Taxpayers and Loan Forgiveness

    A common, long-touted belief from Republicans is that lowering the tax rate is good for the economy: the largest benefit being it spurs investment leading to future years in which the lower tax rate is gathered across a larger economy. In the end the government ends up taking in more money than it would have with the higher rates. Democrats push back on this largely by citing the short-term increase in deficit that was traded in order to give "wealthy people a tax break". They're not wrong. In 2019, the top 50% of taxpayers paid 97% of taxes. The top 1% of earners paid 38% of all income taxes, exceeding those paid by the lower 90% combined(https://taxfoundation.org/publications/latest-federal-income-tax-data/). Any tax cut of significance is going to go overwhelmingly to the top half of earners. Republicans defend this on the grounds that these are precisely the people who will make those investments that will result in more jobs, higher wages, and in the long term more tax revenue. Republicans are not wrong, either. Tax cuts work, and if you want successful business owners or to invest more of their money in creating new, higher paying jobs, those successful business owners need to keep their own money. The same goes for high-earning non-business owners too; they're very likely to invest their money, not hoard it.

    But right now we're focused not on tax cuts, but federal student loan forgiveness: Democrats are talking of forgiving $10k of student loans for those making under $125k a year. Republicans are pushing back by claiming this will increase inflation, as well as shift the burden of those loans from a huge number of students who attended post-graduate school, onto taxpayers at large, a majority of whom never attended college. Republicans exclaim, "Plumbers and Truck Drivers will be paying the student loans of Doctors and Lawyers." 

    This certainly sounds unfair, but the reality is the young "Doctors and Lawyers" who are being helped by this will end up paying vastly more in taxes than even high-earning Plumbers and Truck drivers in the long run. The "Doctors and Lawyers" helped are typically early-career graduates with good wages but heavy debt. They will become very high earning mid-career soon enough, and pay back more than their "fair share". But this "Doctors and Lawyers" claim misses the fact that many(perhaps most) of those with student loans are in more modest careers. The bulk of the people helped will be far less elite than this "doctors and lawyers" subset, and the "Doctors and Lawyers" subset will retain much of their debt and pay it back in due time. We've already established that the top 1% pays more than the bottom 90% in income taxes. It's true that professional tradesman like Plumbers, who likely have never taken student loans, may be part of the top 50% of earners and so part of the 97% of taxes paid; but they're hardly going to shoulder the cost of any loan forgiveness by any real measure. Their taxes don't rise immediately because we have some additional spending. In the end, the bulk of this forgiveness will still be paid for by the wealthiest 10% among us...same as the rest of our government expenditures. Our public debt is already massive, this won't on its own be a significant new burden. This isn't an endorsement of the forgiveness plan, but the Republican objection on the grounds that it shifts burden to the non-college-uneducated rings hollow in light of who actually pays the bulk of the taxes in the long run: those same highest-earning college educated in their mid and late careers.

    Education level is still one of the greatest indicators of future income potential: For those aged 25-34 working full time, median incomes for those with a Bachelors degree is nearly $60K a year, while median income for those with no college is still under $40k a year(https://www.forbes.com/sites/michaeltnietzel/2022/06/01/new-report-shows-college-degree-continues-to-provide-better-employment-prospects-and-higher-income/?sh=e8e3b9c23580). While hard working tradesmen may jump far ahead of the median income for their education level, those in the top 10% are surely well over-represented by college education. Shifting the burden from educated debtors to the taxpayers at large may seem unfair, but in the long run it won't change much regarding who pays the balance: those with the advanced degrees, and therefore highest earnings potential, will end up paying a far greater share of their income as taxes than the average earner. Many fields still have a lack of candidates available to fill positions requiring advanced degrees, and it is in the taxpayers interest to encourage people to attempt these degree paths; ensuring you don't leave undergraduate level saddled with debt is a good way to do so. The fact that not everyone chose to take on debt does not immediately make it wrong to help ease the burden of those who did, especially when the nation's economy and our tax-base specifically is dependent upon the success of those future high-earning graduates(and the nation's policies are what ran up the costs of education in the first place). Even if we accept that loan forgiveness is wrong or unfair, the Republican's insistence on arguing this particular angle may do more harm than good in the long run as it has the appearance of conflicting with the pro tax cut arguments which permit us to cut taxes on the wealthy while poverty exists: there's a significant difference in this scenario regarding the perceived wealthy keeping education money vs earnings, but it still boils down to "why do you need more money if you're a high earner?" The fact remains that high debt vs earnings are harmful to everyone regardless of whether you're low debt with low wages or high debt with high wages, and a nation that expects predominantly college educated, high earners mid to late career to support most of our nation's general spending should perhaps be a little more understanding when expecting them to also take full personal financial risk and the stress that accompanies it to get there.

    Fairness aside, it is still hard to look past the simple truth that one should pay their own debts. Democrats increasingly view debts as a sign the system is flawed to start: you shouldn't have to go in debt for food/housing/education/healthcare/etc, and Republicans tend to view these expenses as just part of life and you alone are responsible for your own life. At the same time, Republicans acknowledge that all of those costs have been raised due to bad policy, education and healthcare especially. We're in a world where the best way to reach financial success is to get a valuable degree; but the cost of that degree has been pushed out of reach of working class families without taking debt or subsidy. If you do take that debt to get the degree, you're left with the potential for years of stress and worry, even if making good wages. Yet this is a reality we all share. Every one of us makes these same decisions between taking debt for education or not.

    How do we compare this to, say, credit card debt and bankruptcy? It's certainly different, as these loan forgiveness recipients are  not bankrupt. They may be stressed and living paycheck to paycheck, but not bankrupt. In fact, with the income dependent repayment plans available for most of these loans, borrowers clearly have much more of a safety net than with consumer debt(including healthcare debt).  In the case where you do declare bankruptcy on consumer debt, the debt isn't put on to the taxpayers; the lender takes a loss. Since the government *is* the lender in these Student loans, though, taxpayers are indeed the proper ones to take the loss should you need bankruptcy protections(which you can't actually get with a student loan, at least not in the traditional sense; you're stuck with those loans till they're repaid or forgiven). Further, credit is usually issued based upon perceived ability to pay, while student loans are issued without regard to ability to pay, as you're hoping the student learns enough to get a good job later, but certainly cannot pay at loan disbursement. An educated population is critical for our economy, so there's a taxpayer benefit to paying for college that doesn't exist with consumer credit. All in all, student loan debt has fundamental differences to most other debts. This debt was issued by the government for benefits that exceed those of the individual debtor. For these reasons, the decision on how to dispose of this debt is indeed a valid matter of policy, while the decision to dispose of credit card debt would not be. If the party in charge believes that maintaining this debt is detrimental to the nation and we are better served by disposing of it, and they have the regulatory room to act upon such belief, then we should not view it as if they paid off someone's house, car, or credit cards. One comparison being made by the left is to PPP loans. Many Republican business owners took PPP loans during COVID-19 lockdowns, and then had those forgiven. This was of course an emergency measure because governments had forcibly closed businesses. PPP forgiveness was baked into the loans from the start though, with requirements the business must meet; this differs from the student loans. Yet, since the student loans are a matter of policy, not private contract, then there's not much difference between rewriting the rules later or at the start; both are valid policy assuming the rule change was otherwise legal.

    What does student loan forgiveness say about the recipients, if anything? Republicans are already referring to them as "deadbeats" and the like. Should they be criticized for taking advantage of a policy decision such as this, or asking for it in the first place? There are many who believe that subsidizing education for the poor through grants is wrong and taxpayers shouldn't be helping people fund their careers at all. There are poor who are reluctant to take advantage of public benefits such as education grants because they feel like they're saying to the taxpayers, "Yes, I'm a charity case; please pay for me." Are these reasonable or good beliefs? Others, like the Democratic platform, believe that students who wish to continue education in adulthood shouldn't be made to pay when college education is a benefit to society and an increasing requirement for employment. While much thought is and should be given towards fairness to plumbers and truck drivers, there's only so many of those we actually, and many jobs require advanced education. Outside of education, our government offers subsidies in countless ways, often with bipartisan support, to entities we believe serve a public purpose. We don't call farmers deadbeats when the government subsidizes their costs; they get that Bipartisan support instead. Much of these subsidies go to the large, profitable farming corporations. Somewhere along the line we wrote them into the budget and carried on with life. The $20B+ Space Launch System has functioned as a gigantic subsidy for manufacturers involved previously in the Space Shuttle project...despite the fact it's an inferior and overpriced rocket to what could have been built, it gets bipartisan support. This includes highly paid engineers, kept employed by a Congress that decides they *want* to keep those companies around and supported by Republicans who find it politically prudent to keep their home-town companies supported by taxpayers despite being years late and over budget. The list of subsidies is massive, and is not limited to low-income individuals or failing companies. How can we justify calling student loan recipients deadbeats, when so many businesses and engineers are kept employed by the government on under-performing, perpetually late, busy work?

    Republicans need to come to grips with reality: Democrats ran campaigns nationally which included student loan forgiveness as a core promise, and they won. If Loan Forgiveness could happen, Loan Forgiveness was going to happen. Yes, this is a vote buying scheme. By doubling down on the most divisive of objections to the forgiveness, pitting "working-class" against "college educated" under superficially thin fairness arguments that don't stand up against the reality of our tax system and the countless other subsidies we already give, Republicans are trying hard to lose the next election too. It will be years before the beneficiaries of loan forgiveness personally suffer due to the collapse in college financing and excessive inflation it will cause. They will remember their sudden reduction in stress as their loans were reduced or eliminated by Democrats, and how much Republicans denigrated them during the process. Republicans are hardening their base against a very flawed policy, but not expanding the base to fight it. 

    Loan Forgiveness will be damaging to the nation. Since the taxpayer fairness argument against loan forgiveness is flawed, if not wrong, Republicans should focus on the remaining arguments; additional spending for loan forgiveness will increase inflation, and loan forgiveness will undermine college financing going forward as every future student will expect to not repay their loan. The latter is the most convincing argument. In fact, it is possibly intended. Democrats have been pushing for "free college" for years now, and effectively backdooring free college through future expectations of loan forgiveness is a good way to achieve what Congress has refused to pass. It is also an amazing handout to the college industry at large as Students will no longer feel the need to keep their costs under control: they can take and spend any loan money they're offered. Costs will rise because the money seems "free", money offered will rise because average costs have risen. With no expectation of loan repayment, we may eventually be forced to limit the loans to those most likely to succeed, knowing the taxpayers will be repaid through future income tax, hurting low income students who have the most to overcome on the way to a degree and post-degree employment. Eventually the system will burn to the ground, and Republicans are not prepared to argue for its replacement. 

    Republicans have thus far said if you take out risky loans as an 18 year old in hopes of a solid future, you're to expect no help as you struggle with that debt and the stress debt brings. While at the same time Republicans argue that the policy of offering those loans broadly has driven up the cost of education, increasing the debt students must take to become educated. For their trouble, our income tax system will then take a massive percent of the earnings from the college educated if they do succeed. Republicans are then stoking hostility towards the college educated debtors for wanting debt relief. Whenever tax policy comes up, Republicans argue(rightly) that the small tax base biased heavily towards the most successful earners is unstable and encourages class based hostility, and therefore the tax base should be broadened and taxes rates flattened. Under such a policy it might make sense to let people subsume the full risk of their personal choice to an education, when they're not being taxed excessively should they eventually succeed. But we're not there. Far from it, and generating hostility between classes is not a way to get there. Plus, while both moral and economically sound, it's hard to tell the voting base, "we want you to pay a higher percentage of the national budget, so the wealthy can keep more of their money they earned through all that risk they took...it'll help grow everyone's wages in the end, I swear". What future do Republicans argue for then, regarding higher education? The status quo sucks: high costs, high taxes, high risk...but eventually higher wages(hopefully). Democrats push flawed policy to address one part of it, and Republicans respond with hostility towards those its helping, and no real solutions.