The Social Security program ...
represents our commitment as a society to the
belief that workers should not live in dread that
a disability, death, or old age could leave them
or their families destitute. -
President Jimmy Carter, December 20,
1977.
[This law] assures the
elderly that America will always keep the promises
made in troubled times a half century ago ... [The
Social Security Amendments of 1983 are] a monument
to the spirit of compassion and commitment that
unites us as a people.- President
Ronald Reagan, April 20, 1983
So
said presidents Carter and Reagan, but that was
before 1996, when the US Congress voted to allow
federal agencies to offset portions of Social
Security payments to collect debts owed to
those agencies. (31 USC
ง3716). Now we read of horror stories like this:
I'm a 68-year-old grandma of 2 young
grandchildren. I went to college to upgrade my
employment status in 1998 or 1999. I finished in
2000 and at that time had a student loan balance
of about 3,500.00.
Could not find a job
and had to request forbearance to carry me. Over
the years I forgot about the loan, dealt with
poor health, had brain surgery in 2006 and the
collection agents decided to collect for the
loan in 2008.
At no time during the 6-7
year gap did anyone remind me or let me know
that I could make a minimum payment on the loan.
Now that I am on Social Security (have been
since I was 62), they have decided to garnishee
my SS check to the tune of 15%.
I have
not been employed since 2004 and have the two
dependents ... I don't dispute that I owed them
the $3,500.00 but am wondering why they let it
build up to somewhere around $17,000/20,000
before they attempted to collect.
Her
debt went from $3,500 to over $17,000 in 10 years!
How could that be?
It seems that congress
has removed nearly every consumer protection from
student loans, including not only standard
bankruptcy protections, statutes of limitations,
and truth in lending requirements, but protection
from usury (excessive interest).
Lenders
can vary the interest rates, and some borrowers
are reporting rates as high as 18-20%. At 20%,
debt doubles in just three-and-a-half years; and
in seven years, it quadruples. Congress has also
given lenders draconian collection powers to
extort not just the original principal and
interest on student loans but huge sums in
penalties, fees, and collection costs.
The
majority of these debts are being imposed on young
people, who have a potential 40 years of gainful
employment ahead of them to pay the debt off. But
a sizeable chunk of US student loan debt is held
by senior citizens, many of whom are not only
unemployed but unemployable.
According to
the New York Federal Reserve, 2 million US seniors
aged 60 and over have student loan debt, on which
they owe a collective $36.5 billion; and 11.2% of
this debt is in default. Almost a third of all
student loan debt is held by people aged 40 and
over, and 4.2% is held by people over the age of
60. The total student debt is now over $1
trillion, more even than credit card debt. The sum
is unsustainable and threatens to be the next debt
tsunami.
Some of this debt is for loans
taken out years earlier on their own schooling,
and some is from co-signing student loans for
children or grandchildren. But much of it has been
incurred by middle-aged people going back to
school in the hope of finding employment in a bad
job market. What they have wound up with is
something much worse: no job, an exponentially
mounting debt that cannot be discharged in
bankruptcy, and the prospect of old age without a
social security check adequate to survive on.
Gone is the promise of earlier presidents
of a "commitment to the belief that workers should
not live in dread that a disability, death, or old
age could leave them or their families destitute".
The plight of the indebted elderly is reminiscent
of the Irish immigrants who came to America after
a potato famine in the 19th century, who were
looked upon in some places as actually lower than
slaves. Plantation owners kept their slaves fed,
clothed and cared for because they were valuable
property. The Irish were expendable, and they were
on their own.
It is obviously not a good
time to raise interest rates on student debt, but
they are set to double on July 1, to 6.8%. Many
lawmakers in both parties agree that the current
3.4% rates should be extended for another year,
but they can't agree on how to find the $6 billion
that this would cost. Republicans want to take the
money from a healthcare fund that promotes
preventive care; Democrats want to eliminate some
tax benefits for small business owners.
Congress cannot agree on $6 billion to
save the students, yet they managed to agree in a
matter of days in September 2008 to come up with
$700 billion to save the banks; and the Federal
Reserve found many trillions more. Estimates are
that tuition could be provided free to students
for a mere $30 billion annually. The government
has the power to find $30 billion - or $300
billion or $3 trillion - in the same place the
Federal Reserve found it: it can simply issue the
money.
Congress is empowered by the
Constitution to "coin money" and "regulate the
value thereof", and no limit is set on the face
amount of the coins it creates. It could issue a
few one-billion dollar coins, deposit them in an
account, and start writing checks.
But
wouldn't that be inflationary? No. The Fed's own
figures show that the money supply (M3) has shrunk
by $3 trillion since 2008. That sum could be added
back into the economy without inflating prices.
Gas and food are going up today, but the whole
range of prices must be considered in order to
determine whether price inflation is occurring.
Housing and wages are significantly larger
components of the price structure than
commodities, and they remain severely depressed.
There is another way the government could
find needed funds without raising taxes, slashing
services, or going further into debt: congress
could re-finance the federal debt through the
Federal Reserve, interest-free.
Canada did
this from 1939 to 1974, keeping its national debt
low and sustainable while funding massive programs
including seaways, roadways, pensions, and
national health care. The national debt shot up
only when the government switched from borrowing
from its own central bank to borrowing from
private lenders at interest. The rationale was
that borrowing bank-created money from the
government's own central bank inflated the money
supply, while borrowing existing funds from
private banks did not. But even the Federal
Reserve acknowledges that private banks create the
money they lend on their books, just as central
banks do.
United States taxpayers now pay
nearly half a trillion dollars annually to finance
our federal debt. The cumulative figure comes to
$8.2 trillion paid in interest just in the past 24
years. By financing the debt itself rather than
paying interest to private parties, the government
could divert what it would have paid in interest
into tuition, jobs, infrastructure and social
services, allowing us to keep the social contract
while at the same time stimulating the economy.
For students, at the very least the
bankruptcy option needs to be reinstated, usury
laws restored, predatory practices eliminated, and
the cost of education brought back down to earth.
One possibility for relieving the burden on
students would be to give them interest-free
loans.
The government of New Zealand now
offers zero-percent loans to New Zealand students,
with repayment to be made from their income after
they graduate. For the past 20 years, the
Australian government has also successfully funded
students by giving out what are in effect
interest-free loans. The loans in the Australian
Higher Education Loan Programme (or HELP) do not
bear interest, but the government gets back more
than it lends because the principal is indexed to
the Consumer Price Index (CPI), which goes up
every year.
Predatory lenders are keeping
us in debt peonage through misguided economics and
bank-captured legislators. We have people who
desperately want to work, to the point of going
back to school to try to improve their chances;
and we have mountains of work that needs to be
done.
The only thing keeping them apart is
that artificial constraint called "money", which
we have allowed to be created by banks and let out
at interest when it could have been created by
public institutions for public purposes, either by
direct issuance or through publicly-owned banks.
We just need to recognize our oppressors and throw
off their yoke, and the good times can roll again.
Ellen Brown is an attorney and
president of the Public Banking Institute, PublicBankingInstitute.org.
In Web of Debt, her latest of 12 books, she
shows how a private cartel has usurped the power
to create money from the people themselves, and
how we the people can get it back. Her websites
are webofdebt.com and
ellenbrown.com.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
