Cuba’s newly legalized private businesses are paying their workers many, many times more than what they had been making when they worked for the communist government.
https://x.com/DanielAlmanPGH/status/1844554537182388317
https://twitter.com/DanielAlmanPGH/status/1844554537182388317
https://miamiherald.com/news/nation-world/world/americas/cuba/article276456256.html
I asked ChatGPT: If a person has little money, please list a low-cost meal plan for one day that would maximize nutrition and minimize cost.
I asked ChatGPT:
If a person has little money, please list a low-cost meal plan for one day that would maximize nutrition and minimize cost.
This is the answer that it gave:
Creating a low-cost meal plan that maximizes nutrition involves choosing affordable, nutrient-dense foods. Here’s a sample meal plan that aims to balance cost, nutrition, and simplicity:
Breakfast: Oatmeal with Fruit and Seeds
Oats: Cooked with water or a small amount of milk (or a plant-based alternative). Oats are inexpensive and provide fiber, protein, and various vitamins and minerals.
Flax Seeds: Add a tablespoon of ground flax seeds to the oatmeal for omega-3s and additional fiber.
Banana: Sliced banana on top for added vitamins and potassium.
Cost Estimate: ~$0.50–$1.00
Lunch: Lentil Soup with Spinach
Lentils: A great, low-cost source of protein and iron. Cook with onions, garlic, and a few spices.
Spinach: Add a handful of fresh or frozen spinach to the soup for vitamins A, C, K, and folate.
Carrots and Celery: Optional, for added flavor and nutrition.
Cost Estimate: ~$1.00–$1.50
Snack: Apple and Peanut Butter
Apple: Provides fiber and vitamin C.
Peanut Butter: A small spoonful for protein and healthy fats.
Cost Estimate: ~$0.50–$1.00
Dinner: Rice and Beans with Vegetables
Brown Rice: Provides complex carbohydrates and fiber.
Black Beans: A good source of protein, iron, and fiber. Use canned beans for convenience, or cook dried beans if you have more time.
Mixed Vegetables: Use frozen vegetables for affordability and nutrition.
You can stir-fry or steam them to add to the rice and beans.
Cost Estimate: ~$1.00–$1.50
Total Daily Cost Estimate: ~$3.00–$5.00
Nutritional Highlights:
Protein: Lentils, beans, and peanut butter provide good sources of protein.
Fiber: Oats, flax seeds, apples, and vegetables contribute to high fiber intake.
Vitamins and Minerals: Fruits, vegetables, and legumes offer essential vitamins and minerals.
Tips to Keep Costs Low:
1. Buy in Bulk: Purchase staples like oats, rice, and lentils in bulk to save money.
2. Use Frozen Vegetables: They’re often cheaper than fresh and have a longer shelf life.
3. Seasonal Produce: Choose fruits and vegetables that are in season for lower prices.
4. Store Brands: Opt for store brands or generic products which are typically cheaper.
This meal plan is designed to be affordable while providing a good range of nutrients. Adjustments can be made based on local prices, seasonal availability, and personal preferences.
In the long run, the only way to enforce price controls on food is to adopt communism. This explains the step by step process of how that happens.
https://x.com/RobertMSterling/status/1824840348008391127
By Robert M Sterling
August 17, 2024
People need to stop overreacting about Kamala’s plan to reduce food inflation, as if it would lead to communism, mass starvation, and the end of America.
I worked in M&A in the food industry. Here’s a step-by-step summary of what would actually happen:
1. The government announces that grocery retailers aren’t allowed to raise prices.
2. Grocery stores, which operate on 1-2% net margins, can’t survive if their suppliers raise prices. So the government announces that food producers (Kraft Heinz, ConAgra, Tyson, Hormel, et. al.) also aren’t allowed to raise prices.
3. Not all grocery stores are created equal. Stores in lower-income areas make less money than those in higher-income areas, as the former disproportionately sell lower-margin prepackaged foods (“center of the store”) instead of higher-margin fresh products like meat (“perimeter of the store”). Because stores in lower-income areas aren’t able to cover overhead (remember, even if their wholesale costs are fixed, their labor, utilities, insurance, and other operating expenses aren’t fixed… yet), grocery chains start to shut them down. Food deserts in rural areas and in low-income urban areas alike become worse.
4. Meanwhile, margins for food producers are also quickly eroding. Their primary costs (ingredients, energy, and labor) aren’t fixed, and their shrinking gross profits leave less cash flow available to cover overhead, maintain facilities, and reinvest in additional production capacity.
5. Grocery chains, which have finite shelf space, start to repurpose their stores (those they didn’t have to shut down, I should say) to sell more non-price-controlled items—everything from nutrition supplements to kitchenware to apparel—and less price-controlled food products. Your local Kroger or Safeway starts to look and feel more like a Walmart.
6. Food producers stop making products with lower margins. Grocery chain start competing with each other to secure inventory. Since they can’t compete by offering stronger prices (remember, producers aren’t allowed to raise prices here, and, even if they could, grocery chains no longer have the gross profit to bear price increases), they compete on things like payment terms.
7. Small grocery chains start to shut down entirely, or get sold to larger chains like Kroger. In addition to not being able to cover fixed costs, a major reason for this is because they can no longer reliably secure delivery of products, due to producers prioritizing sales to larger customers, which are able to leverage their stronger balance sheets to offer superior payment terms.
8. Smaller food producers—which typically sell via distributors, rather than directly to grocery chains—start to go out of business. Because these producers have an additional step their value chains, and because they have lower volumes over which to spread their fixed costs, their cost structure is inherently disadvantaged compared to major food producers. When grocery stores aren’t able to raise prices, cutting product costs becomes all the more important, and deprioritizing purchases from smaller producers is an easy way to do so.
9. As supply chains break down, lines start to form outside grocery stores every morning. Cities assign police officers to patrol store parking lots, and food producers draft contingency plans to assign armed escorts to delivery trucks.
10. The federal government announces a program to issue block grants for states to purchase and operate shuttered grocery stores. The USDA also seizes closed-down production facilities.
11. The government announces that prices for all key food costs—corn, wheat, cattle, energy, etc.—are also now fixed, to stop “profiteers” from gouging the now-government-operated food industry.
12. Shockingly, the government struggles to operate one of the most complex industries on the planet. The entire food supply chain starts imploding.
13. Communism, mass starvation, and the end of America quickly ensue.
Hey wait a second
CNN understands that prices are based on supply and demand: “An influx of new residents drove up housing costs in the Tampa Bay region, leaving it with one of the highest annual inflation rates in the country last year. Now, the Tampa metro has one of the lowest rates, mostly thanks to beefed-up housing supply.”
https://finance.yahoo.com/news/housing-affordability-america-finally-improving-133523145.html
Housing affordability in America is finally improving. Not so much in these cities
By Bryan Mena, CNN
August 27, 2024
With the Federal Reserve all but confirmed to cut interest rates next month, there is finally some light at the end of the tunnel for Americans grappling with the most unaffordable housing market in decades. But the old saying that “real estate is local” still rings painfully true.
In June, home-price growth accelerated the most in New York, San Diego and Las Vegas, according to the latest S&P CoreLogic Case-Shiller 20-City Home Price Index released Tuesday. For several months, San Diego led with the fastest increase in home prices, eventually getting toppled by New York in May — a corner of the country already notorious for its high cost of living.
And it’s not just home buyers feeling the sting: A recent report from Moody’s Analytics showed that the situation is dire for renters, too. New York City, Miami and Fort Lauderdale in Florida, Los Angeles and Northern New Jersey were the five most rent-burdened places in America during the second quarter, the report found, based on rent prices and family incomes (or the rent-to-income ratio.) Renters in those cities allocate more than 30% of their income toward rent, Moody’s said.
That’s in contrast to regions seeing declining shelter costs, such as Tampa, Florida; Denver and Minneapolis, according to Consumer Price Index data. A pickup in home construction has been key for those metropolitan areas because it can ease upward pressure on prices. An influx of new residents drove up housing costs in the Tampa Bay region, leaving it with one of the highest annual inflation rates in the country last year. Now, the Tampa metro has one of the lowest rates, mostly thanks to beefed-up housing supply.
Nationwide, the housing market has finally shown signs of improvement. Year-over-year home-price growth has slowed over the past several months, as measured by the national Case-Shiller index, rising 5.4% in June from a year earlier, down from 5.9% in May, though the index itself reached a fresh record high that month. The average 30-year mortgage rate is currently at its lowest level since May 2023, housing inventory has expanded every month this year so far, and household incomes have continued to grow at a brisk pace, which is factored in to housing affordability,
Good luck living comfortably in New York
Affordability is being stymied for different reasons across different places, but the one region currently taking the crown as America’s most unaffordable housing market seems to be New York.
The Big Apple is the most rent burdened place in the US by far, according to the Moody’s report, where renters dedicated about 58% of their income toward rent during the second quarter. Nationally, that figure stood at about 27% in the April-through-June period. The New York-Newark-Jersey City metro had one of the nation’s highest annual inflation rates in July, with the month-over-month increase “primarily driven by higher prices for shelter,” the Labor Department’s Regional Commissioner William J. Sibley said in a release.
“It’s heartbreaking when I look at the data for New York,” said Lu Chen, senior economist at Moody’s who was the lead author of the group’s report. “There is just no way that many families, depending on the household structure, can afford to live in any unit without sharing.”
The median rent in Manhattan, home to Times Square and New York’s iconic skyscrapers, was $4,300 in July, according to a report from brokerage firm Douglas Elliman and Miller Samuel Real Estate Appraisers and Consultants. In Brooklyn, the median rent in July was $3,600; and in northwest Queens, it was $3,450 that month, the report said. The median national rent for all bedrooms and property types is $2,106, according to Zillow.
Home-price growth in New York was the nation’s fastest, rising 9% in June from a year earlier, according to Case-Shiller data.
Miami’s unaffordability problem persists
Regions that have seen strong population growth in recent years, particularly many cities in the Sun Belt, have seen housing costs climb. From Miami to Atlanta and Phoenix, an influx of new residents in many American cities — either because folks were seeking warmer weather or a lower cost of living — has driven up demand, including for housing. Initially, that resulted in some growing pains: The shelter indexes for the Miami, Atlanta, Phoenix and Tampa metros areas each reached a record high in 2022, CPI data shows.
But nearly all of those metros have now reversed course: Inflation in Atlanta, Tampa and Phoenix has plummeted over the past year, thanks to slowing housing costs. The one exception is Miami, standing in contrast to its counterpart across the state.
“Tampa is a fast-growing area and there’s significant building going on because we have a lot of available land in surrounding areas like Hillsborough County and Pasco County,” Brian Adcock, chair of the Tampa Bay Chamber, told CNN previously. “There are a lot more neighborhoods now and that’s the key difference with Miami.”
Miami was the second-most rent-burdened place in America, Moody’s reported, with renters dishing out about 37% of their income for rent. The CPI shelter index for the metropolitan area registered at a 5.8% annual rate in June, according to the latest data, compared to the 5.1% rate seen nationally in July.
A person with $315,000 in debt says it’s “not fair” that she has to pay it back. Despite having a business degree, she doesn’t seem to understand the concept of compound interest, or why her balance keeps growing.
https://x.com/DanielAlmanPGH/status/1828083309446144067
https://www.yahoo.com/news/gen-xer-6-figure-salary-091202958.html
A Gen Xer with a 6-figure salary and over $315,000 in debt can’t afford a home: ‘This country has failed us’
By Ayelet Sheffey
August 25, 2024
Shirin Tajani, 46, is struggling to manage her student loans and credit card debt.
Despite earning six figures as a nurse, she’s unable to afford homeownership.
She’s hopeful the SAVE student-loan repayment plan will go through to give her lower payments.
Shirin Tajani, 46, went back to school in 2011 to get her nursing degree, and she’s been practicing in the field ever since.
But despite having multiple degrees, achieving homeownership is out of reach due to the over $315,000 in debt she carries from her student loans and credit card.
Tajani moved from Pakistan to the US when she was 10 years old, and her parents wanted her to have the opportunity to benefit from the higher education system in the US. She received a bachelor’s degree in business in 2002 and worked in a corporate job, but after being laid off in 2009, she decided she wanted to become a nurse.
That’s where most of her student loans came from, and while she’s now earning a six-figure salary, according to documents reviewed by BI, it’s not enough to pay off the balance alongside other expenses like rent. She’s even picked up a second job outside her full-time nursing career to help make ends meet, meaning that she now works six days a week.
“I was in a situation that I had to pivot and change my career so that I can stay grounded,” Tajani told BI. “I just feel like this country has failed us, having to come here, not even being born here, going to school, and then you get tied down to these loans.”
Tajani’s student loans are currently on forbearance due to legal challenges confronting President Joe Biden’s new SAVE income-driven repayment plan. Through that plan, Tajani said she got around $250 monthly payments — significantly lower than the nearly $600 she was paying prior.
For now, she’s waiting to see a final court decision on the SAVE plan. She’s among millions of Americans struggling with consumer debt. The New York Federal Reserve recently found that Americans now owe a record $1.14 trillion on their credit cards, with balances rising 5.8% from a year ago. Credit card interest rates are also at record highs, making it even harder for consumers to pay off their debt.
When it comes to student loans, Gen Xers and boomers have the highest median balance, per a recent report from the New School’s Schwartz Center, preventing many of them from achieving financial goals later in life.
With rising home prices and high interest rates in recent years, coupled with an increase in consumer debt, Tajani said she feels defeated that she cannot progress financially — especially after putting herself on the front lines as a nurse during the pandemic.
“I’m trying to get on a budget, trying to cut back on expenses, and it’s been hard. It’s been really hard,” she said. “We basically retooled ourselves, but then we get punished at the end.”
‘It’s sad to see a lot of us suffer’
With high interest rates to combat inflation during the pandemic, it’s no surprise Americans are struggling with consumer debt while juggling other basic expenses. Austan Goolsbee, president of the Chicago Federal Reserve, told BI that the level of delinquencies on consumer products, like credit cards, is “blowing through normal a little bit.”
“The level of delinquencies is a bit uncomfortably high, and that’s a warning sign,” he said, referring to potential signals of an economic downturn.
Tajani is doing all she can to get out of her debt, but she also has some private student loans along with her federal loans, which makes it difficult to stay on top of all of her balances. That’s why the SAVE plan is so important to her — it would give her manageable payments to help her focus on affording her other expenses.
“I have to have my second job to pay my loans because without that, I wouldn’t be able to make payments,” Tajani said. “So I just feel like seeing all these lawsuits blocking these programs for us is just not fair. And it’s sad just to see a lot of us suffer believing that our country would help us out, and they’re not doing anything for that.”
While the SAVE plan is blocked, the Education Department is working to implement other relief efforts, like its broader version for student-loan forgiveness using the Higher Education Act of 1965. The department plans to begin providing that relief to borrowers in October, but legal threats to that plan are already looming, meaning borrowers will likely face delays getting the relief, if at all.
For now, Tajani remains hopeful relief will go through in some way while recognizing the uncertainty lawsuits and the election could bring.
“Right now, we just wait and see what happens. I’m hopeful they’ll do something because I’m sure the government doesn’t want people to default, and that could affect a lot of people’s livelihoods,” she said. “So I’m hopeful something will come about, but I just don’t know when that’s going to happen.”
Kamala Harris’s proposal to tax unrealized capital gains sounds very similar to France’s wealth tax. People who don’t understand human nature, economics, and math should not be allowed to create tax policy.
https://x.com/DanielAlmanPGH/status/1827141184252199309
Old Money, New Money Flee France and Its Wealth Tax
By Molly Moore
July 16, 2006
Eric Pinchet, author of a French tax guide, estimates the wealth tax earns the government about $2.6 billion a year but has cost the country more than $125 billion in capital flight since 1998.
Wall St. Journal: “Their Student Debt Disappeared, but Their Financial Problems Didn’t… In a July study, Yannelis and others found that borrowers experiencing student-loan forgiveness largely replaced it with other forms of debt.”
Their Student Debt Disappeared, but Their Financial Problems Didn’t
By Terell Wright and Melissa Korn
August 17, 2024
The Wall St. Journal
Getting tens of thousands of dollars in student debt canceled isn’t guaranteeing an immediately better financial life for Americans.
So far, about 943,000 people have had their loans eliminated through the federal government’s Public Service Loan Forgiveness plan, with balances averaging $72,000 when they are cleared. Nearly two million more had their student debt erased through programs for disabled borrowers or under income-driven repayment plans.
An additional 1.3 million borrowers with $20 billion in loans have been approved for discharge through a program aimed at students who were misled by their colleges about things like job prospects. Many more are set for relief soon or waiting in limbo as further plans face challenges in the courts.
The plan has been welcomed by advocacy groups and Democrats but has received pushback from Republican lawmakers and some economists, who have criticized the cost of debt cancellation and warn that it could force future spending cuts or tax increases.
In interviews, the borrowers who have had their loans wiped away say the act has given them more freedom or helped them sleep easier at night. But it hasn’t been a panacea for all of their financial stress.
Borrowers who were late on payments or even defaulted on their student debt are often still digging out of other financial problems, including with their credit scores or other forms of debt. And since many weren’t making regular student-loan payments, they don’t find themselves with a new stream of cash just because the monthly bill stopped coming.
“For the typical borrower, the forgiveness is nice but not life-changing,” said Constantine Yannelis, an associate professor of finance at the University of Chicago who studies household finance.
Annetta Walker borrowed $36,000 in the early 1990s to help her get a graphic-design degree at the now-defunct International Academy of Design and Technology in Chicago. That amount more than doubled as she struggled to pay and interest accrued.
In February 2023, she received a letter stating she was approved for her loans to be discharged. The balance, $82,000, was wiped clear this May.
Walker hoped the forgiveness would help her qualify for a mortgage and allow her to take out a parent PLUS loan for her son, who began college last year on a partial football scholarship. She was denied the parent loan, and her son borrowed more himself.
She recently lost her job as a legal assistant and said she feels even further from her goals now.
“I hope one day I’ll be able to buy a home and stop living this transient lifestyle,” Walker said. “And I’m hopeful for some sort of generational wealth for my kids.”
Savings rate
Economists say it is hard to draw broad conclusions just yet, since borrowers have a range of spending habits and earnings. In addition, the bulk of those who have had their loans forgiven are still new to life without having to make the payments.
In a July study, Yannelis and others found that borrowers experiencing student-loan forgiveness largely replaced it with other forms of debt.
Auto-loan borrowing rose by $230, and credit-card borrowing by $220, on average. Home-loan debt also increased, which could boost wealth in the long term.
The researchers found that borrowers whose debt was forgiven experienced almost no change in their credit scores, likely because they were taking on new loans that countered the benefit of the old ones disappearing. Many also already had a bump when the federal government paused certain student-loan payments during the pandemic, potentially limiting the impact now that their balances are erased.
Kimberly Acquaviva, a professor at the University of Virginia School of Nursing, took out around $90,000 in loans to earn her bachelor’s, master’s and Ph.D. from the University of Pennsylvania in the 1990s.
Acquaviva earned a nice living—about $150,000 at the time her debt was wiped—and made $862 in monthly student-loan payments. Through much of her career, she and her wife shared one car, limited their vacation travel and lived in a more affordable, less convenient neighborhood.
Acquaviva learned her loans would be forgiven shortly before her wife died of cancer, and said it eased some of her panic around raising their son in a one-income household.
“It took some of the sandbags off of my back. But it was not, ‘Oh yay, now we can do a fun thing.’ It was, ‘OK, now I’m not in as bad a situation as I could have been,” Acquaviva said.
Acquaviva, now 52 years old, remarried two years ago. She and her husband give priority to paying down their house and saving for retirement when they have some extra cash. They are also helping her stepdaughter pay off some student loans and hope to help her son, who is finishing up a master’s this winter.
“What has changed isn’t so much our quality of life but our sense that we have some choice of how to use that $900 a month,” she said.
For profit
The Biden administration has been particularly aggressive in trying to get loans forgiven for students who went to certain for-profit schools, saying the borrowers were duped by predatory institutions that lied about the value of their programs.
In May, the administration said it would relieve nearly 317,000 former Art Institute students of $6.1 billion in debt, saying the for-profit school misrepresented employment prospects and career support for students.
Jett Duran studied game design at the Art Institute in Phoenix beginning in 2014 but dropped out a few months shy of graduation when his father fell ill. Duran initially made $8 an hour at JCPenney before landing a job as an office manager, then in sales and a corporate role. To keep his costs low, he lived with his in-laws for a while.
“I make my payments, regardless if I have to sell a foot,” Duran said of his mentality during much of his 20s.
Duran and his wife bought a place of their own in the summer of 2020, when student-loan payments were paused for the pandemic.
Duran, 28, now works as a 3-D artist for Trackman, which designs golf simulators, earning $22 an hour with some benefits. Instead of directing $300 each month to his student loans, he puts those funds toward gas money and diapers for his 10-month-old daughter. He is planning a vacation next year to Puerto Vallarta, Mexico.
“I’m happy I get to be in this financial position where I can actually make memories with my family,” Duran said.
When your opponent calls you ‘communist,’ maybe don’t propose price controls?
https://www.washingtonpost.com/opinions/2024/08/15/kamala-harris-price-gouging-groceries/
When your opponent calls you ‘communist,’ maybe don’t propose price controls?
It’s hard to exaggerate how bad Kamala Harris’s price-gouging proposal is.
By Catherine Rampell
August 15, 2024
“Price gouging” is the focus of Vice President Kamala Harris’s economic agenda, her presidential campaign says. She’ll crack down on “excessive prices” and “excessive corporate profits,” particularly for groceries.
So what level counts as “excessive,” you might ask? TBD, but Harris will ban it.
That’s the thing about price gouging: As has been said of hardcore pornography, you know it when you see it.
It’s not hard to figure out where this proposal came from. Voters want to blame someone for high grocery bills, and the presidential candidates have apparently decided the choices are either the Biden administration or corporate greed. Harris has chosen the latter.
In a news release Wednesday, her campaign said the first 100 days of her presidency would include the “first-ever federal ban on price gouging on food and groceries — setting clear rules of the road to make clear that big corporations can’t unfairly exploit consumers to run up excessive corporate profits on food and groceries.”
What are these “clear rules of the road” or the thresholds that determine when a price or profit level becomes “excessive”? The memo doesn’t say, and the campaign did not answer questions I sent seeking clarification.
The most likely template for Harris’s proposal is a recent bill from Sen. Elizabeth Warren (D-Mass.). (Harris co-sponsored similar legislation with Warren in 2020, when Harris was a senator.) Warren’s bill would ban any “grossly excessive price” during any “atypical disruption” of a market. Alas, no definition was provided for these terms, either; rather, the bill would empower the Federal Trade Commission to enforce bans using any metric it deems appropriate.
It’s hard to exaggerate how bad this policy is. It is, in all but name, a sweeping set of government-enforced price controls across every industry, not only food. Supply and demand would no longer determine prices or profit levels. Far-off Washington bureaucrats would. The FTC would be able to tell, say, a Kroger in Ohio the acceptable price it can charge for milk.
At best, this would lead to shortages, black markets and hoarding, among other distortions seen previous times countries tried to limit price growth by fiat. (There’s a reason narrower “price gouging” laws that exist in some U.S. states are rarely invoked.) At worst, it might accidentally raise prices.
That’s because, among other things, the legislation would ban companies from offering lower prices to a big customer such as Costco than to Joe’s Corner Store, which means quantity discounts are in trouble. Worse, it would require public companies to publish detailed internal data about costs, margins, contracts and their future pricing strategies. Posting cost and pricing plans publicly is a fantastic way for companies to collude to keep prices higher — all facilitated by the government.
Normally, the government doesn’t like collusion. In fact, the Harris campaign’s statement about her anti-“price gouging” agenda highlights a case she won as California attorney general against companies colluding to fix prices for LCD flat screens. Presidential administrations of both parties have similarly pursued cases against cartels and other anti-competitive conduct.
That’s because price-fixing is already illegal. And it should be! It’s important to distinguish between real cartel behavior (whether among TV-makers or meatpackers) vs. temporary spikes in prices and profits due to high demand or supply-chain disruptions. Harris’s economic advisers are either too confused or lazy to tell the difference. They don’t seem to know the history of these kinds of policies and apparently haven’t thought very hard about what would make markets more competitive or improve the lives of voters.
They don’t even seem terribly familiar with what’s happening to grocery prices, where the battle against inflation has, believe it not, pretty much already been won.
On Wednesday, a government report showed that grocery prices in July were up a measly 1 percent from last year, as the White House itself touted. Indeed, annual grocery price inflation has hovered around that level for the past eight months, way down from the double-digit inflation in mid-2022.
Additionally, profit margins for supermarkets are notoriously thin. Despite Harris’s (and Warren’s) accusations about “excessive corporate profits,” those margins remained relatively meager even when prices surged. The grocery industry’s net profit margins peaked at 3 percent in 2020, falling to 1.6 percent last year. If that sounds high, note that the average net profit margin (what’s left over after expenses) for all public companies nationwide is 8 percent.
So what actually happened with grocery inflation, if not “price gouging” (however defined)? Superstrong consumer demand plus major supply disruptions (the coronavirus pandemic, bird flu, Russia’s invasion of Ukraine, etc.) pushed prices and profits up. Once those shocks abated and consumers started spending down their pandemic savings, price growth cooled.
These are the kinds of facts the Harris campaign should be explaining to consumers, not exploiting for demagogic gain because push-polling suggests people are mad about “greed.”
But more to the point: If your opponent claims you’re a “communist,” maybe don’t start with an economic agenda that can (accurately) be labeled as federal price controls. We already have plenty of economic gibberish coming from the Republican presidential ticket. Do we really need more from the other side, too?
Kamala Harris to propose ban on ‘price gouging’ for food, groceries
https://www.washingtonpost.com/business/2024/08/15/kamala-harris-economic-policy-2024/
Kamala Harris to propose ban on ‘price gouging’ for food, groceries
The vice president on Friday will make her most substantive economic policy announcement since launching her campaign.
By Jeff Stein
August 15, 2024
Vice President Kamala Harris on Friday will unveil a proposed ban on “price gouging” in the grocery and food industries, embracing a strikingly populist proposal in her most significant economic policy announcement since becoming the Democratic Party’s nominee.
In a statement released late Wednesday night, the Harris campaign said that if elected, she would push for the “first-ever federal ban” on food price hikes, with sweeping new powers for federal authorities. Harris on Friday will also announce plans to lower prescription drug and housing costs, the campaign said.
Harris’s plans amount to a sharp escalation in the economic populism even of President Joe Biden, who had already pulled the party to the left on economic policy compared with his Democratic predecessors. While offering some overtures to the business elite, Harris is attempting to respond to intense voter frustration over rising prices — particularly grocery prices — with a far-reaching proposal.
Harris’s plan will include “the first-ever federal ban on price gouging on food and groceries — setting clear rules of the road to make clear that big corporations can’t unfairly exploit consumers to run up excessive corporate profits on food and groceries,” the campaign said in a statement.
The exact details of the campaign’s plan were not immediately clear, but Harris said she would aim to enact the ban within her first 100 days, in part by directing the Federal Trade Commission to impose “harsh penalties” on firms that break new limits on “price gouging.” The statement did not define price gouging or “excessive” profits.
Republican and many Democratic economists see mandatory price controls as a counterproductive form of government intervention that discourages firms from producing enough supply to meet demand.
“This represents a return to the lazy, failed economic policies of the 1970s, when price controls proved to be a disaster for the economy,” said Brian Riedl, a senior fellow at the Manhattan Institute, a conservative-leaning think tank. “It shows Harris is pandering for easy answers on the economy, even more aggressively than Biden had. Biden had talked about price gouging but was not this aggressive, seeking reforms to actually ban it.”
Harris’s policy announcement comes as Democratic policymakers have been looking for clues into her plans for the economy. Biden staffed his White House and key regulatory agencies with appointments significantly to the left of President Barack Obama’s team; and on a range of policies — antitrust, trade, labor rights, industrial policy — he shattered the party consensus that had prevailed since the Clinton administration, pushing for more government intervention in nearly every facet of the nation’s economy.
Much of Harris’s approach so far suggests continuity with Biden’s policymaking, including her selection as a running mate of Minnesota Gov. Tim Walz, who has enacted a state child tax credit and universal free school lunch, among other liberal policies.
Beyond her interest in advancing the “care agenda,” such as child care and paid family leave, Harris has also been a stalwart ally of labor unions, making one of her first campaign stops with the United Auto Workers. Within the administration, Harris was a strong advocate of reducing medical and student debt and played a role in the administration’s work to crack down on “junk fees.”
Deputy Commerce Secretary Don Graves is viewed as a potential top economic adviser to Harris if she is elected, as are Deputy Treasury Secretary Wally Adeyemo, longtime advisers Rohini Kosoglu and Mike Pyle, and top Treasury official Brian Nelson, who recently joined her campaign team, according to five current and former administration officials, who spoke on the condition of anonymity to describe private relationships.
Other advisers include Brian Deese, who served as Biden’s top economic adviser, and Gene Sperling, who previously served in the Clinton, Obama and Biden administrations and recently joined the campaign’s policy team. Grace Landrieu is the campaign’s policy director.
On many key policy questions, however, tensions are lingering within the Democratic Party over what Harris’s views are and how she might break with Biden.
The biggest potential change may be in how she approaches business. Harris met with JPMorgan chief executive Jamie Dimon in March, for instance, and has had a long-standing relationship with financier Blair Effron and Lazard President Raymond J. McGuire, an early supporter, said two other people familiar with the matter, who also spoke on the condition of anonymity to describe private conversations. The Business Roundtable, a group of the nation’s leading executives, has also invited Harris to speak and is in touch with her team. (A BRT spokeswoman pointed out that was in practice with the organization’s policy and that it is also talking with Trump’s team. Trump spoke to the group earlier this year.)
“Her team is smart to acknowledge there’s a buildup of pressure in parts of the business community and it’s worth talking to them,” said Zach Butterworth, who led private sector engagement for the White House and is now at Lafayette Advisors, a strategic advisory firm. “She knows they’re an important voice.”
But liberals have grown concerned that these olive branches could be used to poke holes in their plans.
On antitrust policy, the Harris campaign has faced calls to make clear that she stands behind Lina Khan, the crusading former law professor whom Biden tapped to lead the Federal Trade Commission, after a top donor said he hopes Harris replaces Khan. Some advisers say it makes little sense for Harris to preemptively vow to stand by Khan — especially on a matter that they believe is of little interest to voters in the Rust Belt. But her long-standing ties to tech executives in California — often the targets of Khan and Gary Gensler, chair of the Securities and Exchange Commission — have deepened suspicions among some critics of Silicon Valley that she could reverse Biden’s tough approach to the industry, including on cryptocurrencies and AI regulation.
For now, considerations on policy will probably be driven almost entirely by ensuring Democrats win the presidential election. The Trump campaign is repeatedly attacking Biden and Harris’s work on policy, with Trump spokeswoman Karoline Leavitt on Wednesday saying in a statement: “Under Kamala Harris, everything costs 20 percent more than it did under President Trump. … America cannot afford another four years of Kamala’s failed economic policies.
Harris last weekend endorsed Trump’s proposal to eliminate taxes on tips, despite the consensus among Democratic policy experts that such a measure is badly designed and unfair. Some advisers have also suggested to the campaign that Harris embrace a tax cut for small businesses to distance herself from the party’s liberal base, or signal a warmer view of the crypto industry than other Democrats.
But her plan to combat prices in food and groceries has suggested that Harris may even move left of Biden on some economic policies. Grocery prices have remained roughly flat over the past year, rising only 1 percent, but have jumped 26 percent since 2019, according to Elizabeth Pancotti, director of special initiatives at the Roosevelt Institute, a left-leaning think tank.
“It’s hard to get down an aisle in the grocery store without finding an example of price gouging or price fixing, and it’s costing us dearly,” said Lindsay Owens, executive director of the Groundwork Collaborative, a left-leaning think tank. “It’s wonderful to see the vice president unleash a suite of policy proposals to crack down on these cheaters and protect Americans’ pocketbooks.”
The Urban Family Exodus Is a Warning for Progressives
The Urban Family Exodus Is a Warning for Progressives
In large urban metros, the number of children under 5 years old is in a free fall.
By Derek Thompson
August 5, 2024
Children—and the millions of private decisions to have or not have them—are in the news these days, for regrettable reasons. Ohio Senator J. D. Vance, the Republican vice-presidential candidate, has made a habit of excoriating progressives who don’t have a record of procreation. In November 2020, he implied that childless Democratic leaders are “sociopathic.” In an interview with the Fox News host Tucker Carlson in 2021, he lamented that the country was being run by “a bunch of childless cat ladies.” Later that year, in an address in Southern California, he said he wanted “to take aim at the left, specifically the childless left … because I think the rejection of the American family is perhaps the most pernicious and most evil thing that the left has done in this country.”
Vance’s commentary is rude and revisionist. Childless adults aren’t psychotic, and many childless people are desperate to bear children. Suggesting that their unsuccessful reproductive efforts amount to sociopathy is cruel. More substantively, in 2022, it was progressive Democratic leaders—that witchy coven of child-loathing felinophiles—who pushed for an extension to the refundable child tax credit, while Republicans overwhelmingly rejected a deal that would have sent tens of billions of dollars to parents.
But, at the risk of giving Vance any credit here, I must admit that progressives do have a family problem. The problem doesn’t exist at the level of individual choice, where conservative scolds tend to fixate. Rather, it exists at the level of urban family policy. American families with young children are leaving big urban counties in droves. And that says something interesting about the state of mobility—and damning about the state of American cities and the progressives who govern them.
First, the facts. In large urban metros, the number of children under 5 years old is in a free fall, according to a new analysis of Census data by Connor O’Brien, a policy analyst at the think tank Economic Innovation Group. From 2020 to 2023, the number of these young kids declined by nearly 20 percent in Manhattan, Brooklyn, Queens, and the Bronx. They also fell by double-digit percentage points in the counties making up most or all of Los Angeles, Chicago, San Francisco, Philadelphia, Minneapolis, and St. Louis.
This exodus is not merely the result of past COVID waves. Yes, the pace of the urban exodus was fastest during the high-pandemic years of 2020 and 2021. But even at the slower rate of out-migration since then, several counties—including those encompassing Manhattan, Brooklyn, Chicago, Los Angeles, and San Francisco—are on pace to lose 50 percent of their under-5 population in 20 years. (To be clear, demographics have complex feedback loops and counter-feedback loops; the toddler population of these places won’t necessarily halve by the 2040s.)
Nor is the exodus merely the result of declining nationwide birth rates. Yes, women across the country are having fewer children than they used to. The share of women under 40 who have never given birth doubled from the early 1980s to the 2020s. But the under-5 population is still declining twice as fast in large urban counties as it is elsewhere, according to O’Brien’s census analysis.
So what’s the matter with Manhattan (and L.A. and Chicago)?
After the Great Recession, during a period of low urban crime, young college-educated people flocked to downtown areas to advance their career. Retail upscaled, and housing costs increased. Soon, families started to leave. In 2019, the economist Jed Kolko showed that in cities including San Francisco, Seattle, and Washington, D.C., young, high-income, college-educated whites were moving in, and multiracial families with children were moving out. The coronavirus pandemic, which resulted in school closures and loosened the tether between home and office, pushed even more families to flee.
“I’m deeply worried about a family-exodus doom loop,” O’Brien told me. “When the population of young kids in a city falls 10 or 20 percent in just a few years, that’s a potential political earthquake. Almost overnight, there are fewer parents around to fight for better schools, local playgrounds, or all the other mundane amenities families care about.”
Behavior is contagious, as the Yale sociologist Nicholas Christakis has shown. If you have a friend who smokes or exercises, it significantly increases the odds that you will do the same. The same principle might hold for having or not having kids. As young children become scarce in big cities, people in their 20s and 30s who are thinking about having children will have fewer opportunities to see firsthand how fulfilling parenthood can be. What they’re left with instead are media representations, which tend to be inflected by the negativity bias of the news.
At a glance, these trends may not seem like they have anything to do with contemporary progressivism. But they do. America’s richest cities are profoundly left-leaning, and many of them—including New York, Los Angeles, and San Francisco—are themselves ensconced in left-leaning states. These places ought to be advertisements for what the modern progressive movement can achieve without meddlesome conservatism getting in the way, at the local or state level. If progressives want to sell their cause to the masses, they should be able to say: Elect us, and we’ll make America more like Oakland. Or Brooklyn. Or suburban Detroit. If they can’t make that argument, that’s a problem.
Right now it’s hard to make the argument, because urban progressivism is afflicted by an inability to build. Cities in red states are building much more housing than those in blue states. In 2024, Austin, Raleigh, and Phoenix are expected to expand their apartment inventory more than five times faster than San Diego, Baltimore, or San Francisco. Housing policy is the quantum field of urban life, extending across every sector and making contact with every problem. When cities fail on housing policy, the failure ripples.
Housing has for several years been the most common reason for moving, and housing in America’s biggest and richest blue cities is consistently the least affordable. According to the Joint Center for Housing Studies at Harvard University, among the cities with the highest median price-to-income ratios in 2023, nine of the top 10 were in California or Hawaii. The five cities with the most cost-burdened renters and owners were Los Angeles, Miami, San Diego, Honolulu, and Oxnard, followed by Riverside, Bakersfield, the New York metro area, and Fresno.
One hidden effect of expensive housing is that it raises the cost of local services and creates shortages of workers willing to accept low wages in labor-intensive industries, such as child care. As a result, large urban areas have more expensive child care, even relative to their higher levels of income. A 2023 analysis by the U.S. Department of Labor and the Women’s Bureau found that infant child care devoured the highest share of family income in large urban counties. Nationwide, the average family with at least one child under the age of 5 devotes about 13 percent of family income to pay for child care. But the typical infant day-care center in San Francisco and Chicago consumes about 20 percent of a local family’s income. In Boston, Manhattan, and Brooklyn, it’s more like 30 percent. Child care is just another example of how constrained housing supply can poison parts of the economy that don’t immediately seem to have anything to do with it.
To be fair, one might argue that federal policy nudges families toward the suburbs. Federal spending on highways lubricates suburban transportation while urban transit sputters, and the mortgage interest deduction reduces the tax hit from homeownership. But a national trend toward the burbs doesn’t explain why cities in red states have managed to build houses, or better restrain child-care inflation, better than those in blue states.
Conservatives like J. D Vance think they’re getting mileage out of judging the private-life decisions of urban progressive men and women. But these decisions exist … well, in the context of all in which we live. They are shaped by place and by policy. The steady march of the childless city is not merely the inevitable result of declining birth rates. It’s the result of urban policy, conceived by, written by, and enacted by liberals. Progressive leaders aren’t family-hating sociopaths, but they currently preside over counties that young families are leaving. They should pride themselves instead on building places where those same families would want to stay.
NASA satellite photo: Korean Peninsula at Night
South Korea is lit up everywhere.
The only part of North Korea that’s lit up is the capital city where all the rich politicians live.
https://www.earthdata.nasa.gov/worldview/worldview-image-archive/korean-peninsula-at-night
Bernie Sanders: “Billionaires should not exist.” Me: “Please name a country that doesn’t allow people to become billionaires, but still has a first world standard of living.”
https://x.com/DanielAlmanPGH/status/1809261328609026510
Washington Post, July 16, 2006: “Old Money, New Money Flee France and Its Wealth Tax… the wealth tax earns the government about $2.6 billion a year but has cost the country more than $125 billion in capital flight since 1998.”
By Daniel Alman (aka Dan from Squirrel Hill)
July 5, 2024
Only people who don’t understand math are in favor of a wealth tax.
Nearly two decades ago, the Washington Post wrote the following:
Old Money, New Money Flee France and Its Wealth Tax
By Molly Moore
July 16, 2006
Eric Pinchet, author of a French tax guide, estimates the wealth tax earns the government about $2.6 billion a year but has cost the country more than $125 billion in capital flight since 1998.
Only someone who doesn’t understand math would think that that was a good idea.
Ethiopia has chosen to greatly increase its use of technology and its standard of living.
By Daniel Alman (aka Dan from Squirrel Hill)
June 16, 2024
Ethiopia has chosen to greatly increase its use of technology and its standard of living.
The Ethiopia of today is absolutely nothing like the Ethiopia that people my age (I’m 53) saw on TV when we were growing up.
Back then, the news blamed Ethiopia’s famines on drought.
Now, this video says that during several recent droughts, there was no famine, and that was because of the choices that they made regarding irrigation, modern farming methods, and other advances in technology.
The same video also shows Ethiopians manufacturing clothing for export to rich countries, and they pointed out that Ethiopia is currently at the approximate level of development than China was at one generation ago.
I totally support these tremendous improvements.
Los Angeles recently gave developers an incentive to limit new apartment buildings to no more than 15 units
By Daniel Alman (aka Dan from Squirrel Hill)
April 13, 2024
The Los Angeles Times recently reported:
Though it’s known as the “mansion tax,” except for rare exceptions it applies to all properties sold for more than $5 million, no matter if they are gas stations, strip malls, apartment buildings or actual mansions. Under the measure, a seller is charged 4% of the sales price for properties sold above $5 million and below $10 million.
At $10 million and above, the tax is 5.5%.
Apartment developers and real estate brokers said additional costs from ULA make it even harder to earn a reasonable profit in what can be a risky business.
That’s because when building apartments, developers often sell their finished product, which would probably trigger the ULA tax for any building over 15 units, according to Greg Harris, a real estate broker with Marcus and Millichap. Even developers who hold onto their properties typically need to take out a mortgage on the finished building — and Harris said lenders are willing to give less because they too would need to pay the tax if they foreclose and sell the property.
Los Angeles recently gave developers an incentive to limit new apartment buildings to no more than 15 units.
Given that the city already has a severe shortage of housing, I think this new policy is a bad idea.
Is it a good thing, or a bad thing, that black people today no longer have these high paying jobs?
By Daniel Alman (aka Dan from Squirrel Hill)
April 9, 2024
CNN just reported the following:
For nearly 50 years, only Black men caddied The Masters. One day, they all but vanished
For Jariah “Jerry” Beard, caddie for 1979 Masters champion Fuzzy Zoeller, it meant he could earn as much in a day as his parents could in a week working at the city’s John P. King mill.
So here’s my question: Is it a good thing, or a bad thing, that black people today no longer have these high paying jobs?
California’s minimum wage hike blamed for Fosters Freeze store closing down — worker laments she’d rather have the old wage because ‘now we don’t have a job’
https://moneywise.com/news/economy/californias-minimum-wage-hike-blamed-for-fosters-freeze
California’s minimum wage hike blamed for Fosters Freeze store closing down — worker laments she’d rather have the old wage because ‘now we don’t have a job’
The owner says small businesses can’t survive, but is she right?
By Jing Pan
April 5, 2024
California’s decision to increase the minimum wage for fast food workers to $20 an hour is primarily aimed at improving the standard of living for these workers in a state that’s notoriously expensive.
However, there’s concern that this new law, which went into effect on April 1, may have a more complicated impact on the local economy.
A Fosters Freeze outlet in Lemoore shut down on Monday — the same day the new minimum wage kicked in — and its workers are now out of a job.
Some employees initially thought it was an April Fool’s joke.
“We had gotten a text in the group chat that we were shutting down, and I completely thought it was an April Fools joke,” former employee Jason Boado told KMPH Fox 26 News.
Unfortunately, it was not a joke. In a text to KMPH, Loren Wright, the owner of the Fosters Freeze, wrote, “Last thing I ever wanted was to close down. By Friday night I knew I was most likely not gonna be able to stay open but I didn’t want to ruin their Easter Sunday.”
Small businesses ‘can’t survive’
According to Wright, the substantial rise in minimum wage has made it challenging for small businesses to stay afloat.
“Small businesses can’t survive a 120% plus min wage increase over the last 10 years. We are all more broke than we were 10 years ago its clear raising min wage isn’t helping,” he wrote.
California has seen a consistent and significant increase in its minimum wage over the past decade. In 2014, the state’s minimum wage was $9.00 an hour. Today, it’s set at $16 an hour, rising to $20 an hour for fast food workers.
Monica Navarro, former assistant general manager of that Fosters Freeze location, told Fox Business that she and her former colleagues would prefer the old wage over being unemployed.
“From the people that I spoke to, my employees, we would have rather stayed at the wage that we did have before, just because now we don’t have a job,” she said. She also observed the impacts of the new minimum wage on those fortunate enough to keep their jobs, stating, “Those who are still working in the areas around us that went up to $20 an hour, they got their hours severely cut and it’s a lot less people working on shifts, so their jobs got a lot more difficult.”
Owners explore other options, majority in US support hikes
Navarro noted that the closure of the Fosters Freeze location is not an isolated incident, cautioning, “This is not the first business that’s closing, there’s already a few local businesses for me that are closing, so I feel like this is just only the beginning.” Critics have long pointed out the unintended consequences of a minimum wage hike.
These fears are not unfounded.
The Wall Street Journal looked at state records and found that California restaurants had outlined plans to cut hundreds of jobs in the months leading up to the April 1 wage mandate.
However, the report adds that many restaurant operators are looking for other ways to cover the cost, like reducing hours, closing during slower parts of the day or serving menu items that take less time to make. Some are also choosing automation, which is something “Dirty Jobs” host Mike Rowe recently warned about.
Menu prices have risen at several locations in the Los Angeles area, per the New York Post. Scott Rodrick, who owns 18 McDonald’s locations in the state, told CNN he has raised prices about 5% to 7% in the last three months to anticipate the higher wages. Instead of cutting any worker hours, he also plans to grow his delivery operations and make decisions about large capital expenses, like postponing updating a dining room or putting off buying new grills or rooftop HVACs.
Nationwide, not all small business owners are against this trend. In fact, the majority (61%) surveyed earlier this year by CNBC said they support raising the minimum wage in their state, even though only one in five (19%) believe that it will help their business.
I hope the people of South Africa will vote the African National Congress out of power, and replace it with the Inkatha Freedom Party
https://www.yahoo.com/news/once-africa-world-class-city-123908974.html
Once Africa’s world-class city, Johannesburg is decaying before residents’ eyes
March 30, 2024
From the outside, Johannesburg does not look like it is doing well.
Roads littered with potholes. Broken traffic lights not repaired for months. Rotting rubbish in the streets.
But from the inside, the scale of the problems facing the biggest city in South Africa and the richest and most industrialised in the continent is even worse.
From taps regularly running dry to daily four-hour power cuts – known locally as load shedding – life for many people in Jo’burg has declined dramatically.
The decline of southern suburb Forest Hills is a case in point.
Previously dominated by poorer white people, in recent decades it has become more mixed as black people sought to move out of the city’s apartheid-era townships.
“Although never wealthy, things used to at least work [around here],” Stuart Marais, a longtime resident and local city councillor, told The Telegraph.
“Traffic signals are regularly vandalised and are not repaired in under six to eight months. Grass is growing into our roads which haven’t been fixed for decades,” said the 63-year-old. “Broken cars lie around and many residents put their rubbish out onto the streets and it lies there rotting.”
It was “far too dangerous” to walk around at night, he said. “The decay in this part of Johannesburg is massive.”
Mr Marais says the blame lies squarely with the municipality, where the African National Congress hold the most seats.
Here’s proof that Seattle Democrats hate the working class: “A driver who made $931 in a week this time last year saw his earnings drop by half to $464.81 in a comparative week this year.”
https://yahoo.com/news/seattle-law-mandating-higher-delivery-110012588.html
https://twitter.com/DanielAlmanPGH/status/1768988315569512731
Why did the city council of Minneapolis pass a law that is causing Uber and Lyft to stop doing business in the city?
https://twitter.com/DanielAlmanPGH/status/1768773365815205973
The only people who are surprised by this are the ones who don’t understand Economics 101
https://finance.yahoo.com/news/seattles-minimum-pay-ordinance-hurting-140001012.html
Seattle’s minimum pay ordinance hurting delivery drivers it meant to help
February 14, 2024
The Seattle City Council’s recently implemented minimum payment ordinance for app-based workers like those who work handling deliveries through apps such as DoorDash, Uber Eats and Instacart is hurting the workers it intended to help.
In 2022, the Seattle City Council enacted a first-of-its-kind ordinance that aimed to help ensure that app-based delivery drivers earn a minimum wage plus tips and compensation for expenses. That law took effect last month and effectively requires companies to pay the greater of a minimum per-minute amount of $0.44 and a minimum per-mile amount of $0.74, or a minimum per-offer amount of $5.
In practice, this has prompted companies like DoorDash and Instacart to pay their independent contractor delivery drivers $26 or more per hour to comply with the regulation and cover their costs. That amount is well above the city of Seattle’s regular minimum wage of $19.97 per hour and has forced those companies to pass some of those costs on to consumers placing orders.
Gary Lardizabal, who lives in Seattle and has made deliveries through Uber since 2016, told FOX Business that the delivery business has fallen off dramatically since the first week of the ordinance’s implementation as consumers balk at higher prices for orders.
“My experience in downtown Seattle, which is booming with Amazon and other tech workers, wait times are half the day,” Lardizabal said in an interview. “There’s reduced orders for drivers and couriers… and there’s definitely reduced business for restaurants.”
“All of them you can see there’s just less bags on the delivery trays, the racks. Chipotle used to just have bags upon bags — that’s gone down,” Lardizabal said. He said one restaurant told him they had averaged 170 orders per day through gig companies before the ordinance, and that last Thursday at 6 p.m. they only had 16 orders placed that day.
If a person can’t pay back a $12,000 loan in 10 years, they’re not responsible enough to be borrowing money in the first place
https://www.yahoo.com/news/type-student-loan-forgiveness-coming-095401294.html
A new type of student-loan forgiveness is coming this month
By Ayelet Sheffey
February 2, 2024
Student-debt relief through a reform to the SAVE plan is coming in February.
Those who originally borrowed $12,000 or less and made at least 10 years of payments could see relief.
Borrowers not enrolled in the SAVE plan will need to do so to make use of the benefit.
More student-loan borrowers can expect debt relief starting this month through a new repayment reform.
In early January, the Education Department announced that borrowers enrolled in the SAVE income-driven repayment plan who originally borrowed $12,000 or less would begin to see their loans forgiven in February if they made at least 10 years of qualifying payments.
The department is rolling out this relief early — when SAVE was announced over the summer, that provision of the plan wasn’t set to be implemented until summer 2024.
“Giving borrowers with smaller loans a faster path to being debt-free will help many borrowers avoid financial distress and have peace of mind,” James Kvaal, the undersecretary of education, said at the time.
It’s unclear how many borrowers will immediately qualify for relief or when those notices will start being sent out this month. Additionally, borrowers who are not enrolled in the SAVE plan will need to enroll at studentaid.gov to qualify for this benefit.
While any borrower can apply for SAVE, the monthly estimated payments will differ — a single borrower making under $32,800 or a family of four making under $67,500 would receive $0 payments under the plan. For other borrowers, SAVE will calculate the most affordable payment based on income.
The Education Department said that borrowers who originally borrowed over $12,000 could still see quicker relief — for every $1,000 above the $12,000 threshold, the borrower is set to get relief after an additional year of payments.
The department said it would continue evaluating borrowers’ accounts on “a regular basis” to identify those who qualify for relief through this SAVE provision.
Other forms of ongoing relief
The new SAVE provision is just one of the Education Department’s relief efforts for targeted groups of borrowers. Over the past year, the department has been implementing account adjustments for borrowers on income-driven repayment plans and in the Public Service Loan Forgiveness program who have made their qualifying payments but have yet to see relief.
Most recently, in January, the department announced 74,000 additional borrowers were getting $5 billion in debt relief — of which 44,000 were public servants, and 30,000 of them were in repayment for at least 20 years but still waiting for loan forgiveness.
Biden touted the account adjustments during a campaign speech in South Carolina last month, saying: “I found another way to help more than 3.7 million people — teachers, nurses, police officers, firefighters — with $130 billion in relief and causing the economy to grow faster as a consequence of that.”
Along with the adjustments, the department is working through a new process to get broader relief to borrowers after the Supreme Court struck down Biden’s first attempt. Using the Higher Education Act of 1965, the department has held three negotiation sessions with stakeholders to help craft this second attempt at relief.
On Thursday, it announced it would be holding a fourth session — following pressure from some advocates, Democratic lawmakers, and even some of the negotiators themselves — to discuss relief for borrowers experiencing hardship. At the end of the third session, the department proposed five categories of borrowers to be included in the relief, but a hardship category was left out.
“We look forward to discussing another avenue for borrower relief related to hardship at our next negotiation session,” Kvaal said.
It’s unclear when exactly borrowers can expect this broader form of relief. Following the fourth negotiation session on February 22 and 23, the department plans to publish the proposed text of the rule to the Public Register to allow an opportunity for public comment. According to the Higher Education Act guidelines, the rule would not go into effect until 2025 unless the education secretary opted for early implementation.
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