Awful truth #12: We have too many universities and too little respect for blue collar workers.
The current aggregate student loan debt is 1.75 trillion dollars. Fiscal malfeasance allowed this debt to balloon into an absurdly large amount. Still furiously pumping air into this balloon are those responsible: foolish lenders and a fiscally irresponsible government. Yes, borrowers also bear their share of responsibility, but it is the lenders and the government which concocted this mess and knowingly assured it becoming a financial bubble, one growing larger and larger every day.
That this was to become another financial bubble—eventually to explode with negative consequences for the entire economy—was easy to see, not just in hindsight, but in foresight, as well. Nostradamus or a crystal ball was not necessary to make this prediction. Any lender or politician who expresses shock at the outcome is either a moron or a liar. We’ve certainly no shortage of these.
Money is lent to people with no hope of ever paying it back and having no recourse to discharge the debt in bankruptcy as is typically done with other types of onerous unpayable debt. Lenders and colleges grow fat off the largesse. By committing the government to a huge unfunded cost, politicians crow about how much they care. In essence, there’s little difference between foolish lending done by the student loan industrial complex and the foolish borrowing done by an art history major taking on debt he or she can never repay. I say this as someone who loves art and history.
So here we are, once again. The public stuck with paying for another predictable financial mess. We’ll pay via taxes diverted from other uses, increased government debt to which a day of reckoning is eventually due, or inflation caused by our betters printing more Monopoly money in order to pay the piper. And, of course, those responsible for the mess are further enriched and remain in power. Nothing will change, except for the ever-upwards tally of debt we incur and the continued debasement of our currency. Debt and debasement are the crystal meth on which our economy operates.
Man, our betters must laugh at us rubes who keep electing and reelecting these fools. I fear that what we should do and what we end up doing are parsecs apart as far as good governance goes, but that’s the way we roll as a society. The obvious question the hapless voter asks is, “What should we do?”
I don’t have an idea how to come up with 1.75 trillion dollars. We could collectively check underneath our sofa cushions for loose change, but I’m guessing we’d come up a tad short. But I do know some addiction therapy self-awareness and confession is absolutely required: “Hi, my name is the United States Government, and I’m an irresponsible borrowing, printing, promising, and spending addict.” The road to recovery for this spending and debt addiction is sure to be long and hard. There is no easy path. Don’t let anyone fool you otherwise. Don’t fool yourself otherwise.
Yes indeed, a large dose of honesty is required if we’re to tackle this mess. We must accept certain foundational philosophical tenets as a starting point. Oh, I know it’s naive of me to expect responsible behavior of predatory lenders and a political class that is completely beholden to Wall Street and our other betters. But try I shall. Let’s pull the pin on the honesty hand grenade and toss it amongst ourselves.
Firstly, the government does not have the money to pay this off. It never did and never will. The first question journalists should ask when hearing people espouse the notion of “forgiving” student debt is, “Where specifically is the money coming from to pay for it?” Our incurious journalists ask nothing of the sort. If something akin to Watergate occurred today, the guilty parties merely need blame climate change or the Russians, and the media will gleefully oblige and move along on their merry way.
The self-serving squawking by elected officials (e.g., Senator Elizabeth Warren) that the president has the authority to waive these loans is nothing but demented political theater. Even if true that the president has this authority, even if Senator Warren and others want it done, even it is demonstrably good public policy to do so, these politicians, especially her, must explain where the money is coming from—specifically. Otherwise, this is just cruel palaver, cruel both to debtors and taxpayers. I’ll answer the question for her: We don’t have the money—and she sure as shit knows it.
Currently, the Federal government is in debt over 30 trillion dollars, which does not include the additional tens of trillions of dollars of unfunded liabilities associated with Social Security and Medicare. By any modicum of fiscal prudence there is not 1.75 trillion dollars available to waive this student loan debt. The elected officials currently caterwauling about how we must waive student debt know this.
Moreover, it doesn’t matter if President Biden presently has the authority to waive this debt or not. The president shouldn’t have this authority. For an elected member of Congress to think that the president can willy-nilly magically waive hundreds of billions of dollars of debt on his own, without legislative approval (or a means to pay for it), is an insane notion. This is true for any expenditure, whether it be battleships for the United States Navy or seeing eye dogs for the blind. Congress must not abrogate its authority just because it’s politically expedient. We’ve seen how well the notion of shirking one’s responsibility has worked with our wars. Congress handed over to a single person the ability to wage war anywhere on Earth. Thereby, we are now mired in foolish forever wars that consume trillions of dollars of our money and destroy entire countries.
That the money does not exist for a desired expenditure is not unusual. In fact, it’s true for most of the federal government’s expenditures, as evident by the endless deficit spending and our current debt. We do not have the money to send over a hundred billion dollars to Ukraine, maintain eleven aircraft carrier strike groups, or give senior citizens their annual Social Security COLA. An adult leadership would establish a budget based on revenues. This would require an honest debate about spending priorities and making hard choices. Borrowing and printing money, well in excess of our ability to ever pay it back, allows our elected leaders to escape having to behave as, well, prudent leaders. The eventual reckoning of accounts is going to be indeed terrible.
Unique features of these student loans are another problem. The government’s promise to backstop the loans on behalf of lenders is a dumb idea—moral hazard writ huge. Making it so the loans aren’t dischargeable in bankruptcy is, quite frankly, cruel and unfair, a modern serfdom or indentured servitude for the borrower.
Most of the student loan debt is for university education. Therefore, we must address the perpetual lie that is at the heart of the student loan mess: Everyone should be able to go to college. This is a not true. It is a lie exploited by politicians and lenders to the demise of the overall economy and individual finances. There are lots of jobs that must get done for society to function. Many of these do not require a college education, and this fact makes them no less important. The “everyone should be able to go to college” platitude is an overt slap in the face to those who don’t go, whether they’re employed adults or children still in a K-12 school. It implies these people are somehow of lesser importance, a lower caste of worker, a political afterthought, if that.
Everyone does not need to go to college. Not everyone is intellectually or temperamentally suited for a college education, no matter how vehemently we wish otherwise. There are many people enrolled in college who would be better off elsewhere. It’s a waste of everyone’s time and money to have them attend college. There are smart people who don’t want to go. And that’s okay because there are a lot of important jobs that don’t require a college education. It’s a misallocation of resources to have as many colleges as we do in the United States. We’d be far better off with fewer colleges and the resources directed elsewhere.
We must disabuse ourselves of the myth that our K-12 schools are exclusively college preparatory academies. We should value the success of graduates, whatever their endeavors, if they turn out to be honest, hardworking, productive members of society. A mechanic and a surgeon both have their useful roles. A hedge fund manager and YouTube influencer, not so much.
Schools must get children ready for life, whether or not they go on to college. Stop the charade of allegedly getting every kid ready for college. We need to get all kids ready for life. This requires a solid basic education to get them at least competent in reading, writing, mathematics, and other subjects. This should be geared to their ability. A variety of other courses should be offered related to interests and career goals. These goals may include further education at a trade school or university or directly entering the workforce.
In summary, we must accept the following facts:
- The government does not have the money to forgive this student debt.
- We have too many colleges and this is a misallocation of resources. There needs to be fewer colleges and these resources directed to the trade schools and improving K-12 education.
- Everyone does not need to go to college.
- There are many people who are intellectually or temperamentally unsuited for college—or, simply, don’t want to go. These people should not be there.
- There are important jobs that don’t require a college degree.
- There are jobs requiring a college degree that can be done by someone without a college degree.
- A college degree is no guarantee of competency, including one from an Ivy League School.
- Blue collar workers are a vitally important part of society. We must respect work not requiring a college degree.
- Everyone who is hardworking, honest, and productive is an asset to society, whatever his or her job.
- Schools must prepare every kid for life, not operate under the fallacy that everyone should go to college.
- Student loans must be lent responsibly (i.e., based on the ability to repay).
- Student loans must be dischargeable in bankruptcy, just like other debts.
- Those lending the money must be fully on the hook for defaults. The government must not be the guarantor of these loans.
Redirecting resources wasted on excess college capacity to instead better fund non-university training would be a far better investment of society’s resources. A robust training program for non-college careers is a wise investment. This is far better than sending to a university people who don’t want to be there or don’t belong there. But this first requires we respect and value blue collar work. Only a fool looks down on blue collar workers. If hedge fund managers and quants vanished from the Earth tomorrow, the world would be a better place. If the workers at Walmart or the lady who cleans your office vanished, you’d quickly notice and finally give a damn.
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