July 1, 2019

Student-Loan Forgiveness: Moral Hazard on Steroids

Democrats appeal to people’s self-entitlement with a massive income-redistribution scheme.

It’s almost impossible to maintain a current list of Democrat Party efforts to buy votes. “Free” health care, “free” college tuition, and reparations for slavery, Native Americans, and gay and lesbian couples are just the tip of the iceberg for a party that would also decriminalize sneaking into America, provide health care to illegal aliens, and raise taxes on middle-class America to pay for it, even when such proposals would blast an already unconscionable level of national debt further into the stratosphere. Yet the most pernicious pandering — courtesy of Sens. Bernie Sanders and Elizabeth Warren — is the idea that $1.6 trillion of outstanding student-loan debt should simply be canceled.

“People are not truly free when they are unable to buy a home, start a family or pursue the career they want because they owe tens of thousands of dollars for the crime of getting an education,” Sanders declares. “This is why, as part of my proposal for a 21st Century Economic Bill of Rights, I have this week introduced legislation to free generations of Americans by canceling the $1.6 trillion in outstanding student loan debt.”

If a shamelessly suck-up proposal with the words “21st Century” attached to it has a familiar ring, it’s because “socialism of the 21st Century” was the term used by the late Hugo Chavez, who promised it put Venezuela on the road to utopia.

Sanders thought so too, as recently as 2011. “These days, the American dream is more apt to be realized in South America, in places such as Ecuador, Venezuela and Argentina, where incomes are actually more equal today than they are in the land of Horatio Alger,” he wrote. “Who’s the banana republic now?”

Certainly not Venezuela. It has devolved from a banana republic to a completely failed state.

In contrast to Sanders, Warren’s giveaway is more intricate. She would eliminate $50,000 in student-loan debt for every person with household income under $100,000, partially cancel debt for those with household incomes between $100,000 and $250,000, and make private student-loan debt eligible for cancellation — and also provide free college to everyone. In a tweet Warren called her plan “the kind of big, structural change we need to make sure our kids have opportunity in this country.”

Structural change? The same shopworn socialist/Marxist redistributionism that has produced “equality” — of misery and poverty — everywhere it’s been tried, is more like it.

How dishonest are Democrats? What could be more dishonest than the word “free” attached to any government proposal? Nothing is free, and the use of the word to describe any transfer of costs from one group of Americans to another is Orwellian doublespeak.

Moreover, it reeks of elitist contempt. Democrats are convinced a large percentage of Americans are either so bereft of common sense and economic acumen or so imbued with a sense of self-entitlement that they’ll climb aboard the socialist gravy train.

No doubt much of that contempt is derived from knowing that they themselves have heartily embraced the wholesale dumbing-down of America’s public-school system, where contempt for a nation in need of “fundamental change” has become an integral part of the curriculum.

Yet who’s kidding whom? There are two primary reasons that college students have accumulated $1.6 trillion of debt Democrat would “forgive.” First, all student-loan defaults are ultimately underwritten by the taxpayers, many of whom have never even sniffed the inside of a college classroom. Thus colleges can — and have — raised their costs with impunity: since 1985 tuition has increased at nearly quadruple the rate of inflation. Moreover, a large percentage of those increases have been dedicated to expanding college bureaucracies, whose costs rose at nearly twice the rate of teaching outlays between 1993 and 2007.

What kind of bureaucracies? Last April, Georgetown University President John DeGioia announced the creation of a Vice President for Diversity, Equity, and Inclusion. One month later, University of Rochester created the same position with the same title. Ivy League colleges Yale and Harvard also inflated their ranks of diversity “specialists,” all of whom are undoubtedly tasked with making their respective universities what DeGioia described as bastions of “racial justice” and “educational equity.”

Second, many students can’t pay off their loans because they can’t get good enough jobs to do so. “I was expected to make a $400 loan payment every month, but I had no money, no sustainable income,” stated Chad Albright, a graduate who fled to China to escape paying his $30,000 debt. “College ruined my life.”

Perhaps. Or perhaps obtaining a degree in public relations was a bad choice.

Yet maybe he wouldn’t have made that choice if colleges were required to publish data on student graduation rates, the level of debt they’ve accumulated, and what students earn after graduating — so potential enrollees know exactly what they’re getting before they go into debt. And maybe colleges wouldn’t be so expensive if they were required to underwrite a percentage of those student-loan defaults, largely engendered by majors that do virtually nothing to prepare students for real-world jobs.

Such truth in advertising coupled with market-based cost controls would produce genuine structural change. Yet for panderers like Sanders and Warren, what it wouldn’t do is far more important: it wouldn’t burnish their social justice warrior credentials.

Thus, both prefer preserving an utterly corrupt system and forcing the “rich” to pay for it.

Yet far worse is something few people talk about any more: moral hazard. Like their obsession with providing a “pathway to citizenship” for millions of people who entered the nation illegally — and making an utter mockery of those who have emigrated here the right way — Sanders and Warren would make a similar mockery of all those former students who have struggled to pay back the money they willingly borrowed.

In short, for nothing more than political gain, they would toss honor, integrity, and commitment to one’s legal obligations on the ash heap of history.

Unsurprisingly, they have their champions. “Student debt is a potent issue that has the potential to drive turnout and influence votes, in 2018 and beyond,” gush columnists Richard Eskow and Sean McElwee. “Individuals holding student debt may well decide which party will control the House of Representatives next session.”

Really? And then what? Columnist Dov Fischer sarcastically ups the morally hazardous ante for the rest of the “woke” Democrat contenders. “Howzabout a zero-percent candidate shooting up from the pack with this proposal: Buy off the whole American Middle Class by promising Home Mortgage Loan Forgiveness!” he writes.

Why not? And why stop there? How about car loans, credit card debt, or even one’s gambling losses at the race track? Isn’t it just as unfair that millions of Americans struggle to cover those costs? Once moral hazard is eliminated, shouldn’t any debt that engenders even the slightest iota of hardship be forgiven?

As our Nate Jackson has wryly noted, “Never get in a bidding war with a true socialist.”

No doubt. Moreover, don’t get into moral arguments with people who believe the accumulation of power — by any means necessary — constitutes the totality of their “moral” universe.

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