So at least says this CNBC article. Now Democrats are always in the business of offering to give something to some interest group, and have somebody else pay for it, so there is little new here. Give me free stuff–what’s not to like? But two quick points on a Monday morning.

First is the proposal itself. Under this plan, you could receive $10,000 debt forgiveness per year, up to five years, provided you work in the public sector. Why work in the public sector? The modern Democratic Party seemingly hates the private sector, and the public sector allows them to further grow their base. The Democratic Party is the party of government, and creating a grateful class of workers that is dependent upon government for their livelihood is in their political interest. Don’t believe me? Ask yourself why Virginia is solidly blue. Look where the Democratic votes come from. Ask yourself why most of the top richest counties in America all surround Washington DC. As the saying goes, where you stand depends on where you sit. If we think that there is an economic reason to forgive debt (more below), then we ought not to discriminate on who is able to get that debt forgiveness. It ought not be designed for partisan political advantage, which this proposal is.

Second is the rationale, which is what really got my interest.

Since President Trump took office, the total amount of student loan debt held by Americans has increased more than 16%, from $1.44 trillion in 2017 to roughly $1.68 trillion today. An estimated 46 million Americans have student loans, making it the second biggest form of household debt in the country.  These totals worry many economists, who say that student debt disproportionately impacts women, contributes to the racial wealth gap, puts younger generations at a disadvantage and holds the economy back. 

Now aside from the standard implicit blaming Mr. Trump for this issue (when you could credibly put the focus on Mr. Obama), we see that who is really worried are the economists. Many of them. Like lots. People that have extensive training that know more than we do. Besides, it hurts women and minorities. And the coup de grâce, it holds the economy back. The reality is, of course, that you can trot out “experts” for almost any position. So let’s say there were 40 economists that were concerned about this issue. In one sense, you could say many. But what if there are thousands of economists? But even if most economists said this, that wouldn’t make it correct. The idea that debt is holding back the economy, that if only the US Taxpayer would take over the debt we would be ok, is fallacious. Transferring debt from individuals to the taxpayer in no way eliminates the debt. Even if we were to raise taxes (in the middle of a pandemic, smart idea huh?), that means someone’s consumption is being curtailed so that others consumption can be increased. Further, remember that for every debtor there is a creditor. The interest that is being paid on that student debt is someone else’s income. The lost consumption by paying off debt is furthering consumption in the economy by others.*

At the end of the day, this is just another fairy tale proposal–we can have something for nothing. But don’t worry, many economists would approve it. Not this one.

* This argument is in no way overcome by suggesting that there will be distributional differences in consumption (i.e., younger people have to buy more stuff so it’s better to put purchasing power in their hands). Other groups may consume final goods and services less, but they will invest in the economy, and expenditure on investment activity in the economy is, if anything, more productive. Contra the Keynesian mentality, money is not hoarded under a mattress.