When Elizabeth Warren proposed her student debt forgiveness plan this spring, I wrote a piece detailing its fundamental flaws. Namely, (a) it would do nothing to reduce the underlying issue of college costs sailing ever higher, and would almost certainly have the opposite effect, (b) it was rife with unfairness, unintended consequences and perverse incentives, and (c) Warren's suggested funding mechanism has proven to be profoundly ineffective when implemented elsewhere. Bernie Sanders' new policy idea -- the cancellation of all student loan debt, supposedly financed by a Wall Street tax, faces even bigger problems on the former two fronts, and is raising questions on the latter, too.
If the government uses taxpayer money as a magic wand to make student debt vanish, the tuition and other associated costs will go up even further; there will be literally no incentive whatsoever for institutions to claw back their prices. This is already the problem. "Forgiveness" schemes would make this phenomenon more acute and entrenched. Setting aside the moral hazard and unfairness of forcing one group of people to pay off another group's debts that were accrued voluntarily, Bernie's plan would also amount to a redistribution scheme specifically designed to disproportionately benefit non-indigent people. Here's a reminder of the dynamic at play, with the caveat that this issue would be even more pronounced under Sanders' proposal, because Warren at least made an attempt to mitigate against it:
On the surface, Warren's idea might sound like another expensive federal benefit for struggling families. But the nature of college attendance and student loans means that Warren's loan forgiveness plan is a massive giveaway to relatively well-off people. In the U.S., only about a third of people over 25 have a college degree, making them a comparatively elite group whose elite status is reinforced by, among other things, the connections they make while at college. On average, college graduates earn about $1 million more during their lifetimes than non-college graduates, according to a Georgetown University study. A separate study from Pew found that college graduates typically earn about $17,500 more annually than people who only had high school degrees.
And then, of course, there's the matter of Bernie's pay-for. Budget expert Brian Riedl says the math doesn't come close to adding up, which is a recurring theme on these big ticket spending adventures:
The real cost:— Brian Riedl (@Brian_Riedl) June 24, 2019
Public and private student loan forgiveness: $1.6T
+Free public college moving forward: $1.2T over decade (using TPC data)
+Future renewals of private college loan forgiveness: $200B?
Even Sanders rosy financial tax estimate is not close to enough. https://t.co/ZfipS6dDds
And that's on top of the roughly $36 trillion ten-year price tag on his government healthcare system, which outlaws private insurance and covers illegal immigrants, naturally. Philip Klein wonders if the Democratic primary will escalate even further into a bidding war using other people's money. Every day is a magic show in Bernieworld. And while the leftward-sprinting Democrats appear dead set on making matters worse, here's a timely reminder that the currently-constituted GOP also has virtually no interest in, or political appetite for, fiscal discipline:
Tonight at @aspenideas, former speaker Paul Ryan acknowledged he was unsuccessful in convincing President Trump to tackle long-term federal spending. But, he added, “We walked him through as many PowerPoint presentations as we could.”— Robert Costa (@costareports) June 24, 2019
This will make the party's inevitable shift back into debt hawkishness (once a Democrat is in office) seem less convincing. I'll leave you with what a Twitter pal referred to as a "metaphor for our times," courtesy of the media's supposed equality guardians: