Biden's Debt Forgiveness

 

Biden’s plan to forgive three hundred billion dollars of student loan debt is not only bad. It is much worse in important ways than other recent handouts from government. The bailouts of investment banks and other financial institutions in 2008 and 2009 were accompanied by some arguments that they were less bad and less costly than the alternative of the government having to pay even more through the FDIC and other guarantees in an economic depression. Those arguments may or may not have been valid, but they at least provided a cover story. Similarly when the government sent citizens so-called stimulus money in 2020 and 2021, there were claims that the payments were necessary to keep the economy from falling too far or even justified as compensation of a sort for the burdens the government placed on people during the epidemic. Those claims do not hold up well, but they too provided a cover story.

There is no plausible cover story for this one. Biden is attempting to buy votes by shifting the burden of some people’s often poor decisions in borrowing onto other people who either did not make similar decisions or paid up if they did. It is a simple case of robbing Peter to pay Paul in the hope that Paul will be stimulated to vote for Democrats in November. In the long run it brings the risk of incentivizing people to take out large student loans in the hope they will not have to pay them back and the moral hazard of telling people that they should not worry too much about making bad decisions, since one politician or another facing a tough election will bail them out. It definitely harms the country. To function well a society needs a large number of people who deal honestly, honor their word and commitments, and pay their debts. Biden and company just sent those people a message that they are suckers.

It may not even play well for the Democrats politically. There are lots of voters who either never took out student loans or paid them off fair and square. They may be annoyed. I hope so.