A recent White House fact sheet declares that President Biden has delivered on promises to cancel $10,000 of student debt for low- to middle-income borrowers. Who’s he really delivering for?
Without question, the student debt crisis is a disgrace. There are roughly 45 million student loan borrowers who owe on the order of $1.6 trillion. Most of this debt is from federal student loans.
Thus, the federal government is responsible for this mess. It supplied the credit. In turn, massive amounts of federal student loans inflated a higher education bubble and an industry of entitled, fake intellectuals.
The business model generally requires signing credulous 18-year-olds up for massive amounts of government backed student loans. These young adults have been told since before they could count that college was the magical path to a bright future. But as tuition costs ran higher, propelled by more and more student loans, the value proposition no longer penciled out.
To be clear, cancelling student debt rewards a corrupted education industry much more than it rewards overindebted students. It allows colleges and universities to perpetuate an inflated product.
Rather than cancelling student debt Biden should cut off government sponsored student loans. Scuttle the gravy train that supplies universities with undeserved wealth.
Now what would happen to all these high paid professors and fancy country club style college campuses without all this government sponsored debt? For starters, tuition prices would fall. Professor salaries would also fall. And college campuses would adjust to their more modest means.
Would the product – the education – be inferior? Not for the technical disciplines that matter.
Smaller budgets, however, would help trim the fat, and eliminate many of the nonsense quack ‘studies’ courses. These courses have little redeeming value and only exist because they’re funded by an abundance of federal student loans.
Cancelling student debt with the stroke of a pen does not make it go away. Debt, remember, is unearned money that’s borrowed from the future. It must either be repaid or defaulted on.
Since this is government sponsored debt, the act of cancelling it merely transfers it from student borrowers to the American public – that’s you. You’ll pay for it through taxes and inflation for the rest of your life.
Yet this is what people want. This is what they demand.
For a society that’s subjected to incremental increases in government control becomes passive to it. Over time, perhaps over several generations, the character of the people becomes warped. Attitudes towards central planning become more accepting.
People come to rely on the paternalistic hand of the welfare state. They vote for politicians who promise them ever greater desserts. They demand that the government somehow fixes all social ails.
Traditions of political liberty and the spirit of independence are gradually undermined. Power becomes centralized. The collective will, an amorphous influence, becomes superior to personal freedoms.
Forces of collectivism rule over forces of individuality, requiring everyone to adapt to the needs of the least capable. Moreover, those who desire freedom, who just want to be left alone to live their lives, are deemed domestic terrorists.
Special agencies and bureaus, and a labyrinth of rules and regulations, are constructed like roadside distractions. They divert attention and resources from productive tasks of providing goods and services to useless tasks of maintaining compliance.
Forms, paperwork, recordkeeping, and reporting become central to business. For many working stiffs, compliance reporting is the job.
At the same time, careers in these government agencies are passed off as gainful employment. The bureaus and departments provide adult daycare for college graduates with worthless degrees. Show up. Complete mindless tasks. Collect a paycheck.
Stable jobs, good benefits, and excellent pensions are all part of the deal. It doesn’t matter that the work is primarily minutia, with no real value to anyone. If it helps the commissioners plan and control the world around them then it must be worthwhile.
The fact is all these bureau and agency jobs are wealth subtracting. Their purpose is to control and regulate. In doing so they take real wealth, derived from real production, and flush it down the toilet.
At the local level, the breadth of government overreach can be absurd. In San Francisco, according to the Institute for Justice, prospective restaurateurs must pay 17 different fees totaling $22,648 all before selling their first sandwich. These costs and regulatory obstacles come in addition to the normal costs and work of opening a restaurant.
So why bother?
What’s the point of opening a restaurant when you can make more working at the city health department? Your day ends at 5pm, you get weekends and holidays off, and the benefits are wonderful.
Practically speaking, when considering all rules and regulations, the cons grossly outweigh the pros for starting your own business. Even something ultra-basic is subject to a massive onslaught of requirements.
For example, opening a home-based tutoring business should be as simple as posting an ad in the local paper. In Phoenix, however, it requires 21 different regulatory steps to be in full legal compliance.
It’s absolute insanity. And it’s highly destructive…
The Politics of Control and Economic Oblivion
If you recall, the Bureau of Labor Statistics second quarter labor productivity report was an absolute turd. Labor productivity, as revised, decreased 4.1 percent in the second quarter of 2022. Output decreased 1.4 percent while hours worked increased 2.7 percent. This marked the sharpest decline in labor productivity since 1948 – roughly 74 years ago.
This means people are working more and producing less. They are, in effect, laboring backwards. One implication is that because less is being produced there is less available to consume. This supports high consumer price inflation.
So, why has labor productivity collapsed?
The drive for productive activity is attained by the mental and physical ability of workers to produce new goods and services with the least expenditure of energy and material possible. To produce more at a lower cost. The ability to produce more for less leads to economic growth.
But even with all the mechanized improvements and technology that have compounded since the dawn of the industrial revolution, labor productivity has collapsed. What gives?
Plausible reasons may vary. Still, they all come back to a few fundamental factors. Over regulation, over taxation, money printing, credit market manipulation, and, in total, the near full intervention of economic and business life by all levels of government that are completely out of control.
Cancelling student debt may buy the Democrats some votes at the mid-term election. That’s what Biden is banking on. More importantly, it marks one more milestone on the path to the central planner’s utopia of complete political control and economic oblivion.
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I think there’s at least a 50/50 chance that the student debt cancellation was just the beginning of an entire forthcoming “debt jubilee” designed to keep the failing debt-based financial system rolling for a few more years.