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Earning Interest On Your Money

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While I’m between jobs, I’ve been tinkering with the family finances, and I’ve learned a thing or two about banking. It’s nothing personal finance experts haven’t known for years, but I find it fascinating, so I thought I’d share. And while it’s not quite financial advice, you might get something useful out of it. Be warned, however, that I’m going to talk a lot about interest rates.

If you’ve been paying attention to financial news, you might know that the Federal Reserve lowered interest rates a few weeks ago, and you probably also heard that President Trump wants rates lowered even further. In this case, the interest rate we’re talking about is the federal funds rate, which is the rate banks charge when loaning each other money.

After the latest change, the Federal Reserve will be targeting a rate between 2 and 2.25 percent, which is on the low side from a historical perspective. However, when the mortgage crisis hit the U.S. in 2007, the ensuing collapse dried up the supply of credit, and the Fed tried to get money flowing again by pushing the federal funds rate down below 0.25%. It actually got down as low as 0.04% a few times, which is almost free money.

Even if you weren’t paying attention to the Fed back then, you probably noticed the effect on your bank account: Interest rates plummeted to effectively zero. That’s because banks no longer needed your money to fund loans. They could borrow from other banks at rates often below 0.20% and sometimes as low as 0.05%. Furthermore, consumer savings accounts have a lot of overhead — maintaining branch offices, printing statements, operating ATM networks, hiring customer service personnel — all of which ate into the profits they could make by loaning out your money. Many banks dropped their rates to 0.01%, meaning a $10,000 savings balance would only earn a single dollar in an entire year.

The Great Recession is gone now, and the low rates went with it. The federal funds rate was 2.40% last month, meaning banks now have to pay about ten times as much to borrow money from each other as they did during the recession. So we might expect that banks would have to offer comparable rates on savings accounts to bring in the cash they need. Even with the additional overhead of retail banking, you’d expect savings accounts to be paying around 2.00%.

And yet they’re not.

For example, Citibank is offering a rate of only 0.04% across all its savings plans. Bank of America is offering 0.03%, and Chase and Wells Fargo are both still at 0.01%. (In all cases, I’m ignoring limited-duration promotional rates.) If you poke around on these banks’ websites, you’ll find they’ll go a little higher if you deposit more money. Bank of America goes to 0.06% if you deposit $100,000, but Wells Fargo will go to 0.15% for the same amount. Chase will go to 0.11% for $250,000, and Citibank will go to 0.15% only if you deposit $500,000 or more.

So how come these banks pay around 2% when borrowing from each other, but when they borrow money from you in the form of a savings account deposit, they pay no more than 1/13th of that rate, and in some cases as little as 1/200th of that rate? What’s going on?

To some extent, they’re just taking advantage of you. If you have a relatively small amount of money in the bank, the difference between earning 2.00% and earning 0.01% is only going to be a few bucks per month, which might not be worth worrying about. But for a bank with millions of accounts, that difference adds up to a nice profit.

Still, even with the relatively small amounts at stake for most people, you’d think the market would still grind away until banks were forced to compete on rates. The fact that they don’t makes me suspect that maybe retail savings banks simply can’t compete.

The banks I’ve mentioned — Chase, Bank of America, Citigroup, and Wells Fargo — are the four largest banks in the United States, operating a combined total of 22,000 bank branches and employing 900,000 people. That costs them a lot of money, maybe enough money that they can’t afford to offer better rates.

Compare those expenses to a bank like Capital One. You’ve probably seen their endless stream of credit card ads, but did you know they also have regular bank accounts? With fewer than 800 branches and 50,000 employees, they also have lower costs, so you might think they could offer a better savings rate, and you’d be right. As I write this, you can get a straight 1.00% on a savings account, more than six times the regular rate from the big four banks.

But what if banks cut operating costs even further? Ally Bank only has about 8,000 employees and they are purely an online bank that operates no branches. You bank with them using websites, phone apps, ATMs, phone support, and the occasional mailed document. They’re keeping their overhead low, which is probably why they’re able to offer 1.90% interest on a savings account.

We can do even better if we’re willing to give up a lot of banking conveniences. For example, it turns out Goldman Sachs isn’t just for the super-rich any more. Their Marcus product line includes a high-yield savings account paying 2.15%, and unlike those banks that make you deposit $100,000 for just 0.15%, there’s no minimum deposit. You could have a high-yield savings account at Goldman Sachs for a dollar.

The downside of using Marcus is that a savings account is the only banking product they offer. Even at a no-frills bank like Ally, you can get a checking account and you can move money between savings and checking instantly on their website. They also offer online bill payment, and you can withdraw cash through an associated ATM network. But if you open a Marcus savings account, you get none of that. The only way to move money in or out of the account is to do an electronic inter-bank ACH transfer to or from an account at another bank, which typically takes a few days.

If you can live with the inconvenience, there are several more of these high-yield savings accounts out there, if you take the time to find them. So far, the highest rate I’ve found is a Popular Direct account paying 2.55%. That account is no more convenient than the Marcus account, plus they want a minimum opening deposit of $5,000, and they’ll charge a fee if your balance drops below $500, so it’s definitely not for everyone.

My personal solution is to use a regular bank for checking services, bill payment, and ATM withdrawals, while keeping my savings in a high-yield account at another bank. Currently, my savings are in a Wealthfront cash account paying 2.32%. This is an ACH-only account like Marcus or Popular Direct, so I can’t get money in and out fast, but I can live with that because I’m only using this account for money I won’t need in a hurry, such as reserves for home repair or riding out unemployment. I feed the account with periodic ACH transfers, and I can transfer the money back to my checking account when I need it.

Wealthfront isn’t actually a bank. It’s a brokerage, and this account is basically their cash sweep account, which is where they park cash that’s not invested in the market (although I don’t have to have investments to have a cash account). Wealthfront doesn’t hold the cash themselves. Instead, they make deals with several banks to hold it for them in regular savings accounts in their customers’ names, thus ensuring the money is safely covered by FDIC insurance. In fact, if your savings balance exceeds the $250,000 FDIC limit, Wealthfront will spread your money across several banks, keeping each account below the limit, so you are completely protected for cash deposits up to $1 million. (Alas, not a service I need.)

This leads to a bit of a twist: My statement shows which bank Wealthfront has put my money in, and the answer is somewhat surprising…

Citibank.

That’s right, the same Citibank which pays its regular customers only 0.04% is paying me more than 50 times as much, which seems pretty crazy.

Part of the reason they pay me more is undoubtedly the increased bargaining power that comes from Wealthfront aggregating my money with that of thousands of other people. Wealthfront is offering to place millions of dollars, so they can make certain demands on banks.

Another reason Citibank is willing to pay a higher rate is the the low administrative cost of accepting deposits through Wealthfront. Citibank never has to process my application, cash my checks, or talk to me on the phone. Wealthfront creates and manages all the accounts over the internet and transfers the cash by wire.

Finally, I can’t prove it, but I’m pretty sure another reason Citibank pays me more than their regular customers is what economists call price discrimination. That’s something businesses try to do when different customers are willing to pay different prices for the same item.

For example, a grocery’s low-income customers might only be willing to pay $5 per pound for ground coffee, whereas high-income customers may be willing to go as high as $8 per pound for the exact same coffee because they are not concerned about a $3 difference. If the grocery sets the price at $8/pound, they will maximize their profit per pound, but they will lose all the sales to low-income customers who won’t pay more than $5/pound. However, if they set the price at $5/pound, they will lose the $3/pound profit from selling to high-income customers.

Ideally, the grocery would like to offer different prices to different customers based on their income, but they can’t just ask. And even if they could, how would they keep high-income customers from saying they have low incomes just to get the better price?

One solution is to find a way to make customers reveal their price preferences. The grocery could put a table full of 1-pound canisters of coffee at the front of the store, priced to sell at $8 each, and they could also stock a shelf full of 2-pound canisters for $10 each at the back of the store. Low-income customers will know they can get a good price by walking to the back, whereas high-income customers will just grab the $8 canisters because they don’t really pay attention to the price.

I think Citibank is doing the same thing. I shopped around for savings interest rates, and like the customers who walk to the back of the store, I found a good price. Other customers who don’t care about savings interest rates just opened a savings account at whichever bank was most convenient.

The bottom line is that it can pay to shop around for a savings account. Although it doesn’t pay as much as it used to. Back in the late 1970’s and early 1980’s, inflation drove federal funds rates much higher, often more than 10%.

This was a problem for the specialized system of “Savings and Loan” banks, which were chartered under special rules that prevented them from paying more than 5.25% interest. But the rules did not prevent them from offering customers “gifts” for opening an account, so Savings & Loan banks tried to entice customers by filling their front windows with piles of stuff — everything from toasters to televisions — to make up for the poor interest rate they were offering.

They don’t do that any more, but if you shop around for rates, you might find one high enough to buy yourself a nice toaster.

Snitches Get Disses

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Eugene Volokh notes a disturbing federal case regarding 18 U.S.C. § 1513(e), part  of the witness retaliation statute, which appears to criminalize retaliatory speech against witnesses:

And U.S. v. Edwards, a nonprecedential decision handed down Thursday by the Sixth Circuit, read it precisely this way:

Joy Edwards made numerous derogatory posts on Facebook about a confidential informant who testified against her brothers during their criminal trial. The Facebook posts revealed the informant’s identity and called him—among other things—a “snitch.” Edwards was indicted on a single count of retaliating against a witness in violation of 18 U.S.C § 1513(e). At a bench trial, the district court found that the informant suffered harm as a result of these Facebook posts and that the posts were intended to retaliate against the informant. Edwards was convicted and sentenced to short terms of prison and lesser forms of confinement….

Basically, a confidential informant referred to as D.B. did controlled buys from some drug dealers to set them up for arrest. A few months after the trial, the sister of several defendants attacked D.B. on social media:

  • Re-posting another user’s photo of D.B. on the witness stand and calling him a “snitch” in the comments section
  • Commenting on her own post saying “f*** him,” “Look at that bitch ass snitch lips! They are crack up and ashey white from running it so much! His bitch ass needs some WD40!”
  • Re-posting another user’s doctored photo of D.B. holding a t-shirt with a police badge on it
  • Re-posting another user’s photo of D.B. with the caption “stop snitching” over it, to which Edwards added, “Snitch ass bitch”
  • Commenting on her own post in response to another user’s question about the identity of D.B., saying, “This guy is snitching! He snitched on my brothers! And lied about everything!”
  • Re-posting another user’s photo of D.B. with the caption “Snitching like a bitch”
  • Re-posting another user’s picture featuring hands in police handcuffs with the caption “Man up … Shut your mouth. Take the charge and don’t snitch.”
  • “Liked” numerous other users’ posts of similar material

It’s important to note two things here. First, all of this activity took place after the trial was over, so this wasn’t a case of interfering with a trial by attempting to intimidating a witness. Second, although the posts revealed D.B.’s name and other personal information, none of these posts amount to a “true threat” or an “incitement” which would not be protected by the First Amendment.

Nevertheless, it was enough to send her to jail, and her conviction was upheld:

The court upheld Edwards’ conviction—not because her speech was a true threat or incitement (again, this statute doesn’t require proof of that), but simply because it was intended to retaliate and was intended to and did cause “harm”

As Eugene Volokh explains, that isn’t normally considered to be an exception to First Amendment protections. As long as you don’t make false statements of fact, it’s entirely legal to say things about people that you know will make their life difficult.

Volokh summarizes 18 U.S.C. § 1513(e) as applying to

  • “Whoever knowingly,
  • “with the intent to retaliate,
  • “takes any action harmful to any person, including interference with the lawful employment or livelihood of any person,
  • “for providing to a law enforcement officer any truthful information relating to the commission or possible commission of any Federal offense,

That’s extremely broad. Taken at face value, this would make it nearly impossible to criticize anyone who reported a crime to federal law enforcement, even when the crime is…not a very big one:

(@CrimeADay says “18 USC §1865 & 36 CFR §2.11 make it a federal crime to picnic in violation of the picnicking conditions in a national park.”)

So if someone reported you to the rangers for a picnicking violation, and you found out they owned a car dealership in your town, you would not be allowed to call out the dealership owners as joyless assholes, because that would be “retaliation” which could cause them to lose business.

It’s not even clear you have to have a connection to the crime to get in trouble. In theory, if I called out D.B. by name in this post for being a snitch ass bitch, I could be charged with a crime, as could you if you reposted it somewhere.

For that matter, if news broke that a major politician reported one of his neighbors as a “suspected terrorist” with no more evidence than that he was dark skinned and wore a turban, it looks like we would technically be in violation of the witness retaliation statute for attacking him on Twitter during election season, because that would interfere with his livelihood.

The good news is that the decision in the appeal did not reach the First Amendment issue for technical reasons, and it won’t set a dangerous precedent. Nevertheless, at least one federal prosecutor and one federal judge didn’t see a problem with this law.

In any case, this issue will probably end up in court again, and as Eugene Volokh says,

I hope that, when the First Amendment question is squarely presented to an appellate court, it will recognize that the statute (at least unless it’s sharply limited to threats, incitement, or nonspeech conduct) is unconstitutionally overbroad.

You can read Eugene Volokh’s whole post here.

Have Keyboard, Will (not) Travel

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I don’t normally blog about my day job, but I’m genuinely proud of the work I’ve been doing, and (for reasons that will become clear) this is as good a time as any to talk about it.

For the last eight years, I’ve been developing legal technology for Thomson Reuters. It started when I applied to an interesting-sounding job at a small company called Serengeti Law, which had just been acquired by TR. Serengeti’s product was a web-based legal matter management tool called Serengeti Tracker, which corporate legal departments purchased to help manage the costs of legal matters being handled by outside law firms. TR was investing heavily in this product, now called Thomson Reuters Legal Tracker, and they brought me on board to help build it bigger and better.

I know a few lawyers who practice solo or in small firms, but Tracker was designed for the practice of law on a whole different scale. Just imagine how much legal work a company must need for it to be cost-effective to spend tens of thousands of dollars per year on software just to track outside spending. And Legal Tracker has over 1300 customers.

When I first took the job, I wasn’t planning to stay very long. I had been freelancing for a decade (which gave me the flexibility to take care of my parents in their final years) and this job would be my first step back into corporate life. Legal billing software didn’t sound very exciting, so I figured I’d give it a few years and then move on to something more interesting.

I was pleasantly surprised. Software that helped lawyers pay other lawyers wasn’t exactly the coolest tech product, but the process of creating it allowed me to do what I did best: Solve interesting problems. You want to add feature X to the product? You want to support technology Y to meet customer demand? I could make that happen. Later, I led project teams that made that happen. We got things done. We shipped code. We built tools that people could use.

All in all, it was an amazing software development experience. We had all the tools we needed, we used a flexible agile methodology, and we were encouraged to take the time to do things the right way. We even got to work from home full-time. But what really made the job enjoyable was the people I worked with. It was a terrific engineering culture — quality-oriented, ego-free, blame-free, and asshole free. This was everything I wanted in a job.

Unfortunately, this happened:

Thomson Reuters will close the Bellevue, Wash. headquarters of Legal Tracker, an online billing and analytics affiliate, as part of a larger series of layoffs and office consolidations.

Legal Tracker itself is not going away, but the office will close next summer, and the headquarters will shift to Thomson Reuters’ Toronto office, spokesman Dave Moran told GeekWire. The office closure will affect roughly 60 people, though Thomson Reuters is still working through how many will be laid off and if any will transfer.

…

The move to shutter the Bellevue office is part of a broader series of layoffs at Thomson Reuters that will see the company cut 3,200 jobs and close 55 offices by 2020. Toronto-based Thomson Reuters employs about 27,000 people across the globe, and it includes a news organization, services for the legal industry and financial software.

Although I live in the Chicago suburbs, I was attached to the Bellevue, Washington office, which makes me one of the unlucky three thousand. As of this month, I’m out of a job.

This is one of the risks of working for a large company. No matter how well you do your job, sometimes your future depends on strategic issues beyond your control. It’s the way large corporations work, and I’ve always known that getting laid off was a possibility. Which is not to say that it doesn’t suck to lose my job.

But out of all the times I’ve lost my job…this was my favorite. Thomson Reuters has been a good place to work. Even the layoff process has been professional and dignified. I had plenty of advanced warning this was coming, and everybody has been really helpful. My severance agreement is confidential, but I think I can safely say that it was acceptable. I would still recommend TR to anyone thinking of taking a job there.

That said, I’m still out of a job, which means I’m back in the job market. So if you need a software developer, I’m available, as long as I can work from home. I’ve gotten used to that arrangement, and I’m not ready to give it up, especially now that my wife also works from home.

I work mostly with C#/.NET these days, but I also know SQL and basic web technology. I also have a lot of history with C/C++. In the meantime, I’ve learned some Python, and I’ve tinkered with PHP and Java…and a whole bunch of other things, really, because I’ve been writing software for a long time. 

In the meantime, I’m going to have some time on my hands, and I wouldn’t mind working on some sort of project that dovetails with the themes of this blog. So if any of you have ideas for something related to law or economics (or whatever) that could use a little help from a tech nerd like me, get in touch. Maybe we can do something interesting together.

Is Chief Hopper a Perpetrator of Domestic Violence?

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Evan Rachel Wood, who plays Dolores Abernathy on Westworld, has been taking a bit of flack on Twitter for this:

(Because I don’t trust Twitter embeds, she wrote: “You should never date a guy like the cop from #strangerthings Extreme jealousy and violent rages are not flattering or sexy like TV would have you believe. That is all.”)

Some of her critics have been tediously pointing out that Sheriff Jim Hopper is a fictional character, as if we don’t discuss the ethics of of fictional characters all the time. (Also, as I’ll explain in a minute, part of Wood’s point is that real people aren’t like Hopper.)

Many other critics make a somewhat better point, which is that Hopper never hits Joyce Byers or any of the kids. He may be filled with rage, but he doesn’t actually hurt anyone — except the show’s bad guys, of course. That’s not a completely satisfying response, however, because angry men don’t have to actually hit women to scare the crap out of them, and scaring the crap out of someone is certainly abusive.

All of which brings me to the point that I think Wood was trying to make with her tweet: Fictional people like Hopper and real people like Hopper are not the same thing.

Fictional Sheriff Hopper is a guy with issues. He gets angry a lot. However, no matter how pissed-off he gets, Hopper would never actually hit Joyce or any of the children. We know this, because we recognize him as a well-known fictional archetype: The Violent Male Who Only Hurts Bad People.

That guy is everywhere in our fiction, from James Bond to Dominic Toretto to John Wick. Many comic superheros fit the mold — Batman, Wolverine, Deadpool, the Punisher, the Hulk, Hellboy — as do many of the love interests in romance novels. Actors like Arnold Schwarzenegger, Sylvester Stallone, and Dwayne Johnson have spent half their careers playing some variation of that character. When we see this guy, we all know him, and we all know he’s not going to hurt the innocent people in his life.

The objection that abusive men don’t have to hit women to abuse them doesn’t really apply either because, by the rules of the genre, the fictional women and fictional children in his fictional life are quite aware that he won’t hurt them. In Stranger Things, Joyce Byers is startled and confused by Hopper’s rage at times, but she never reacts like she’s really afraid of him.

(I didn’t re-watch the entire show, but I can’t remember any real fear of him. If I got that wrong, I’ll have to walk this back.)

Another example of this is Arnold Schwarzenegger’s character in Kindergarden Cop. He’s tough police detective who goes undercover as a school teacher. Much of the humor in the movie comes from the fact that no one is afraid of him — not the women teachers, not the lady principle, and not any of the children.

In the real world, violent people don’t follow genre rules. People with impulse control problems aren’t always able to draw the lines so carefully. They don’t just get violent with criminals and terrorists. They hurt people who are close to them, either because they can’t tell the difference, or because they just don’t care. In real life, guys who act like Hopper can be dangerous to have in your life.

We put up with a lot in fictional characters that we shouldn’t in real life. Fictional TV cops like Walt Longmire or Steve McGarrett beat the crap out of suspects, and we’re more or less okay with it, because Cop Who Breaks All The Rules For Justice is another well-known archetype. This cop may break the rules, but he always only does it to keep really bad people from getting away. This is unlike real-life rule-breaking cops, who are more likely to beat the crap out of 15-year-old turnstile jumpers who mouth off.

Another example is the character of Leroy Jethro Gibbs on NCIS. As a fictional character, he comes across as a stern teacher and charmingly gruff boss. But a real-life boss who bullies his employees, sometimes even hitting them, is an HR nightmare who drags down everyone on his team. 

Or, getting back to Stranger Things, let’s think about the character of Eleven for a minute. This is a child who was isolated and emotionally abused all her life, and who was subjected to unethical science experiments. And at every moment she is carrying a weapon — her dangerous psychic ability — with which she has already killed at least a dozen people. Knowing all this about her, would you really let her anywhere near your children?

It’s the nature of our relationship to fiction that we empathize with the protagonists of a story, even when they are objectively bad people. The move Bonnie and Clyde from 1967 is a notorious example that made a couple of murderous bank robbers into romantic protagonists. More recently, the writers on Breaking Bad used this effect with Walter White, intentionally making him into a self-absorbed violent jerk…who we still wanted to see win.

The effect doesn’t always work, however, because sometimes viewers have trouble getting past real life. I liked the Major Crimes police procedural stories, but every now and then I found myself yelling at the screen because they did something I had read about in one of Radley Balko’s gut-punching stories of police misconduct. I also had trouble enjoying the 1991 comedy Nothing But Trouble, about a bunch of big-city travelers who get in trouble in a small town ruled by a sadistic judge who likes to use a special machine called “Mr. Bonestripper” to execute people without a proper trial. It’s supposed to be a dark comedy, but I couldn’t get it out of my head that there are real places in the world where sadistic rulers find amusing ways to kill people who anger them.

For Evan Rachel Wood watching Stranger Things, it was Hopper’s out-of-control anger that was too close to reality. She knows a thing or two about sexual assault and domestic violence, and Hopper set off some warnings. He’s an entertaining character, but she wouldn’t want the real-world version of him in her life.

Doing Something About Tuition Debt

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Democratic presidential candidate Elizabeth Warren has a plan to deal with tuition loan debt:

My plan for broad student debt cancellation will:

  • Cancel debt for more than 95% of the nearly 45 million Americans with student loan debt;
  • Wipe out student loan debt entirely for more than 75% of the Americans with that debt;
  • Substantially increase wealth for Black and Latinx families and reduce both the Black-White and Latinx-White wealth gaps; and
  • Provide an enormous middle-class stimulus that will boost economic growth, increase home purchases, and fuel a new wave of small business formation.

Naturally, Democratic presidential candidate Bernie Sanders has his own plan to deal with college debt:

When Bernie is in the White House, he will:

  • Cancel the entire $1.6 trillion in outstanding student debt for the 45 million borrowers who are weighed down by the crushing burden of student debt. This will save around $3,000 a year for the average student loan borrower.

There are a lot of things wrong with this idea.

For one thing, it’s not an incentive mechanism. Most of the time, when we as a society give money to someone for doing something, it’s because we want to encourage that activity. So we subsidize solar energy to encourage development of cleaner energy sources, and we subsidize housing to encourage home construction and ownership. Subsidizing certain things is usually a way to encourage socially desirable behavior.

But that’s not the case here: Student debt cancellation does nothing to encourage students to go to college because it only affects people who have already been to college. It’s a pure giveaway (that just happens to be going to a bunch of young people who are likely to vote).

Supporters of tuition debt cancellation are quick to argue that debt cancellation would provide an economic stimulus:

The result is a huge student loan debt burden that’s crushing millions of families and acting as an anchor on our economy. It’s reducing home ownership rates. It’s leading fewer people to start businesses.

First of all, we’re not exactly talking about gigantic loans. 45 million people owing $1.6 trillion works out to about $36,000 per person. That’s not a “crippling” debt. Most of the time, when you hear really high numbers, it’s for people getting loans for advanced degrees such as law or medicine. The average college debt is more like financing a well-equipped Ford Taurus.

Keep in mind, too, that people with college degrees tend to earn more money. According to the most recent Education Pays report,

In 2015, median earnings of bachelor’s degree recipients with no advanced degree working full time were $24,600 (67%) higher than those of high school graduates. Bachelor’s degree recipients paid an estimated $6,900 (91%) more in taxes and took home $17,700 (61%) more in after-tax income than high school graduates.

That difference alone is enough to theoretically pay off a $36,000 student debt in a little over two years at peak earnings. Even taking other costs into account — including the opportunity cost of going to college instead of working — a college education is a good investment:

The median four-year college graduate who enrolls at age 18 and graduates in four years can expect to earn enough relative to the median high school graduate by age 34 to compensate for being out of the labor force for four years and for paying the full tuition and fees and books and supplies without any grant aid.

In other words, paying off the tuition debts of college graduates means giving free money to  people who are already destined to be financially better off than most.

Furthermore, getting a college education is just one way of investing in your future. There are plenty of small business owners who have spent $36,000 to equip a restaurant or machine shop, or remodel an office. I’m sure they would also benefit if Elizabeth Warren or Bernie Sanders cancelled their debt.

Or what about people who took out loans to pay for college tuition and just now finished paying off their debt? They’ve got to feel cheated by all this. And it’s hard to argue that their case is much different, because I’m sure giving them $36,000 would help them buy a house or start a business too.

We should also consider the classic invisible people: Those who didn’t go to college because they couldn’t afford it. Imagine what it’s like the be a woman who made the prudent decision to stick with waitressing for a few more years only to hear that people who went to college are getting a $36,000 handout. Why shouldn’t she get $36,000 too? She probably needs the money more, and giving it to her would be at least as much of a stimulus as giving it to a college student.

Or for that matter, we could just let taxpayers have the money. All other things being equal, not paying college graduates $1.6 trillion would leave $4900 for every man, woman, and child in the United States. 

I should note that there is one group of people for whom debt cancellation makes some sense: People who went to college but did not graduate. These people are seriously screwed, because they’ve got the debt — for the cost of however many years as they went to college — but they don’t receive any of the benefits that come with earning a degree. And unlike college graduates, these people really are likely to be poor, so getting out from under the debt will be a serious struggle.

It’s almost like we need a debt cancellation program that is targeted to these people. Maybe some sort of means-tested program, that only cancels their debt if they really are having difficulty paying it down…

Of course, the U.S. already has such a program. It’s called bankruptcy. When someone has debts they can’t pay, declaring bankruptcy allows them to get out from under the debt and move on. The lender does take a loss when a debtor declares bankruptcy, but if the debtor was never really able to pay the loan, then the lender is really just recognizing a loss that has already occurred. And the great thing about bankruptcy is that it works for everyone who’s in debt over their head, not just college students.

Although, actually…college tuition loans are one of the few debts that cannot be discharged through the ordinary bankruptcy process. A series of murky changes to bankruptcy law since the 1970s have made it much harder to get out from under student loans. It can be done, but the process is poorly defined and applicants are unlikely to succeed.

While I question the wisdom of giving gobs of money to college graduates, I think it makes no sense to block people with tuition debt from having the same bankruptcy protections as everyone else. The good news is that there’s actually a bill that would fix this problem. It’s the Student Loan Borrower Bankruptcy Act of 2019, which is supported by both Sanders and Warren. Let’s use the debt protections we have, rather than inventing expensive new ones.

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