A mega-pander aimed at siphoning off some of Bernie’s support among young adults. And nothing short of a mega-pander is what it’ll take: According to Axios, in a survey of college students’ 2020 preferences, she currently ranks behind, ah, John Kasich.
She’s still ahead of Howard Schultz, though! By three points.
Debt forgiveness is one half of her plan. The other half is free two-year or four-year college education at public schools for anyone who wants it. How will we pay for it, you ask? Via her “Ultra-Millionaire Tax,” she insists, a two-percent charge on households with a net worth of $50 million or more that’ll allegedly provide $2.75 trillion in revenue over 10 years. I have a hunch that by the end of the campaign the money to be raised by the Ultra-Millionaire Tax will have been appropriated to cover something like $20 trillion in spending on different programs.
The first step in addressing this crisis is to deal head-on with the outstanding debt that is weighing down millions of families and should never have been required in the first place. That’s why I’m calling for something truly transformational — the cancellation of up to $50,000 in student loan debt for 42 million Americans.
My plan for broad student debt cancellation will:
Cancel debt for more than 95% of the nearly 45 million Americans with student loan debt;
Wipe out student loan debt entirely for more than 75% of the Americans with that debt;
Substantially increase wealth for Black and Latinx families and reduce both the Black-White and Latinx-White wealth gaps; and
Provide an enormous middle-class stimulus that will boost economic growth, increase home purchases, and fuel a new wave of small business formation.
I managed to pay off my own student loans about a decade ago, sacrificing the proceeds of a modest business success to finally get free and clear of further interest obligations. I could have used it as a downpayment on a house or as seed money for a small business but I prioritized. And so I have the same question for Warren as Dan Foster does: When do I get my reimbursement check?
Note the point about resentment. “The Wall Street bailouts created Elizabeth Warren,” asks Foster ominously. “What will Warren’s student loan bailouts create?” A progressive wiseguy responded to that by saying, “A generation of homeowners, heaven forfend,” but that’s Foster’s point. He would have been a homeowner much sooner himself if not for his loan obligations. On what moral basis should someone who made the same economic decision he did be absolved from its consequences when he wasn’t? It’s the higher-ed equivalent of Democrats’ immigration preferences: There’s no moral logic at all to amnestizing someone who entered the U.S. illegally when immigrants who insist on following the law wait years for citizenship. But it solves a messy social problem in one fell swoop and it flatters certain key constituencies whose votes Democrats desperately need.
Philip Klein wrote his own post today about the moral hazard in rewarding profligacy. The less responsible you were in incurring debt you couldn’t afford and the less willing you’ve been to sacrifice in order to repay it, the more your government will reward you. For making that obvious point he was slammed on social media with various poor analogies:
An example is: Saying student loan forgiveness would be unfair to those who struggled to pay off their loans would be like saying, we can’t cure cancer, because it would be unfair to those who already died from the disease…
Curing cancer would not have negative impacts on those who already suffered from cancer, whereas if the government were to take on the cost of student loans, it would be a burden that would be placed on other citizens either in the form of higher taxes or more debt…
Furthermore, there is no moral hazard issue involved with curing cancer. That is, paying off student loans would be another signal from the federal government that those who may be engaging in less responsible behavior will eventually be bailed out by government while those who make responsible decisions will receive no benefit. As we contemplate what to do about the long-term entitlement crisis, this sends a horrible signal — that there’s no reason to be a sucker and manage money wisely now, because at the end of the day, the government will always be there to step in.
Another problem with the cancer analogy is that suckers like me and Foster who foolishly repaid our loans aren’t “dead” for purposes of it. We could be reimbursed. Double the “Ultra-Millionaire Tax” or whatever and get the money from there. What Warren’s proposing is more like the government devising a cure for cancer, deciding for no apparent reason that it’ll be administered only to a fraction of people with the disease, and prioritizing for treatment those who knowingly engaged in high-risk behavior like smoking. I’m not clear either on whether Warren’s plan would apply prospectively to future students who have their hearts set on expensive private schools instead of the free public schools that she’s proposing. Do they get $50,000 in debt forgiveness right off the top, before the debt is even incurred? (Imagine what national college tuition would suddenly look like if they did.) If not, if Warren’s plan applies only to loans that currently exist, what happens in 10 years when the next generation declares that they have too much debt to pursue their life goals? By what logic should they be denied the sort of bailout that their elders received? Surely we’re not going to deny them the chance to be a generation of homeowners, heaven forfend.
At the very least, Warren’s messaging about this proposal should focus acutely on what supposedly makes the current generation of student debtors especially deserving of a massive federal bailout. If I were her I’d reference the Great Recession in every third sentence. It’s not the fact that the feds have incentivized higher tuitions that makes twentysomethings worthy of debt forgiveness (although it’s certainly true that they’ve incentivized it), since that doesn’t answer the “Why them and not me?” objection from Foster, Klein, and me. It’s the fact that young adults had greater difficulty than most generations getting hired and building careers thanks to the financial crisis. They were set back by it to an unusual degree and now, for the sake of ensuring their passage into the middle class, they need an unusual remedy. The wrinkle in that argument, though, is that the people who suffered most from the recession aren’t recent graduates, they’re the graduates of, say, 2005-2013, people who’d only recently entered the work force or were about to when the crisis struck. Why would someone who graduated last year with $50,000 in debt and entered a booming economy deserve a bailout? Answer: Because Elizabeth Warren needs votes, that’s why.
I’m calling for universal free college and the cancellation of student loan debt for more than 95% of Americans. This is the kind of big, structural change we need to make sure our kids have opportunity in this country. pic.twitter.com/KERw3APDMo
— Elizabeth Warren (@ewarren) April 22, 2019