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How will Republicans responds to Biden's student loan giveaway?
Even though the Supreme Court scuppered Biden's plan to forgive student loan debt without congressional approval, he is apparently doing it anyway. So far, it would appear that 4.75 million people have had loans forgiven for a total cost of $167 billion.
Here's a link to a recent Biden administration press release.
I will admit, the devil is in the details. I am not going to comment on the constitutional legality, the many ways to qualify for forgiveness, nor the amount given to high-income earners, which some have claimed is substantial.
But the total cost is staggering. It amounts to over $1000 for every American who pays income tax.
Clearly, this money has electoral implications. The base of people who have large student debts is presumed to be mostly Democratic voters. By giving this group a mean payment of $35,000 each, the Biden administration hopes to increase their enthusiasm to vote. Even the ones who do lean towards Trump might view Biden favorably after getting (almost) enough money to buy a new Tesla Model 3.
Buying votes goes back as far as democracy does. Famously, Julius Caesar was forced to conquer southern Spain after going broke buying votes to become Pontifex Maximus. In recent times, some have argued that farm subsidies amount to vote buying. But, while special interests have always played a large role in American politics, student debt forgiveness is possibly the closest thing to naked vote buying we've seen in our lifetimes.
So... how do the Republicans respond? Whose votes should they purchase with a fig leaf of social justice? I'd propose a group that honestly needs it and creates a lot of value for society: blue collar workers. People who work 30 hours a week or more and make less than $30/hour should get an "earned income credit" of $10,000 a year.
If we're going to just be giving money away, give it to the workers, not to excess elites.
I’m with Tomato. Assuming this is constitutional (apparently a big ask), it’s just as legitimate as tax cuts or farm subsidies or energy credits or every other education program. The minarchist pipe dream of a government without redistribution is not and never has been on the table.
It’s not ascribed to social justice, either. Sometimes that shows up, because it is fashionable, but messaging like the linked press release have nothing to say about the subject. No, it’s framed as relief for economic hardship.
Many of these loans were taken out with the expectation of securing a valuable job. If that didn’t materialize, who’s to blame?
If you believe 1 or 2, you have an excuse to support redistribution. Even if you subscribe to 3, there’s a possible justification; the government does have an interest in an educated populace. I think it’s the most compelling out of these, because teaching a generation that aspiring to a better job will actually prevent them from affording kids is burning the candle on both ends.
But it’s 4 that underpins the opposition. For those who believe that the beneficiaries are stupid, there’s barely any reason to soften the blow. And if one thinks they’re malicious, abusing the system to get an education they never intended to pay off…well. Might as well take one’s own slice, right?
That’s not to say I actually agree with the policy. It sucks and it only has the thinnest veneer of a justification outside of the class warfare. If nothing else, it’s contributing to the credential inflation which devalued degrees in the first place.
But throwing helicopter money at some other group? That’s the worst option. There’s no reason to do it unless you’re playing tit-for-tar against the least charitable version of your enemies. At that point, it’s all over but the crying.
Expectations aren't the basis for loans. Do we think mortgages are invalid if the house burns down?
No, but loans are often granted only when the lender agrees to insure themselves against the house burning down. A world in which every high school graduate gets to see the insurance market's actuaries' estimates of their future income conditional on their resume and choice of school and major would be a much more interesting world.
Assuming an insurance market was allowed to exist, of course. I fear most voters still don't really get the concept of insurance as a way to pay E[X]*(1+p) for a benefit of X, rather than as a weird form of potential charity that would let us squeeze money for poor people from evil corporations instead of from government coffers if only we were brave enough to pass the right laws.
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Sure they are.Expectations are definitely the basis for loans. Would people take a mortgage if they expected to be left footing the bill after a fire?But that’s what I’m trying to get at. Imagine some city in California becomes uninsurable against fire. By default, the demand curve for homes will move left as fewer people are willing to risk holding all that debt. That drags down the clearing price of housing.
I can think of several reasons why the government might step in and put a finger on the scales. Some of them might apply to college debt, too.
[Edit: unclear wording]
It’s not a real expectation based on real data on the part of either party.
The student at least the ones I know are not looking at data, the expectations of employers in the field, the number of graduates per opening, or their own talents. Just for a trivial example, we graduate more BS in Psychology students every year than there are working psychologists in the USA. And it’s been that way in a number of fields for some time. Other fields have a very tiny demand for phd students, and no other real demand. Some teach skills that one can learn on their own by simple practice and peer review (mostly the arts). But I don’t see demand for poor bet degrees falling. People are still going to school and “expecting” to get a good job after graduation. Likewise, they’re not really being honest with themselves about what they can actually achieve. C students in high school and college simply are not going to stand out enough to get the internships they need to get the kind of jobs allow them to afford to repay that $40K a year in tuition loans. You aren’t going to do well in engineering if you’re not doing A to high B in physics and high level math. The thinking here isn’t based on reality but simply fantasy.
On the lender end, getting a student loan is much much easier than getting any other kind of loan. If you want a home loan, you need to have a good job, have had that job for a number of years, have excellent credit, and even then you’re limited in what you can get. You might only get approved for a small amount based on history. If you want a business loan, you need the steady income and good credit, but you also need a business plan, and one that makes sense to the bank. If you want a student loan, you just get one. No credit checks, no need for a strong work history, no grade requirement, no thought as to whether a major in X is worth the investment. Just sign here and take out the loans.
What I think the issue is coming from is the government backing of these loans. If the law were changed to allow defaults in limited cases, or after a given time frame, I think it would set both things to right. Kids would have to think, really think, about what they’re going to do after high school. If they want college they’d have to work to get in, work to keep grades high to keep their loans, and so on. They would be forced into getting useful skills in college rather than doing whatever sounded fun at the time.
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https://www.consumerfinance.gov/ask-cfpb/what-should-i-do-if-my-house-is-destroyed-in-a-natural-disaster-en-1521/
Right. The usual way this is handled is the mortgagor takes out insurance, and not only that, they are required by the terms of the mortgage to insure against destruction of the property. If they don't, the mortgagee will buy insurance for them (usually at a very inflated rate) and charge them for it.
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Sorry, I wasn’t clear.
Expectations are the basis for loans. People would take smaller mortgages if it wasn’t for insurance coverage. I’m not claiming that mortgages would be invalidated.
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Aside from when the Republic was founded, you mean. The question of “redistribution” was barely a question until the 20th century and the unionization of massive segments of the working population.
Hm. Perhaps the Articles of Confederation avoided it. If so, it’s only because they assumed states would handle the process.
You’re defining the term too narrowly. Think “40 acres and a mule”—the government has always sent people out to develop land in its interest. Maybe the 40 acres don’t count, if they weren’t taken from other citizens, but the mule? The garrisons, the infrastructure, the subsidies? They blur the line between buying favor and provision of public goods.
When we broke free of Britain, we spent American lives to give others a more favorable regime. When we bought French territory, we used American tax dollars to procure new land for our expanding population. By the middle of the century, we’d decided to redistribute the Southern economy rather drastically.
Governments exist because they provide a service which is otherwise hard to coordinate. Within a state, that implies redistribution.
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Were they?
I sincerely doubt that CS or EE majors are anything but underrepresented in the recipients of these bailouts. Which does point to a third possible party who has at significant share of the blame: universities themselves. They encourage students to take massive loans of dubious benefit with false advertising. More economically advantageous majors are often even limited in enrollment.
I don't hold the student loan debtors too responsible for the issue. They're young idiots who are told by pretty much everyone that it's a good idea to go on what's effectively a four year party vacation because they'll automatically get a good job afterwards. It's akin to someone who doesn't understand how interest rates work taking out a payday loan. But we really should be punishing the institutions that put them in that position.
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those who fail to get jobs or only get low-paying jobs simply do not pay anyway. the bulk of payments is by people who get decent jobs.
credentialism is not the same as education. Below-market rate loans with extremely lenient repayment terms are the only way to make it affordable without having to impose price controls or controlling credentialism. Both sides like credentialism: employers get a large, prescreen population for hiring purposes, and the left gets to force their courses and ideology on the population. So the result is a distorted market.
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I think this one is wrongheaded and it's why the Republicans need an equal and opposite stimulus to undo the damage, and then hopefully, reach an armed truce.
The country doesn't need the kind of education that these loans are paying for. In fact, one of the criteria for forgiveness was the uselessness of the degree. From the press release:
We need people in the economy working, or studying for the purpose of that work, not studying useless things.
This is where the humanities professor says something like, "life shouldn't be all work and no play". And I agree! That's why we need relief for workers. Because workers deserve more pay, fewer hours, and better benefits. And all of this is harder to achieve if we pay and reward people for doing useless, even counterproductive, things.
We've already reached the point at which further education is mostly a net negative. I'm okay with it as a luxury good. But asking workers to pay for it is too much.
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