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The cancellation of student loan debt drives subsidies to working-class elites



A good rule of thumb is to judge parties and politicians by their priorities. See which things actually work to achieve or spend political capital. This will tell you not only what they are really for, but also which components they really care about.

According to this indicator, it will be very indicative whether one of Joe Biden’s first actions as president will be the forgiveness of student debt.

This is an idea that revolves around democratic circles – especially among the progressive base. The base turned out to be Biden, and now they want it paid off – literally, in the event of a mass debt forgiveness.

Last week, a coalition of 236 progressive groups led by teachers̵

7; unions called for Biden to cancel student debt in its early days. Biden himself has already called on Congress to cancel $ 10,000 as part of the pandemic relief package.

Sensei Bernie Sanders and Elizabeth Warren called for even greater debt forgiveness. Sanders’ plan would cost about $ 1.6 trillion.

I think this is bad politics and bad politics. Start with politics: As economists on the left and right will tell you, the economic crater caused by the pandemic is not like a typical recession. In normal times, saving a business is a bad idea because, among other things, it creates what economists call “moral hazard” – stimulating bad decisions that people make when they think someone else (i.e. f. taxpayers) will take the section.

But a restaurant that was profitable before COVID-19 did nothing wrong. Trying to keep such a business and their employees afloat during the bipartisan pandemic was a good idea.

Proponents of loan forgiveness say that’s true. Well, before the pandemic, no one called for a mass rescue of small businesses, but many progressives called for the abolition of student debt. In other words, they believe that the pandemic is a crisis that should not be lost.

That doesn’t automatically mean they’re wrong, but it doesn’t make them right. Forgiving a student loan, even on formulas that exclude the very wealthy, has much broader economic benefits. As Jason Furman (chairman of Barack Obama’s Council of Economic Advisers) points out, debt forgiveness will be taxable – which would have a stimulating effect on the economy.

Think of it this way: If you only had $ 1.5 trillion, what kind of policy would help most people who are actually struggling right now? I don’t think the cancellation of student loans would be in the top 20.

Which leads me to politics. Most Americans, especially most poor Americans, do not have student debt because most of them did not attend college in the first place.

In addition, most people who have gone to college do not have or have very little student debt. According to the liberal Brookings Institution, approximately 30 percent of students do not. Another 25 percent have up to $ 20,000 in loans. Despite what you may have heard about the student debt crisis, only 6 percent of borrowers owe more than $ 100,000. In fact, they all borrowed so much because they were in graduate school.

You can argue that people who choose to graduate – including many young doctors, lawyers and training engineers – deserve relief. But do truck drivers, mechanics or short cooks deserve more help?

One of the reasons teachers’ unions – a huge source of donations and a political organization for the Democratic Party – is demanding a loan forgiveness is that teachers and administrators can increase their salaries by returning to school to receive 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 far less likely to lose their jobs and are more likely to find new jobs seems terribly self-serving.

The popularity of this idea stems from the fact that the Democratic Party is increasingly becoming a party of educated professionals as the GOP becomes more working class. Many poor people are still Democrats, but they are not the main source of power in the party – the bureaucrats who claim to be talking about them are. And that’s what Democrats give priority to.

Twitter: @JonahDispatch


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