A frequent campaign promise and issue, forgiving student debt seems to be fairly high up the agenda of the potentially-incoming Biden-Harris regime. We are talking big bucks, and that naturally has a lot of us riled.
The response to the issue illustrated how many people (virtually everyone?) in the Fifty States has been brainwashed by the mainstream media’s and politicians’ propaganda. Propaganda disseminated constantly for decades in multiple ways, starting with the schools. Propaganda so pervasive and successful it can be rightly called a form of brainwashing.
Brainwashing makes someone believe something (usually radically different ideas) by using systematic pressure. Sometimes with force: forcefeeding “facts” by various means. Those ideas can be true, but usually are not.
Numerous conservatives and at least a few libertarians have listed reasons that college debt forgiveness by the FedGov is a BAD idea. (Please keep in mind, it IS a bad idea, but not necessarily for the reasons that have been stamped deeply into our brains.)
One of the top reasons is that “debt forgiveness is the working class (taxpayer) subsidizing the wealthy and upper class.” In other words, “the elite.”
We hear this over and over. Even when these writerss KNOW where federal tax money comes from. Including that loaned to college students.
Unlike Social Security, Medicare, or Highway Fuel Tax money, it is not collected from a broad range of taxpayers. (And put into so-called “trust funds” which for the most part are mythical. Like fuel taxes, social security, booze and tobacco taxes, and Medicare.) Federal college loans seem to come from two sources. The first is directly from the Fedgov general fund. This in turn is supplied by THREE sources of revenue: (1) income taxes; (2) excise taxes not earmarked for specific uses; and (3) borrowing, massive borrowing. The income taxes, as has been constantly pointed out, come from the upper 5% of the taxpayers. Indeed, as AIER pointed out recently, the upper 1% pay 40% of the federal taxes. Borrowing, ultimately (and theoretically) will be paid off by those same income taxes, sometime “in the future.” Ah, yes. There will be pie in the sky by and by.
That revenue funds not only direct college loans, but also pays for grants to college students. Grants, by definition do not have have to be paid back. Billions and billions in grants have been given over the decades.
But much of the money loaned to college students comes from banks. Loans guaranteed by the FedGov to be repaid if the borrower (the college student or graduate) is unable to pay off the loan. Oooh, evil banks, right! But not just the big Wall Street banks: often the loans are coming from small neighborhood and community banks. And I believe that many such loans still come from savings and loan associations (as did some of mine I paid off decades ago). This is important, because unlike commercial banks (such as Bank of America, Wells Fargo, etc.) savings and loans do not “create” money (debt) by fractional reserve banking. Every dollar they loan out comes from money deposited by an association member.
So if these loans – direct fed or indirect bank/S&L – are “forgiven” by federal fiat?
The students are in essence defaulting on their loans, with Uncle Joe’s permission. The amount owed does not simply vanish into a magical mist. The debt still exists, by contract. A contract in which the FedGov is a party. Somebody must pay. That somebody is the FedGov: the US Treasury directly or though the Department of Education (or perhaps some other agency).
But the FedGov has no money of its own: it obtains ITS money from taxpayers now (Income tax, excise taxes, etc.) OR taxpayers in the future. By borrowing trillions and trillions of dollars. So every pittance (as they want us to call a mere $50,000) will be stolen from taxpayers. And as we have already discussed, the bulk of that stolen money will NOT come from working class, or poor, people. It will come from the very wealthy. The top 5%. And future taxpayers. (Which are always going to be very wealthy, according to another line of propaganda, if we listen to the politicians – because they will marvelously and miraculously make it so.)
(I am not saying that the working classes and even the poor are not beaten down by taxes – and even federal taxes. In addition to indirect pressure due to federal taxes, the poor and working class (even if they don’t pay (or don’t pay much) in federal income taxes, pay through the nose: social security, medicare, excise taxes on motor fuels, excise taxes on alcohol, and the like. But none of that money would go DIRECTLY to forgiving student debt.)
Ultimately, like ALL taxes, the money is sucked out of the economy: the rich and not-so-rich will see taxes going up (as promised already by Uncle Joe), and will therefore spend less money buying goods and services from the poorer people. Provided that the rich don’t just go Galt. Then who pays?
Those are the facts of the matter. At least as I understand it. But most Americans, including many Libertarians and classical liberals, have bought into this line we’ve been fed for more than half a century.
Sadly, propaganda works. And seemingly, will keep working long enough to destroy our economy through things like this.
Why is this important? Because the false information and misunderstanding of the true situation slants the discussion and Congress will make decisions based on fiction. AND what normal people decide and do. Which will in turn create untold damage. JUST as it has done with the CCP flu Pandemic and Panic.
Of course, there is another way of dealing with this 1.8 trillion of student debt. But that will have to be discussed in a future commentary. And not a pretty one, either.