Major Student Debt Relief Redux

Update 771  — CPI Hotter Than Expected;
March Report Dampens Rate Cut Outlook

Following this week’s CPI report for March, observers ranging from President Biden to Fed Governors to market participants agree that the trends in stubbornly elevated prices thus far this year point to a reduced likelihood of a Fed pivot to interest rate cuts anytime soon. After the March report, the upward price blips of January and February, initially dismissed as seasonal or transitory, now suggest rates will remain higher for even longer, well into the summer or beyond. 

We cover Wednesday’s CPI report, this week’s developments in Congress, as well as a set of hearings this week, focused on fiscal policy, including the problem of rampant tax evasion and efforts to combat forced arbitration clauses. See the full roundup of the week’s economic policy developments below. 

Good weekends all…



Inflation Rises More Than Expected in March

On Wednesday morning, the Bureau of Labor Statistics released its latest consumer price index (CPI) data, showing that prices rose by 0.4 percent in March, just as it had in February. Headline CPI rose by 3.5 percent on an annualized basis, up from an increase of 3.2 percent in February and 3.1 percent in March. 

Core CPI, which excludes volatile food and energy prices, rose by 0.4 percent on a monthly basis in March, just as it had over the two months prior. Over the previous twelve months, core CPI has risen by 3.8 percent, exceeding expectations. This is on par with an annualized increase of 3.8 percent in February and 3.9 percent in January and December. 

Source: Council of Economic Advisors

Shelter and gasoline contributed to over half of the monthly increase in headline CPI. Gasoline prices rose by 1.7 percent over the month, driving a 1.1 percent increase in the energy index, while shelter prices rose by 0.4 percent in March, just as it had in February. Motor vehicle insurance and motor vehicle maintenance and repair both rose significantly over the month, rising by 2.6 percent and 1.7 percent respectively. Part of the challenge for the Fed is costs that are impervious to rate hikes. For example, car insurance prices have spiked recently but little the Fed does will have a bearing on insurance claims and therefore prices for premiums.  

The hotter-than-expected inflation data raises the question of whether the Federal Reserve will proceed with cutting interest rates three times this year, as it said it had planned to as recently as mid-March. The Fed’s hope to see lower inflation figures, to signal that higher CPI figures in January and February were only a seasonal quirk, were disappointed.  

Fed Chair Powell has previously shown concern that inflation would plateau rather than continue its downward trend toward the Fed’s target of two percent. At the conclusion of the Federal Open Market Committee (FOMC) meeting in January, Powell said “I think the greater risk is that it (inflation) would… stabilize at a level meaningfully above two percent.” Powell has continuously reiterated that the Fed is prepared to adjust its projected path forward if inflation fails to progress as expected. Personal consumption expenditures (PCE) index data for March, to be released in two weeks, will provide a clearer picture of inflation’s progress ahead of the Committee’s next meeting. 

Other Developments

House Turns to Ukraine Funding after FISA Passage

As work on the National Security Supplemental package remains stalled in the House, Congress returned on Tuesday after its two-week recess, turning its attention instead to the quickly approaching April 19 deadline for Foreign Intelligence Surveillance Act (FISA) reauthorization. In what could have been a stalemate, the House finally passed the bill at 273-147 after failing to pass a procedural vote on Wednesday.

Cementing hard-right opposition to the bill earlier this week, former President Donald Trump took to Truth Social to encourage representatives to “KILL FISA” after claiming that the surveillance program up for reauthorization was used to spy on him. Nineteen House Republicans broke with leadership on Wednesday to block a procedural vote for the fourth time after demanding the inclusion of an amendment that would require a warrant when the program captures the data of Americans while surveilling foreigners. 

In the end, the compromise reached would adjust the reauthorization for two years rather than five, which could mean its next consideration will come under a new administration, while a vote on the warrant amendment narrowly failed. 

With FISA passed in the House, they remain in session next week and the focus turns squarely to Ukraine funding and the larger National Security Supplemental. Hard-right conservatives remain staunchly against Ukraine funding, especially without the inclusion of harsh H.R. 2 or similar border provisions. Meanwhile, Democrats and some moderate Republicans have signaled their support for Johnson bringing the supplemental package to the floor. 

While not confirmed, Speaker Johnson is expected to unveil a Ukraine funding alternative to the Senate’s package as a loan structure to attract more of his party to support Ukraine funding. Johnson’s proposal may also include provisions from the REPO Act, which would give the President the authority to confiscate Russian assets and transfer them to assist in Ukraine’s rebuilding efforts. Furthermore, it is unclear how the Speaker plans to address Israel or the Indo-Pacific, the other components of the Senate’s package. 

Watching closely is Representative Marjorie Taylor Green (R-GA), who threatened a motion to vacate to remove the Speaker if he brings a Ukraine funding package to the floor. 

FY25 Appropriations under New House Committee Chair

On Wednesday, the House GOP elected Representative Tom Cole (R-OK) as Chairman of the House Appropriations Committee. This move occurred following the exit of Chairwoman Kay Granger (R-TX), who stepped down upon the conclusion of the tumultuous FY24 budget process. Representative Robert Aderholt (R-AL) is currently the most senior Republican on the House Appropriations Committee but he did not formally throw his hat in the ring despite showing initial interest in the role.

This move will require Rep. Cole to give up his spot as Chairman of the House Rules Committee, for which Speaker Johnson has nominated Representative Michael Burgess (R-TX) as his replacement. The House GOP will also need to replace Cole as head of the Transportation, Housing, and Urban Development Appropriations Subcommittee, though it is not currently clear who is being considered for this role. 

Rep. Cole’s transition to Chair is viewed as a best-case for Democrats as he has historically been willing to engage in bipartisanship despite his conservative views. Democratic leadership hopes he will push back against the extreme House Freedom Caucus (HFC) and their long list of policy demands, which is only expected to grow in the new fiscal year. It is widely believed that Congress will push the passage of FY25 bills past the November elections, meaning we could see a short tenure from Rep. Cole and another Committee Chair before the conclusion of the FY25 budget process. 

Biden Continues His Student Debt Forgiveness Efforts

Fresh off the heels of his major student debt forgiveness announcement on Monday, President Biden announced today that his administration is forgiving another $7.4 billion in student debt for 277,000 borrowers. This latest round of forgiveness targets borrowers enrolled in the President’s Saving for a Valuable Education (SAVE) program and other income-driven repayment plans, and borrowers receiving Public Service Loan Forgiveness. The newest round of forgiveness raises the total amount of student debt relief approved by the Biden Administration to $153 billion for 4.3 million Americans.

As covered in 20/20 Vision’s most recent update, President Biden’s efforts to forgive as much federal student debt for as many borrowers as possible come as time runs out for the President to fulfill a 2020 campaign promise. Approval lags among Gen Z and Millennial voters. In response to his latest efforts, conservatives have renewed their promise to contest President Biden’s student debt relief policies in court. Earlier this week, additional GOP-led states joined two lawsuits challenging the SAVE program.


Senate Budget Committee Takes Aim at Tax Evasion

On Wednesday, the Senate Budget Committee held a hearing to discuss offshore tax evasion by the wealthy and corporations. Under the leadership of Chairman Sheldon Whitehouse, the Senate Budget has placed a great deal of attention on tax fairness, a central component of President Biden’s latest budget proposal and Democratic candidates’ 2024 platform. 

Much of the hearing centered on the enforcement of rules associated with shifting profits and assets offshore to avoid the associated tax liabilities. On the individual side, the Foreign Account Tax Compliance Act (FATCA) generally requires that foreign financial Institutions report on the foreign assets held by their U.S. account holders. However, this legislation has been ineffective in reigning in the stashing of assets in foreign tax havens. Corporations also take advantage of techniques to move their profits to low-tax jurisdictions, such as transfer pricing, a practice by which a corporate entity buys a product from their foreign subsidiary for inflated prices, shifting profits into tax haven countries. 

While Democratic Senators and progressive witnesses touted the revenue-raising potential of the $688 billion dollar tax gap – the difference between taxes owed and taxes paid each year –  Ranking Member Chuck Grassley (R-IA) pushed back arguing that increased enforcement hurts taxpayers and has limited potential to right our fiscal course. 

While addressing offshore tax loopholes will not be able to bring down deficits on its own, Americans are very much in support of the renewed focus on tax fairness with over 60 percent of voters feeling very frustrated by the lower rates often enjoyed by wealthy individuals and corporations. 

House Ways and Means Discusses 2025 Tax Fight

The House Ways and Means Committee held a hearing on Thursday to discuss Trump’s Tax Cuts and Jobs Act (TCJA), major provisions of which are scheduled to expire at the end of next year. The Republican majority on the Committee used this opportunity to highlight the perceived positive economic effects of the TCJA, as well as the legislation’s role in lowering tax liabilities for working-class Americans. Although the expiration of TCJA provisions would end a series of dramatic tax cuts, Republicans, including Chairman Jason Smith (R-MO), are messaging full TCJA expiration as “the largest tax hike in history on workers, families, farmers, and small businesses,” ignoring fiscal consequences. 

Democrats, led by Ranking Member Richard Neal (D-MA), argued that a vast majority of TCJA benefited the wealthy and corporations at an extremely large cost to the American people. The TCJA has already cost upwards of $2 trillion in federal revenue and would add an additional $3.5 trillion-plus to the federal deficit in the case of a wholesale extension. 

Witnesses at the hearing representing the business community voiced their support for provisions that helped put them on an equal footing with larger corporations and enabled them to keep their doors open. They specifically cited provisions already passed in the House as a part of the Tax Relief for American Families and Workers Act, pairing business tax cuts and an expanded Child Tax Credit (CTC) negotiated by Chairman Smith and Senator Wyden (D-OR) earlier this year. The bill is currently stalled in the Senate despite bipartisan support, possibly signaling a difficult road ahead for tax policy as we approach 2025. 

Senate Judiciary Targets Forced Arbitration Provisions

The Senate Judiciary Committee convened on Tuesday for a hearing titled “Small Print, Big Impact: Examining the Effects of Forced Arbitration.”

Pre-dispute mandatory arbitration clauses, known as forced arbitration clauses, have had a profound effect on consumers, workers, and small businesses. As Professor Myriam Gilles highlighted, these traps are created by companies and hidden in standard-form contracts to protect them from accountability. As Committee Chair Dick Durbin (D-IL) noted in his opening statement, these clauses rob tens of millions of Americans of their constitutional right to a jury trial, instead forcing individuals into a privatized forum in which they are unlikely to prevail. An estimated 825 million consumer arbitration agreements were enforced in 2018, a figure that has likely risen since then. 

Senator Sheldon Whitehouse (D-RI) asserted that these clauses protect corporations from accountability when they commit high-dollar, low-volume fraud, which consumers may be financially prepared to fight in court. In November, 100 organizations, including 20/20 Vision, supported a CFPB petition for a rulemaking to address forced arbitration clauses and we continue to oppose the use of such clauses by companies.

Look Ahead

Tuesday, April 16