rapid increase in FMS. Foreign countries want to buy US weapons, and Washington is happy to oblige.

However, surging demand for US weapons may not be good news for Taiwan, at least not immediately. The US defense industrial base has started increasing its production capacity across many highly sought-after weapons. But it will be several years until these expansions are complete. Demand for US weapons currently outpaces supply, and this will remain the case until the late 2020s for several key capabilities.

Taiwan has already had to deal with the effects of this supply-and-demand mismatch. In 2022, Taipei cancelled a purchase of Paladin self-propelled howitzers due to production delays. Taiwan has also contended with delays for deliveries of TOW-2B anti-tank missiles and Stinger anti-aircraft missiles, both of which have been sent to Ukraine in large numbers.

The United States has used different legal mechanisms for providing weapons to Ukraine, and weapons sent to Ukraine do not necessarily or automatically lead to Taiwan arms delays. However, the defense industrial base must simultaneously replenish US stockpiles and fulfill new FMS cases while also supplying regular US military demand, and a growing number of new FMS cases are for weapons that haven’t been delivered to Taiwan yet. Taiwan should start receiving several large arms packages in the next one to two years. However, these timelines could slip given the competing demands on the US defense industrial base that are exacerbated by a record-high FMS caseload.

Ultimately, the pace of US weapons deliveries to Taiwan, especially before expanded industrial supply can catch up with increased demand, will be a useful tool to measure US foreign policy priorities. If moving Taiwan toward an asymmetric self-defense strategy is indeed a top US priority, then Taiwan should not see delays for high-demand capabilities, especially in FMS cases announced before the 2022 surge of new cases. Unfortunately, Taiwan’s recent experience suggests that it does not enjoy such pride of place.

Taiwan Arms Backlog Dataset, August 2024

Andrew Gillen

Note, this post updates last month’s post. The biggest changes from last month include:

The Supreme Court has let the Eighth Circuit’s pause on the SAVE plan remain in place.
Reworked the student loan payment pause section, including a new estimate of how much interest was waived ($208 billion).

Mass student loan forgiveness is terrible policy (see this report for a comprehensive list of reasons), but that hasn’t stopped the Biden administration from trying to forge ahead. While the Supreme Court overturned the Biden administration’s student loan forgiveness plan, every few weeks the Biden administration announces another batch of loans that have been forgiven. In fact, the administration recently celebrated that since taking office it has succeeded in forgiving $169 billion of student loans for 4.76 million borrowers by transferring the financial burden from the students who took out the loans to taxpayers who did not.

And they aren’t going to stop—the administration’s spokeswoman declared, “President Biden has vowed to use every tool available to cancel student debt for as many borrowers as possible, as quickly as possible.” And Biden himself stated, “I will never stop working to cancel student debt—no matter how many times Republican elected officials try to stop us.”

But if student loan forgiveness lost in the Supreme Court, how are so many student loans still being forgiven? The answer is that there isn’t a student loan forgiveness plan, there are many plans, some of which are already up and running. Previous laws had already left a plethora of methods to forgive student loans, and many of those laws may give the Secretary of Education the ability to expand those programs. The administration also claims existing law gives it the authority to create new ways to forgive student loans.

So the student loans the Biden administration already has or wants to forgive are a combination of existing programs, existing programs the Biden administration has expanded, and new programs the administration is seeking to implement.

Here’s a rundown of the administration’s student loan forgiveness plans and actions, which I’ll update monthly.

HEROES (New plan – overturned in court)

This was the big plan that got a lot of attention in 2022 and 2023. The plan was to forgive $10,000 for borrowers making less than $125,000, and $20,000 for borrowers who received a Pell Grant, at a total cost of $469 billion to $519 billion. The alleged authority for the plan was the 2003 HEROES Act. While designed to alleviate loan-related hardships for soldiers and reservists serving in Iraq and Afghanistan, the law also covered national emergencies; the Biden administration argued the COVID-19 emergency gave it the authority to forgive virtually everyone’s loans. Most observers were skeptical of this supposed authority, but it was not clear who had standing to sue (standing is the requirement that those filing the suit have a concrete injury from the policy). The companies that service student loans would be the most obvious injured party. But there was a perception that the Biden administration would punish any servicer that challenged the policy in court, a perception that now appears accurate.

Fortunately, the Supreme Court ruled that Missouri had standing to sue (due to a quasi-public student loan servicer that would lose revenue under the plan), and that the plan violated the major questions doctrine (which holds that there needs to be clear congressional authorization for programs of substantial economic or political significance), preventing the policy from being implemented.

Higher Education Act (New plan – forthcoming)

Immediately after losing on HEROES, the Biden administration announced a new effort that would use authority under the Higher Education Act. The administration announced the new plan, which would

waive unpaid interest;
forgive debt for those who have repaid for 20 years (25 years if there is debt for graduate school);
forgive debt for those who attended a low-financial value program (e.g., programs or colleges that fail the Cohort Default Rate or Gainful Employment); and
there is also a plan to release additional regulations soon that will forgive debt for those undergoing financial hardship.

There are several problems with this plan, which the Penn Wharton Budget Model estimates will cost $84 billion. The public comment window on the proposed regulations recently concluded, and the administration is now considering those comments and will issue final regulations, with a goal to start forgiving debt this fall. Once finalized, this plan will likely be overturned by the courts for two main reasons. First, it is likely to run afoul of the major questions doctrine, just as the HEROES plan did. Second, the Supreme Court recently overturned Chevron deference, which held that courts should defer to executive agencies when a statute was ambiguous. With major questions and no Chevron deference, it is very hard to imagine the courts allowing the administration to stretch vague clauses in old laws into vast new powers authorizing billions of dollars in forgiveness.

However, much of this forgiveness is easy to implement, so a key question is whether a court injunction will come fast enough to prevent the administration from forgiving billions of debt before the courts can determine whether the regulations are legal. The Biden administration is already preparing to move quickly to present the plan as a fait accompli the moment the final plan is released by immediately forgiving billions in loans. So state attorneys general need to be ready to file lawsuits the moment the final regulations are published.

SAVE (New plan – paused by the courts)

Before diving into this one, it is important to understand the concept of income driven repayment (IDR). Under traditional (mortgage) style loan repayment, the amount and length of repayment are fixed (e.g., $200 a month for 10 years). For the past few decades, the federal government has been introducing IDR plans, in which the amount repaid each month varies based on the borrower’s current income and the length of repayment varies based on how fast they repay their loan. The key features of an income driven repayment plan are:

the share of income owed each month (e.g., 20%);
the income exemption that is protected from any repayment obligation (e.g., the poverty line); and
the cap on length of repayment (e.g., 25 years).

IDR is a great idea, providing borrowers with better consumption smoothing across their lifetime and flexible repayment, which helps avoid defaults due to short-term liquidity constraints.

But we’ve also botched the implementation. To begin with, a cap on the length of repayment is completely inappropriate. IDR ensures that payments are always affordable, and borrowers who make so little they do not repay will receive de facto forgiveness even without the cap, so there is no justification for a cap on the length of repayment.

The other problem with how we’ve implemented income driven repayment is political—the plans are tailor-made to allow politicians to give constituents big benefits today while sticking future taxpayers with the bill. It is, therefore, no surprise that these plans have grown more generous over time. The first IDR plan, introduced in 1994, had an income exemption equal to the poverty line, a share of income owed of 20 percent, and a cap on length of 25 years. Very few borrowers would receive forgiveness under these terms, and of those who did, they really wouldn’t have been able to repay regardless of whether they received forgiveness. The Obama administration introduced plans with an income exemption of 150 percent of the poverty line, a share of income owed of 10 percent, and a cap on length of payment of 20 years.

The Biden administration’s Saving on a Valuable Education (SAVE) plan took an existing plan (the REPAYE plan) and made it much more generous. It changes the share of income owed from 10 percent to 5 percent, increases the income exemption from 150 percent of the poverty line to 225 percent, and caps the length of repayment at as little as 10 years for some borrowers. By cranking every possible lever to the most generous settings in history, this plan would impose massive costs on taxpayers, estimated at $475 billion for just the next 10 years.

The legal questions facing this plan are the reverse of the HEROES plan. For the HEROES plan, the main obstacle was standing. Once that hurdle was cleared, it was fairly obvious that the plan was well beyond what Congress had authorized. But for the SAVE lawsuits, this is reversed. Standing is easily established (for Missouri at least). But the plan does have a much stronger argument of being within the parameters of the law.

Mark Kantrowitz thinks SAVE will be upheld, while Michael Brickman did yeoman’s work digging up details on page 18,909 of the 1993 Congressional Record that may lead to SAVE being scrapped. Jason Delisle also recently released a fascinating report on the legal foundation of SAVE. He argues that “the Biden administration has claimed legal authority far outside what Congress intended when it enacted the law.” In particular, he argues that, 

“Lawmakers assumed that the IDR plan the secretary would create would entail minimal or no budget costs” whereas SAVE may cost up to half a trillion dollars over 10 years.
“Lawmakers assumed that the secretary would set loan forgiveness at 20 or 25 years, but not earlier as SAVE does. Moreover, loan forgiveness was clearly an afterthought in the original debates” whereas it is the central feature of SAVE.
“Lawmakers believed that appropriate monthly payments in an IDR plan should be much higher than those in the SAVE plan.”

The Supreme Court’s overturning of Chevron deference is also likely to affect these cases in a major way. Now that courts are no longer required to defer to executive agencies when statutory language is ambiguous, it will be much harder to convince courts that the president spending close to half a trillion dollars over the next 10 years on this plan is consistent with congressional intent.

Parts of the SAVE plan have already been implemented, and full implementation was scheduled for July 2024. The plan has already forgiven “$5.5 billion for 414,000 borrowers.” However, there are two lawsuits that seek to overturn the plan, one by Kansas and 10 other states (though a court ruled that only three of the states had standing to sue), and another by Missouri and six other states. An injunction from the Eighth Circuit Court of Appeals (in the Missouri case) has paused implementation of the entire SAVE plan pending resolution of the case.

In sum, the chances of SAVE surviving the court challenges have declined dramatically over the past year. When it was first introduced, many analysts thought it had the best chance of being upheld in court. But the recent injunction, the overturning of Chevron deference, and the work by Brickman and Delisle on congressional intent leave SAVE much more vulnerable legally than most thought would be the case a year ago.

Student Loan Payment Pause (Existing and extended plan – now expired)

When COVID-19 hit in March 2020, student loan payments were paused. The pause was supposed to last two months but ended up lasting three-and-a-half years after Trump extended it once and Biden extended it six times.

The payment pause resulted in two costs to taxpayers.

First, while no interest accrued on student loans (around $208 billion of interest was waived), the government had to borrow more money to make up for the lack of payments (recall that the government is the lender for student loans) and the government paid interest on that extra borrowing. Thus, even if students eventually repay everything, there would still be a cost for taxpayers.

Second, recall that IDR plans (unnecessarily) cap the length of repayment, and the pause counted towards that cap. In other words, for any student that does not fully repay before they hit the length of repayment cap, payments weren’t paused, they were waived. We won’t know for many years how many students had their payments forgiven rather than postponed.

New research from Sylvain Catherine, Mark Pérez Clanton, and Constantine Yannelis finds that the substantial inflation and the counting of paused months towards the cap on repayment reduced the present value of future student repayments by around 25 percent.

There is virtually no chance for this burden on the taxpayer to be reversed. The only good news is that the payment pause ended, with most borrowers restarting payments in October 2023.

Public Service Loan Forgiveness (Existing and extended plan – still active)

The Public Service Loan Forgiveness (PSLF) program was established during the George W. Bush administration and allowed public and nonprofit workers to receive forgiveness after 10 years of repayment when they used an IDR plan. While I object to PSLF in principle (as a distorting and non-transparent subsidy for the government and nonprofit sectors) and due to the windfalls these borrowers receive (an average of over $70,000 per beneficiary), because PSLF legally exists, it should operate as seamlessly as possible.

The Biden administration granted many waivers and other changes to increase the number of borrowers who could benefit under PSLF. For example, the administration introduced a waiver that allowed for payments made under non-IDR plans to count toward the payment limit (previously, only payments made while enrolled in an IDR plan counted). Some of these changes were good in the sense that they more faithfully implemented the law. But the administration crossed some lines too. In particular, it started counting some types of deferment as payments (borrowers can get deferment when they cannot afford to make payments, which generally allows the borrower to temporarily postpone payments though interest continues to accrue). The whole point of deferment is to temporarily avoid making payments. So for the Biden administration to give borrowers credit for making payments when they were in deferment is logically, morally, and potentially legally wrong (Cato was part of a lawsuit seeking to end this abuse, but the case was thrown out when a court ruled the policy didn’t directly affect Cato enough to satisfy standing requirements). The administration also waived income requirements, making more people eligible for the program. 

The Biden administration has forgiven $69.2 billion for 946,000 borrowers under these programs, which works out to around $73,000 per borrower. By comparison, a formerly homeless student who receives the maximum Pell Grant for four years would get less than $30,000 in Pell Grants. Some of this would have been forgiven even if the administration hadn’t made any changes to the program, but not all of it. In the future, these burdens on the taxpayer can be reduced by rolling back some of the administrative changes. However, eliminating the program would require legislation.

Borrower defense to repayment (Existing and extended plan – still active, though recent changes are paused during a court case)

When a college engages in fraud or severely misleads students, borrowers can have their debt forgiven under borrower defense to repayment. This is reasonable, as victims of fraud should have some recourse. It is also rare because a college would not just need to dupe a student but would also need to fool a state, an accreditor, and the US Department of Education, as all three are required to sign off on the legitimacy of a college before its students can take out student loans. As the House Committee on Education & the Workforce noted, “for the first 20 years of the rule, there were 59 claims.”

However, the federal government can claw back debt forgiven from the responsible college. This makes borrower defense to repayment a powerful tool for progressives in their war on for-profit colleges. If a for-profit college can be declared to have substantially misled students, they can be ruined financially by the clawbacks. Indeed, new regulations from the Biden administration would make it much easier to conclude a college engaged in misconduct.

As the White House gloated, “Less than $600 million in debt relief had been approved through borrower defense, closed school discharges, and related court settlements from all prior administrations combined, compared to the $22.5 billion approved under the Biden-Harris Administration alone.” Some of this was done outside the law. For example, $5.8 billion of debt for Corinthian College students was forgiven even if students didn’t submit a borrower defense claim. The administration has promised to forgo clawbacks on much of it (likely in part to avoid giving affected colleges standing to oppose the changes in court).

The good news is that any further forgiveness under the new regulation is on hold due to an injunction from the Fifth Circuit Court of Appeals (this injunction applies to the closed school discharge plan as well).

Closed School Discharge (Existing and extended plan – still active, though recent changes are paused during a court case)

Borrowers whose school closes while they are still enrolled or shortly after they have withdrawn can have their student loans forgiven. The Biden administration imposed new regulations that loosened the requirements and has used this as an excuse to forgive other loans as well. For example, Biden forgave $1.5 billion in debt for students from ITT Technical Institute, even if they didn’t qualify for a discharge. Further forgiveness under the new regulations has been paused by the Fifth Circuit Court of Appeals until courts determine whether the new regulations are legal. However, the administration can still forgive loans under the previous iteration of these regulations.

Total and Permanent Disability Discharge (Existing and extended plan –active)

Borrowers who are unable to work due to a permanent disability can have their loans forgiven. Historically this was very rare. To protect against fraud, the income of borrowers who had their debt forgiven was monitored to ensure that they really couldn’t work. The Biden administration both expanded eligibility and dropped fraud detection efforts. In particular, in 2021, regulations were introduced that “provided automatic forgiveness for borrowers who were identified as eligible for a total and permanent disability discharge through a data match with the Social Security Administration. The department had been using such a match for years to identify eligible borrowers but required them to opt in to receive relief.” Switching to the opt-out model dramatically increased the number of borrowers receiving forgiveness. As a result of these changes, forgiveness under total and permanent disability discharge spiked from negligible amounts to $14.1 billion for 548,000 borrowers.

Waiving Interest

Another method the Biden administration is using to forgive loans is to waive interest. This plan is somewhat unique in that it is usually a component of another forgiveness plan, but the goal and methods are unique enough to warrant its own category.

Waiving interest has been implemented primarily through three mechanisms. The first was the student loan payment pause, which, as noted above, waived interest for three and a half years. The second involved regulations that took effect in July 2023 that “ceased capitalizing interest in all situations where it is not required by statute (87 FR 65904). This includes when a borrower enters repayment, exits a forbearance, leaves any IDR plan besides Income-Based Repayment (IBR), and enters default.” And the third is the SAVE repayment plan, which waives any unpaid interest.

Conclusion

In sum, the Biden administration has been the most aggressive in history regarding student loan forgiveness. Despite many setbacks, the administration has canceled a massive amount of debt ($169 billion and counting), with most of the burden on taxpayers still to come from future repayments that will no longer be made. And while many of its attempts to forgive student loans have been stymied, there are still many active plans in play, with more on the horizon.

Jeffrey Miron

Popular opinion views liberalism and conservatism as radically different perspectives about the proper size and scope of government.

Liberals and conservatives do advocate dramatically different policies regarding abortion, drugs, guns, economic regulation, climate change, criminal justice, and more.

Yet liberal and conservative perspectives are the same in one key respect: both advocate using government to impose particular values. Conservatives want to ban drugs, liberals guns. Conservatives advocate banning abortions, liberals subsidizing them. Conservatives support subsidies for home schooling and religious schools, liberals the same for low-income housing and “clean” energy. Liberals advocate reparations for descendants of slaves, while conservatives want to ban affirmative action. Conservatives propose teaching traditional religious values in school, while liberals support critical race theory and LGBTQ+ themes in school curricula. Thus the goals of favored policies differ, but not the belief that government should promote specific views.

Indeed, liberal and conservative preferred policies—all of which involve government interference with private decisions—are often close to indistinguishable; on immigration and trade restrictions, industrial policies, protecting Social Security and Medicare, lowering drug prices, regulation of social media content, and more, conservative and liberal positions differ in details but not overall thrust.

In a few cases, liberals and conservatives agree on smaller government: land use regulation, federal prisons, government surveillance, civil asset forfeiture, eminent domain, and corporate bailouts. But these are exceptions.

Libertarianism differs fundamentally from both the liberal and conservative perspectives. While accepting that private arrangements are imperfect, libertarianism consistently asks whether government intervention does more harm than good. And it applies this skepticism regardless of the associated “values.”

Thus libertarianism argues against both drug prohibition and gun control; against government protection of unions, but not against unions per se; against government-imposed affirmative action, but not against privately adopted affirmative action; against any government-imposed content moderation of social media, but not against private moderation policies; against all trade and immigration restrictions; against government restrictions on school choice; against government-mandated licenses; and against the government defining marriage.

Perhaps libertarians are wrong about the merits of some government interventions. But applying a consistent lens across policies helps understand the inconsistencies of both liberal and conservative perspectives.

This article appeared on Substack on September 1, 2024. Constantin Wells, a former exchange student at Harvard, co-wrote this post.

Vanessa Brown Calder

On the campaign trail last week, former President Trump promised that under a future Trump administration, “government will pay” or “your insurance company will be mandated to pay” for all IVF treatment costs. Trump described the policy in pro-natal terms (“we want more babies”) and said he has always been in favor of IVF.

It is certainly positive to see the top of the Republican ticket vocally in favor of in vitro fertilization (IVF), particularly in light of recent comments by conservative critics. There are many reasons to support the procedure, which resulted in around 97,000 infants born in the most recent reporting year and constitutes the most successful way to treat a range of fertility issues.

However, for a variety of reasons, Trump’s plan to subsidize or mandate IVF is a mistake. Paying for IVF at the federal level would be extremely costly, it could create perverse fertility incentives, and the government should not compel taxpayers or religious employers to subsidize a procedure some disagree with.

First, subsidizing IVF would be enormously expensive. Subsidizing IVF would cost around $7 billion annually or about the annual cost of public housing or the Head Start program. This estimate assumes that 413,776 assisted reproductive technology (ART) cycles are performed annually, IVF constitutes more than 99 percent of ART procedures/​cycles, the average IVF cycle costs between $15,000 and $20,000, and potential beneficiaries do not change their behavior in response to the policy.

However, new incentives are likely to change behavior. So a static estimate likely understates the true long-term cost of the program. For instance, most IVF patients are currently self-pay, limiting IVF use. Moreover, government-funded IVF would induce couples to delay childbearing or engage in elective fertility preservation, leading to growing use and reliance on fertility treatment over time.

As Jeff Singer, MD, mentioned Friday, if the government mandates that insurance companies provide IVF coverage, this will likely raise premiums as providers pass costs onto consumers. If insurance companies are required to provide IVF coverage, incentives for providers to offer competitively priced IVF will evaporate as many patients become less price-sensitive overnight.

The behavioral changes associated with a government program or mandate mean that although IVF use would increase, the policy may not ultimately be pro-natal. Patients and the public are not fully aware of IVF’s limitations, and declining births could result when patients are overly optimistic about IVF success.

Studies find that positive anecdotes and media portrayals of IVF distort patient perceptions. In a 2022 study, the average IVF patient expected a 59 percent success rate, whereas doctors’ average prospective estimate of patient success was nearly half that, at 30 percent. A 2021 study similarly found that women’s estimates of IVF success were vastly unrealistic.

Although IVF is a miracle for many couples, IVF success declines dramatically with patient age. According to CDC data, IVF procedures result in a baby about 50 percent of the time for women younger than 35, but less than 8 percent of the time for women older than 40. The promise of a government-funded fertility insurance policy could lead would-be parents to put childbearing off, only to realize childbearing is impossible later, even with reproductive technology’s help.

Finally, although certain critics’ claims about IVF are exaggerated and do not hold up to scrutiny, it is nonetheless the case that some religious people disagree with the use of reproductive technology, including IVF. Taxpayers, employers, and insurance providers should not be required to subsidize activities for which they object.

In summary, although Trump’s vocal support for IVF is welcome, Trump’s proposal is a mistake. Preserving individual freedom and protecting IVF from regulations that limit its efficacy is a good idea; subsidizing or mandating coverage is not.

Colleen Hroncich

Given the focus on unconventional education, the Friday Feature often highlights newer educational entities such as microschools and hybrid schools. But traditional schools can also be places where exciting things happen. Detroit Catholic Central High School is a good example of that.

Founded in 1928, Catholic Central is an all-boys school that has weathered the ups and downs of Catholic education in America with remarkable resiliency. DCC began this school year with 90 more students enrolled than graduated last spring; with 1,010 young men enrolled this year, they are the largest private high school in Michigan.

According to Director of Admissions Jake Marmul, “We are blessed to have many things going well for our school, and success attracts more success. Catholic Central offers a holistic environment where every young man, regardless of his interests, can pursue excellence.”

DCC’s size, Jake says, makes it “large enough to offer exceptional experiences and facilities, yet small enough to nurture strong relationships.”

Among these facilities is the new George and Mary Turek Hall of Science. Opened earlier this month, this state-of-the-art complex features a 57,000-square-foot STEM center, programs in space exploration and aviation—including a working flight simulator—and a 5,300-square-foot robotics arena.

Jake’s enthusiasm about the new Hall of Science is palpable. “The Hall of Science has already led to increased student enrollment in STEM electives and stronger community partnerships,” he says. “Our aviation program uniquely positions Catholic Central as a leading pipeline for future pilots across the nation, our robotics space and machine shop allow students interested in engineering and machining to gain hands-on experience, and our partnership with NASA allows our students to access their resources and contribute data from in-class experiments, allowing them to see the impact science can have in the real world.”

DCC plans to share these resources with the entire Southeast Michigan region. By partnering with local food banks, students are growing and donating crops—potentially adding an entire second growing season for local farms. The school continues to strengthen collaborations with other local school and community groups, such as organizations that work with at-risk women as well as local scout groups. These programs allow current and future students to follow the school’s long tradition of serving others.

Recognizing the importance of this community involvement, Jake says, “We plan to host star-gazing parties to introduce children to the wonders of space and inspire them to dream big for their future. While our students benefit from these facilities daily, our goal is for the broader community to also recognize Catholic Central as a tremendous resource.”

As DCC strives to inspire students to embrace lifelong learning and growth, they know the importance of modeling it within the school. While traditions are a cornerstone of their identity, they recognize that simply following established practices for tradition’s sake is a backward approach.

The school recognizes the need to blend tradition and evolution, as shown with their annual tuition assistance DRIVE. What started more than 80 years ago as a simple fundraiser has evolved into a 10-day celebration of young men, complete with daily school assemblies, skits, contests, costumes, decorations, and more. Last year students raised nearly $900,000 for the school’s tuition assistance fund.

From Jake’s perspective, “At Catholic Central, we believe that if we have the ability to do something better for our students, we have the responsibility to do so. This principle drives us to continually assess and enhance what we offer. Our ‘why’ is the young men in our building, and our mission to teach them goodness, discipline, and knowledge. We firmly believe that the young men who matriculate from our school can and will make this world a better place.”

Jeffrey A. Singer

On August 29, at a town hall in La Crosse, Wisconsin, Republican presidential candidate Donald Trump told the audience, “I’m announcing today in a major statement that under the Trump administration, your government will pay for, or your insurance company will be mandated to pay for, all costs associated with IVF treatment.”

More than 13 percent of women and more than 11 percent of male peers in the US have fertility problems. In vitro fertilization (IVF) makes up more than 99 percent of assisted reproductive technology (ART) procedures. According to the Department of Health and Human Services, in 2021 more than 81,000 babies—2.3 percent of all those born in the US—were conceived using IVF. As more women choose to have children later in life, more are choosing IVF. In some European countries, women have used IVF to conceive 5 percent of newborns.

The price of a single IVF cycle (ovarian stimulation to egg retrieval to embryo transfer) can range from $15,000 to $30,000, depending upon the center and the medications required.

The government mandating that health insurers pay for IVF will raise premiums for all health insurance beneficiaries, regardless of age, sex, or lifestyle choices. To mitigate costs, insurers might raise deductibles and make provider networks narrower and less attractive to would-be fertility patients. Insurers would also intrude into reproductive decision-making through the authorization and approval process.

That authorization process will likely become even more inefficient and cumbersome if he forces taxpayers to pay for government-funded IVF, which Trump supports as an alternative. (Trump didn’t address the impact of such a program on the budget deficit.)

Whether indirectly, through health insurance mandates, or directly from a government program, Trump proposes to socialize IVF. For someone who has referred to Kamala Harris as “a socialist lunatic,” this is more than a little hypocritical.

Travis Fisher and Josh Loucks

Just north of Boston in Everett, Massachusetts sits the poster child for irrational energy permitting in the United States. The Everett Marine Terminal is a facility that connects imported liquefied natural gas (LNG)—often from Trinidad, more than 2,200 miles away—to natural gas delivery networks in New England. This is an absurd outcome for at least three reasons:

New England demands natural gas, which generated 55 percent of the electricity on the New England power grid in 2023 and heats about half of the homes in Massachusetts,
Abundant natural gas resources are being developed nearby. However, states like New York can abuse environmental statutes like the Clean Water Act to block any new pipeline that would move shale gas to New England. The Marcellus shale gas play (the most productive formation in the country) extends through Pennsylvania into New York, which shares a long border with Massachusetts, and
Even if no new pipelines were built through New York state from Pennsylvania to Massachusetts, several American LNG export terminals (in Maryland, Georgia, Louisiana, and Texas) could supply New England if not for arcane laws like the Jones Act. As my Cato colleague Colin Grabow explains, the Jones Act “restricts domestic shipping to vessels that are US-flagged, built, owned, and crewed,” which effectively bans LNG shipments between US ports.

It would be a dark comedy of errors if the people of New England suffered because of inept energy policies and unnecessary barriers to energy resources even beyond predictably higher prices. As one example, fuel security has been a concern for the New England grid for several years, and many believe it is a matter of time until the region faces blackouts during a prolonged winter storm. James Danly, former commissioner and chairman of the Federal Energy Regulatory Commission (FERC), stated:

Some areas of the country, particularly New England, are suffering the effects of severe natural gas transmission capacity constraints. … Without action being taken to relieve these constraints, an eventual failure of the electric system in some regions appears very likely.

Although New England epitomizes the hobbled state of energy production and delivery in America, it is by no means the only region facing steep barriers to new energy supplies. American energy production from all resources (and in all regions) is impaired by permitting issues.

The recent growth in wind and solar energy has placed those industries among the energy suppliers in the United States that face steep regulatory barriers to new projects, a position the oil and natural gas industries have occupied for years. In other words, now that wind and solar have joined the party, longstanding permitting problems are receiving renewed attention from lawmakers.

The Senate’s Draft Permitting Bill

Released in late July, the Energy Permitting Reform Act of 2024 (S. 4753) appears on the surface to be a step toward more production of both hydrocarbon and renewable energy resources. However, the draft legislation fails to address fundamental challenges to all energy resources and unreasonably favors specific resources like onshore renewables and offshore wind. The strongest provisions of the legislation—including an apparent rebuke of the Department of Energy’s pause on LNG exports in Section—are watered down by several weak provisions.

Onshore Renewables: Section 207 (Improving Renewable Energy Coordination on Federal Land) requires relevant federal agencies to “establish a target date for the authorization of not less than 50 gigawatts of renewable energy production on federal land by not later than 2030.” This provision builds on language in the Energy Act of 2020, which established a goal of 25 gigawatts by 2025. Section 207 also provides for the 50-gigawatt goal to be revised periodically.

Offshore Wind: Section 302 (Offshore Wind Energy) requires the Secretary of the Interior to “establish an initial target date for an offshore wind energy production goal of 30 gigawatts,” which dovetails with President Biden’s offshore wind goal of 30 gigawatts by 2030. Total installed offshore wind capacity in 2023 was 42 megawatts, just 0.14 percent of the 30 gigawatt (30,000 megawatt) target. In earlier articles, we have detailed the high cost of offshore wind.

Transmission: Sections 401 (Transmission Permitting) and 402 (Transmission Planning) would accelerate the buildout of electric transmission by codifying and expanding several policies included in FERC’s Order No. 1920. We critiqued that order earlier this year because it would “socialize the cost of the most aggressive climate and renewable energy goals of some states and corporate customers at the expense of consumers and taxpayers everywhere.”

For opponents of FERC’s Order No. 1920, the language in sections 401 and 402 should be troubling because one of the key arguments against the order is that it lacks a statutory basis and could be overturned by the courts in a post-Chevron world. The Senate bill also weakens the cost allocation language in Order No. 1920 by further reducing the benefits threshold from “roughly commensurate” with costs (a standard established in case law) to not “trivial in relation to the costs sought to be allocated.” (Page 49)

Taken together, the transmission provisions are a step in the wrong direction that would be codified in statute, preempting any potential court victory over FERC Order No. 1920.

Subsidies on Steroids

As the saying goes, “There is no transition without transmission.” Under current law, taxpayers will foot the bill for the energy expansion enabled by more transmission. Specifically, subsidies in the Inflation Reduction Act (IRA) are available to various resources that require an expanded transmission grid to interconnect and deliver energy. The potential $3 trillion cost to taxpayers will only be intensified and accelerated by the expansion of transmission for renewables.

Today, the lack of available transmission is a barrier to new-generation technologies eligible for the tax credits in the IRA. For example, generators can only claim the Production Tax Credit (PTC) if they can produce energy and deliver it to the grid (and avoid being curtailed for lack of transmission capacity). Further, PTC eligibility will expand to include even more resources in 2025, so the pressure to expand transmission will only grow in the coming years as these resources rush to harvest subsidies. Expanding the transmission system for the benefit of subsidized resources would hurt taxpayers because it would put the PTC on steroids.

A Free-Market Path Forward

It is an unforced error that we face energy scarcity in a nation that leads the world in natural gas production by a wide margin and has a wealth of renewable energy potential and hydrocarbon reserves. By favoring a resource-neutral set of reforms, policymakers can enact lasting, non-distortionary permitting reforms and unleash American energy. But real reform, as the Competitive Enterprise Institute points out, requires amending underlying environmental statutes, eliminating resource favoritism, and repealing distortionary energy subsidies (don’t forget to throw in Jones Act reform for good measure!). The Senate’s recent attempt doesn’t cut it.