The U.S. Senate voted Aug. 10 to advance a $1 trillion bipartisan infrastructure bill, the first in many years. This is a good thing, in general, even if the process getting here was fraught with tempestuous politicking and ego-management in the halls of power.
But amid the self-congratulations coming from the nation’s capital over Congress doing its job, it’s easy to overlook the fact that we recently and narrowly averted two major crises.
The national eviction moratorium, first enacted at the dawn of the COVID-19 pandemic, expired July 31. More than 11 million renters are behind on the rent, and an estimated 3.6 million faced eviction within months. After a bit of political hot potato between Congressional Democrats and President Biden over who should do what, Biden went ahead and extended the moratorium until Oct. 3.
(That moratorium only slowed the rate of evictions; Eviction Lab has tracked nearly a half-million eviction lawsuits that were filed by landlords during the pandemic so far.)
At the same time, the administration extended the federal student loan forbearance program, which was set to expire Sept. 30, until Jan. 31, 2022. Nearly 45 million people in the U.S. have $1.7 trillion in accumulated student debt to pay.
These are not just young people. Borrowers 50 and older owe an average of $41,059 each, The Washington Post has reported, either for their own or their children’s education, compared with an average debt of $33,090 held by younger borrowers.
While there was some justifiable relief that these two moratoriums were extended, especially as the next wave of COVID-19 is surging among unvaccinated populations, the victories are ringing a bit hollow. So much more could have been done, and still can be.
Both programs are lifelines for millions of Americans. Renters who lost work during the pandemic and had no other income sources were at risk of losing their homes. Students who defaulted on their loans faced a mountain of financial penalties on top of their already too-expensive debts. These are big structural problems in our economy.
In response, the administration took the path of least resistance and kicked the can down the road. Those crises are still waiting to strike again once the new moratoria run out. Possible solutions are out there, but right now they don’t seem to have the political support to get through Congress, even on a good day when the Senate is doing its job.
Right now, several organized campaigns are working to cancel rent entirely. And that’s because the moratorium on evictions didn’t stop the back rent from mounting up. Once the moratorium expires, all that accumulated back rent will come due. It’s a safe bet that very few unemployed renters who had to stop payments during the pandemic have been able to save up a year or more of back rent in that time.
On the other hand, many landlords are not the super-rich corporate villains they’re made out to be, but small-business owners dependent on rental income to pay their mortgages. Nearly half of the 48.2 million rental housing units are in buildings comprising one to four units. Three-quarters of those units are owned by individuals, and 7.9 million of those owners have a mortgage or some other kind of debt (42% of all rental properties are financed by mortgages or other debts). Some landlords have the means to ride out the pandemic without income, but others are twisting into financial knots keeping foreclosure or predatory acquisitions at bay.
Setting aside the legal gray area we’d enter if the federal government started invalidating leases across the country, solving this problem boils down to putting cash into the hands of people who need it so that the bills—rents, mortgages, necessary renovation loans—get paid. Even proponents of canceling rent, such as U.S. Rep. Ilhan Omar of Minnesota, who drafted a bill in the U.S. House of Representatives, acknowledge that many property owners also need help.
To be fair, putting cash in people’s pockets for housing is what the government tried to do. And it largely failed.
The first installment of the Emergency Rental Assistance Program, passed in December 2020, allocated up to $25 billion to state, territorial and tribal governments to support renters. The American Rescue Plan passed by Congress in March 2021 allocated an added $21.5 billion.
In our federal system, federal rental assistance is distributed through local government, and not all those institutions are equally capable of distributing the money efficiently, fairly, or at all. And state-level efforts to enact their own protections on top of the federal response also vary widely. On Aug. 12, the Supreme Court cut the heart out of New York state’s eviction moratorium, potentially exposing thousands of renters to eviction.
While landlords also have been eligible to apply for federal rental assistance, it’s not clear how many have. What is clear is that less than 7% of the total allocation has reached either renters or landlords—just $3 billion dispersed out of $46.5 billion allocated.
It’s impossible to understand how we got here without acknowledging the extremely stingy approach the United States took in providing direct financial support to individuals during the pandemic, compared with other wealthy industrialized nations. Under the Trump administration, individuals received a maximum of $1,800 in direct support (plus $1,100 per child) spread out over two rounds of direct payments. The American Rescue Plan added $1,400 per adult and child to the total, paid in a single installment.
That grand total of $3,200, plus whatever rental assistance people could obtain, plus an added 13 weeks of unemployment assistance to a total of 26 weeks—which allowed states to expand who qualified for unemployment without necessarily raising the amount of money paid out—was supposed to keep us all housed and fed during the pandemic.
With the average monthly rent in the U.S. being $1,062, direct support amounts to three months of rent, and quite a bit less in many cities. And that doesn’t include expenses for food, transportation, or anything else.
By contrast, many other industrialized nations provided much more generous packages. The United Kingdom paid out 80% of the salaries of employees temporarily laid off, and also enacted a mortgage holiday for homeowners. Japan paid up to 90% in wage subsidies to businesses on condition they retain their employees during the shutdown. Germany enacted a similar program (at 60%), and also included a broad palette of other aid, such as loan guarantees and equity investments to significantly affected companies.
It goes without saying that many of those other countries also have universal health care systems, so a public health crisis didn’t also turn into a financial crisis for those who became ill.
In the U.S.’s decentralized economy, it may be that the best intentions of the feds are just too easily handicapped by bureaucratic snafus (or incompetence) at the local level. Certainly, having a governor and legislature who take the pandemic seriously is going to yield better public health results than those who insist on politicizing it. (I’m looking at you, Florida.)
And yet it’s also possible that direct cash payments to individual taxpayers through the IRS may have been the most efficient way of providing aid, even if many recipients have already spent the money, are still unemployed, and live in fear of eviction once the rent moratorium expires again.
The only way we’re going to get ahead of the problem will be if politicians get over their aversion to spending money on the people. The economic canard that only the free market can solve problems, and that the government never can, has been refuted. But significant numbers of Democrats (and almost all Republicans) still abide by it, preferring to tinker with marginal tax rates to see if one of the second- or third-order effects will be that businesses hire more people and pay them more. (Spoiler: They don’t.)
Student loans are another story. That’s because the student loan program is centralized; the federal government is the holder of 92% of all student debt, and in theory, it could change the number in the budget and declare the debts forgiven. (The government can literally create money out of nothing—every issued loan, treasury bill, or disbursement to regional banks is new money that keeps the economy running.)
A growing chorus in Washington is urging Biden to cancel up to $50,000 in student debt per borrower. Some naysayers, such as House Speaker Nancy Pelosi, have said the president can’t just do that unilaterally, but the truth is, we won’t know until he tries it and someone else tries to stop him.
And putting an extra $400 each month into the pockets of formerly indebted borrowers will likely give the economy a big boost.
In both examples—either direct income support to avoid eviction, or student loan forgiveness—the key is that money winds up in the hands of the people, and they in turn pay their bills, so landlords can pay their mortgages, and everyone pays their taxes.
That’s the theory, in any event. In practice, far too many grifters have their hands in the cookie jar, so to speak, and the tax code has long been exploited by the ultra-wealthy at the expense of everyone else.
The pandemic showed us with stark clarity where our economy’s weak points were. The whole point of the “Build Back Better” slogan Biden campaigned on should have been to address the deep systemic issues we face, including with inequitable housing, the perennial crises of the unhoused, skyrocketing costs, student debt, lack of national health care, and many, many more.
These particular twin crises of unpaid rent and unpaid student debt are going to come back to bite us soon. It would be nice to have a better plan in place than to just kick the can down the road again.
Here’s a thought: President Biden has an ambitious plan to enlarge the social safety net—the biggest increase in social services since the 1960s. The Senate also just cleared a key vote to pack a lot of things into a $3.5 trillion budget reconciliation bill that can be approved by a simple majority—no Republicans necessary!
It would be useful if, in addition to creating a bunch of new programs that we need, we also invest in fixing some of our older long-standing problems. Highway bills are fine, but if we really want to build back better, we need to recognize that the market can only begin to work its “magic” when money is put into the hands of the people.
If that means the government needs to step in to write a check, so be it. We certainly have the money for it, now that we’re ending our 20-year occupation of Afghanistan and 18-year occupation of Iraq.
But even if that weren’t the case, the government can create the money it needs if it wants to. It just has to decide it wants to.