Elizabeth Warren’s Loan Redistribution Plan isn’t just Bad Business, it’s Morally Bankrupt
It is undeniably a tough policy to hate, and an easy political sell. Who wouldn’t want poor loan-burdened students to catch a break? Who wouldn’t want those greedy predatory lenders brought to justice – evil loans forgiven – by the power and glory of democratic socialism?
Well, first off let’s get something clear; this isn’t loan cancellation, it’s loan *redistribution*. Smart people understand this. Warren probably understands this. If Trump is smart – let alone lucky enough to face Warren in the 2020 showdown – he’ll emphasize this as much as possible.
Nobody is stupid enough to ‘cancel’ loans. Well, hopefully nobody. As that’s not only the fast track to completely freeze all the glorious and necessary liquidity of the capitalist economy; it’s the path to completely disintegrate the integrity of a fiat currency based economy at all. No, Warren’s plan is to *pay* the loans for the debtors. Forbes lays it out in detail,
“The student debt crisis is real and it’s crushing millions of people — especially people of color,” Warren said in a statement. “It’s time to decide: Are we going to be a country that only helps the rich and powerful get richer and more powerful, or are we going to be a country that invests in its future?”
Specifically, Warren’s legislative proposal for student loan debt forgiveness would:
- Cancel $50,000 in student loan debt for every person with household income under $100,000.
- Provide substantial debt cancellation for every person with household income between $100,000 and $250,000.
- Not tax as income student loan debt that has been canceled.
- Also, make private student loan debt eligible for cancellation.
- Streamline the student loan debt forgiveness process using data and income information already available to the federal government.
Importantly, Warren’s plan offers no student loan debt cancellation to borrowers with a household income above $250,000, which she says is the Top 5% of earners. There would also be “phase-outs” based on income. The $50,000 cancellation amount would phase out by $1 for every $3 in income above $100,000. According to Warren, for example, “a person with household income of $130,000 gets $40,000 in cancellation, while a person with household income of $160,000 gets $30,000 in cancellation.”
Sounds pretty good right? Well, if you’re someone currently burdened with often abusive student loans, pure self-interest would make it nigh impossible to convince you otherwise. But if you aren’t it should be easy. Why? Well, because you’re paying for it, chump…
‘No!’ exclaims Warren. Only those dastardly uber rich will have to pay, as per her apparent plan to couple the program with an ‘Ultra-Millionaire Tax’ that would include a 2% annual tax on the 75,000 families in the U.S. who have at least $50 million in net worth.
But assuming a President Warren can manage to get Congress to agree to tax that tiny portion of our population, its laughable to presume such a paltry source – again only 75,000 families – is meant to cover the loans of the 44 million Americans saddled with student loans equally roughly $1.5 trillion dollars…
This is the crux of the issue. Warren isn’t waving a magical wand to make the evil bad debt disappear, she’s using the government to pay it off in full; notedly in what amounts to a fiscal wet dream for the loaning institutions. And who funds the government? Taxpayers.
Depending on the specific context of your taxpaying this can be more than irksome, it can be downright immoral. Consider a student who *did not* incur loans. Who, through financial aid, employment, scholarship, and three working gap years (*coughs* ahem) managed to obtain their degrees without them. Who through a myriad of personal sacrifices of time, energy, or just picking a hard but fruitful career path, manage to pay them off just fine.
Warren’s plan – and any like it – spits in the face of those people.
Redistributing the debt of people who *chose* to take the admittedly less than pleasant loans to those who did not or have already paid them off is immoral. And ultimately that’s exactly what these types of plans do in shifting the burden to the already massive burden carried by American taxpayers.
There are many things we perhaps *should* be doing to assuage to student debt in the US. Things like interest forgiveness/reduction or allowing them to be shed with bankruptcy. Forcing everyone else to pay for them is not one of the things.
Warren’s plan isn’t just unsavvy in terms of financial sense, its an immoral use of the government.