The class madness of canceling student loans

It’s only been two weeks since Joe Biden won the presidential election, and the progressive feeding frenzy on political priorities is already well underway.

Thanks to a widely reported tweet Last week, by Massachusetts Senator Elizabeth Warren, calls for the Biden administration to come out with a plan to write off billions of dollars in student loan debt reverberated on the left. he may be possible for the president to write off this debt with executive action (and without congressional involvement) only makes the plan more attractive to progressives.

But canceling student loan debt would be a massive and unforced error for the new Biden administration. It would show that one of the new Democratic president’s highest priorities during a pandemic and destabilizing economic shock is to provide a bailout for people who are very likely to end up as members of the upper middle class. This would amount to a transfer payment from contractors and service workers to high income knowledge workers and other white collar workers. As such, it would also accelerate tendencies within the Democratic Party that would make it vulnerable to a Republican Party increasingly trying to rename itself as a champion of the working class.

As economist Thomas Piketty and others have pointed out in recent years, center-left political parties suffer at the ballot box when it comes to representing the interests of the upper middle class at the expense of the working class, allowing right-wing nationalist-populists to make inroads with them. This has happened in a series of European countries in recent years, and it is also happening in the United States, with Democrats appreciating growing support in the small crown but is losing ground in popular, peri-urban and rural areas. In the 2020 election, the Democrats managed to defeat Donald Trump with this coalition, but they got tripped over the ballot, likely failing to secure a majority in the Senate, losing seats in the House and failing to do so. not even having overthrown a single state legislature.

The cancellation of billions of dollars in student loans would make this problem much worse.

Those who attend selective four-year colleges routinely overestimate the number of Americans who go to college and have student debt. In fact, only 35% of Americans over 25 have a bachelor’s degree – and only 30% of adults under 30 have student loan debt. Their debt is a burden, but their education is a ticket to significantly higher incomes than those who do not. In 2017, the median usual weekly earnings for a person with a bachelor’s degree were $ 1,173. This compares to $ 712 for someone with a high school diploma and no college courses (and therefore probably no education-related debt). Over the course of a lifetime, someone who graduates from a four-year college will earn a lot more than someone who didn’t and come out far ahead, even after paying off a big pile of student loans.

Those with student debt are far from the most needy in the country. In a world of limited resources, where priorities must be set, they should not be at the top of the list of those receiving multibillion dollar assistance from the federal government.

Many on the left say that something as economically and intellectually beneficial as a college education shouldn’t force the student into debt so deep. I am okay. But canceling these debts will not solve this problem at all. In fact, that would likely make the problem worse.

The easy availability of federal grants and loans to colleges allowed universities to raise prices well beyond the rate of inflation for decades – because schools knew the money would be available to pay the bills. With this arrangement in place, the only thing that put downward pressure on these ever-increasing prices was the reluctance of young people to take responsibility for the debts. But once the federal government begins to write off those debts, that worry will go away, pushing prices even higher – especially since everyone will know full well that it will be politically impossible for the act of debt cancellation to be a one-off event. Once a generation of college graduates is freed from the burden of its debt, each subsequent generation will appeal to the principle of fairness by demanding the same.

Soon we will be living in a country where the federal government actually offers free colleges to anyone who wants them – not only community colleges and public schools, but the more expensive private colleges as well. Some might think this sounds like a dream, but they should think about it again – because as soon as Washington is responsible for the bill, voters will demand a cut in costs. And that will almost certainly mean price controls – as well as much greater government involvement in what colleges teach and what professors are allowed to say in class, in their writing, and in their research.

Is this really what future progressives want – de facto federal control of universities in a country that regularly elects conservative Republicans to Congress and the presidency?

Of course, this scenario assumes that a student loan forgiveness program will be politically popular enough that it doesn’t immediately explode in Democrats’ noses – and that’s doubtful. Sixty-five percent of Americans have not graduated from a four-year college. Will this vast majority really promote a multibillion-dollar bailout for people who hold these degrees when their debt has been freely taken on and granted them a degree that gives them a ticket to higher incomes for life? Or will it instead be seen by many as an unusually vivid example of how America’s elites (and those about to join them) have captured the machinery of government for profit?

The country’s two main parties are engaged in a decades-long battle to determine which of them will be considered the greatest champion of the American worker. Spending tens of billions of dollars to write off college debts would be a major act of surrender in this fight. This is why politically savvy Democrats should prefer the new president to pursue a general stimulus package, infrastructure spending, the expansion of the Affordable Care Act, or pretty much any other debt cancellation policy. colleges.

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