CONFLICTS AND RUSSIA, RUSSIA, RUSSIA

Donald Trump is trying to keep separate the two biggest controversies swirling around him — business conflicts of interest and the Russia connection. But they’re inextricably intertwined. Even so, he moves adroitly between them as a distraction device.

Roll the tape and follow the ball, as it bounces from conflicts to Russia and back again.

Conflicts

The conflicts between Trump’s worldwide business interests and his Presidential responsibilities have been news for months. He refused to release his tax returns that would reveal all of them, but intrepid journalists have persevered. From the federal government landlord owning the site of his new hotel in Washington, D.C. to his Trump Tower developments around the world, the sun never sets on the empire creating his conflicts.

November 18: Even the conservative stalwart editorial board of The Wall Street Journal says that liquidation of Trump’s businesses is the only way to solve those conflicts.

The same day, Trump diverts attention to his pick for National Security Adviser, Lt. Gen. Mike Flynn, who has appeared on Russian-owned television and sat with Putin at the network’s celebratory dinner in December 2015. (Flynn’s selection itself is a distraction that makes his other two picks of the day — Jeff Sessions (Attorney General) and Mike Pompeo (CIA Director) — look good, which they aren’t. That’s how the Trump process of normalizing the abnormal works.)

Russia

Saturday, December 10: The Washington Post reports that the CIA has reached a new stage in its investigation of Russian efforts to disrupt the presidential election. Russia had a specific goal: Trump’s victory over Clinton.

Over the weekend, bipartisan support grows for an investigation into Russia’s role in manipulating the election. On Sunday morning talk shows, two of Trump’s attorney-enablers, Kellyanne Conway (George Washington, JD, ’92) and Reince Priebus (U of Miami, JD, ’98), parse, deflect, and dissemble in lawyerly fashion the serious questions that the Russia issue raises.

Simultaneously, Exxon Mobil CEO Rex Tillerson — with long and deep ties to Vladimir Putin — emerges as the leading candidate to become Trump’s secretary of state.

Monday morning, December 12: Ten electors send an open letter to Director of National Intelligence James Clapper. Quoting from Alexander Hamilton, they emphasize their constitutional role to prevent a “desire in foreign powers to gain an improper ascendant in our councils.” The electors want to fulfill Hamilton’s charge that they elect a President “endowed with the requisite qualifications.”

The electors request a briefing on all investigations relating to connections between Trump (and his current and former aides) and the Russian government. Later in the day, Senate Majority Leader Mitch McConnell announces his support for Senate hearings on Russia’s interference with the election.

December 12, 3:30 p.m.: University of Chicago Law School Professor Geoffrey R. Stone publishes a powerful editorial calling for the Electoral College to do the job that the U.S. Constitution envisioned for precisely the situation that Donald Trump presents: deliberate over the legitimate question of whether Trump should be President. The Electoral College meets on December 19.

As of Tuesday morning, December 13, another 30 electors have added their names to the Clapper letter — and the number grows by the hour.

Conflicts

Late on December 12: Trump postpones his December 15 press conference on his conflicts plan. Meanwhile, he offers this meaningless assurance:

“Even though I am not mandated by law to do so, I will be leaving my businesses before January 20th so that I can focus full time on the Presidency. Two of my children, Don and Eric, plus executives, will manage them.”

Trump adds a sentence that he assumes no one will remember, but everyone should: “No new deals will be done during my term(s) in office.”

Tuesday, December 13: Trump announces his pick for secretary of state: Rex Tillerson, which takes us back to Russia.

Surprised? Why?

Flashback: During the presidential campaign, Trump praised Vladimir Putin. He rejected the intelligence community’s consensus that Russia was responsible for hacking into Democratic National Committee computers. And he surrounded himself with advisers whose Russian connections should have raised more red flags than they generated — Paul Manafort, Boris EphsteynCarter Page.

A day after the election that Trump lost by almost 3 million popular votes, Russia’s deputy foreign minister admitted to the Kremlin’s continuing communications with Trump’s entourage during the campaign.

Then came Lt. Gen. Flynn as NSA.

Secretary of State Tillerson

In Moscow, Carter Page cheered Tillerson’s selection. Page, formerly a Trump foreign policy adviser, was in Russia to meet with “business leaders and thought leaders.”

As for Tillerson, The Wall Street Journal reports his long and deep relationship with Putin that began in 1999:

“He has had more interactive time with Vladimir Putin than probably any other American with the exception of Henry Kissinger,” John Hamre, a deputy defense secretary during the Clinton administration and president of the Center for Strategic and International Studies, a Washington think tank where Tillerson is a board member.”

In 2012, Putin awarded Tillerson the country’s Order of Friendship, one of Russia’s highest civilian honors. Tillerson favors removing sanctions that the United States imposed after Putin annexed the Crimea. Those sanctions have halted some of Exxon Mobil’s big projects in Russia. If Trump/Tillerson get those sanctions lifted, the company could reap billions of dollars.

End Game

Perhaps Trump is running out the clock on his conflict of interest problems until after the Electoral College meets on December 19. Or maybe his Russia problems are now so huge that he can’t weather another round of criticism over plainly inadequate steps to deal with his business conflicts. Or maybe Trump’s actions are best viewed through the prism of distraction from the biggest issue: the hair on the head of American democracy is on fire from a match that Putin lit.

By the way, if you wonder what the Romney/Trump date night interview for secretary of state was all about, the answer comes from a line in the movie, Superman II: “Kneel before Zod.

The line applies to other prominent Republicans whom Trump ridiculed repeatedly and who now grovel at the feet of their new emperor who still lacks clothes. Yes, I’m looking at you, Carly Fiorina. After Trump publicly degraded you and all women, you called him out. But you now call his moves “brilliant,” as you audition to become his director of national intelligence.

And you, Rick Perry. You called Trump a “cancer on conservatism.” But now seek to be his energy secretary — a department you promised to abolish if you’d won the presidency.

And you, Paul Ryan. Throughout Trump’s campaign, you admonished him and distanced yourself from his vile words and deeds. He retaliated by calling you a weak and ineffective leader. But now you grin while giving Trump another do-over: “We’re fine. We’re not looking back…That’s behind us, we’re way beyond that.”

We’re not way beyond anything. The battle for America’s soul has barely begun.

THE STRANGE CASE OF STUDENT LOAN DEBT

The Obama administration has a multifaceted approach to the student debt crisis. It’s time for a policy consistency checkup.

— The President says he wants all young people to pursue higher education and he hopes parents will encourage their kids to do so.

— The President says he wants to hold colleges and vocational schools accountable financially for graduates’ poor outcomes. At many schools, those outcomes include stunning rates of attrition and dismal employment results for graduates.

— The President says he wants to end soaring tuition that creates enormous student debt.

— And the President says students should avail themselves of income-based repayment (IBR) and loan forgiveness, even though those programs will produce large long-term hits to the federal treasury.

— But when students and their parents find themselves swamped in educational debt because graduates can’t find jobs offering a realistic shot at repaying their loans, the President’s Department of Education jumps to the schools’ defense. In its vigorous resistance to discharging school loans in bankruptcy, the administration provides another layer of protection to marginal schools that remain unaccountable for their students’ poor outcomes.

A Case in Point

In 2012, Republican presidential candidate Mitt Romney suggested famously that, if necessary, students should borrow from their parents to attend college. It’s not Mitt’s fault, but two years before he become governor of Massachusetts and continuing through 2007, one of his constituents, Robert Murphy, took out a loans totaling $221,000 to do exactly that for his three kids.

Unfortunately, when Murphy’s manufacturing company closed and moved overseas in 2002, he lost his job as its president. Since then, he hasn’t found work. He’s now 65 years old.

To cover living expenses, Murphy’s IRA retirement account valued at $250,000 in 2002 is now gone. He and his wife live on $13,000 a year that she earns as a teacher’s aide. In 2014, their $500,000 home was worth $200,000 less than the mortgage on it — and was in foreclosure.

As interest accrued, the balance due on Murphy’s educational loans for his kids increased to more than $240,000 by 2014. He now represents himself in a bankruptcy case that has reached the United States Court of Appeals for the First Circuit. The issue is how the court should interpret and apply the “undue hardship” requirement for discharging educational debt. The statute doesn’t define the phrase and the federal appeals courts have adopted differing standards. All are difficult for debtors.

Enter the Department of Education

In this and other cases, the government’s primary educational debt servicing contractor, Educational Credit Management Corporation (ECMC), has urged courts to apply the toughest possible rule in deciding whether to grant relief to student loan debtors. At the request of the court hearing Murphy’s appeal, the U.S. Department of Education intervened on October 12.

Murphy calculates that if he found a job paying $50,000 a year and worked until he was 77, the student debt he owes would actually increase — to $500,000. His government doesn’t care. The Department of Education spares no adjective in describing the parade of horribles that would follow upon discharging Murphy’s debt.

For example, allowing him off the hook would “impair the fiscal stability of the loan program…” Repaying the loans may require “that he remain employed at or past normal retirement age,” it argues, even though “his income may top out or decrease” and “further employment opportunities may be limited.” The government regards retirement account contributions, fast-food dinners, cell-phone plans, and nutritional supplements as “luxury expenses.”

Absent showing a “certainty of hopelessness,” the government urges, no debtor should get relief from student loans: “[A] debtor must specifically prove a total incapacity in the future to repay the debt for reasons not within his control.”

Welcome to America’s 21st century version of debtors’ prison.

Confused Priorities

What matters most, the government urges, is “protecting the solvency of the student loan program.” But if solvency is a function of how much the United States receives in return for the money it lends, aren’t income-based repayment and loan forgiveness greater long-run threats to the solvency of the program? Oh, I forgot. The long run is always someone else’s problem.

Even more to the point, debtors in Robert Murphy’s position will never be able to repay their loans anyway. Simply put, the government’s failure to write off Murphy’s bad loan — and others like his — just means that its accounting methods haven’t caught up with reality.

When that reality hits, some may look back and ask why today’s policymakers ignored the bad behavior of marginal schools at the front end. In fact, government policies encourage misbehavior. As the President delivers his “get more education” message to students and parents, marginal schools beat the bushes for enrollees who represent revenue streams of federally insured loans. Why isn’t the ability of those students to repay their loans the focus of efforts aimed at preserving the student loan program’s solvency?

Ask the Right Questions

Currently, schools have no financial stake in student outcomes and marginal schools have exploited the resulting market dysfunction. Did students complete degrees? Did graduates find decent jobs?

Anyone looking for a true picture of the “solvency of the student loan program” might consider those questions, along with this one: How many students are repaying their loans? Last month, the Obama administration released a new report providing some troubling answers to that one.

Three years after their loans had become due, more than one-third of all student loan borrowers had made no progress toward repaying their educational debt. None. And the bar for “progress” was as low as it could be: one dollar.

Profiting from Market Failure

At 347 colleges, more than half of borrowers had failed to pay down a single dollar of their principal loan balance after seven years. Of that group, almost 300 are for-profit schools. Through the federally insured student loan program that relieves them of any debt collection responsibility, some for-profit schools and their investors are making a lot of money off the rest of us.

Many of those same investors decry government intervention in anything. Like Mitt Romney — a vocal supporter of for-profit colleges during his 2012 campaign — they embrace competitive markets as the only proper way to produce correct decisions. But they’re delighted to exploit a student loan market that doesn’t work at all. Romney’s running mate, Paul Ryan, divided the country into “takers” and “makers.” A lot of those for-profit college investors feeding off government student loan largesse sure look like “takers” — albeit in nicely tailored clothing.

So much for the probative value of divisive partisan labels.

A PLUTOCRAT’S PITTANCE

Recently on ABC’s “This Week with George Stephanopoulos,” the usually thoughtful George Will practically jumped from his seat at the prospect that the interest rate on student loans might continue at 3.4 percent (based on a federal subsidy that President George W. Bush signed in 2007), rather than move up to 6.8 percent. He was — for him — apoplectic at the idea of creating what he was sure would become yet another “entitlement.”

Will opposes such relief because the average college student graduates with around $30,000 in loans and, over a lifetime of earning superiority over non-college graduates, he says, “that’s a pittance.” One man’s pittance is another man’s fortune, I guess. Then again, Will has a much different opinion about a slightly greater amount — $36,900 — when it’s the additional tax he’d pay on a million dollars of annual income if the Bush tax cuts expire.

But rather than search for consistency that can’t be found, put Will’s comment next to Mitt Romney’s related suggestion that young people should do everything they can to attend college, even “borrow from your parents.” If only all college-bound students had parents who could float them six-figure loans for however long it might take to repay them.

About those big salary differences

That leads to the point that Will sidestepped: repayment could take a while. Will’s “pittance” argument relies on studies showing that a college degree produces better lifetime earnings for those who obtain them. Historically, that’s been true. But it ignores what’s been happening to the newest college graduates. The NY Times recently reported  how unemployed graduates have been flocking to unpaid internships. Sadly, two years ago it ran a similar piece. Meanwhile, the Times also reports, they and their families are buried in debt.

Ultimately, many who get degrees will fare better than their non-degree counterparts. But at the moment there are more unemployed and underemployed recent college graduates than ever. Studies show that their delayed entry into the labor market will likely translate into huge lifetime earnings losses. As baby boomers defer retirement because the Great Recession wiped out their savings, the plight of young people worsens.

How about lawyers?

Among the most burdened in the youngest generation of debt holders are new attorneys. Their average law school debt exceeds $100,000 — and it’s climbing. So is their reported unemployment rate, especially now that law schools have to start disclosing the truth about their graduates. If you’re wondering why all of those students went to law school when there are legal jobs for, at most, half of them, deceptive deans have been a big contributor.

On their promotional websites, law schools routinely reported more than 90 percent of their graduates as employed. But they didn’t mention that the number included those with part-time jobs, non-lawyer positions (like working at Starbucks), or temporary employment by the law school itself for just long enough to count in their U.S. News ranking.

A compromise

Tavis Smiley responded to Will’s position with this: Wall Street bankers got zero-interest rate loans from the government; why can’t students get a break on theirs? That’s not a bad question. However, not all students need relief from their student loans. Families like the ones Mitt Romney had in mind sure don’t, but many others do. The Wall Street Journal recently profiled one — a 34-year old unemployed attorney with more than $200,000 in educational loans, mostly from law school:  “It’s a noose around my neck that I see no way out of.”

Here’s a compromise: get rid of the noose by returning to pre-1976 bankruptcy rules. In those days, any baby boomer who wanted out of even federal student loan debt could get it. Filing for bankruptcy was an extreme step and few did it. In fact, there was never empirical support for changing the rule. There was even less reason for the added protection against discharge that private lenders received in 2005 — a change that no legislator is currently willing to admit sponsoring.

Those who cry “moral hazard” should prove it — not simply list a theoretical parade of horribles that never happened under the old rule. If the bankruptcy option was good enough for baby boomers, it should be good enough for their kids.