Forgive student loans

Perhaps you misunderstand what I mean by "forgive" student loan debt. I'm not suggesting we just tell the lenders to shove it. The money is federally guaranteed. The feds were kind enough to spend billions of our tax dollars to stabilize the banking and housing sectors. The tacit expectation was that those sectors would use the money to bolster the economy. They chose, instead, to hoard it. You say the banks are justified hoarding money because of the state of the economy. I say the economy is in its current state because the banks are hoarding money. A federal bailout of the banks didn't fix the economy. Let's try a federal bailout of the middle class-- the people who actually spend money when they have it.

 

I understood you perfectly. At the end of the day, unless you are saying that the federal government pays the balance, forgiveness of student debt is telling the banks to shove it, which means they will stop lending money. If you are suggesting the United States just comps it all, well the US at least had an expectation of repayment with TARP. A good portion of that was repaid, I believe. That would not be the case here.

And again, your explanation for why the economy is the way it is overlooks several elements. The fact that the bailout of the banks was not meant to fix the economy but to prevent the total destruction of the banking sector. Home foreclosures played a major part to the downturn due to banks and individuals entering into loan agreements that couldn't repaid due to federal encouragement to do so. Massive credit card defaults. The European banks maintaining their liquidity using PIIGS debt, to meet their liquidity needs, as permitted by European regulation. The promise of increased regulation, yet no real clue as to what it will be. And so on and so on. Another bailout of anyone, without significant structural adjustment at every level of society (people, business, government, etc.) will solve nothing other than putting off the true pain for a few more years. We cannot afford to be simplistic and go for the move that feels right, cause that will kill us.

We are better than this. Lets go for the bigger plan, and make the structural change. No more bailouts. Lets fix the damn ship.

 

Just curious, but how well did those other "bailouts" work?

 

The problem with fixing a ship that is sinking this fast is, you may end up with a seaworthy ship sitting on the bottom of the ocean full of dead people. We need jobs and we need need them yesterday. The amount of money that student loan forgiveness would inject into the real economy (I don't think you can call banking an economy anymore, since they just collect money and don't distribute it) would create jobs immediately. Once the economy starts rolling again, the tax base would increase and confidence in our economy would also improve.

 

Pretty well. They prevented the complete collapse of key sectors and took Bush's record unemployment growth and cut it by over 90 percent. Not too shabby.
Now, give a bailout to the people who will spend their money on real items and start building the economy from the ground up. It's like a leaning tower, you can only stabilize it from the top for so long, then you have to work on the foundation.

 

But your argument does not take into consideration time issues. Jobs would not be created immediately as there is a backlog of production that would need to be burned off...production capabilities would have to be retooled and prepared. President Obama referred to this phenomena himself when he said "The shovel ready jobs were not so shovel ready." So it would be in this scenario. There is a significant time differential between a fresh influx of cash and hiring more people. And the issue with just fixing what is in front of you is that you never get to fixing what is head until it turns into a crisis. You never get your feet under you.

I get what you are saying. I get it, I do. But we are in a situation where life is going to suck regardless. By fixing the structural deficiencies now we can have a more measurable impact on those problems now, so when jobs do eventually come back they are not impeded by other issues.

 

Not to be purely contrarian...but DS - there is a suggestion that unemployment did not decrease, but that underemployment and frustrated workers just increased. Also, I find it interesting that you suggest that jobs are the base, when employment is constantly in flux and ebbs and flows. Isn't regulation and overall economic structures, which do not fluctuate, more of a base than overall employment?

 

Well you go live where they are working pretty well. I don't consider 15% un and under employment "pretty well". I don't consider $15 T of debt "pretty well".

 

Again, those "shovel ready" jobs were being funded through federal and state agencies, along with banks. Not the best people for handing out money and conducting business in a timely manner. Ever been to the DMV?
If you put immediate cashflow into the hands of regular people, they will start spending it almost as soon as they get it. Then, the people they are buying from will have increased capital, again, almost immediately. Increased demand, plus increased capital equals increased need for labor and the ability to pay for it. If you forgave student loans in one state, I would be willing to bet that you would start to see increasing employment numbers within 60 days. Just a guess, but I think the numbers plus human nature would bear it out.

 

But isn't rampant spending without saving what got us into this mess in the first place? And how long would those increased job numbers last? People spent a ton of people they couldn't afford to lose and set none aside for when times got tough. Times got tough, and here comes the collapse. I think your focus on the short-term is an impetus you share with incumbent and it is dangerous. It is the same basic argument that was used to justify the tax cuts that you despise and the bailouts you loathe. In the end it results in the same thing; another collapse with high unemployment and nothing really changed except another 2 years on the credit card.

Your arguments are not illogical on their face. Its just the same arguments that have been used for the past 20 years. Merely shifting from one group (people who pay the most in taxes) to another (middle class with debt) does not shift the fundamentals.

 

I'm not sure how you keep coming up with "short term." I will be paying $600 a month for the next 25 years. That money will benefit no one. It will go to the same federal programs that have failed us for the last half century. Put the money in my hands, and I'll spend an extra $600 a month on real goods for the next 25 years.
Where did you get the idea that I despise tax cuts? I'd love one. I'm self employed-- last fiscal year, I paid more in personal income taxes than Bank of America, Exxon, and GE combined. Again, give me the tax cuts and I'll help create jobs through spending. Give GE the tax cuts and they'll help create jobs through sweatshops in Bangladesh.

 

And by allowing you to "create jobs through spending", you are taking money from my pocket which I would otherwise have used to "create jobs through spending". However, in order for me to make up for your needs, it has to run through the government, so I (the tax paying public) lose significantly more than you gain. Net result is a loss of job creating spending.

 

I don;t have any student loan debt but I would like another car. Hopefully, they will buy me one. Or maybe pay off my house for me. If they did that I could buy an even better another car.

 

Well, rlm, that makes no sense whatsoever. The federal government has already set aside the tax dollars for student loan surety. Paying off the loans would have no impact on the current budget. And, even if it did, the revenues created by putting millions of people back to work would offset any deficit spending.

 

I have no idea who fed you that line of BS, but I can assure you that the federal government has nothing set aside to cover any loans like that.

 

I will ask you the same questions that I always ask when someone makes these kinds of statements. When did you go to school and what did you study? I know a lot of people who say this and you later find out that they went to school decades ago and/or took a degree that doesn't create a lot of student loan debt.

You can't compare going to school twenty years ago with going to school now. The costs of an education, which is often called as the solution to low income capacity, is more expensive now than most people realize. We want people to be productive and innovative members of society, but we want to raise the cost of education so high only the rich can afford it.
Go get a degree they say.
Don't have the cash, take a loan they say.
Raise the cost of education they say.
Create a society of slaves to debt they say.

Create a vicious circle where there isn't any escape that doesn't make you destitute in some way. Either you get a degree that promises you can pay your debt someday and become enslaved to the credit companies or don't and never have the ability to be anything other than poor. Otherwise known as damned if you do and damned if you don't.

 

I went to school several decades ago in Chemical Engineering. Not exactly the cheapest out there.

Now let me ask you a couple questions. What happened to "Don't have the cash, go earn it"? Who signed that loan contract? Next, what on earth makes you think would happen to this country if every signed contract was as meaningless as you are trying to make your loan contract? Believe me, I have been in a place that tried living like that. The war forever scared the country and I doubt that it will ever be the same. Think about that for a while.

 

I don't think they should forgive student loans. But I think it would be worthwhile to adjust student loan payments according to income rather than according to the amount owed. This would allow people to spend their money on other stuff besides loan payments, which would stimulate the economy.

 

RLM - all due respect, but in 1968 it cost $368 to go to the University of Minnesota. A student working 6.2 hours a week at minimum wage could have made tuition. Now, granted, your tuition may have been more expensive. But if you went to school several decades ago, comparing the tuition then to now is just disingenuous. "Holding off and earning the cash" prior to going to a school that costs $50k a year is just not reasonable. But I find it highly unlikely that anyone would tell a student who got into a quality institution to "hold off" because of debt. We live in a society that values accreditation above all else. And I believe it disingenuous to suggest that children who were raised in that culture and environment would be expected to against EVERY cultural meme and hold off on education because of financial concerns.

 

I completed my undergrad in 1990 (Business School) from a state school and earned my MBA in 1993 from a rather expensive private school. Tuition was less then but so were my wages. I saved for college and worked 2 or 3 jobs while in school to pay my way. I grew up poor & my parents weren't able to help me financially.