Categories:
Economic and Political Philosophy
Government Growth
A friend on Facebook, Stanley Ridgley, posted this this morning:
Congrats to everyone who didn’t have college debt. Now you do.
A nice succinct statement of the problem with Joe Biden’s latest move: making people who didn’t take on debt for college or paid it off pay for those who haven’t paid off their college debt.
Re the legality of Biden’s move, I find myself in the rare situation of agreeing with Nancy Pelosi, at least the Nancy Pelosi of July 2021. It’s illegal.
READER COMMENTS
Vivian Darkbloom
Aug 25 2022 at 2:12pm
Re the legality of Biden’s move, I am reminded of the phrase “Congress does not hide elephants in mouse holes”
https://www.law.cornell.edu/supct/html/99-1257.ZS.html
Unfortunately, there is a serious question as to whether there is any party with standing to sue by challenging this action in court.
Vivian Darkbloom
Aug 25 2022 at 2:12pm
As to the standing issue, see, for example:
https://www.virginialawreview.org/articles/standing-and-student-loan-cancellation/
David Henderson
Aug 25 2022 at 3:23pm
You write:
Yes. I’ve been making that point in conversations with friends. With the courts’ bizarre views about standing, someone making a few hundred million dollars a year, who would therefore be on the hook for possibly one million dollars would not have standing to sue.
zeke5123
Aug 25 2022 at 3:34pm
Also, the canon esjudem generis seems applicable in defining what is a natural emergency.
I do wonder if someone could claim standing who earned say 126K. The tax on their incremental 1K of income is effectively 1,000%. That seems, at minimum, a takings.
diz
Aug 25 2022 at 5:40pm
I think it would be fun for some states to bring an Article 4 Section 4 claim
“The United States shall guarantee to every State in this Union a Republican Form of Government”.
Not more flimsy than Biden’s argument he has this power, I think.
Charley Hooper
Aug 25 2022 at 2:40pm
Well said!
The government has no way to generate money other than to take it from taxpayers. Therefore, if the government gives Group A some money, it had to come from taxpayers. Because taxes won’t go up immediately, the government shifted debt from Group A to future taxpayers.
But it’s worse than that. It wasn’t “government.” It was one public official who acted on a whim.
No rule of law. No democratic debates and votes. Taxation with (effectively) no representation.
Thomas Lee Hutcheson
Aug 26 2022 at 5:33pm
Now you know how it feels to live in DC 🙂
vince
Aug 25 2022 at 2:55pm
Once again, credit to Frederic Bastiat: “The state is that great fiction by which everyone tries to live at the expense of everyone else.”
Don Boudreaux
Aug 28 2022 at 7:11am
I love Bastiat; his influence on me is enormous and I quote him often. But this quotation of his – which is indeed famous – is one that I’ve never liked. I dislike it because the state is not a fiction. It’s a very real thing. The state’s actions in such cases as the quotation refers are motivated by a fictional belief – namely, the belief that the state can enrich everyone by transferring money from the pockets of A to the pockets of B to the pockets of C to the pockets of A. But the state itself is not a fiction.
I don’t know how this famous quip reads in the original French. But I don’t care for it in its English rendition.
Maniel
Aug 28 2022 at 1:25pm
Yes, context does indeed matter. But, I claim that Bastiat provides that context in his own subsequent paragraph. My translation skills are imperfect at best; Pierre or someone else on this site is welcome to correct (below).
Bastiat : « L’État, c’est la grande fiction à travers laquelle tout le monde s’efforce de vivre aux dépens de tout le monde.
Maniel : The state is that great myth whereby everyone lives at the expense of everyone. [l’état in France would be the government here; le gouvernement refers to the current (Macron) administration in France.]
Bastiat : « Car, aujourd’hui comme autrefois, chacun, un peu plus, un peu moins, voudrait bien profiter du travail d’autrui. Ce sentiment, on n’ose l’afficher, on se le dissimule à soi-même ; et alors que fait-on ? On imagine un intermédiaire, on s’adresse à l’État, et chaque classe tour à tour vient lui dire : « Vous qui pouvez prendre loyalement, honnêtement, prenez au public, et nous partagerons. » Hélas ! l’État n’a que trop de pente à suivre le diabolique conseil ; car il est composé de ministres, de fonctionnaires, d’hommes enfin, qui, comme tous les hommes, portent au cœur le désir et saisissent toujours avec empressement l’occasion de voir grandir leurs richesses et leur influence. L’État comprend donc bien vite le parti qu’il peut tirer du rôle que le public lui confie. Il sera l’arbitre, le maître de toutes les destinées : il prendra beaucoup, donc il lui restera beaucoup à lui-même ; il multipliera le nombre de ses agents, il élargira le cercle de ses attributions ; il finira par acquérir des proportions écrasantes. »
Maniel : Because today, as in the past, each of us, more or less, would like to benefit from the work of others. This attitude, which we’d rather not make known, we keep to ourselves; so, what to do? We envision a go-between, we put our case to THE STATE, and, one by one we come before him and say, “you can loyally and honestly take from the public and we will share.” Unfortunately, the state is only too eager to follow our diabolical advice; since the state is comprised of ministers, civil servants, ultimately of men, who, like all men are acquisitive and eager to seize the opportunity to grow their wealth and influence. The state quickly realizes how it can benefit from the role the public has entrusted it to play. It can be the arbitrator, the master of all our fates; since it will take a lot, a lot will be left over for itself; it will increase the number of its workers and grow its takings; and it will wind up taking crushing amounts.
Mark Brophy
Aug 29 2022 at 2:31am
It’s very easy to translate French-English because 25% of the words in English come from French. The Bastiat translation is accurate.
vince
Aug 29 2022 at 6:18pm
Keep it simple. Synonyms for fiction include lie, falsehood, fantasy, concoction, fabrication.
Thomas Lee Hutcheson
Aug 25 2022 at 2:58pm
You do or don’t depending on whether you are the marginal taxpayer. That reaches far to low in my opinion, but still leaves out a lot of people, including I suspect at least some complaining about it on social media. Maybe they should invest more emotional energy if advocating a fair er and more efficient tax system. 🙂
zeke5123
Aug 25 2022 at 3:36pm
Government largesse is paid for either via taxes or inflation. Marginal taxpayer doesn’t impact the second one at all.
Keep in mind, the fed is raising rates to try to slow inflation but because the government debt is heavily short-term rising rates will severely harm the federal budget (as interest payments will make up more and more of its revenue). Yet Biden, with basically zero authority, eliminated an approx. 300b asset.
Thomas Lee Hutcheson
Aug 26 2022 at 5:45pm
I don’t think that government expenditures and taxes affect inflation at all. A famous economist once said “Inflation is a monetary phenomenon” and I agree with him. The debt forgiveness does increase the deficit, reducing private investment and so it was unwise not to have coupled the debt forgiveness with an increase in taxes, ideally consumption taxes in which case the incidence of the transfer would be clearer. As a deficit, I guess the incidence is on those who would have benefitted from the investment’s not made.
Can you think of a better way?
Monte
Aug 26 2022 at 7:16pm
Former U.S. Treasury secretary Larry Summers was quoted on Twitter saying that debt relief “consumes resources that could be better used helping those who did not, for whatever reason, have the chance to attend college. It will also tend to be inflationary by raising tuitions.”
Similarly Jason Furman, a Harvard professor who headed the Council of Economic Advisers during the Obama administration, said debt-cancellation would nullify the deflationary powers of the Inflation Reduction Act. “Pouring roughly half a trillion dollars of gasoline on the inflationary fire that is already burning recklessly,” he said.
Setting aside any inflationary concerns, this is vote-buying of the most (technically) illegal, unethical, idiotic, and unfair kind that, according to the University of Pennsylvania Wharton Budget model, is going to cost the taxpayers an estimated $300 billion.
Monte
Aug 26 2022 at 7:26pm
Former U.S. Treasury secretary Larry Summers was quoted on Twitter saying that debt relief “consumes resources that could be better used helping those who did not, for whatever reason, have the chance to attend college. It will also tend to be inflationary by raising tuitions.”
Similarly Jason Furman, a Harvard professor who headed the Council of Economic Advisers during the Obama administration, said debt-cancellation would nullify the deflationary powers of the Inflation Reduction Act. “Pouring roughly half a trillion dollars of gasoline on the inflationary fire that is already burning recklessly,” he said.
Setting aside any inflationary concerns, this is vote-buying of the most (technically) illegal, unethical, fatuous, and unfair kind that, according to the University of Pennsylvania Wharton Budget model, is going to cost the taxpayers an estimated $300 billion.
Art Carden
Aug 25 2022 at 3:44pm
Well, crud. Now we have to worry about paying off student loans again.
Bill
Aug 25 2022 at 4:20pm
Not the type of “double dipper” one aspires to be!
Stephen
Aug 25 2022 at 3:55pm
For those who argue that the President has the authority to forgive student debt, what’s the limiting principle? Why not $50,000? Why not $100,000?
Manfred
Aug 25 2022 at 4:22pm
Stephen, yes! Exactly. I would like to have an answer to that question as well.
Monte
Aug 25 2022 at 5:34pm
Illegal, unethical, unfair, inflationary, etc. But not to worry! Our président faible d’esprit holds the master key to unlock the door to all legal challenges: the Public Health Crisis.
David Seltzer
Aug 25 2022 at 5:57pm
Federal student loans account for about 90% of all student loans. Federal loans are contracts with the taxpayer lending and the student borrowing. How does Biden have the power to unilaterally abrogate that contract so as to harm the taxpayer?
Monte
Aug 25 2022 at 7:43pm
Because he holds the master key to unlock the door to any legal challenge: the Public Health Crisis.
David Seltzer
Aug 25 2022 at 9:29pm
Thanks Monte.
Phil H
Aug 26 2022 at 8:39am
This point would have more rhetorical impact if it hadn’t been undermined by years of right wing whining that most poorer people don’t pay federal income tax.
If most people don’t pay income tax, and student debt relief represents a shift in the tax burden from poorer college grads to those who, according to Henderson/Ridgley don’t have any student debt and are wealthy enough to pay income tax, then that makes it a progressive shift. Which means that at the very least, it’s doing what Biden says on the tin. The right wing may not like it, but… they’re not supposed to. Democrats do Democrat stuff.
diz
Aug 26 2022 at 1:19pm
It’s not “right wing rhetoric” that poorer people don’t tend to pay income tax it’s literally in the statutes that way and clearly observable in official government statistics. But the reality of this particular Biden dictat is that this spending would be added to the Federal debt. No one will pay any additional tax because of this order without further action. Now you can feel free to argue about who will pay that debt off if you like but I do not foresee a day when income taxes are raised enough to cover the deficit in my lifetime. My guess is the time when the debt will be inflated away or underfunded benefits like Social Security and Medicare will be reduced is now somewhat closer due to this order. Well, my first guess is it won’t stand up in court but if it does.
vince
Aug 26 2022 at 1:57pm
“… student debt relief represents a shift in the tax burden from poorer college grads … ”
Yes, a poor college grad who just got a job paying $125,000. And you can call it a shift in tax burden, but it amounts to one person signing a loan contract, and then the government forcing someone else to pay it.
Ken P
Aug 26 2022 at 4:08pm
Age matters too. Wealthy people are typically older. Someone making $125k in their 20s is already in top 10% of all workers but even a higher ranking for their age and is destined for very high salaries in the future.
vince
Aug 26 2022 at 1:48pm
Phil H whined about “… right wing whining that most poorer people don’t pay federal income tax.”
The poverty level for a couple filing jointly is $18,000. Thanks to Donald Trump, they don’t begin paying tax until their income is $27,000.
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