Tag: student loans

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education and schooling national politics & policies tax policy

Trump to Ax Tip Tax

Joe Biden, taxes, tipping, student loans, buying votes, debt

When Biden panders to his lower-​income supporters, he targets zeroing out their student debt and regulating credit card companies with further restrictions on their ability to charge for overdrafts and the like.

When Trump panders to his lower-​income supporters, he promises to exempt tips from income taxation, as he did recently in Las Vegas.

This may be the most obvious difference between left- and right-​styles in politicking to the masses, good-ol’-fashioned vote-​buying or its twin: leftists forgive debts and add regulations, rightists reduce taxes.

Like me, you may, at first blanch, prefer the latter form of pandering, but Eric Boehm, at Reason, offers some reasons not to look so kindly on Trump’s pandering. First, and most obviously: “Reducing revenue without identifying offsetting spending cuts means Trump is merely promising to borrow more heavily.”

A bigger challenge comes later: “On the surface, that sounds great. But there’s already one likely unintended consequence: A lot more income will suddenly be reported as tips. Any time a government gives preferential tax treatment to one type of economic activity, you tend to get a lot more of that type of economic activity. Does that mean we’ll have an entirely tip-​based economy?” The answer is a likely No.

Oddly, Mr. Boehm doesn’t address one obvious element: Tips aren’t wages and they aren’t profits. Tips are gifts. They aren’t determined by employers and they aren’t specified by employees. And gifts aren’t taxed as income like other income is.

So letting people who accept tips in the course of their labors not pay taxes on them is really, really hard to object to.

In fact, I don’t object.

This is Common Sense. I’m Paul Jacob.

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education and schooling judiciary subsidy

One Way or Another or Another

student debt relief

The courts have not been kind to President Joe Biden’s unilateral attempt to erase some $200 billion to $500 billion in student-​loan debt. (By “erase” I mean force all taxpayers to pay debt incurred by the millions of borrowers eligible for the forgiveness program.)

Last month, a federal judge issued a temporary stay on the program while the litigation plays out.

On November 10, another federal judge, Mark Pittman, ruled that the program is a “complete usurpation” of congressional authority. Per Pittman, the U.S. is “not ruled by an all-​powerful executive [but] by a Constitution that provides for three distinct and independent branches of government.”

In consequence, the Biden administration stopped accepting applications for student-​loan debt relief. By then more some 26 million borrowers had applied.

On November 14, another federal court also blocked the program. So Biden’s debt-​transfer plan is apparently at least thrice bogged down.

Except that another student-​loan-​debt-​erasing thing has been going on since early in the pandemic, a pause on debt payments rationalized by the economic hardship imposed by lockdowns.

This pause was set to lapse at the end of this year, with payments to resume in January. But according to a White House insider “familiar with the matter,” the administration has been making “increasingly firm plans to extend the repayment pause.”

The pause also costs taxpayers money. The original rationale for it no longer exists. Like the mega-​debt-​relief program, extending the pause would also be unconstitutional.

This subsidy is also unlikely to inspire kindness from the courts.

This is Common Sense. I’m Paul Jacob.

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deficits and debt folly national politics & policies

Relief Spelled S‑U-​B-​S-​I-​D‑Y

Joe Biden, emergency, inflation, student loans

In a bid to bail out the sinking ship of his party, President Joe Biden has decided he can go ahead and bail out Americans who are having trouble paying off their student loans.

Yesterday he announced that (quoting The Epoch Times) “his administration will spend hundreds of billions of dollars to pay off $10,000 in federal student loan debt for some borrowers,” with the Education Department giving the specifics: “individuals earning less than $125,000 a year or families earning less than $250,000 will be eligible for up to $10,000 in debt cancellation.” Pell Grant recipients in the same situation will be eligible for relief of up to twice as much.

The politic nature of the move is so obvious that … it isn’t getting enough attention from critics. 

Most of those alarmed at the move concentrate on the unfairness: rewarding those who have not met their obligations and thereby penalizing those who have. Defenders of student debt relief make the usual arguments about the need to help the under-​privileged — by giving them more privilege (if anything’s a privilege it is to be able to take out a loan and then not pay it back).

You may be wondering how a president can authorize spending billions of dollars. Isn’t that Congress’s job? Well, the administration has found a semi-​plausible excuse — from Congress: a 2003 higher education law that allows the Education Department to provide relief in response to a national emergency. 

And what is the emergency?

Pick one. Inflation, for example.

Which is spurred by overspending.

Which an extra $250 billion will merely increase.

You gotta wonder: isn’t it college graduates who cook up this stuff?

It’s ‘We the People’ who deserve not relief but a full refund.

This is Common Sense. I’m Paul Jacob.

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Accountability folly free trade & free markets ideological culture media and media people national politics & policies

Next Bubble to Pop?

bubble, Paul Krugman, recession, student loans, debt, folly, David Stockman

There was a great and wondrous moment, a decade and a half ago, when economist Paul Krugman, Nobel Laureate and New York Times’s unregistered shill for the Democratic Party, suggested that what the economy really needed was another housing bubble. 

What he wrote, specifically, was this: “To fight this recession, the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”

Krugman later reinterpreted that statement in a clever (if not convincingly honest) way. After the subprime loan industry collapsed in 2008, he attributed that bust to financial market malfeasance, not the Fed-​inflated bubble we got … and that he had previously called for.

Now we are looking at several ready-​to-​burst bubbles:

  • The student loan debt problem seems scary. 
  • The sovereign debt problem is undoubtedly more dangerous and far larger, but is perhaps still able to take on more fake money — all the world’s 1s and 0s have to go somewhere! 
  • So the current bets seem to be on a huge auto loan industry bubble, about to pop.

Loan terms have increased in duration, and the average amount new car buyers are financing has jumped over 17 percent in five years. The idea has been “to continually lower monthly payments,” says David Stockman, “so people can get behind the wheels of vehicles they can’t really afford.”*

Which bubble does Krugman favor? I don’t have the stomach to check.

But, be certain, as we play pop goes the bubble, he’ll play pop goes the weasel.

This is Common Sense. I’m Paul Jacob.

 

* Stockman seems to be echoing warnings made by Eric Peters, of Eric Peters Autos.

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Common Sense

Higher Ed Jubilee?

Student loans, bailout, bail out, loans, jubilee, banks, subsidies

“Everything is beautiful in its own way,” goes Ray Stevens’s hit song of 1970. But still, pay your bills. 

That’s what I thought reading a Fox Business story on a recent poll in which 42 percent of Americans, a plurality, thought that “President Trump’s administration should forgive all federal student debt in order to help stimulate the economy.”

Roughly 37 percent disagree, at least. Twenty-​one percent were undecided. 

For starters, justifying a huge financial giveaway to some citizens at the expense of other citizens as a way to help “stimulate the economy”? A sad commentary on the state of civic discussion.

Of course, this particular voter survey may have been concocted as nothing more than some capitalist PR plot by MoneyTips​.com. Still, the numbers are believable, and with total student debt reaching $1.3 trillion — owed by some 44 million Americans — the subject is certain to come up again. 

Let’s not forget, Bernie Sanders declared it a sin against public policy that Americans were not provided a free university-​level education. I can hear his future oration, “We bailed out the banks for the one-​percent. We can bail out the students!” 

It should be a popular position on college campuses, cui bono and all.

“Drilling into the data, we found millennials (18 – 29) were especially passionate about student loan debt forgiveness, strongly agreeing with the idea nearly twice as much as those 50 and older,” confirmed MoneyTips co-​founder Michael Dubrow. “Even if older people are still paying off their loans, younger people paid more and borrowed more for higher education.”

This sounds like a good reason to cut current subsidies, not increase them.

No. More. Bailouts.

This is Common Sense. I’m Paul Jacob.

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education and schooling free trade & free markets too much government

Take That Money

I didn’t notice it right away, but President Obama included some strange stuff about student loans in his State of the Union address. He called the current system an “unwarranted” taxpayer subsidy to banks.

Well, yeah. His solution? Another unwarranted taxpayer subsidy.

The president seeks to give families a $10,000 tax credit for sending kids to college. He also insists that no student spend more than 10 percent of his income to pay back loans, and that the unpaid portion of loans be forgiven after 20 years.

Further, if the former student happens to work for the government, the loan would be forgiven in half that time — just ten years!

This amounts to a huge special favor to government workers, of course. It may sound nice and patriotic when the president calls it “public service,” but it seems less so when you realize that government workers now earn, on average, more than private sector workers. Perhaps the fact that public employee unions are a big spending political powerhouse for Obama and Democrats matters in some small way.

Alas, more vote buying.

The president used an interesting phrase, explaining what he’s up to. He instructs us to “take that money” now loaned by banks and “give to families.” This is pseudo-​specific. It’s not the same money.

But a politician obscuring the real source of wealth is nothing new.

This is Common Sense. I’m Paul Jacob.