Senator Bernie Sanders (I-Vermont) is officially the first presidential candidate to propose eliminating all $1.6 trillion in outstanding student debt and pair it with tuition-free college.
And under Sanders’ plan, high-frequency stock traders would pay for it.
The Vermont senator estimates the cost of his plan to be approximately $2.2 trillion, when taking into account the cost of implementing tuition-free college and eliminating student debt over a ten-year period. On his 2020 campaign website, Sanders said a financial transaction tax focusing on speculative trading on Wall Street (also known as an FTT) would raise roughly $2.4 trillion with a 0.5% tax on stock trades, a 0.1% tax on bond trades, and a 0.005% tax on derivatives trades (typically the most speculative).
To arrive at that figure, Sen. Sanders cited a 2018 study from the International Review of Applied Economics, which analyzed the financial impact of 2012 and 2015 FTT legislation in both the House and Senate. The report’s authors found that, when applying a small tax on stocks, bonds, and derivatives, it would raise enough revenue to equal approximately 1.2% of U.S. annual GDP.
“If Wall Street can be bailed out for several trillion dollars, 45 million Americans can and will be bailed out of the $1.6 trillion burden of student loan debt and we can provide free college for all,” Sanders’ campaign website reads. “Some 40 countries throughout the world have imposed a similar tax, including Britain, South Korea, Hong Kong, Brazil, Germany, France, Switzerland and China.”
While Sanders has been pushing for an FTT for many years as a senator, the United States once had an FTT. The Center for Economic and Policy Research — a non-partisan think tank focusing on economic policy — pointed out that between 1914 and 1966, the U.S. had a small tax on stock issuances. In fact, the tax was doubled during the Great Depression in order to raise badly needed revenues for jobs programs like the WPA, which put 8.5 million Americans to work during the peak of the Depression.
Sanders isn’t the only candidate to propose eliminating student debt. In April, his 2020 rival, Senator Elizabeth Warren (D-Massachusetts), rolled out a plan to eliminate student debt for borrowers making less than $100,000, on debt loads of $50,000 or less. This would, according to Warren, be fully paid for by taxing the net worths of individuals with personal assets of more than $50 million, and would eliminate nearly all student debt, except for higher debt loads taken on by student borrowers who attend law school or medical school.
While one would assume lawyers and doctors would be able to pay off those debts on their own, it’s worth mentioning that even several dozen members of Congress — who make six-figure salaries and have federal benefits — still have mountains of student debt. Senator Chris Murphy (D-Connecticut), for example, still has more than $200,000 in student debt from earning his law degree, despite earning a Congressional salary since 2007.
Forgiving all student debt could prove to be a significant economic stimulus. In 2018, the Levy Institute of Economics at Bard College found that eliminating all student could result in $1 trillion in new economic activity over a ten-year period, as former debtors would be freed up to buy homes, start businesses, and have additional income to spend in local economies. Debt cancellation could also create roughly one million new jobs in the process.
Both Sanders and Warren will likely be asked about their student debt cancellation proposals at the first Democratic debates, which will air this Wednesday and Thursday.
Carl Gibson is a politics contributor for Grit Post. His work has previously been published in The Guardian, The Washington Post, The Houston Chronicle, Al-Jazeera America, and NPR, among others. Follow him on Twitter @crgibs or send him an email at carl at gritpost dot com.