The Biden administration is gearing up to offer some sort of college debt jubilee as their answer to the student debt crisis. The details of the scheme are being leaked to generate interest in the forthcoming announcement. The idea is to use printed money to buy votes from the millions holding student debt. Coincidentally, this comes just as the regime begins the fall campaign. Currently there is $1.6 trillion in outstanding college debt, most held by the Federal government.
There is no economic sense behind the idea. A debt jubilee is just another way of dropping cash onto the economy. With roaring inflation and supply chain problems, this is pretty much the opposite of good policy. The net effect of the program is to put more money in the pockets of the debtors. They will spend the money, just as they did the stimulus checks, which puts upward pressure on prices. Of course, this will come after the midterms so it makes sense to the politicians.
The reason there is $1.6 trillion in college debt is that the government has been mucking around in the education markets for several generations. Financial aid, like public pensions, quickly became a good way to buy votes. Opposing it on economic grounds, while factually correct, looked like you were opposing it on moral grounds, which makes you a monster. It quickly became a political racket that grew out of control and now we have a multi-trillion dollar monster.
The madness of college financial aid is obvious when you look at the rise in tuition costs over the last thirty years. They have grown at multiples of the official inflation rate and that is excluding hidden fees. There was a time when a student could work his way through college. It was a struggle, but it was possible. Today, the cost of tuition alone dwarfs what a student can make working fulltime. In other words, in the effort to make college affordable, it was made increasingly unaffordable.
This is a well understood phenomenon. If the government starts issuing subsidies for the purchase of new BMW’s, the price of the cars will increase. The increase will track with the subsidy. The people running BMW are not stupid. Once they know the buyers can afford the premium, they will raise prices. This very same thing just happened with the subsidy for electric cars. The electric car makers raised prices to match the new subsidy from Washington.
The remarkable thing about this is everyone knows it is true. The reason the people animating Biden’s corpse have been slow to pull the trigger on this scheme is they know it will be bad for the economy. The timing is to get the applause before the election, then have the public pay the price after the election. They figure that in two years people will forget all about it. Come the 2024 election, the corpse animators will have some new scheme to sell the public.
Even more remarkable is the fact that some people in the media know it is true, but most are innumerate so they do not understand the material. Some of the former group will ask the Biden people about the math and the Biden people will make up a whopper about how the definitions of commonly used economic terms have changed so shut up bigot and clap louder. There will be no serious discussion of this scheme and the economic condition of the country will decline a bit further.
Critics will settle for blaming the voters, especially those rotten kids down at the coffee shop with their nose rings, philosophy degrees and college debt. “The people are voting themselves a raise from the public fisc!” It is a good example of the perverse effect of democracy on the public mind. The people responsible for the terrible governance get a pass, while their victims get the blame. When the people work through bad policy, the “leaders” take credit for the result.
If Joe Biden were the dictator, installed by the ruling class after the old dictator was deposed, there would be no question about who to blame. This is why they remain berserk over the 2020 election controversy. If the people think the game was rigged, then there is no way to shift the blame for the results onto the voters. It turns out that the best way to avoid the wrath of the people over the manifest corruption of their leaders is to give them a ballot and tell them they are in charge.
Putting all of this aside, the college debt crisis hides a much bigger problem going on that you can see in the college numbers. As the cost of a credential has gone up, its value has declined. One reason for that is the dilution of it by handing them out to anyone who qualifies for debt. The other reason is the changing complexion of the student body. The diversity push has changed what the credential means, which has diluted its value to the core market.
The people not going to college are the people who should be getting the additional training from the education system. That is the cohort that is dropping out of the system because the cost-benefit relationship has turned negative. The result is a swelling number of credentialed idiots carrying debt they can never pay. They are also more likely to stop paying, knowing you will not dare go after them. The moral inversion of the education system is creating new downstream problems.
Of course, all of this means the system can never be reformed. What needs to happen is a debt jubilee along with the abolition of all subsidies. Most colleges would close and half of the current students would drop out of school. The system would shrink down to its core of training bright young people and doing useful research. That can never be allowed to happen, so the system will stagger on like this until the printing presses can no longer keep pace and we reach collapse.
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