Federal Giveaways

Federal Giveaways


Leonard Zwelling


This New York Times article from December 11 is about forgiveness by the federal government for the debt acquired by millions to pay for their college educational expenses. It could be about any program in the federal government that transfers funds from the government (acquired through taxes on Americans and companies) to individual other Americans. This could include the oft-discussed issue of reparations for slavery, tax forgiveness, or covid relief. There is no shortage of worthy Americans in debt or in financial hot water of other kinds (businesses closed or jobs lost). That there are many in need is not the question. The questions are:

How did they get in need and why?

How can handouts be made equitable—if they can and even do you believe governments should give handouts?

How are we going to afford all of these giveaways?

The article lists some scary statistics.

Forty-three million Americans owe about $1.7 trillion in outstanding student loans. Many of those in debt are in the minority community, so any debt relief for student loans would disproportionately benefit individuals in those communities. Many in those communities expect Mr. Biden to provide them with that relief, either through proposed legislation or through executive action as most of the debt is held by the Department of Education which can, in theory, forgive the debt. Remember, that the working poor are not really these debtors as most of them did not attend college. According to the article most of the college debt is owed by those in in the top 40% of earners. That’s right. It is the people making good salaries who owe this money to the government. Do they deserve a bailout?

Additionally, the size of the relief necessary to wipe out the college debt is enormous and would only increase the national debt. After covid relief, that’s asking a lot of those who pay their taxes.

Like reparations about which this blog has written previously, student debt relief would essentially be a get out of jail free card for a selective few among the 330 million who live here. Is this a good idea? Is any bailout for anything a good idea? I think that the answer is pretty obvious. Sometimes a bailout is necessary. Most times it is money down the drain.

When there is a natural disaster like a hurricanes or a fire, the federal government ought to swoop in and bailout those damaged by Mother Nature. It was not their fault that the category five storm hit the Gulf. They are Americans and need our help. I also feel that way about covid relief, especially for small businesses and those who lost their jobs to closures during the pandemic. Congress ought to pass a covid relief bill and it looks like it finally did on December 20. Most potential recipients were not asking for federal handouts as recently as a year ago. They need our help to get back on their feet once herd immunity is reached in a year or so. Both responses to natural disasters and pandemic relief are likely one-time bailouts.

The same would not be true with forgiveness of college debt as people would go on acquiring it in the hopes that there will be continuing bailouts. Given that so many of those in debt for their educational loans are people who are gainfully employed at jobs their college educations allowed them to get, it is not clear to me why these loans should be forgiven now, just because the Democrats will be in the White House and the liberal left is pressing Biden for the debt relief.

This, to make this abundantly clear, is also my take on reparations. I understand why the stain of slavery has put African Americans in a unique place in the American caste system, but throwing money at a problem must make sense and be supported by real data. I suggest again, some pilot projects on the value of reparations in a small neighborhood. If after ten years, there is clearly a decrease in crime statistics, an increase in those educated and gainfully employed, and the possibility of passing wealth to the next generation, then maybe reparations are a good idea. Short of a demonstrated beneficial effect, reparations, like the forgiveness of student debt, has a real feel good character without the attendant data of effectiveness or demonstration that it is a good idea on any level.

I understand that many who gave their votes to Joe Biden expect some payback in the form of student debt relief. Senator John Thune (R-SD) has proposed a program to have employers donate $5250 tax-free to employees’ student debt. But a wholesale bailout with taxpayer money of any kind—whether for Wall Street banks, airlines or debt-ridden former students, does not seem like a good idea to me. And as for reparations, given the harsh criticism I received at even considering the idea, I still think it is worthy of discussion and perhaps a demonstration project. Trillion dollar transfers of American treasure to individual citizens or even to large corporations is a really bad move. Let’s hope President-elect Biden can resist the temptation.

2 thoughts on “Federal Giveaways”

  1. Identifying the neediest for education debt reliefs is so important to helping those individuals remain above the poverty line and be able to afford good housing, etc. Young people should be willing serve their states or nation in some form of public service which would forgive year for year of their public educational debts. There needs to be some exchange for the debt relief.

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