Wonkbook: Obama’s plan to address the $1.2 trillion student debt problem

June 9

Welcome to Wonkbook, Wonkblog’s morning policy news primer by Puneet Kollipara. To subscribe by e-mail, click here. Send comments, criticism or ideas to Wonkbook at Washpost dot com. To read more by the Wonkblog team, click here.

Wonkbook’s Number of the Day: 8.7 million. That's the number of jobs the economy has gained since the Great Recession's onset, recouping all job losses (but also as the population grew).

Wonkbook’s Chart of the Day: These charts show the continuing rise in public support for legalizing same-sex marriage.

Wonkbook's Top 5 Stories: (1) Election-year all-in on student loans; (2) a not-so-exciting jobs milestone; (3) another same-sex marriage milestone; (4) VA's first fixes; and (5) beyond the environment in environmental regulations.

1. Top story: Obama's student-loan debt push

Obama's expected to issue an executive action on student loans. "Obama, in executive action coordinated with a legislative push by Senate Democrats, will direct the Department of Education to expand the number of people who can take advantage of a law capping payments on federal direct loans to no more than 10 percent of their monthly incomes....The action marks the latest effort by Obama’s administration to advance policies by executive action after being stymied on Capitol Hill....The president has spent much of this year initiating modest changes in programs that may provide a boost to Democrats in advance of the midterm elections. Obama’s action tomorrow will expand a 2010 law....An additional 5 million people who took out loans before October 2007 or haven’t borrowed since 2011 will be eligible." Phil Mattingly in Bloomberg.

Video: President Obama's weekly address. CBS News.

Elizabeth Warren's own student loan measure faces an uphill battle. "President Obama on Saturday signaled his support for a student loan reform measure proposed by Senate Democrats that could come up for a vote next week....He pointed to a bill proposed by Sen. Elizabeth Warren (D-Mass.), that could come up for a vote as early as Wednesday, as a solution....The bill allows graduates with existing federal loans to refinance those loans at the lower interest rates offered to new borrowers. But the proposal has met significant opposition from Republicans, in part because it pays for an increase in government spending through a new tax on top earners." Alexandra Jaffe in The Hill.

Explainer: How Sen. Warren's measure would work. Max Ehrenfreund in The Washington Post.

Chart: The $1.2 trillion student debt problem, by state. Danielle Douglas in The Washington Post.

The backdrop: Rising debt load and tuition hurts the economy. "Despite past actions by the administration, borrowers’ debt load is growing and retarding the ability to buy homes, start businesses or otherwise spend to spur the economy, economists say....About $1 trillion in federal student loans or loan guarantees is outstanding, on top of more than $100 billion in outstanding private student loans that are not federally guaranteed....While economists argue that a postsecondary education is an investment that pays off, average tuition at four-year public colleges has more than tripled over the past three decades, according to the administration, and 71 percent of those who graduated with a bachelor’s degree carried debt, which averaged $29,400." Jackie Calmes in The New York Times.

Primary source: The Congressional testimony of the CFPB's Rohit Chopra from last week.

Good news for graduates: Your job prospects may be getting better. "May's data on jobs and wages fits with earlier predictions of brighter prospects for the 1.8 million Americans graduating from college with bachelor's degrees this year. A survey done this spring by the National Association of Colleges and Employers showed companies plan to hire nearly 9 percent more college graduates compared with 2013. And the survey also showed employers are boosting starting salaries by 1.2 percent over last year. For those graduates who studied science or engineering, this hiring season looks particularly encouraging. One NACE survey showed petroleum engineers are getting starting pay of more than $95,000 a year." Marilyn Geewax in NPR.

Background reading:

Interest rates are going up for federal student loans. Janet Lorin in Bloomberg.

Default rates on federal loans keep rising. Department of Education.

Student-debt forgiveness plans skyrocket, raising concerns over costs, higher tuition. Josh Mitchell in The Wall Street Journal.

Other education reads:

Long read: Why colleges are on the hook for sexual assault. Robin Wilson in The Chronicle of Higher Education.

Top opinion

SUMMERS: Did the financial crisis response focus too much on banks and neglect homeowners? "Atif Mian and Amir Sufi’s House of Debt, despite some tough competition, looks likely to be the most important economics book of 2014; it could be the most important book to come out of the 2008 financial crisis and subsequent Great Recession. Its arguments deserve careful attention, and its publication provides an opportunity to reconsider policy choices made in 2009 and 2010 regarding mortgage debt. House of Debt is important because it persuasively demonstrates that the conventional meta-narrative of the crisis and its aftermath, which emphasises the breakdown of financial intermediation, is inadequate " Lawrence Summers in The Financial Times.

KRUGMAN: Interests, ideology and climate. "There are three things we know about man-made global warming. First, the consequences will be terrible if we don’t take quick action to limit carbon emissions. Second, in pure economic terms the required action shouldn’t be hard to take: emission controls, done right, would probably slow economic growth, but not by much. Third, the politics of action are nonetheless very difficult. But why is it so hard to act? Is it the power of vested interests? I’ve...come to the somewhat surprising conclusion that it’s not mainly about the vested interests....What makes rational action on climate so hard is something else — a toxic mix of ideology and anti-intellectualism." Paul Krugman in The New York Times.

JACOBY: Where Piketty and Marx differ. "Inasmuch as Marx and Piketty look in different directions, so do their solutions. Consistent with his alarm over inequality and distribution, Piketty proposes a progressive global tax on capital, which will “stop the indefinite increase of inequality in wealth.” He admits the idea is “utopian,” but maintains is useful and necessary. “Many people will reject the global tax on capital as a dangerous illusion, just as the income tax was rejected in its time, a little more than a century ago.” Marx’s Capital offers no real solutions." Russell Jacoby in The New Republic.

SALAM: Technology, not regulation, to tackle climate change. "Conservatives often get lectured for failing to embrace cap-and-trade or stringent carbon regulation. Ezra Klein, writing for the liberal news site Vox, observes that Arizona Sen. John McCain favored a cap-and-trade system during his 2008 presidential campaign....But if anything, it is McCain who was wrong in 2008, not Republicans who balk at policies that will raise energy prices. Indeed, rather than avoid talking about climate change and the environment, the right should go on the offense. While the president and his allies back price-hiking regulation, conservatives should call for accelerating price-lowering technological innovation." Reihan Salam in Reuters.

This I learned today interlude: Chimpanzees make monkeys out of humans in video game.

2. We're back to pre-recession employment levels, but...

...it's a not-so-feel-good milestone. "Yes, the number of jobs on United States employers’ payrolls has risen back to its pre-recession levels. But in the six and a half years that have passed, the nation’s population has risen a good deal....So we now have about the same number of jobs as we did then, but about 15 million more people who might wish to hold them. And consider wages. The average private-sector worker took home $838.70 a week in April. In January 2008, if you use April 2014 dollars, that was $818.31. In other words, in the last six and a half years, the average private-sector American worker has seen a total inflation-adjusted pay increase of only 2.5 percent, a lousy $20 a week. And some sectors have come back more strongly than others." Neil Irwin in The New York Times.

@bencasselman: Note on pop. adjustment: We've added 14.5m adults (16+) since 12/07, but only 6.3m working age (16-64). Prime-age (25-54) pop actually DOWN.

The other milestone: 51st consecutive month of private-sector job growth, matching a record. Justin Wolfers in The New York Times.

@JustinWolfers: If you updated your views about the economy today, then you had the wrong prior.

Here's why we can't party like it's 1999. "The U.S. economy is much weaker today than it was in late 1999 and early 2000. Gross domestic product...contracted at a 1% seasonally adjusted annual rate in the first quarter of 2014, the Commerce Department said, and economists forecast a rebound to around 3% in the second quarter. In the fourth quarter of 1999, it had expanded at a 7.1% pace, though growth slowed to a 1.2% annual pace in the first quarter of 2000....The unemployment rate was 4.2% in September 1999...hitting 4% in December and January 2000. By comparison, the jobless rate last month was 6.3%, unchanged from April and down from 6.7% in February and March. And the productivity of U.S. workers was accelerating in the late 1990s." Ben Leubsdorf in The Wall Street Journal.

The good is news is also the bad news. "There's still a big jobs gap, and it's going to take a long time to fill. Maybe the best way to tell that the labor market isn't anywhere near tight — which, a few months ago, people thought it was — is muted wage inflation. Average hourly earnings barely increased in May from $20.51 to $20.54, and over the last twelve months are only up 2.1 percent. It seems pretty clear that the long-term and shadow unemployed do, as a recent Federal Reserve paper argues, exert downward pressure on wages." Matt O'Brien in The Washington Post.

Looking for a jobs-day recap? We've got you covered. Ylan Q. Mui in The Washington Post.

Charts:

Charts: 10 charts that round up the five-year recovery. Ben Casselman in FiveThirtyEight.

How has the economy changed since 2007? Christopher S. Rugaber in the Associated Press.

Primary source: The May jobs report.

The housing sector hasn't been much help. "A dive into the home-building portion of the data shows that the number of construction jobs has been climbing, rising about 7 percent to 2.6 million in May from a year earlier, when electricians and other speciality trade contractors are added. But that's way down from the high of 3.45 million in April 2006, the housing market’s frothy days....While jobs overall are back to their pre-recession peak, residential construction jobs are 34.5 percent below their peak. Even if the specialty contractor jobs are stripped away, the residential construction jobs are still way off, almost 27 percent down from the peak, according to a Freddie Mac analysis." Dina ElBoghdady in The Washington Post.

Europe's going in the opposite direction. "Over all, the number of unemployed workers in the United States was 3 percent higher in May than it was in September 2008. In Germany, where employment fell less than in the United States during the crisis and then rose faster in the recovery, the number of unemployed workers is down by 25 percent. But in every other country in the euro zone, unemployment remains higher, often by large amounts, than it was then." Floyd Norris in The New York Times.

More charts that put the jobs recovery in perspective:

It's taking longer to get back to normal after each recession. Josh Zumbrun in The Wall Street Journal.

The U.S. outperforms other nations in recoveries from financial crisis-induced recessions. Oregon Office of Economic Analysis.

What Yellen & Co. are thinking. "Friday’s U.S. employment report...should reassure Federal Reserve officials that the economy is improving as they have been predicting. It will intensify their debate about when to start raising short-term interest rates, strengthening the hand of those officials who want to move sooner, but the question is far from resolved....The surprise in the report was the stability of the U.S. unemployment rate....A lower jobless rate implies less slack in the economy and more inflation and wage pressure building, which in turn suggests the Fed could lean toward earlier increases in interest rates. But top officials likely won’t be convinced just yet." Jon Hilsenrath in The Wall Street Journal.

@JustinWolfers: For the Fed, the unemployment rate is less relevant--it's hard to interpret these days--and more relevant is the subdued pace of wage growth

Meanwhile, on the jobless-benefits front...crickets. "Democratic efforts to revive the benefits have stalled. Friday's news that the economy added 217,000 jobs and the national unemployment rate held at 6.3 percent in May probably won't change the situation. Lawmakers have moved on." Arthur Delaney in The Huffington Post.

So much for the job-killing health-care law? "Since the Affordable Care Act was signed into law in March 2010, the health care industry has gained nearly 1 million jobs—982,300, to be more precise—according to Bureau of Labor Statistics estimates released on Friday....Booming growth in the heath care industry shouldn’t come as a surprise. The health care sector was gaining about 25,000 jobs per month in the years before the Affordable Care Act, and the law’s infusion of newly insured patients will help bolster providers’ bottom lines." Dan Diamond in Forbes.

Other economic/financial reads:

Interview: The jobs report is flawed. One economist wants to fix that. Danielle Kurtzleben in Vox.

Is Piketty's second law of capitalism really a law? Peter Coy in Bloomberg Businessweek.

Science interlude: Why you shouldn't be cynical.

3. Yet another new milestone for same-sex marriage

America's last unchallenged ban on same-sex marriage brought to court. "Seven couples filed a federal lawsuit Friday challenging the constitutional ban on same-sex marriage in North Dakota, making it the last state in the country to be sued by couples seeking the right to marry in their home state. The lawsuit, filed in U.S. District Court in Fargo, challenges both North Dakota's constitutional ban on gay marriage and its refusal to recognize marriages of same-sex couples who legally wed in other states. That means cases are currently pending in all 31 states with gay marriage bans. Judges have overturned several of those bans since the U.S. Supreme Court struck down part of the federal Defense of Marriage Act last year." Kevin Burbach in the Associated Press.

Interview: Author of the first appellate ruling that allowed same-sex marriage. "Margaret H. Marshall, the former chief justice of the Massachusetts Supreme Judicial Court, wrote the majority opinion in the landmark case Goodridge v. Department of Public Health, which legalized same-sex marriage in Massachusetts. Released on Nov. 18, 2003, the 4 to 3 opinion was the first of its kind by an appellate court in the United States. The ruling gave Massachusetts 180 days to change its marriage licenses and rules, and same-sex couples started to wed in the state on May 17, 2004." Katie Zezima in The Washington Post.

Gay-marriage opponents don't have much fight left in them. "Gay marriage supporters continue to win their battles — almost without exception. A big reason: Because gay marriage opponents don't have much interest in waging the war. A new Washington Post-ABC News poll shows that 56 percent of Americans support the right of gay people to get married, and another 50 percent believe it's a constitutional right. That's pretty much in line with recent polling showing support for gay marriage on the rise. And while gay marriage opponents are an ever-shrinking portion of the population, just as importantly, they are far less keen on pressing the issue." Aaron Blake in The Washington Post.

Methodists fear split over same-sex marriage. "Talk of a possible schism in the United Methodist church — the nation's third largest denomination, with 7.6 million members — has vexed the mainline Protestant group for more than a decade and will likely be a topic of discussion even as clergy, lay leaders and others from the state's 660 congregations gather for the Florida Conference, which opens Wednesday in Lakeland. But even as more Americans approve of same-sex marriage and as homosexual unions gained legal status in 19 states, the denomination's leadership is seeing the discussion reach an impasse of doctrine and scripture." J.D. Gallop in USA Today.

'Orange Is the New Black' interlude: The cute kitten version.

4. What are the first steps the VA is taking to address the scandal?

Here's one of them: Bids for 'purchased care.' "The acting secretary of the Department of Veterans Affairs said on Friday the agency is putting out bids for 'purchased care' that would allow veterans to be treated at other hospitals at the VA's expense while cutting backlogs at its facilities." Jim Forsyth in Reuters.

And another: Ditching the 14-day wait-time goal. "The US Department of Veterans Affairs will abandon its 14-day wait time goal for scheduling patients, acting VA Secretary Sloan Gibson announced Thursday....The scheduling goal created a perverse incentive that was at the heart of the VA scandal. First, the VA asked local hospital administrators to schedule patients quickly, with the promise of financial bonuses if hospitals lived up to the 14-day goal. Then, when local administrators realized the goal was unrealistic, they began to manipulate and falsify the scheduling data so they could still get their financial bonuses. " German Lopez in Vox.

Why fixing the VA scandal will be tough. "Fixing the sprawling agency with an entrenched bureaucracy won’t be easy. It has a management culture marred by cronyism, intimidation and poor oversight from the Department of Veterans Affairs central office. It has a performance-based bonus system that rewards those who falsify records to meet unrealistic quotas. And it simultaneously penalizes supervisors who don’t push their employees to 'cook the books.'" Lindsay Wise in McClatchy Newspapers.

So much for any hope of poaching the Cleveland Clinic's top doc. "The CEO of the Cleveland Clinic, who was approached by the White House about heading the Department of Veterans Affairs, has withdrawn his name from consideration. Delos 'Toby' Cosgrove said in a statement Saturday that he was 'humbled and honored' to have been asked about the post but has decided to stay at the Cleveland Clinic....Cosgrove, a heart surgeon, served as a surgeon in the Air Force in Da Nang, Vietnam. He was awarded the Bronze Star and the Republic of Vietnam Commendation Medal." Katie Zezima in The Washington Post.

Did VA officials retaliate against whistleblowers? "A federal investigative agency is looking into claims that Veterans Affairs supervisors retaliated against 37 employees who filed whistleblower complaints, including some who complained about improper scheduling practices....The special counsel's office is investigating complaints of retaliation from employees at 28 VA facilities in 18 states and Puerto Rico....About half the 37 complaints have been reported in the past two months, after allegations about treatment delays and secret waiting lists at the VA hospital in Phoenix became public in April. The agency also is reviewing 49 additional whistleblower complaints related to scheduling improprieties and other potential threats to patient safety at VA facilities." Matthew Daly in the Associated Press.

Keep your eyes peeled: More details from nationwide audit expected to come out Monday. Richard Simon in the Los Angeles Times.

Birthday gift interlude: A ’57 Chevy for Dad’s 57th birthday.

5. Environmental regulations aren't just about the environment

Regulators are eyeing chemical-handling rules after plant explosion. "Federal agencies will revamp some policies and may broaden regulations in an effort to close gaps in chemical-handling procedures that came to light after a deadly fertilizer explosion last year in Texas. But a report issued Friday stopped short of the aggressive overhaul urged by some safety advocates and environmentalists....The Chemical Safety Board recorded 245 chemical accidents last year at workplaces that resulted in broad property damage or other significant impacts. Workplace-safety officials say recent accidents indicate chemical laws may have too many loopholes." Alexandra Berzon in The Wall Street Journal.

How the Keystone XL pipeline could pose a safety risk. "The State Department on Friday corrected several errors it made in a key study evaluating the impact of the proposed Keystone XL pipeline, including a understatement of how many people could be killed on railroad tracks if the project were rejected and oil traffic by rail increased. The department said, however, these corrections had 'no impact' on the integrity of the conclusions....The January report determined that blocking the controversial pipeline could increase oil train traffic and lead to an additional 49 injuries and six deaths per year, mostly by using historical injury and fatality statistics for railways." Patrick Rucker in Reuters.

Primary source: White House report outlines 6 ways climate change affects public health.

Other environmental/energy reads:

Tom Steyer's slow, ongoing conversion from fossil-fuel investor into climate activist. Carol D. Leonnig, Tom Hamburger and Rosalind S. Helderman in The Washington Post.

In some states, emissions cuts defy skeptics. Justin Gillis and Michael Wines in The New York Times.

Is the EPA too optimistic on energy efficiency goals? Zack Colman in the Washington Examiner.

Animals interlude: The running of the goats.

Wonkblog roundup

Bad medicine: The awful drug reactions Americans report. Dan Keating and Jason Millman.

Investors think Uber is worth $17 billion. Why that’s not entirely crazy. Emily Badger.

The economy has reached a milestone. No thanks to the housing sector. Dina ElBoghdady.

The good news: We’re back to 2008 job levels. That’s also the bad news. Matt O'Brien.

The looming approach of a world without World War II veterans. Emily Badger.

Obamacare is adding insurers where they’re most needed. Jason Millman.

Schwarzenegger says he’s ‘pumped up’ for nationwide redistricting reform. Christopher Ingraham.

Your life insurance will run out faster than you expect. Jonnelle Marte.

Economy adds 217k jobs in May; jobless rate holds steady at 6.3 percent. Ylan Q. Mui.

Et Cetera

Vodafone report shows global scale of governments' phone-snooping. Danica Kirka in Associated Press.

Vermont's new GMO labeling law could upend the food industry nationally. Evan Halper in the Los Angeles Times.

GOP leadership seeks to clarify highway-funding bill mechanism amid furor. Billy House in National Journal.

U.S. pensions "cash-negative" by 2016. Steve Johnson in The Financial Times.

Hundreds more youth surge across the U.S. border, overwhelming officials. Cindy Carcamo and Molly Hennessy-Fiske in the Los Angeles Times.

Got tips, additions, or comments? E-mail us.

Wonkbook is produced with help from Michelle Williams and Ryan McCarthy.

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