Warren’s confiscatory student debt plan draws needed backlash - OCRegister

There was something familiar about the the angry Iowa voter who waited in line to ask Elizabeth Warren about her plan to forgive student debt.

“I just want to ask one question,” said the man at the Grimes Community High School event. “My daughter’s getting out of school, I saved all my money, she doesn’t have any student loans. Am I going to get my money back?”

“Of course not,” Warren answered.

“So you’re going to pay for people who didn’t save any money, and those of us that did the right thing get screwed,” the voter said.

“No, it’s not that you’re going to get screwed…” Warren began.

“My buddy had fun, bought a car, went on vacations, I saved my money. He made more than I did. I worked a double shift, worked extra, my daughter worked since she was ten. So, you’re laughing,” the man said, “That’s exactly what you’re doing. We did the right thing, and we get screwed.”

The exchange was eerily similar to a famous rant from the Chicago financial markets on February 19, 2009, just one month after President Barack Obama was sworn into office.

“The government is promoting bad behavior,” said CNBC correspondent Rick Santelli. He was reacting to a proposed plan for the government to subsidize the mortgages of people who got in over their heads, instead of allowing the houses to go into foreclosure.

“How many of you people want to pay for your neighbors’ mortgage that has an extra bathroom and can’t pay their bills?” Santelli asked the traders on the floor. A chorus of boos answered him. “President Obama, are you listening?” Santelli demanded.

One of the CNBC anchors asked Santelli to comment on a proposal to refinance the troubled mortgages at 2 percent. Santelli couldn’t conceal his disgust. “You could go down to minus two percent, they can’t afford the house,” he said emphatically.

Santelli’s rant is credited with setting off the Tea Party movement that made town hall meetings such an unpleasant experience for members of Congress who came home to face the voters.

Americans don’t care for government bailouts of reckless decisions, whether those decisions were made by mega-banks or by individuals struggling to get ahead. Voters are quick to recognize, even if some candidates can’t see it, that the government doesn’t have any money of its own. It only has what it takes from the American people. The money that’s coming out of everybody’s paycheck could do a lot of good for the people who earned it, instead of flying off to Washington for do-gooders to spend on other people.

It’s bad enough when politicians use your money to buy your vote. It’s worse when they use your  money to buy somebody else’s vote.

But the worst thing about government bailout policies is that they incentivize destructive decisions and introduce an expectation that warps planning throughout the economy.

At the individual level, a plan to pay off student debt with taxpayer dollars incentivizes the next group of student borrowers to rack up a level of debt that they would never take on if they believed they’d have to pay it back. Who is going to believe that student debt forgiveness is a one-time thing?

If the government’s student-loan portfolio is nearly $1.6 trillion now, how much will it be after everybody feels empowered to incur crazy levels of student debt without the slightest hesitation over how those loans will be repaid?

Then what?

Then angry Iowa voter who complained that his family did the right thing and got screwed will vanish, never to return. No one will do the right thing. It would be foolish to limit your opportunities by trying to live within your means. It would be a needless personal sacrifice to pay off your student loans when you could just go to a rally and hold a sign.

In the meantime, campuses would be flooded with the proceeds from ever-growing student loans, enough to allow university administrators to increase tuition, not to mention staff salaries. Everyone will have enough money to pay tuition increases, because nobody’s going to worry about paying back student loans.

Everybody wins! Isn’t socialism great?

Actually, no. Socialism isn’t great because when the bill comes, the government uses force to take money from people. That affects planning, too.

Elizabeth Warren says she will pay for her plan with a “wealth tax” of 2% on the 75,000 families in the United States who have at least $50 million in net worth.

“You have it, I’m taking it,” is not a policy. It’s an armed robbery.

But even if you think it’s morally right to tax the property of one group of people to provide benefits for another group, it’s fantasy to believe that the money will just sit in U.S. accounts and wait to be counted and seized. Everyone makes plans and adjustments based on the rules as they exist at any given time. Change the rules, and you change the outcome.

That means all taxpayers will ultimately pay for the bailout. Every taxpayer who sees money withheld from a paycheck will be contributing to student loan forgiveness for people outside their own family who made different choices and took more risks.

This is just wrong. It will always be immoral for the government to subsidize people who got in over their heads with the tax dollars of people who didn’t.

Susan Shelley is an editorial writer and columnist for the Southern California News Group. Susan@SusanShelley.com. Twitter: @Susan_Shelley

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Warren’s confiscatory student debt plan draws needed backlash - OCRegister
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