THE TRUMP RESISTANCE PLAN: STEP 2

[This article first appeared on billmoyers.com on January 23, 2017. It’s the fourth in my series and you can read the first three installments herehere, and here.]

“It is not in numbers, but in unity, that our great strength lies…”

— Thomas Paine, Common Sense (1776)

Americans acting in good faith are destined to disagree on many issues of public concern. Colonists fighting the Revolutionary War couldn’t agree on much either, but they fought side-by-side for independence from foreign governments and the rejection of official corruption. Those two founding principles formed central pillars of American democracy. They still do.

Facts Are Stubborn Things

The truth is that on a critical issue, we are more united today than most people may realize, but not in a way Donald Trump likes. His approval ratings have plummeted to dramatic and historic pre-inauguration lows:

ABC News/Washington Post: 40% — Compare that to the three most recent presidents-elect immediately prior to their inaugurations: Obama – 80%; G. W. Bush – 72%; Clinton 81%

Every major poll confirms Trump’s dismal standing with the American people:

CBS: 37%

CNN: 40%

Gallup: 44%

NBC/Wall Street Journal: 44%

Quinnipiac: 37%

Trump famously ignores or denies the accuracy of polls that disfavor him, as he did in this January 17 tweet: “The same people who did the phony election polls, and were so wrong, are now doing approval rating polls. They are rigged just like before.”

That’s Trump’s “Three-D’s Strategy” in action: deflect, divert, and distract. Although pre-election polls missed on individual state totals that determined the electoral college results, they got the popular vote outcome about right: he lost by two percent compared to the final average of all pre-election polls that had him behind by three — well within the polls’ three percent margin of error. Giving Trump the benefit of the same margin barely moves the needle.

Former career pollster Kellyanne Conway and Republicans in Congress surely grasp the harsh truth. Already a historic popular vote loser, Trump is rapidly becoming a regret for many who chose him. As the Republican Party’s albatross, he grows heavier by the hour.

It’s time for Americans to demonstrate their unity, strengthen it, and mobilize.

TRP Unity Strategy #1: Unite in Opposition

Abandon the circular firing squad and look at the big picture: Vladimir Putin and Donald Trump played all of us against each other, and they’re still at it. Rather than continue an internecine battle over how the last war was lost, resolve to prevail in this one.

The disenfranchised American majority should stop squabbling with itself. Some Sanders supporters believe that party regulars betrayed them by tilting the playing field against their guy. Some Clinton supporters think Sanders people didn’t respond with sufficient enthusiasm to her nomination. Jill Stein and Gary Johnson voters think that neither party focused on the correct issues. All of them have a point. Acknowledge it, shake hands, join arms, and move forward together.

TRP Unity Strategy #2: Embrace Trump Voters

Most Trump voters are American patriots, and many are now having buyer’s remorse. Welcome them to the Trump Resistance Plan. Loyal citizens take differing sides on many social and political questions. Organized, issue-related, protests should continue in earnest. But unity in the defense of democracy is now a transcendent imperative for all.

TRP Unity Strategy #3: Search for Senate Help

Guarding against foreign interference in our elections and resisting institutionalized corruption in the presidency are central to preservation of the republic. If Trump prevails in his assault on those fundamental principles, party labels will cease to have meaning. Many Republican senators already understand that vital point, which makes them natural allies of the TRP.

Senator John McCain (R-AZ) chairs the Senate Armed Services Committee seeking the truth about Putin’s interference with the 2016 election. He and Senator Lindsay Graham (R-SC) are leading that charge. Likewise, Senator Richard Burr’s (R-NC) Intelligence Committee is investigating possible connections between the Trump campaign and Russia. Three more Republicans represent states that Hillary Clinton carried: Maine’s Susan Collins, Colorado’s Cory Gardner, and Nevada’s Dean Heller. And another six found candidate Trump’s behavior especially problematic, to say the least: Arizona’s Jeff Flake, Utah’s Mike Lee, Alaska’s Lisa Murkowski and Dan Sullivan, Ohio’s Rob Portman, and Nebraska’s Ben Sasse.

Contact all of them – as well as the senators from your own state – and demand a relentless search for the truth. Write and repeat. Every week, send a message that conveys this central point:

On the January 8 edition of “Meet The Press,” Senator Graham promised to take the Trump/Russia election investigation wherever it leads, including Trump’s business conflicts of interest. Hold him to that promise and support his efforts.

With Democrats unified, it takes only three Republicans to deprive Trump of his leverage over the Senate. Then he’ll have to deal with those representing a majority of Americans who never wanted him in the Oval Office. Most Republicans in Congress will be reluctant warriors. But love of country and the encouragement of fellow citizens will help them do the right thing. Support the brave and bolster the wary.

Unity Strategy #4: Don’t Forget the House

The House of Representatives poses special challenges. Rep. Devin Nunes (R-CA) heads the Permanent Select Committee on Intelligence that could follow the Senate’s lead. But Nunes was also on Trump’s transition team, so send him a message along these lines:

The House must follow the Senate’s lead in pursuing the Trump/Russia election investigation wherever it leads. Choose democracy over the defense of a dangerous president’s reputation.

Even better, give him a call or visit one of his offices. Contact his fellow Republicans on the committee. Encourage Democrats on the committee – especially ranking member Adam Schiff (D-CA) – to remain though and stand strong. In messages to your own state’s representatives who aren’t on Nunes’ committee, express your fear that democracy is in peril.

Unity Strategy #5: Shine a Spotlight on Corruption

Trump’s stonewalling with respect to his financial conflicts of interest undermines the institutional integrity of the presidency. But so far, that crucial norm of democracy has not found strong Republican defenders comparable to Senators McCain and Graham on Russian election interference.

Until a courageous Republican voice emerges, it’s up to Senate Democrats to keep the public focused on the issue. In questioning HUD Secretary-designate Ben Carson, Senator Elizabeth Warren demonstrated skillfully how pervasive Trump’s financial conflict of interest problems are. As Trump’s agenda makes its way through Congress, those problems will become ubiquitous and the spotlight on them must shine ever brighter.

Unity Strategy #6: Think Beyond Your Own Bubble

Regardless of party, support any member of Congress — and anyone else — who stands up to Trump in defending the two central pillars of democracy that he’s attacking. They’re worried about Trump’s branding skills and thinking twice before risking his wrath. That’s a testament to the effectiveness of Trump’s “Bully and Intimidate Strategy.”

As brave patriots step forward – especially those from Trump’s own party and others who voted for him – reward them and rebrand them: America’s New Heroes.

THE ONGOING LAW SCHOOL BAILOUT

Recently, Senators Dick Durbin (D-IL), Jack Reed (D-RI), and Elizabeth Warren (D-MA) introduced the “Protect Student Borrowers Act of 2013.” The bill would allow the Secretary of Education to require that colleges and universities pay a penalty for federal student loans in default. The penalty would increase with the school’s default rate.

Default is too long to wait before creating a better nexus between educators’ incentives and their graduates’ fate. Thousands of recent law graduates are living with the consequences of a system that immunizes schools from financial accountability for their students’ poor employment outcomes. Eighty-five percent of today’s newest lawyers have six-figure law school debt. Only about half of all 2012 graduates found full-time long-term jobs requiring a JD. The most recent Bureau of Labor Statistics employment report indicates that between December 2012 and December 2013, employment in the “all legal services” category actually declined by 1,000 people.

Demand down; supply still growing

As the profession was losing a thousand jobs last year, law schools graduated a record number of new lawyers — 46,000 — and big classes are in the pipeline. Sure, law school applications are down, but acceptance rates have gone way, way up to compensate. Recent BLS estimates suggest an ongoing lawyer glut for years to come. (For a more detailed analysis, take a look at Matt Leichter’s recent article in Am Law Daily.) And in the midst of this disaster, law school tuition keeps increasing. It’s all quite perverse.

Unfortunately, it’s also a predictable consequence of structural incentives. Most university administrators (and their law school deans) run their institutions as businesses. In the current system of financing higher education, that approach produces a myopic focus: maximizing short-term tuition revenues by filling classrooms. Added encouragement comes from U.S. News rankings criteria that, for example, actually reward expenditures regardless of added value or lack thereof. The vast majority of students borrow enormous sums to pay tuition. But — and here’s where educational institutions lack the constraints that they would encounter as true businesses — any later failure to repay those loans never becomes the school’s problem.

Instead, virtually all student loans come with the backing of the federal government. In case of default, the schools remain protected. So far, graduate student default rates have remained below those for colleges and vocational schools, but across the board, all rates are trending higher. (I wonder if low JD default rates are attributable, in part, to lawyers’ better understanding of the procedural steps that can forestall default. Attorneys also grasp the counterproductive futility of defaulting: educational debt survives bankruptcy and forcing the government to pursue a default just adds monetary penalties and collection costs to the tab.)

IBR is no panacea

Income-based tuition repayment plans may become an important potential relief valve to some indebted graduates. But IBR is new and it comes with lots of caveats. For example, during the time that a graduate remains in the program, interest on his or her overall debt continues to accrue. Exiting the system before completing the requisite repayment period (typically 25 years; 10 years for public service jobs) can produce an even greater debt than existed upon graduation.

Those who make it all the way to the end of the repayment period are off the hook for their loans and accrued interest, but debt forgiven through IBR is considered taxable income. If Congress doesn’t fix that problem, the result will be a big tax bill for a person who, by definition of ongoing participation in the IBR program, can’t afford it. Moreover, the forgiven amounts still have to come from the federal treasury at taxpayer expense, so there never was or will be a free lunch – except for the schools that received tuition but thereafter had no financial skin in the game. It has the feel of a law school bailout, doesn’t?

A better way

Maybe this three-step approach would help to restore a functioning market: 1) allow educational loans to become dischargeable in bankruptcy; 2) in the course of such a proceeding, require the bankruptcy court to determine whether educational debt was a significant factor in the debtor’s need for bankruptcy protection; and 3) in those cases where it is such a factor, permit the federal government guarantor to seek recompense from the educational institution whose conduct lies at the heart of the mess. (Requiring need-blind admissions as a prerequisite to participation in the federal loan guaranty program generally might counteract a school’s temptation to bias admissions in favor of those who can afford to pay.)

Most people profess confidence in free markets — some with an evangelistic zeal. If they really want to give the market a chance to work in the student debt setting, they’ll support a serious effort to cure the system’s current failures. Personal educational debt currently exceeds $1.2 trillion — more than all consumer credit card debt combined. Every day, that bubble is growing. Just ask a law student.

MAKING MONEY ON OUR KIDS

Where can an investor earn a 7.9 percent guaranteed annual rate of return? Not 30-year United States Treasury bonds; they pay around 3 percent. Not other countries’ sovereign debt; some of the most economically fragile nations in the Euro zone sell 10-year bonds bearing interest rates of less than 6 percent—and it’s certainly not guaranteed.

Try your kids. The interest rate on subsidized federal student loans is currently 3.4 percent, but it will jump to 6.8 percent on July 1 and covers just a slice of the market anyway. For undergraduates who don’t qualify for the subsidy, it’s already 6.8 percent. For graduate students (including law students), the rate is 7.9 percent.

Big returns with no risk

The program is a moneymaker for the government. According to a February 2013 Congressional Budget Office report, the federal government makes about 36 cents in revenue for every student loan dollar it puts out. Graduate (and law) student loans are especially lucrative — 55 cents on the dollar.

These eye-popping returns are especially juicy because the loans have virtually no risk of non-repayment. If a student defaults, the feds retain a collection agency to pursue the money (total cost of all federally retained debt collectors last year: more than $1 billion). Eventually, they’ll get it because such loans are in that small category of debts that survive a personal bankruptcy filing, along with alimony, child support, certain fines, and taxes. An exception for debtors who can demonstrate “undue hardship” rarely applies.

Bipartisan blame

How did this happen? Good intentions went awry. In the 1960s, Congress followed economist Milton Friedman’s earlier recommendation that the government provide direct loans for higher education. The underlying principle still resonates: a society’s investment in human capital pays long run dividends. The corollary is that those who benefit personally should repay loans for the education that gives them a better life.

Unfortunately, as that better life has become more elusive for so many, the student loan program has converted struggling young people into profit centers for the government. In the trillion-dollar world of educational debt, students entering the professions — including law — are among the most unfortunate victims, in part because both their tuition and their loan interest rates are the highest.

The special plight of young lawyers

Lawyers generate little sympathy from the rest of the population. But 85 percent of today’s law graduates have educational loans exceeding $100,000. The grim market for new attorneys means that only about half of them are finding full-time long-term employment requiring a legal degree. Even fewer earn enough to repay their staggering loans. (Before blaming these young people for their plights, take a close look at the behavior of many law school deans who misled them into the profession with deceptive information about post-graduate employment prospects. Meaningful transparency on that topic is a recent phenomenon.)

As the July 1 deadline nears, proposals that seem to be gaining traction in Washington would preserve all above-market rates and the student loan program’s profitability. They also suggest that we’ve learned little from the subprime mortgage debacle. The House recently passed Rep. John Kline’s (R-MN) bill, resetting the graduate student rate at 4.5 percent above the 10-year Treasury, subject to a 10.5 percent cap.

In the unlikely event that the House bill gets past the Senate, President Obama has threatened to veto it. However, he is willing to have students borrow at a lower variable rate that’s still significantly higher than the 10-year Treasury, but with no cap (although once set, the rate would remain for the life of the loan). Combining the floating rate elements of the House proposal with the president’s plan could produce a truly disastrous compromise. The president also wants income-based repayment and debt forgiveness. Because Republicans with blocking power oppose those partial remedies on the grounds that it will encourage students to take on bigger debt, those proposals seem doomed.

Recently, Sen. Elizabeth Warren (D-MA) offered her first bill. For a year, it would cut the student loan rate to 0.75 percent—the same rate that big banks get on their borrowing from the Fed. Unfortunately, a prospective one-year solution is no solution at all. Sen. Kirsten Gillibrand has the best current plan: set a 4 percent rate for all student loans and allow graduates with existing debt to refinance at that rate. But that won’t happen, either.

Guiding principles

As policymakers grapple with the growing educational debt bubble, they might consider two governing principles.

First, those running institutions of higher education should be held accountable financially for their graduates’ poor employment outcomes. Otherwise, federal dollars will continue to worsen the situation as administrators focus myopically on filling classroom seats to maximize tuition revenues. Allowing the discharge of educational debt in bankruptcy and permitting the federal government to seek recourse from schools that impoverish their graduates with tuition loans might alter some schools’ worst behavior.

A second principle should be even easier to implement. No mechanism for funding higher education should convert our kids into profit centers.