Student loan forgiveness would be a bailout for elites

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Nov 19, 2020, 8:11:09 AM11/19/20
Voters sent a clear signal in this election that while they are ready
to move on from President Trump, they are wary of giving Democrats the
power to impose a sweeping left-wing agenda.

In a best-case scenario for Democrats, the Biden administration will
start with a smaller Democratic majority in the House and a 50-50
Senate. If Republicans can win just one of the two Georgia Senate
runoff races, Democrats will be stuck in the minority in the upper

Preparing for that possibility, Senate Minority Leader Chuck Schumer is
urging President-elect Joe Biden to bypass Congress to wipe away
student loan debt. “I have a proposal with Elizabeth Warren that the
first $50,000 of debt be vanquished, and we believe that Joe Biden can
do that with the pen as opposed to legislation,” Schumer said.

In the proposal that Schumer released with Warren in the fall, the two
Democrats tried to use the coronavirus pandemic as an excuse to breathe
new life into a proposal that Warren advanced during her failed
presidential bid.

Having the president wipe away a substantial portion of the $1.7
trillion in student loan debt without an act of Congress would
immediately trigger significant constitutional challenges. It would
also be quite the spectacle, after years of blasting Trump for
executive overreach and calling for more bipartisanship, if Biden came
right out of the gate with such an extraordinary power grab.

But beyond these issues, it would be terrible policy.

Student loans are an undeniable burden on young borrowers, but they
also represent obligations that they took on because they wanted to
obtain something of value.

Forgiving student loans with such a broad stroke would create
tremendous moral hazard. Individuals who scrimped for years, forgoing
dinners with friends and vacations and fancy phones to pay off their
student loans, would effectively feel ripped off knowing that had they
only been more profligate, the federal government would have wiped away
all of their debt. Those who were much less careful about their
spending patterns, on the other hand, would feel vindicated.

If a president could wipe away debt with a stroke of a pen, Biden would
not be the last president to do so. Those taking out debt in the future
would be sent the signal that if they simply hold out long enough, they
can avoid repaying the money.

In addition, it would, in effect, mean a huge injection into the higher
education racket that would encourage colleges and universities to
raise tuition even higher. Many studies have shown that the increase in
federally subsidized student loans explains much of the extraordinary
tuition increases we’ve seen in recent decades. If loans are forgiven,
it will increase demand for new loans and thus provide an opening for
further tuition hikes.

On top of this, for a Democratic Party that likes to present itself as
the party of the worker, it would be a tremendous wealth transfer to
the elites. College graduates tend to come from wealthier families and
tend to be more well off and connected. A recent Brookings Institution
analysis of Federal Reserve data found: “The highest-income 40% of
households (those with incomes above $74,000) owe almost 60% of the
outstanding education debt and make almost three-quarters of the
payments. The lowest-income 40% of households hold just under 20
percent of the outstanding debt and make only 10% of the payments.”

It would be reckless and misguided for Biden to kick off his presidency
by disregarding Congress to orchestrate a massive bailout for the

"We have put together, I think, the most extensive and and inclusive
voter fraud organization in the history of American politics."
- Joe Biden


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