Student Loans and Scams

Folks are growing concerned about the magnitude of, and problems associated with, the massive student loan situation, and the some are even calling it a scam.

Defaults have fallen for most forms of consumer debt as the economic expansion continues. Mortgage delinquencies last quarter hit a historic low. But severely delinquent student loans have soared since 2012 and are now 35% of “severe derogatories”—more than credit cards (23%), auto loans (21%), and mortgages (11%).

This “scam” is laid at the feet of the CBO during the Obama administration.  It’s certainly true that the CBO misread the situation, perhaps even negligently so.

Here’s the short and sweet of it, though.

The student loan overhang is a serious problem.  However, the real scam is that of so many Progressive-Democratic Party Presidential candidates who want to forgive all those loans—transferring the loan problem directly onto the backs of taxpayers, instead of leaving it where it belongs: the responsibility of the students and parents who borrowed so foolishly and of the lenders who so foolishly loaned.

An Economic Misunderstanding

The Congressional Budget Office said Wednesday that the two-year budget deal will increase our annual deficits significantly over the next ten years.  That puts a premium on Republicans regaining the majority in the House, retaining/expanding its majority in the Senate, and retaining the White House, with an emphasis on Conservative Republicans in that mix.  That’s for another post, though.

What…triggered…me was this bit at the end of the article CBO Director Phillip Swagel:

The nation’s fiscal outlook is challenging. To put it on a sustainable course, lawmakers will have to make significant changes to tax and spending policies—making revenues larger than they would be under current law, reducing spending below projected accounts, or adopting some combination of those approaches.

Close, but no cigar—not even an ersatz vaping cigar (do they make these?).  To get onto a sustainable course, the only change to tax policy is to continue reducing the rates: make the individual income tax rates permanent, then move onto a course to (permanent) low flat tax rate on all income, regardless of source. Add to that elimination corporate income taxes altogether; it’s corporations’ customers who pay the bulk of those taxes, anyway, in the form of higher prices.

Then cut spending to levels below the resulting revenues, with an emphasis on cutting non-defense spending.  It’s time the government stopped misspending us citizens’ money.  It’s also time the government stopped competing in the economy for products, services, and resources to produce those products and services.

With more money left in our hands, and with less competition from Government driving up our prices, the private economy will truly take off—increasing along the way revenues to the government from that greatly increased economic activity.

That increased economic activity and revenue to Government will have an additional mid-term salutary effect, if politicians are sensible and don’t lose their nerve.  The increased revenue could ease the pain of transitioning our Social Security and Medicare programs to privately done facilities, getting Government further out of our personal economic and health lives.

The increased economic activity also would redound to the States’ collected revenues—facilitating over the same mid-term a conversion of Federal Medicaid transfers to block grants to the States on an annual declining balance to zero schedule.