Should Federal Taxpayers Underwrite a $321B Student Loan Forgiveness Package?
There are two camps opposing federal student loan forgiveness. One comprises individuals who, while personally struggling to pay for their college education, insist that others should not have an easier time. The other includes people who do not wish to contribute to what they perceive as a handout and mistakenly believe in the myth of "their tax dollars going to pay for someone else’s loans."
Why Forgiving Student Loans Is a Good Idea
Forgiving federal student loans for millions of borrowers can provide substantial relief. It would pay off a significant portion of many borrowers' federal student loan debts and, for some, eliminate their federal student loan obligations altogether. This would make monthly expenses more manageable for a substantial number of Americans.
Why Taxpayers Should Not Finance the Forgiveness
No, taxpayers should not finance a $321 billion student loan forgiveness package. Thankfully, that's not the proposal on the table. Even if such a plan were to be considered, it would not involve taxpayers' dollars being used to pay for others' loans.
Understanding Federal Spending and Taxation
It's crucial to understand how federal taxes and spending operate. Federal taxes are deleted upon being received, and thus "your tax dollars" do not actually persist. The federal government is the sole issuer of US dollars and can spend as much as it is authorized to do so. This spending is not constrained by reported tax revenues; the government can fund policies based on policy decisions and the willingness of Congress to pass spending bills.
Myth of Federal Spending and Personal Finances
The idea that federal spending works like personal spending is a big lie. Federal taxes don't pay for public goods or services; they don't dictate the allocation of funds for any specific purpose. Political expedience keeps this myth alive, providing politicians with an easy excuse to avoid funding popular but potentially controversial policies.
The Case for Forgiving Federal Student Debt
Politicians avoid acknowledging that the entire federal student loan debt could be forgiven without affecting the government's ability to fund its policies. Recognizing this would highlight that the long suffering of borrowers to pay off their debts is completely unnecessary. Canceling all federal student debt and making public college tuition and board-free would be ideal, but canceling $10,000 to $20,000 for each borrower is a reasonable start.
Outrage and Rationalization of Federal Spending
If individuals insist on being angry about federal spending, there are valid reasons for outrage. However, "I don't wanna pay for other people's benefit" is not one of them. Financially, taxpayers are not contributing to this forgiveness in a way that directly affects their wallets.