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A good rule of thumb is to judge parties and politicians based on their priorities. Look at the things they actually work for or spend political capital on. This will tell you not only what they really are for, but also which voters they really care about.
According to this metric, it will be very revealing if one of Joe Biden’s first actions as president will be to write off student debt.
It’s an idea that swirls in Democratic circles – especially among the progressive base. The basis has turned out for Biden, and now they want them paid off – literally, in the event of massive debt cancellation.
Last week, a coalition of 236 progressive groups led by teacher unions called on Biden to cancel student debt in his early days in office. Biden himself has previously urged Congress to set aside $ 10,000 as part of a pandemic relief program.
Senator Bernie Sanders and Elizabeth Warren have called for even greater debt relief. Sanders’ plan would cost around $ 1.6 trillion.
I think it is bad policy and bad policy. Start with the Politics: As economists on the left and right will tell you, the economic crisis caused by the pandemic does not look like a typical recession. In normal times, bailing out companies is a bad idea because, among other things, it creates what economists call “moral hazard” – causing people to make bad decisions when they think someone else ( taxpayers) will take note.
But a restaurant that was profitable before COVID-19 was doing nothing wrong. Trying to keep such companies and their employees afloat during the pandemic, which Washington did on a bipartisan basis, was a good idea.
Advocates of loan forgiveness claim it is like that. Well, before the pandemic, no one was calling for a massive small business bailout, but a lot of progressives were calling for student debt cancellation. In other words, they think the pandemic is a crisis that shouldn’t be wasted.
That doesn’t automatically mean they’re wrong, but it doesn’t either. The forgiveness of student loans, even on formulas that exclude the better-off, has very little broader economic benefit. As Jason Furman (Chairman of Barack Obama’s Council of Economic Advisers) notes, debt cancellation would be taxable – reducing any stimulating effect on the economy.
Think of it this way: if you only have $ 1.5 trillion to spend, what policy would help most people in difficulty right now? I don’t think student loan cancellation would rank in the top 20.
Which brings me to politics. Most Americans, especially most poor Americans, have no student debt because most did not go to college to begin with.
In addition, most people who went to college have little or no student debt. According to the liberal-leaning Brookings Institution, about 30% of undergraduates don’t. Another 25 percent have up to $ 20,000 in loans. Despite what you may have heard of the student debt crisis, only 6% of borrowers owe more than $ 100,000. Almost all of them borrowed so much because they went to college.
You can argue that people who choose to pursue graduate degrees – including many young doctors, lawyers, and engineers in training – deserve relief. But do they deserve more help than truck drivers, mechanics or short-term cooks?
One of the reasons teachers’ unions – a huge source of donations and political organization for the Democratic Party – want loans canceled is that teachers and administrators can increase their salaries by going back to school. school to obtain higher degrees. Other municipal and federal workers – another major constituency for Democrats – have similar rules.
Using the pandemic as an excuse to reward workers who are much less likely to lose their jobs and more likely to find new jobs if they do, seems terribly interested.
The popularity of this idea stems from the fact that the Democratic Party has increasingly become the party of educated professionals, while the GOP has become more working-class. Many of the poor are still Democrats, but they are not a major source of power within the party – the bureaucrats who claim to speak on their behalf are. And that’s what Democrats prioritize.
Twitter: @JonahDispatch
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