Rogue Executive Actions 

Biden is already bending to the wishes of Elizabeth Warren and Bernie Sanders to want to forgive student loans. 

On Monday, Senate Minority Leader Chuck Schumer announced Biden ‘Considering’ Forgiving $50,000 in Student Loan Debt via Executive Action.

Schumer held a press conference alongside Democratic Congressmen-elect Ritchie Torres, Mondaire Jones and Jamaal Bowman of New York, during which the group announced they have “come to the conclusion” that Biden can “forgive $50,000 of debt the first day he becomes president.”

“You don’t need Congress, all you need is the flick of a pen and President-elect Biden — then President Biden — can make this happen,” Schumer said.

Asked if Biden will have the executive authority to forgive the debt, the New York Senator said the president-elect is researching that and “I believe when he does his research, he will find that he does.”

Congress, Who Needs It?

I believe we have seen enough rogue executive actions of dubious legality.

Even if legal, this is a terrible idea. It mainly benefits middle-class whites and unfairly so. 

We can’t give money to people at the bottom who have lost their jobs, possibly permanently, due to government decree. But hey, let's  forgive $50,000 in debt to the upwardly mobile.

Less Education for Your Buck

Less Education for your buck

The above chart is from US College Tuition & Fees vs. Overall Inflation.

Please note the acceleration in 2005. What happened?

The cost of education escalated madly when Bush passed the bankruptcy reform act of 2005 making student debt not dischargeable in bankruptcy. 

Flashback 2005

On April 15, 2005, I penned The Deflation Guarantee Act of 2005.

Today Congress passed the “The Deflation Guarantee Act of 2005” currently known as the “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005”.

Twenty years from now economists are going to be studying legislation from this Congress and signed by this administration and be wondering: “What the * were they thinking?”.

Anytime this administration passes a law with the “protection” in it, assume it will do just the opposite.

This was a bill written by loan sharks, and bought via payoffs (otherwise known as campaign contributions) to those voting for this bill. It has NOTHING to do with “Consumer Protection”.

I believe this will backfire in many ways, and not all of them are fully understood yet.

Disease vs Symptoms

I graduated from the University of Illinois in 1976 with a degree in Civil Engineering. The cost of tuition was $250 a semester when I entered college in 1971.

Some blame states for not contributing to education. Indeed, states would would not raise taxes to cover escalating costs because of voter backlash.

But that is blaming the disease on the symptom. The disease was then and still is high administration costs, public unions, outrageous coaching contracts, unbelievable pensions, and serious lack of competition. 

Five Student Loan Facts 

Brookings 5 Facts #1

Brookings has a set of Five Facts About Student Loans that everyone discussing forgiveness needs to be aware of. 

  1. Six Percent of Borrowers owe a third of the outstanding debt.
  2. About one quarter of borrowers who have about half of the debt borrowed for graduate school.
  3. The individuals who owe the most money are not the individuals who default on debt
  4. Most bachelor's degree recipients graduate with little to no debt
  5. Even if financial aid covers the whole tuition bill, many students borrow to cover living costs

Questions of the Day

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  • Given those facts, why should borrowers be bailed out at taxpayer expense?
  • If they are, when will it stop?

Dead on Arrival

On November 29, I commented Biden's Progressive Agenda is Dead on Arrival .

The obvious implication is "DOA in Congress" as opposed to seriously misguided and dubiously legal executive orders. 

Compelling Case

HedgEye author Neil Howe makes a compelling case in Is A Student Debt Jubilee Coming?

Colleges possess such extraordinary pricing power in part because they bar or discourage new competitors and in part because lazy employers rely on a limited number of them to act as credential gate keepers. What federal policy ought to do is actively promote new types of educational institutions better fitted to employer needs and to promote measures by which families can fairly compare the value-added of different schools. Colleges and collegiate associations actively discourage all of the above.  

In sum, it's a mistake to enact a student debt jubilee without first rethinking and recasting the whole market for higher education. Otherwise, we’ll either end up right back where we started (with millions of new students crushed by huge debt loads) or somewhere we don’t want to go (with taxpayers committed to covering the cost of whatever colleges want to charge... a bit like they now do with healthcare providers).

Huge Moral Hazard 

Debt discharge is a huge moral hazard that encourages more overpaying for useless degrees.

It will do nothing to address the cost of higher education.

We need more competition, more accredited schools, more alternatives, and less public union graft. 

Forgiving debt fosters less competition and more graft.

Under Pressure

Biden is under pressure from Bernie Sanders and Elizabeth Warren who believe Biden could not have won without them.

This claim is off by 180 degrees.

Election Message

The fact of the matter is rightful fear of Progressives could have cost Biden the election.

You can see this in the House and Senate races. 

Trump lost but Biden had negative coattails. Why? 

Fear of exactly this kind of liberal agenda. 

Voters did not want Trump but they did not want liberal nonsense either. 

Message Not Heard!

Trump did not get the message. Neither did Biden nor the Progressive wing of the Democratic party. 

Biden is off to a bad start by listening to the Progressive wing that damn near cost him the election.

Mish