When Sen. Elizabeth Warren on Monday proposed a sweeping plan to provide free college to Americans and also to cancel student loan debt, she said it could be easily paid for by ultramillionaires. The problem is, she has already claimed ultramillionaires would be paying for her childcare plan, her housing plan, and her plans to make a “down payment” on the “Green New Deal” and free healthcare.
One of the most absurd myths developing in the 2020 Democratic presidential race is the idea that Warren, despite her poor performance in polls, is distinguishing herself by her policy seriousness in rolling out ideas to address financial struggles facing Americans. The only reason this narrative has developed is that she isn’t performing well enough to generate much scrutiny, and the political press is characteristically lazy when it comes to examining the finer details about policy. So, all they see is that Warren is constantly trotting out various plans, so they assume it must mean she’s taking policy seriously.
In reality, her policy ideas are a joke. She is merely pandering by promising that the government can pay for all of the expenses that are currently putting a financial strain on families. Her proposals do not grapple with implementation challenges, and they rely on deceptive accounting. The biggest joke is how she’s promised to pay for all of her proposals by taxing ultramillionaires.
The plan released today, she claims, would offer debt cancellation of up to $50,000 to more than 42 million people, or 95% of those with debt. She says that will completely wipe out debt for 75% of borrowers with student loans.
In her plan, as described in a Medium post, Warren wrote: “We can fully cover the cost of these ideas with revenue from my Ultra-Millionaire Tax on the wealthiest 75,000 families in the country — those with fortunes of $50 million or more.”
That sounded familiar to me, because I had written back in February on the dishonest accounting in her childcare plan. Sure enough, I wasn’t mistaken. The Medium post on her childcare proposal read: “The entire cost of this proposal can be covered by my Ultra-Millionaire Tax. The Ultra-Millionaire Tax asks the wealthiest families in America — those with a net worth of more than $50 million — to pay a small annual tax on their wealth.”
So, the plan to offer free college to everybody and to cancel student loan debt for 42 million borrowers would be paid for with the same pot of money that’s already been promised to pay for a universal childcare plan.
There are multiple problems with that. As I noted back in February, Warren’s estimate that the childcare proposal would cost $700 billion was based on a “dynamic analysis” that took into account the economic benefit of having subsidized childcare. Now, that might be justifiable if it weren’t for the fact that the estimate that her ultramillionaires tax would raise $2.75 trillion per year was based on a static analysis. That is, the analysis ignores any of the administrative challenges, such as the difficulty of valuing assets of the ultra-rich, their ability to move around money to minimize their tax burden, and the shrinking tax base as wealth declines over time as a result of the tax.
When we get to the estimates for the student loan and free college proposals, there are similar problems. Even the analysis she links to for the student loan cancellation portion of her college plan says that the $640 billion estimate is a rough one based on multiplying the estimated cost per household by the number of U.S. households, subject to data limitations. The analysis notes, “Given the data sources utilized in this analysis, a more precise estimate is challenging.”
There are clearly other ways of analyzing the plan that could make it more costly, given that total student loan balances are approaching $1.6 trillion and Warren is promising to eliminate most of that debt. But Warren says that loan cancellation, coupled with her free college proposal, would only cost $1.2 trillion over a decade.
However, even if we assume Warren’s low-ball estimates of the cost of her proposals, and assume her high-ball estimates as to the amount raised on her wealth tax, it still doesn’t get at all of the programs she’s expecting to be paid for by ultramillionaires.
In the section of her website called, “Rebuild the Middle Class,” Warren describes “an Ultra-Millionaire Tax on America’s 75,000 richest families to produce trillions that can be used to build an economy that works for everyone, including universal childcare, student loan debt relief, and down payments on a Green New Deal and Medicare for All.”
But “Medicare for all” has been estimated to cost $32 trillion over a decade, and even if one were to back out the healthcare element of the “Green New Deal,” it would still involve trillions more in spending (for such projects as building a low-carbon electricity grid and upgrading every building in America to be energy-efficient).
What’s more, this is not the only way that Warren proposes to lean on the wealthy to finance her agenda. Her $500 billion housing plan also is paid for by raising the death tax so that “ultra-millionaires and billionaires pay a larger share.”
Despite what the media would have you believe, Warren is not a serious policy candidate. She’s merely promising to solve every problem by having the federal government spend more money and perpetuating the fiction that all of it could be paid for by simply asking a small number of ultra-rich Americans to contribute a little bit more.
Other countries that have the sort of socialist welfare states that Warren is envisioning rely on significantly higher taxes on the middle class and thus are actually less progressive than the U.S. Among other things, the U.S. is more reliant than most other countries on taxing income, profits, and property (all of which tend to be disproportionately imposed on the wealthy) and less reliant on taxing payroll and goods and services, which tend to disproportionately fall on those with lower incomes who rely on wages and who spend a higher proportion of the money that they earn.
Warren is trying to propose goodies for everybody without acknowledging that the society she envisions would require significantly higher taxes on all Americans, not just the ultra-rich.
