We had numerous forums and debates in our recently concluded mayoral primary, not to mention a slew of TV ads. But can you recall any truly innovative policy proposals, particularly when it comes to jumpstarting our lagging economic growth?
Other cities, in the face of dysfunction in the nation’s capital and gridlock at the state level, have by necessity become laboratories of experimentation. Universal basic income, Baby Bonds, Marshall Plans for racial equity, auditing and unlocking public wealth for investment purposes, using AI to better manage transit systems — these are all things being explored elsewhere. Here, with a long-ago checked-out mayor whose administration is in love with pilot programs for policies already proven to work elsewhere, we just launched a study of a guaranteed income program.
Think of that: It’s the eighth year of the Kenney administration. Debuting a pilot program for a policy currently up and running in some 55 other cities is kind of akin to sacrifice-bunting when you’re down ten runs in the bottom of the ninth. To the uninitiated, it may seem like the right play, but you’re really just going through the motions.
Say one thing for Cherelle Parker, who will be the city’s next mayor: On the campaign trail, she didn’t give off a going-through-the-motions vibe. Which is why there is much hope among civic and business leaders who are concerned about the city’s moribund job numbers that between now and when she takes office next year, Parker will develop some big policy ideas that are in keeping with her big personality. We’re definitely in need of some new thinking that harkens back to FDR’s long-ago call for “bold, persistent experimentation;” after all, among the nation’s 30 biggest cities, we’re tied for 22nd in average annual job growth, at -0.4 percent, and the jobs we do produce pay roughly $35,000 per year compared to Boston’s $89,000.
So how about this for a potentially transformative idea: Forgiving medical debt. It’s a new idea that cities like Washington, D.C. and Pittsburgh are embracing. Why not get in on the trend?
Better than student debt relief
Progressives have spent a lot of time arguing for student debt forgiveness, despite the fact that it’s actually regressive, disproportionately advantaging the already well-off. According to Brookings, almost a third of all student debt is owed by the wealthiest 20 percent of households and only 8 percent by the bottom 20 percent. In fact, across-the-board student loan forgiveness is regressive whether measured by income, family affluence, educational attainment, or wealth.
That not only makes for ill-informed policy, but bad politics, as well. Think of the legions of working folks who did pay off their student loans and now are wondering why they’re bailing out those who didn’t, and then take a look at the polling data: The party once seen as the provider of opportunity for those who shower after work is now perceived to be run for and by the elite.
But forgiving medical debt is decidedly progressive, not to mention more pressing, given that escalating health care bills are the nation’s top cause of personal bankruptcy.
On our recently released episode of the How to Really Run a City podcast with former Mayors Michael Nutter and Kasim Reed, Washington Mayor Muriel Bowser shared her rationale for using $900,000 in budget surplus funds to forgive $90 million of medical debt held by her city’s most economically struggling residents.
“What all governments are trying to do is ask how do we ensure more people have a pathway to the middle class,” said the three-term mayor. “Another way to put it is how to make sure our investments are helping middle class families continue to live here. We’re able to leverage our dollars that will cancel $90 million of debt, and touch 90,000 people. It’s almost a no-brainer that we would do that. It can mean the difference between someone living in D.C. or someplace else or the difference between being a renter or buying a home.”
Here’s how it works. The Citizen has some experience in this, you’ll recall, because in 2019 we partnered with the nonprofit RIP Medical Debt, which buys up hospital debt in bulk for pennies on the dollar — and then forgives it for economically-challenged residents. We turned $50,000 into the writing off of $5 million of debt. Local residents received letters saying that, thanks to The Citizen and donors like philanthropists Richard Vague, Jeff Brown and Pat Croce, their hospital debt had been satisfied.
We got more than one call from perplexed folks wondering what the catch was — and the answer is there is none, due to the innovation of the RIP model. Fact is, hospitals are owed vast sums that will never be paid off. They’re happy, then, to accept, say, ten cents on the dollar to write off the debt — something being better than nothing, after all. And RIP — founded by two debt collectors now doing God’s work — is happy to forgive the debt.
D.C. is likely to also partner with RIP Medical Debt, as have Cook County, Illinois, and Lucas County, Ohio, in a combined erasure of $240 million. Toledo and New Orleans have also gotten in on the trend. Many cities have funded their investments by using leftover American Rescue Plan dollars. According to the White House, $16 million of ARP money has wiped out nearly $1.5 billion of medical debt nationwide. In the spring, New Jersey Gov. Phil Murphy proposed using $10 million to partner with RIP to clear out debt statewide.
Earlier this month, Pittsburgh was the latest to get on board when its City Council announced a $1 million investment in partnership with RIP that is projected to cure $115 million in debt held by 24,000 residents.
A way to close the wealth gap
So, how is forgiving medical debt an investment in economic growth among predominantly African American populations, and not just another liberal big city handout? Well, keep in mind that the median household net worth of a White family is $189,000, compared to merely $24,000 among Black families.
And consider that only one in 19 White Americans have a credit rating below 620 — which lenders consider high risk — compared to a staggering one in five African Americans. These things don’t just happen; they’re the result of decades of policy choices that have effectively denied African Americans the full wealth-building benefits of home ownership, as Richard Rothstein so persuasively documents in The Color of Law: A Forgotten History of How Our Government Segregated America. That makes clearing debt and raising credit scores an investment in economic growth.
“It’s not a silver bullet, but it is a powerful tool in getting more Black homeowners in D.C., which is a strong pillar of our comeback plan,” Mayor Bowser says.
And — critically — it’s not an investment that requires any overt redistribution of wealth. Bowser isn’t raising taxes or otherwise taking away anything from the haves in order to help her city’s have-nots. The resentment felt by those who have already paid off their student loans when others’ debts are forgiven doesn’t really apply when it comes to medical debt. Hospitals have simply made a deal that is in their economic self-interest. Who can get mad at that?
In that way, forgiving medical debt is actually a communitarian policy. It underscores to a city that “We’re all in this together.” And the way a forward-thinking mayor implements it can underscore that ethic, too. How about, I don’t know, committing $5 million of City money and challenging the business community to match it, leading to the writing off of some $100 million of hospital debt held by the poorest Philadelphians?
How about the message that press conference would send, with Mayor Parker shoulder to shoulder, say, with our new generation of civic and business leaders — like the Chamber’s Chellie Cameron, FS Investment co-founder and CEO Michael Forman, and Comcast’s Bret Perkins — all proclaiming a new commitment to providing opportunity, pursuing equity, and fostering cross-sector collaboration. Could there be a better way to announce that the days of sleepwalking through the governance of the nation’s sixth-largest city are over?
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Header photo by Images Money via Flickr.