Boomergeddon Watch: Student Debt Relief

debt_reliefby James A. Bacon

It should surprise no one that Hillary Clinton is advocating free college tuition and  loan forgiveness for millions of students in an attempt to appeal to the Millennial vote. But the pandering of presidential candidates doesn’t begin to plumb the depths of perversity in the American political system. Now industry is joining the cause. Reports the Wall Street Journal:

Real estate agents, farmers, architects, startup lenders, lawyers, tech companies, benefits administrators — even podiatrists — have sent lobbyists to Capitol Hill over the past two years to push for legislation to forgive or at least reduce what workers and consumers owe on their student loans. … Many industries argue that freeing up student debt, even for well-paid workers, would help the economy.

The proposal with the most traction, says the WSJ, would allow employers to contribute up to $5,250 a year toward an employee’s student debt without it being taxed.

The bald self-interest of these industries is appalling. To be sure, forgiveness of all or part of the $1.3 trillion in student debt would stimulate consumer spending — Millennials could buy more houses, more cars, more consumer goods. But such measures would pass on the cost to taxpayers, and it would ratchet up moral hazard to unprecedented levels.

It is mind-numbing to me that anyone is considering massive debt relief that would reward the profligate and irresponsible while punishing those who dutifully paid off their obligations. But why not? After all, we bailed out Wall Street after the real estate crash. We bailed out Detroit. We hand out tax breaks to big business like John D. Rockefeller tossed out dimes. We allow affluent home owners to deduct mortgage interest from their taxes. Now Donald Trump wants to hand out billions for a day care entitlement. There’s no end to the goodies we dispense, so what’s one more multi-billion-dollar giveaway?

The blindness is breathtaking. Despite sequestration, despite the expiration of the Bush tax cuts, despite a zero interest-rate monetary policy, despite continued (though tepid) economic growth, the Congressional Budget Office says that the post-recession trend of declining deficits is over, and that spending shortfalls will continue to increase every year, pretty much forever, and so will the national debt.

projected_deficits

Adding another entitlement — a higher-ed entitlement — rather than addressing the underlying problem of rising college tuition will only accelerate America’s march to Boomergeddon. This cannot possibly end well.

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21 responses to “Boomergeddon Watch: Student Debt Relief

  1. But this is just the tip of the iceberg. See Mitch Daniels guest column in today’s WSJ

  2. didn’t see Daniels guest column.. but saw this one:

    The Trump Plan Will Help Working Mothers
    By Ivanka Trump
    My father wants to empower working and stay-at-home parents and give families freedom of choice in child care.

    • Larry,

      I highly doubt that you didn’t see the Daniels column unless someone sent you the Ivanka Trump piece and you don’t regularly read WSJ, which itself would be informing to the rest of us. Otherwise, it means that you went to the WSJ editorial pages but failed to engage your wrist to see all the editorial material. Really? I think you just wanted to ignore the common sense contained in his piece. It doesn’t suit your narrative

  3. so… what’s the difference between a “free” K-12 education and a “free” K-16 education is it results in higher productivity, lower unemployment and fewer entitlements?

    or how about this –

    tax breaks in general that contribute to higher productivity, lower unemployment and fewer entitlements as opposed to tax breaks that contribute to preservation of wealth?

    look at your current to ten tax expenditures:

    and which ones essentially preserve wealth and income and which ones contributes to higher productivity ?

  4. “A national government that, year after year, borrows enormous sums and spends them not on genuine investment in the future but on current consumption, passing the bill down to others, pretending that the problem is smaller that it really is, lacks not only good judgement but integrity. It is not hyperbole to label such behavior immoral …”

    For the frightening details see opinion piece in today’s WSJ labelled: “Mitch Daniels: Washington’s Wake-Up Call.”

    This immoral conduct, the wasting of our peoples” money by the leaders of our nation’s public institutions has now spread out of control, like wild fire. Witness the Board of Visitors of the University of Virginia. How this crew is now crowing in UVA Magazine how it spent more than $50 million dollars of other people’s money on a phony “restoration” of the Rotunda to show off their new Board Room. And while this gross extravagance was going on over the past four years they were at the same time pleading poverty and hiding their intentions regarding yet another $2.3 billion of other peoples money.

    • By the way, the new fall edition of UVa tells us the Rotunda renovation is now up to the incredible sum of $58 Million and still counting apparently. Of course this is only the first installment. Another $150 Million is planned for the balance of Mr. Jefferson’s original academic Village, or at least that was the estimate a few years back, all other people’s money.

  5. re: “Mitch Daniels: Washington’s Wake-Up Call.”

    more hand-wringing ideological blather …

    he has no specific recommendations.. just “bad bad govt”.

    entitlements bad. Defense spending good.

    these guys are worthless.. except for bleating ideological goodball stuff…

    you need REAL specific recommendations.. you need to OWN them as YOUR approach.. we already got way to many handwringing naysayers..

    • I love your ad hominem attacks. They’re always so helpful.

      I don’t know why you find this so complicated. It’s very straight forward. You have to cut spending. The left always bleats about specific recommendations, then they don’t make any of their own, for the very simple reason that they don’t want any cuts. They want to spend into oblivion. Why should our side make specific recommendations when your side won’t? When we get agreement that cuts have to be made, then we can all get very specific indeed. I’m not holding my breath that the left will ever do that. They can’t. They would lose their constituencies of free loaders.

      BTW, if you bother to read Mitch’s stuff, you know that he made very specific recommendations right along when he was head of OMB.

      • Afraid Larry’s back to his old habits. This time lecturing Mitch Daniels.

      • “I love your ad hominem attacks. They’re always so helpful.”

        you might check .. I was talking about the issues and the lack of specifics…

        “I don’t know why you find this so complicated. It’s very straight forward. You have to cut spending. The left always bleats about specific recommendations, then they don’t make any of their own, for the very simple reason that they don’t want any cuts. ”

        why should the left be offering cuts when the other side does not support their own ?

        why is it up to the “left” to supply them?

        if you want cuts – man up and specify them.. or admit to being cowardly ….

        “They want to spend into oblivion. Why should our side make specific recommendations when your side won’t? When we get agreement that cuts have to be made, then we can all get very specific indeed. I’m not holding my breath that the left will ever do that. They can’t. They would lose their constituencies of free loaders.”

        “MY side”? You might need to pay closer attention.

        I’ve made specific recommendations… guy…

        BTW, if you bother to read Mitch’s stuff, you know that he made very specific recommendations right along when he was head of OMB.

        that was then – this is now… if you write the article – talk-the-talk – then walk-the-walk.

        if you want cuts -then specify them… stand behind them, advocate for them.. be honest with the voters.. and say what you want to do… you don’t get elected by refusing to say what you want to do – unless you are a Conservative -eh?

  6. In LarryG’s defense — let’s go back to the subject of this post and the lovely graph embedded in it, above: the annual deficits and surpluses since 1966 according to the Congressional Budget Office. Notice the ONLY years with surpluses were 1969 (President Johnson) and 1998-2001 (President Clinton). It wasn’t the conservatives’ promises of trickle-down economics that brought you those exceptions; it was liberals’ tax increases.

    • Sorry Acbar,

      Can’t remember the situation in 1969, but the late 90’s situation was clearly the restraint imposed by the Gingrich congress. The mammoth economic growth due to technology in the 90’s produced a bonanza of tax revenues. Tax increases had nothing to do with it. Tax increases depress growth for the reasons cited and explained in previous posts. They de-stimulate those from whom the taxes are taken without any corresponding increase in growth in the private economy. This is well understood, but also something the left categorically refuses to understand because of their class envy, which has been around since the Bolsheviks. Turned out really well for them, didn’t it?

  7. so… in theory – the one trillion dollars in tax cuts should have stimulated the economy, right?

    so the more tax cuts – the more the economy is stimulated, right?

    sure seemed to work for Kansas…. holy moly!

    check out this National Review article

    http://www.nationalreview.com/article/434885/kansas-tax-cuts-wont-starve-government-beast

    excerpts:

    “Conservatives tell two incompatible stories about tax cuts. The first story is the naïve supply-side story, that tax cuts pay for themselves or even pay for themselves and then some. There isn’t much evidence that this is true.

    The second story is the fairy tale called “Starve the Beast.” This version is economically more realistic but politically a fantasy.

    We are not going to balance the federal budget without cutting Social Security and other popular entitlements as well as the military, and Kansas is not going to bring its spending down to match a lower revenue line without touching education and the roads. It isn’t going to happen.

    Yes, conservatives believe in smaller government, but conservatives also believe in prudence — and that our political calculations must in the end take account of reality. And here’s the reality that every politician eventually discovers: You can promise to Starve the Beast, but in the end, the Beast is Us.

    so give the folks in Kansas credit.. they actually walked the walk – they went forward with their beliefs… and values…

  8. Somewhere I was reading that 6 Trillion dollars came up missing or unaccounted for. Why can’t the government bean counters make a line item accounting adjustment under the student loan account for part of that loss ? After all, they aren’t really sure where the money went. It’s already gone. The only evidence it ever existed is some numbers on a spreadsheet. Pick the account and hit Delete.

  9. The budget surpluses of the 1990 were significantly enabled by the 1990 budget deal that was signed by George H W Bush. It contained about $500B in debt reduction through about 2/3 spending cuts and 1/3 tax increases. To do the deal with Democrats, he had to violate his “read my lips, no new taxes” pledge to do it, which probably contributed significantly to his loss in the 1992 election. That deal also included the provision to pay-as-you-go for new spending, requiring offsets from budget cuts or tax increases.

    The Clinton balanced budgets came in years when the budgets were passed by a Republican-held congress. There were deficits in the years when the budgets were passed by a Democratic-held Congress.

    The 1969 balanced budget was small and was during the Nixon years, but the budget for that year was passed by a Democratic Congress and signed by Johnson.

  10. I forgot to mention that the 1969 balanced budget was only achieved by combining independent funds like Social Security into the calculation. It would have been a deficit without that. It also masked the rising costs of the Vietnam war.

    • Izzo –

      Good analysis. A book needs to be written on the GOP controlled Congresses of the 1990s, the unusual impacts those Congresses had on the Nation in contrast to what has been the norm in modern times. In particular, for example, how credit, blame, and controversy was passed around and co-oped between the three branches of government. And how modern historians have work so hard and diligently to distort the record in their efforts, both conscious and unconscious, to fool the future and everyone in it.

  11. Not that hard to balance the budget:

    1. – require people on Medicare who make 85k in retirement income to pay more than $122 a month for health care.

    2. – get rid of Medicare Advantage so that all of Medicare has a 20% co-pay

    3.- get rid of the tax exclusion for employer-provided health insurance

    4. – get rid of every military base the Pentagon wants to get rid of

    5. – get rid of every weapon system the Pentagon wants to get rid of.

    6. – require military folks who have never served in a combat zone to work longer than 20 years for a full retirement.

    7. Get rid of the mortgage interest deduction except for one owner-occupied house up to median price .

    8. Get rid of subsidized flood insurance and turn it over to the private sector

    9. get rid of college loans except for community college occupational certificates.

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