Day: 2011/10/12

Richard Vedder Thinks Student Loan Debtors Are Lucky Duckies

Are you an overpaid university administrator? A professor who works a couple dozen hours a week while receiving a six-figure salary for publishing unread journal articles? Feeling whispers of guilt as your students graduate into crippling debt and destitution? Fear no more, for Richard Vedder is here to put your conscience to rest. Turns out the real beneficiaries of our higher education financing policies are the students after all! Hooray!

The demonstrators say that selfish plutocrats are ruining our economy and creating an unjust society. Rather, a group of predominantly rather spoiled and coddled young persons, long favored and subsidized by the American taxpayer, are complaining that society has not given them enough — they want the taxpayer to foot the bill for their years of limited learning and heavy partying while in college. Hopefully, this burst of dimwittery should not pass muster even in our often dysfunctional Congress. -Richard Vedder, “Forgive Student Loans?” in the National Review.

There’s a lot to love in Vedder’s mispaupery, victim-blaming, and hatred of young people (older people have student loans too). My favorite part is that he seems to think the students–and not banks that received loan guarantees–lobbied for the policies that contributed to their “limited learning and heavy partying.”

A tribute to the versatile J.D. Reuben Bolling received from Harvard in the 80s.

My sarcasm aside, I agree with Vedder’s main criticisms of the student loan program: accrual accounting causes the government to underestimate market risk, student loans aren’t underwritten, they’ve contributed to tuition increases, and higher education is neither a right nor necessary for everyone. Beyond that, though, the rest of his article is his radical dogmatism dominating the second page, e.g. stimulating a depressed economy doesn’t work, Social Security is in peril, the national debt will kill us, and unfalsifiable bond vigilantes will backstab the U.S. Treasury.

Rather, now that student debt is crawling into mainstream politics, the public is tasting the ideological hostility it’ll witness. It will be all the bloodier because many of the people we’re talking about are young, and young people make excellent political scapegoats. Recognize that there are plenty of powerful Americans who couldn’t care less if the country mires in indefinite stagnation if it means we can use (or ignore) the levers of government to punish “bad people” who took on too much debt of whatever type. I lived in Japan ten to fifteen years after its real estate bubble burst. I’ve seen a society whipped by a government that opted for punitive stagnation, and now my life is like a Twilight Zone episode because it’s happening again.

In the United States, this decade will see a test between two political ideologies, one retributive and the other consequentialist. The only way forward is to do away with the former. Democracy means doing the most good for the most people, even if it means that people don’t have to pay back debt or that banks fail and academics lose their jobs. Yes, some people who made “bad choices” will come out ahead and others who “worked hard” won’t directly benefit, but don’t let appeals to “fairness” on the part of the “hard workers” fool you: Neither Vedder nor the National Review cares whether Americans suffer in permanent poverty due to policies sculpted to protect banks from taking risks.

Meanwhile, we need to recognize that the solution must be comprehensive. We cannot wipe out debt without preventing it from re-accumulating. If that means terminating the Direct Loan Program as Vedder advocates, fine. However, unlike Vedder, we can’t abandon existing debtors. The solution must come about either by restoring bankruptcy protections or canceling the debt. They lead to the same result, only one’s quicker and the other uses the judicial system, which I’m sure plenty of unemployed law school graduates will appreciate.

But Wait! There’s Good News!! Really! This made happy:

[The Fed] could move to deflate the debt that millions of households face from mortgages and student loans. This would mean following the path advocated by Ben Bernanke for Japan’s central bank when he was still a professor at Princeton; deliberately targeting a somewhat higher rate of inflation (e.g 4-6 percent). “David Brooks: Bard of the 1 Percent

This quote is the first time I’ve ever seen Dean Baker mention student loans. I credit Occupy Wall Street.