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      Federal Reserve announces biggest interest rate hike since 1994

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      Federal Reserve announces biggest interest rate hike since 1994Fed confirms 0.75 percentage-point increase as Americans across country hit hard by rising prices and shortages of key items With soaring inflation and the shadow of recession hanging over the United States, the Federal Reserve announced a 0.75 percentage-point increase in interest rates on Wednesday – the largest hike since 1994.Until this week the Fed had been expected to announce a smaller increase. At a press conference, the Fed chair, Jerome Powell, said the central bank decided that a larger hike was needed after recent economic news, including last week’s announcement that inflation had risen to a 40-year high.He made clear that a similarly outsized rate rise should be expected at its next meeting in July unless price rises softened. “We at the Fed understand the hardship inflation is causing,” he said. “Inflation can’t go down until it flattens out. That’s what we’re looking to see.”The hike will increase the Fed’s benchmark federal-funds rate to a range between 1.5% and 1.75% and officials said they expected rates to rise to at least 3% this year.Powell acknowledged that the Fed’s attempt to cool spending is likely to lead to job losses. The Fed expects unemployment to rise to 4.1% from the current rate of 3.6% as it attempts to bring inflation back down to its target rate of 2%.“We never seek to put people out of work,” Powell said. But, he added: “You really cannot have the kind of labor market we want without price stability.”The rate rise came after more bad news on inflation late last week sent US stock markets into a tailspin, presenting the Fed and the Biden administration with an escalating crisis amid fears that runaway inflation has now spread through the economy.Over a third of US population urged to stay indoors amid record-breaking heatRead moreThe Fed cut rates to near zero at the start of the coronavirus pandemic, as the US and global economies effectively shut down. It increased rates for the first time since 2018 in March this year, but the increase did nothing to tamp down rising prices.Powell initially described rising prices as “transitory”, but has changed his view and says the Fed intends to aggressively increase rates in order to bring prices back under control. There are already signs that consumers are cutting back in the face of rising inflation. Retail spending fell for the first time this year in May, the commerce department said on Wednesday. Home sales have fallen for three consecutive months and consumer confidence hit a record low between May and June.Last week the labor department announced consumer prices were 8.6% higher in May than they were a year ago. The increase was broad-based, with food and fuel prices rising alongside rent, airfares and car prices.Across the country, consumers are being confronted by rising prices and shortages. Nationally, gas now costs an average of $5 per gallon, close to $2 higher than a year ago. In California, a gallon of gas now costs more than $6, up from just over $4 a year ago.Supply chain disruptions and other issues have led to shortages of basic necessities including tampons and baby formula.On Wednesday, Joe Biden summoned top oil executives to the White House to discuss ways they can “work with my administration to bring forward concrete, near-term solutions that address the crisis”.Biden’s handling of the inflation issue has battered his poll numbers. With crucial midterm elections, and control of Congress, coming up in November, Biden’s approval rating is 33%, according to Quinnipiac University’s national poll, equal to the lowest rating for his administration.Many parts of the economy remain strong and the Fed is aiming for a “soft landing” – hoping it can tame inflation by raising rates without sharply increasing the unemployment rate – but Powell acknowledged some risks, including the war in Ukraine, were beyond the influence of the Fed.Nearly 70% of the academic economists polled by the Financial Times and the University of Chicago’s Booth School of Business now believe the US economy will tip into a recession next year.TopicsFederal ReserveUS interest ratesUS economyInflationUS politicsBiden administrationEconomicsnewsReuse this content More

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      in Elections

      Garland says he is watching January 6 hearings amid pressure to investigate Trump

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      Garland says he is watching January 6 hearings amid pressure to investigate TrumpUS attorney general says official guidelines do not prevent him from investigating ex-president The US attorney general said on Monday that he was watching the House January 6 select committee’s hearings, as he faces mounting pressure from congressional Democrats to open a criminal investigation into Donald Trump over his role in the Capitol attack.Merrick Garland also said at a press conference at the justice department’s headquarters in Washington that internal office of legal counsel guidelines did not prevent him from opening an investigation into the former president.“I am watching and I will be watching all the hearings, although I may not be able to watch all of it live,” Garland said shortly after the select committee concluded its second hearing. “I can assure you the January 6 prosecutors are watching all of the hearings, as well.”The attorney general declined to address potential investigations into Trump or other individuals mentioned by the select committee at the hearings, saying that could undermine prosecutors’ work and would be unfair to people under scrutiny who might never be charged.Capitol attack panel members urge DoJ to consider criminal charges for TrumpRead moreBut Garland reiterated earlier promises that the justice department is exploring potential criminal conduct regardless of those people’s level, their positions in the government and proximity to Trump, or whether they were at the Capitol on 6 January 2021.The justice department appears in recent weeks to have expanded its criminal investigation to examine top figures connected to Trump’s efforts to overturn the results of the 2020 election, including government officials and Republican lawyers and operatives.One grand jury in Washington is investigating the rallies that preceded the Capitol attack and whether any executive or legislative branch officials were involved in trying to obstruct Joe Biden’s election certification, according to a subpoena seen by the Guardian.The justice department also appears to be investigating political operatives close to Trump, according to another grand jury subpoena seen by the Guardian, as well as some Trump lawyers involved in a scheme to send fake Trump electors to Congress.Lisa Monaco, the deputy attorney general, confirmed in January that prosecutors were looking into any criminality in that plan, under which Trump’s lawyers hoped the former vice-president Mike Pence would refuse to certify those states and return Trump to office.The attorney general added some additional insight into the justice department’s decision-making with respect to opening an investigation into Trump, saying that internal guidelines did not prevent him from taking such action if warranted.“There’s nothing within the office of legal counsel that prevents us from doing an investigation,” Garland said. “There’s nothing that’s coming in the way of our investigation … We’re just going to follow the facts wherever they lead.”Garland’s remarks about the office inside the justice department, which issues opinions for the agency that are broadly seen as binding, did not address whether the guidelines preclude charging, not just investigating, a former president.But his careful response reflected the delicate and complicated legal considerations looming over the justice department should it consider whether to investigate and charge Trump over his efforts to reverse his 2020 election defeat to Biden.In court filings and at its hearings, the select committee has been making the case that it believes Trump committed at least two felonies – obstructing a congressional proceeding and defrauding the United States – given evidence it has collected in its 11-month inquiry.The question of whether to pursue a case against Trump has started to prompt serious discussions among senior justice department officials, according to a source familiar with the matter, though there has been no indication that Trump is currently a target of an investigation.Meanwhile, congressman Bennie Thompson, the chairman of the January 6 committee, said on Monday that he did not expect to make a criminal referral against Donald Trump or anyone else over the Capitol attack to the justice department at the conclusion of its investigation.The chairman appeared to indicate the panel would put the evidence of potential crimes by the former president into a final report – currently expected to come in September – and that Garland’s justice department would then have to decide whether to pursue a case.“No,” Thompson said when asked explicitly on Capitol Hill whether the select committee would make a referral against Trump, “that’s not our job. Our job is to look at the facts and circumstances around January 6, what caused it, and make recommendations after the hearings.”The disclosure from Thompson reflects a sense among some of the members on the panel that a criminal referral would make a resulting investigation by the justice department appear political and could undermine a potential case, according to sources close to the inquiry.If the evidence is sufficient for the justice department to consider investigating or charging Trump, the sources said, then the justice department should be able to move ahead with a case regardless of whether the select committee makes a criminal referral.The internal deliberations also come as the select committee has publicly said Trump repeatedly broke the law as he sought to overturn the 2020 election results, but criminal referrals are not binding and the final decision to prosecute rests with the justice department.TopicsJan 6 hearingsMerrick GarlandBiden administrationUS Capitol attackUS CongressUS politicsnewsReuse this content More

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      in US Politics

      Feel the benefit: union workers receive far better pay and rights, Congress finds

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      Feel the benefit: union workers receive far better pay and rights, Congress findsStudy shows unionized workers earn 10.2% more than non-union peers, amid wave of organizing at some of largest US employers Workers represented by labor unions earn 10.2% higher wages than their non-union peers, have better benefits and collectively raise wages industry-wide, according to a report released by the House and Senate committees on Friday and first shared with the Guardian.Joe Biden has pledged to be the most pro-union president in generations, and the report outlining the economic benefits of union membership was released as his administration pushes for legislative and executive-action efforts to support workers’ rights to organize.According to the report, by the joint economic committee of Congress and the House education and labor committee, unionized workers are also 18.3% more likely to receive employer-sponsored health insurance, and employers pay 77.4% more per hour worked toward the cost of health insurance for unionized workers compared with non-unionized workers.Labor unions have also contributed to narrowing racial and gender pay disparities; unionization correlates to pay premiums of 17.3% for Black workers, 23.1% for Latino workers and 14.7% for Asian workers, compared with 10.1% for white workers. Overall, female union workers receive 4.7% higher hourly wages than their non-union peers and in female dominated service industries, union workers are paid 52.1% more than non-union workers.“Unions are the foundation of America’s middle class,” said congressman Don Beyer, chair of the Joint Economic Committee. “For too long, the wealthy have captured an increasing share of the economic pie. As this report makes clear, unions help address economic inequality and ensure workers actually see the benefits when the economy grows.”The Biden administration’s drive to increase union membership comes amid a wave of organizing among workers at some of America’s largest employers, including Amazon and Starbucks.But despite the recent uptick in organizing, union membership has declined markedly in recent decades, from 34.8% of all US wage and salary workers in 1954 to 10.3% in 2021. According to several studies the decline has contributed significantly to increasing wage inequality and stagnation.Corporate practices and legal changes have also eroded workers’ bargaining power, particularly from the 1970s, as employers increasingly attempted to break union organizing efforts and were issued only weak penalties for violating labor laws.The report cites the recent resurgence of the US labor movement, and strong public support for labor unions, as a call to action to improve wages and working conditions and support worker organizing.“As chair of the education and labor committee, I am committed to addressing the decades of anti-worker attacks that have eroded workers’ collective bargaining rights,” said education and labor committee chair congressman Bobby Scott.“With the release of this report, I once again call on the Senate to pass the Protecting the Right to Organize Act, which would take historic steps to strengthen workers’ right to organize, rebuild our middle class, and improve the lives of workers and their families.”TopicsUS unionsBiden administrationUS politicsnewsReuse this content More

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      in US Politics

      No easy ride for Biden as Kimmel tells him to ‘start yelling at people’

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      No easy ride for Biden as Kimmel tells him to ‘start yelling at people’Serious questions on gun violence mean there are few laughs as US president meets late-night TV host “Our very special guest tonight is to aviator sunglasses what Tom Cruise is to aviator sunglasses,” quipped the late-night TV host Jimmy Kimmel. “I’m proud to say I voted for him dozens of times. He is the reason we all got a cavity search tonight.”This was how Kimmel introduced Joe Biden for his first in-person interview with a late-night host since taking office as US president.But any hopes that Biden, whose poll ratings are plunging, might have had that the comedian would invite him to show a lighter side to his personality were soon dashed. It was a night when there were not many laughs.Once the president had sat down, Kimmel asked: “Do you mind if I ask you some serious questions?” He then dived straight in to demand why, after a flurry of mass shootings across America, nothing had been done since Biden entered the White House.“Well, I think a lot of it’s intimidation by the NRA [National Rifle Association],” the president replied. “Look, this is not your father’s Republican party. This is a Maga party,” – a reference to the former president Donald Trump’s “Make America great again” slogan, which Biden is increasingly using an insult.“It’s a very different Republican party and so you find people who are worried, I believe, that if they vote for a rational gun policy they’re going to be primaried and they’re going to lose in a hard-right Republican primary.”Biden said he had always had a “straight relationship” with Mitch McConnell, the Republican minority leader in the Senate. “You know, he’s a guy that when he says something, he means it. I disagree with a lot of what he says, but he means it.”But Kimmel, seemingly determined to blunt rightwing criticism that he would give the president an easy ride, showed greater willingness to interrupt Biden than many political interviewers. He objected that McConnell had contradicted himself on confirming supreme court justices in a president’s final year.Sign up to First Edition, our free daily newsletter – every weekday morning at 7am BSTBiden added: “Look, he’s the leader of a party that’s moved very hard right and so, in order to get anything done, he has a different problem than he did early on before Trump became president.”Kimmel observed that although the Republican party had moved to the hard right, the American people had not because an overwhelming majority supported expanded background checks on gun buyers. His voice quivering with emotion, the host suggested that every senator should sit with the grieving families of 19 schoolchildren killed last month in Uvalde, Texas.He interrupted Biden again to ask impatiently: “Can’t you issue an executive order? Trump passed those out like Halloween candy.”The president noted he had issued some executive orders but said to applause: “I don’t want to emulate Trump’s abuse of the constitution and constitutional authority.”He said he knew some people felt like “Republicans don’t play it square, why do you play it square? Well, guess what? If we do the same thing they do, our democracy will literally be in jeopardy. Not a joke.”Kimmel replied: “It’s like you’re playing Monopoly with somebody who won’t pass go or won’t follow any of the rules, and how do you ever make any progress if they’re not following the rules?”Biden smiled and joked, “You’ve got to send them to jail”, a reference to a punishment in the board game.Biden is facing concerns about high fuel prices, baby formula shortages, and a lack of progress on several legislative fronts such as gun safety and voting rights. A Morning Consult poll published on Wednesday found that 58% of those surveyed disapproved of Biden’s performance as president, while 39% of respondents approved.Biden has also been criticised for giving fewer media interviews than his predecessors: Wednesday’s was his first since 10 February. While Trump gave late-night TV a wide berth as president, Barack Obama was a regular presence on the shows during his time in office. Biden did a virtual interview with Jimmy Fallon last December.Kimmel’s show on the ABC network was recorded in Los Angeles, where Biden is visiting for this week’s Summit of the Americas, bringing together countries from across the hemisphere. The first lady, Jill Biden, was in the audience along with Biden’s granddaughter Naomi and her fiance.At one point Kimmel, who in past years has spoken out passionately about healthcare and gun violence, pondered political gridlock and the spread of false information and advised: “I think you need to start yelling at people.”Biden demurred, saying the US was still suffering from the effects of the coronavirus pandemic, but insisted he had “never been more optimistic in my life”.Kimmel again cut in: “Why are you so optimistic? It makes no sense.”Biden said he was pinning his hopes on young people, the “best educated, least prejudiced, most giving generation in American history. This generation is going to change everything. We just have to make sure we don’t give up.”Later Kimmel sympathised with Biden’s endlessly multiplying crises, including an imminent supreme court decision on abortion rights. “What a terrible job you have,” he said. “I’m glad you’re doing it. But, boy oh boy, does this seem like a bad gig.”TopicsJoe BidenThe US politics sketchBiden administrationUS gun controlJimmy KimmelUS politicsfeaturesReuse this content More

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      in US Politics

      Janet Yellen tells Congress US faces ‘unacceptable levels of inflation’

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      Janet Yellen tells Congress US faces ‘unacceptable levels of inflation’Treasury secretary admits she regrets describing inflation as ‘transitory’ and says it is ‘top economic problem at this point’ Janet Yellen told Congress that the US is facing “unacceptable levels of inflation” on Tuesday as the treasury secretary defended herself from criticism of her previous comments that rising prices were “transitory”.Although the hearing with the Senate finance committee was centered on Joe Biden’s budget for 2023, Yellen was forced to answer questions on inflation, including some on how she once said that inflation would be “transitory”, or temporary.In response to a question about how she had initially framed inflation, Yellen said: “When I said that inflation would be transitory, what I was not anticipating was a scenario in which we would end up contending with multiple variants of Covid that would be scrambling our economy and global supply chains.“I was not envisioning impacts on food and energy prices we’ve seen from Russia’s invasion of Ukraine.”Yellen said she and the Federal Reserve chair, Jerome Powell, “could have used a better term than transitory”.She said: “There’s no question that we have huge inflation pressures, that inflation is really our top economic problem at this point and that it’s critical that we address it. I do expect inflation to remain high, although I very much hope that it will be coming down now.”Last week, Yellen drew headlines for making similar comments to CNN, during an interview in which she had been “wrong then about the path inflation would take”.At the hearing on Tuesday, Yellen said: “We currently face macroeconomic challenges, including unacceptable levels of inflation, as well as the headwinds associated with the disruptions caused by the pandemic’s effect on supply chain and the effects of supply-side disturbances to oil and food market.”‘We’re still struggling’: low unemployment can’t hide impact of low wages and rising inflationRead moreThe Biden administration has been delicately walking the inflation tightrope over the last few months as they try to push an aggressive response while also emphasizing other indicators that prove the economy is still improving, particularly in the jobs market.Biden celebrated the figures shown in May’s jobs report, released last Friday, which showed that 390,000 new jobs were created that month.“Because of the enormous progress we’ve made on the economy, Americans can tackle inflation from a position of strength,” Biden said in remarks following the release of the jobs report.Republicans in Tuesday’s hearing repeatedly pointed to the passing of the $1.9bn American Rescue Plan, which was passed in March last year and delivered further coronavirus aid, as a key driver of inflation.In response, Yellen noted that Biden “inherited an economy with very high unemployment”.“We had to address the possibility that this could be the downturn that could match the Great Recession,” she said. “In the policy, there were various risks taken into account. Of course, inflation was one of them. But the overwhelming risk was that America would be marred by a deep and long recession.”Yellen pointed to the expansion of child tax credit, which gave extra assistance to families, in the stimulus package that “resulted in a dramatic reduction in childhood poverty and financial insecurity for American families and contributed little to nothing to inflation”.She also said the US is “not the only country that’s experiencing inflation – you can see that in virtually every developed country around the world”.TopicsInflationJanet YellenEconomicsUS politicsBiden administrationnewsReuse this content More

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      in US Politics

      Biden commerce secretary shifts blame for inflation onto Russia’s war in Ukraine

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      Biden commerce secretary shifts blame for inflation onto Russia’s war in UkraineGina Raimondo’s comments seen as part of a White House push to deflect blame for nation’s economic troubles away from Biden Joe Biden’s commerce secretary Gina Raimondo attempted on Sunday to shift blame for the US inflation crisis back onto Russia’s war in Ukraine, days after another cabinet member admitted the presidential administration had made failures in predicting its impact on the economy.Janet Yellen, the treasury secretary, conceded last week she made an error in 2021 when she said inflation, which has only recently dropped from a near 40-year high, posed merely a “small risk”.“I think I was wrong then about the path that inflation would take,” Yellen told CNN last Tuesday.In her appearance on the same network’s State of the Union on Sunday, Raimondo pointed to “unexpected” developments that had derailed the global economy, and insisted: “We will get inflation under control.”She said: “I don’t think anyone predicted (Russian president Vladimir) Putin’s war in Ukraine, or various other things that have happened that have been unexpected. It’s worth noting that gas prices are up $1.40 a gallon since Putin moved troops into Ukraine.”Her comments will be seen as part of a concerted White House push to deflect blame for the nation’s economic troubles away from Biden, who has faced accusations of ignoring experts’ warnings over inflation and, more recently, the baby formula shortage.Calling inflation his “top domestic priority”, the president and his acolytes have embarked on a messaging campaign in recent weeks directed at voters in November’s midterm elections, and playing up his economic successes such as the bipartisan infrastructure act.It comes as gas prices reach almost record daily highs, up to $4.84 a gallon according to the AAA, the cost of groceries and services continue to soar, and new parents scramble to find baby formula.Raimondo herself appeared to torpedo the effort later in the interview by admitting she only learned of issues with formula in April, the same time as Biden. But production at the nation’s biggest manufacturing plant, owned by Abbott in Michigan, was closed down after bacteria was found during inspections as early as January, and problems were evident at the site late last year.“I’m not involved in the administration’s response here, but I think they’re doing a very good job and as soon as they learned that this could be a severe shortage they got on top of it,” she said.The Michigan facility resumed production this weekend after a lengthy shutdown, although it will likely be several weeks before formula appears on shelves.In another sign of growing disconnect in Democratic circles over the economy, California congressman Adam Schiff spoke out strongly on Sunday against Biden’s planned summer trip to Saudi Arabia, one of the world’s leading oil producing nations.“We should make every effort to lower oil prices, but going hat-in-hand to someone who’s murdered an American resident would not be on my list,” Schiff said on CBS’ Face the Nation, referring to the implication of Saudi Arabian Crown Prince Mohammed bin Salman in the 2018 killing of Washington Post columnist Jamal Khashoggi in Turkey.“I wouldn’t go,” Schiff continued. “I wouldn’t shake his hand. I would want to see Saudi Arabia lower oil prices, or increase their production [and] I’d want to see them make changes in their human rights record. I want to see them hold people accountable that were involved in that (Khashoggi) murder … before I would extend that kind of dignity.”TopicsUS newsUS economyInflationUS politicsJoe BidenBiden administrationnewsReuse this content More

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      in US Politics

      Peter Navarro subpoena suggests DoJ may be investigating Trump

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      Peter Navarro subpoena suggests DoJ may be investigating TrumpJustice department seeks former aide’s communications with ex-president and his attorneys Peter Navarro, a top White House adviser to Donald Trump, is being commanded by a federal grand jury subpoena to turn over to the justice department his communications with the former president, the former president’s attorneys and the former president’s representatives.The exact nature of the subpoena – served on 26 May 2022 and first obtained by the Guardian – and whether it means Trump himself is under criminal investigation for January 6 could not be established given the unusually sparse details included on the order.But certain elements appear to suggest that it is related to a new investigation examining potential criminality by the former president and, at the very least, that the justice department is expanding its inquiry for the first time into Trump and his inner circle.The subpoena compelled Navarro to either testify to a grand jury early next month, or produce to prosecutors all documents requested in a separate congressional subpoena issued earlier this year by the House select committee investigating the January 6 Capitol attack.“All documents relating to the subpoena dated February 9, 2022, that you received from the House select committee,” the justice department says in the subpoena, “including but not limited to any communication with former President Trump and/or his counsel or representatives.”The existence of the federal subpoena was revealed in a lawsuit filed by Navarro that sought to declare the congressional subpoena unlawful. It remains entirely possible, given the explicit reference to the select committee, that the grand jury subpoena indicates the US attorney for the District of Columbia, Matthew Graves, is building a criminal contempt of Congress charge against Navarro.Trump aide Peter Navarro ordered to testify before grand jury over January 6Read moreThe assistant US attorney listed on the subpoena, Elizabeth Aloi, is also listed as working in the office of the US Attorney for the District of Columbia that handles contempt of Congress cases – though that is not necessarily indicative of the kind of investigation involved.The confounding aspect of this grand jury subpoena, according to three former assistant US attorneys who spoke on the condition of anonymity, is that targets of investigations are rarely subpoenaed. And “process” charges such as contempt do not require subpoenas for documents.But the fact that Trump is specifically named in the subpoena – a reference that the justice department would not have made lightly – and the specific requests for Navarro’s communications with Trump could indicate that this is a criminal investigation examining Trump.The internal US attorney’s office number and the ID number of the grand jury subpoena to Navarro suggests that the investigation is a new line of inquiry for the justice department. Variants of #GJ2022052590979 or USAO #2022R00631 have not surfaced on other subpoenas.At least four separate grand juries are now examining events related to the January 6 Capitol attack.One grand jury was impaneled last year for a contempt charge against Trump’s strategist Steve Bannon. A second is examining organizers of pro-Trump rallies, a third is looking at Trump lawyers in a scheme to falsify slates of electors, and now a fourth concerns Navarro.Navarro was not told when he was served with the grand jury subpoena whether he was a target or a subject of the investigation. If he was a target, that might indicate the subpoena was related to a contempt case. If he was a subject, it could make him part of a wider inquiry.The distinction also raises a third possibility, according to the former assistant US attorneys: he may be a target for a contempt case, and also a subject in a different case – and prosecutors might use the contempt case as leverage to gain cooperation for the other.A spokesman for the justice department and the US attorney’s office did not respond to requests for comment.In his lawsuit, Navarro is challenging both the validity of the congressional subpoena as well as the federal grand jury subpoena. Navarro argues the federal grand jury subpoena is invalid since it requests materials demanded in the congressional subpoena, which he argues is also invalid.“The US Attorney cannot issue a Grand Jury Subpoena deemed to be lawful and enforceable that is derivative of a fruit of the poisonous tree ultra vires, unlawful, and unenforceable subpoena issued by the Committee,” Navarro writes in the 88-page filing.Navarro also contends that by demanding his communications with Trump, the justice department is improperly asking him to violate executive privilege – privilege that he says has not been waived by the former president.TopicsTrump administrationDonald TrumpUS politicsBiden administrationnewsReuse this content More

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      How the US student loan debt crisis started — and how it could end

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      How the US student loan debt crisis started — and how it could end The $1.8tn debt has become a hot political issues as midterm elections approachAmerica’s students have a debt problem. A big one. More than 45 million Americans – more than the population of California – now owe a collective $1.7tn in student debt.What to do about that debt has become a hot political issues as midterm elections approach.The vast majority of the money is owed to the federal government, which has been backing or directly offering student loans for higher education since 1958. While student loans are not new in the United States, the amount of student debt has more than tripled over the last 16 years.The Biden administration has recently hinted that some form of student debt forgiveness could be announced soon – specifically, canceling at least $10,000 in student debt for Americans earning less than $125,000 a year. With that threshold, most student loan borrowers will qualify for some debt forgiveness.If the executive action is undertaken, it will be the first large debt cancellation by the federal government to address the student debt crisis. Understanding the impact of such a dramatic policy requires unpacking the student debt crisis, beginning with its origins.How the student debt crisis startedIn 1957 the Soviet Union successfully launching the first earth-orbiting satellite, Sputnik. With the cold war raging the federal government feared the US education system was failing to produce enough scientists and engineers to compete with the Soviets and, in 1958, started handing out student loans through the National Defense Education Act.Nearly a decade later, the Higher Education Act of 1965 allowed more people to take out loans as the federal government promised to pay back banks for any loans that were not repaid.“It all started from this choice, which I think was a terrible choice, to decide that as a policy matter we should support higher education … by giving [students] an opportunity to get a loan,” said Dalié Jimenez, professor of law and director of the Student Loan Law Initiative at the University of California at Irvine. “It was just a terrible mistake.”Starting in 2010, the federal government started directly lending money to student borrowers. In the wake of the Great Recession, the amount of student debt began to increase rapidly. Colleges were seeing increased enrollment as people left the workforce to go back to school. States slashed their higher education budgets, leading to higher tuition. More students were turning to for-profit colleges, which tend to be more expensive than public colleges.Over the last few years, the amount of grant aid, which does not need to be paid back, has risen. Yet despite this appearance of more financial support for students to attend college, the cost of attendance has remained the same.Two line charts comparing the gap between the listed price and what it actually costs to attend public and non-profit private institutions.The cost of attending public college has actually increased at a higher rate than the cost to attend a private college. The net cost of attendance for four-year public colleges, which takes into account any grants students receive, went from $17,500 in 2006 to $20,210 in 2016, according to data from College Board.Line chart of the costs of public and private non-profit increasing and then slightly decreasing from 2006-07 to 2020-21 school years.“That era 10 years ago was a really formative moment for producing a lot of debt that’s still out there,” said Kevin Miller, associate director for higher education at the Bipartisan Policy Center’s Economic Policy Project. “The cost of college attendance has gone up a lot while household incomes in the United States haven’t … there’s a real sense that if grant, state or institutional aid isn’t filling the gap, that just leaves debt as the only option.”What student debt looks like todayFor the 2021-2022 school year, the average cost of tuition and fees for a four-year public college is $10,740. The cost is nearly quadrupled for private institutions, at an average of $38,070. Even with grant aid, the cost of attendance is an average of $19,230 for public institutions and $32,720 at private schools.Estimates put the average debt of those in the class of 2019 who took out student loans at $28,950. The number is close to the maximum $31,000 that students who are dependents of parents or guardians can borrow from the federal government to fund undergraduate education.Area chart of student debt increasing from Q1 2006 to Q1 2022.Continuing racial wealth disparities are reflected in who has to take out loans to fund college. About half of Black college students take out student loans, compared with 40% of white students. Black Americans owe an average of $25,000 more in debt than their white counterparts and are more likely to be behind on their payments.Despite the amount of debt many students need to take on to attend college, nearly 20 million Americans still enroll in college every year. While earnings can depend on a person’s industry, those with a bachelor’s degrees earn 75% more in their lifetime than those with just a high school diploma.“The message is you have to get a college degree. It’s not just a rhetorical message, it’s an actual truth that if you don’t have a college degree, particularly if you are Black or brown … you will not be able to get a job that is better than your parents’,” Jimenez said.Those with graduate and professional degrees earn even more, but the price for an advanced degree is even higher. A good chunk of student debt – about 40% – is held by those who took out loans to pay for graduate school.What the government has done to address student debtThe most substantial policy addressing student debt was first implemented by the Trump administration, which paused student loan payments and interest accrual at the beginning of the Covid-19 pandemic. Both Trump and Biden extended the pause over the last two years, and it is now set to expire on 31 August.Since the beginning of this year, Biden has announced a slate of additional policies alongside the pause extension. Those who have defaulted or are delinquent on their federal student loans will be returned to good standing. Biden forgave $415m in student debt for borrowers who attended predatory for-profit schools.His administration also announced changes to the Public Service Loan Forgiveness Program, which forgives the student loans of borrowers who are non-profit and government employees after 10 years of debt or after 120 payments are made. Over 113,000 borrowers with a cumulative $6.8bn in debt are now eligible for forgiveness. Over the years, the program has been under much criticism, as relief through the program was rare and borrowers were often deemed not qualified for logistical reasons.The debate over debt forgivenessEven as it seems Biden is prepared to cancel some debt, the idea has gotten some criticism over the last few months.Republicans have been using student debt as a talking point against Biden as the midterm elections start rolling.Senator Mitt Romney suggested that Democrats canceling student loans is a way of bribing voters. “Other bribe suggestions: Forgive auto loans? Forgive credit card debt? Forgive mortgages?” he wrote on Twitter. JD Vance (who went to Yale Law School) told the Washington Post that “Biden essentially wants blue-collar workers like truck drivers – who didn’t have the luxury of going to college to get drunk for four years – to bail out a bunch of upper-middle-class kids.”The reality is that the student loans of those in the highest income quartile – people making more than $97,000 – do make up a third of all outstanding student debt. But many low-income Americans also have student debt, though the amount of debt they have is smaller. Those making below $27,000 a year make up 17% of all borrowers, but their loans comprise 12% of all the outstanding debt.An income threshold could be a way for the government to target forgiveness to those who need it most. But some have pointed out that an income ceiling does not take into consideration a person’s wealth.“You’re looking at a snapshot of what your income was this year or last year, that tells you very little,” Jimenez said. “If your family has no wealth, you’re very differently situated from someone who has family wealth or personal wealth from previous careers.”Those who have been advocating for student debt cancellation say that $10,000 in forgiveness will not be enough to address the breadth of the crisis. Democratic lawmakers, including Senate majority leader Chuck Schumer, Senator Elizabeth Warren and Representative Alexandria Ocasio-Cortez, have called on Biden to cancel up to $50,000.“I don’t believe in a cutoff, especially for so many of the frontline workers who are drowning in debt and would likely be excluded from relief,” Ocasio-Cortez told the Washington Post. “Canceling $50,000 in debt is where you really make a dent in inequality and the racial gap. $10,000 isn’t.”Ending the student debt crisis for goodEven if Biden forgives some student debt, future college students will continue to take out loans – and at higher interest rates. Tackling the price tag of college will come with its own complications, but advocates say it will be necessary to ensure student debt does not get worse.While Biden’s plan for free community college was killed along with the rest of the social and climate spending bill that was making its way through Congress, some efforts for better college funding are happening at the local level.In March, the governor of New Mexico signed a bill that would use $75m in state funds to cover tuition and fees for undergraduate students at two- and four-year colleges. Drives for similar government support have been seen in Pennsylvania, California and Maine.“The cost of college is too high for a lot of students to manage without debt. Making it so that students can go without debt or take less debt in the first place is the thing that we really need to be focusing on,” Miller said. “What about the next generation or the one after that?”
      This article was amended on 26 May 2022. An earlier version stated that student debt had doubled over 16 years. In fact, it has more than tripled.
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