The Daily Wire

CAMP: Student Debt Cannot Be ‘Cancelled,’ Just Redistributed

By  Frank
United States Dollar notes exchange hands at a local bank in Beijing 15 May 2006.
STR/AFP via Getty Images

On Friday, The Daily Wire’s Matt Walsh retweeted a post from NPR in which the news organization writes: “Elizabeth Warren has pledged to cancel up to $50,000 of debt for 95% of student loan borrowers if she’s elected president – and she says she could cancel those debts all on her own.”

Walsh wrote above the tweet:

No such thing as “canceling” debt. If we’re being honest, we’d call it what it is: debt transfer. We’d be transferring debt from the people who took out the loans to people who did not take out the loans. Of course it sounds utterly unjust and crazy when you put it like that.

The article linked in NPR’s tweet suggests that Warren could accomplish the alleged “cancellation” of student debt without Congress.

Here’s the direct text from Warren’s own website:

But the Department of Education already has broad legal authority to cancel student debt, and we can’t afford to wait for Congress to act. So I will start to use existing laws on day one of my presidency to implement my student loan debt cancellation plan that offers relief to 42 million Americans – in addition to using all available tools to address racial disparities in higher education, crack down on for-profit institutions, and eliminate predatory lending…

When I am president … I’ll direct the Secretary of Education to use their authority to begin to compromise and modify federal student loans consistent with my plan to cancel up to $50,000 in debt for 95% of student loan borrowers (about 42 million people).

While Walsh’s tweet has more than 13,400 “likes” as of publication, and approximately 3,700 retweets, some commenters don’t seem to understand the idea that the government cannot “cancel” debt.

User @EllenGirl71 wrote: “There *is* debt forgiveness. It means that no one will be paying it back. The US government federal student loan debt can be forgiven any time the US govt decides to forgive it.”

There were numerous commenters who tried to argue with @EllenGirl71, but the following two exchanges were some of the more illuminating ones.

@MarkFidelman wrote: “Sorry Ellen, the money came from tax dollars or private investors. Someone lost in that transaction. It also sends a chilling message to future taxpayers and investors that the government can’t be trusted.”

Ellen replied: “The borrowers are also taxpayers, and they and the country are losing in this transaction. I would prefer that they spend that $1 trillion in the economy. The status quo of high household debt is the one unacceptable choice.”

In another exchange, @TheProbableMatt wrote: “It is absolutely magic. Grants & gifts also cost money. Where is that money coming from? It has to come from somewhere. And that somewhere is almost always future taxation rather than budget cut somewhere else. even then the federal govt does not generate income. They take ours.”

Ellen replied: “Nothing magical about forgiving a loan. It does not get transferred to someone else. No one else owes that money now. If I forgive you the 500 I lent you, no one else has to pay me back. The money just stays in your pocket.”

Matt shot back: “And it still came out of your pocket. You are expecting the government to eat the $500. The govt doesn’t eat money. They tax. This is how economics work.”

As Walsh and others stated, debt cannot simply vanish. It must be shifted.

Here’s an imperfect and very simplified, but apt analogy.

There are five siblings. Two of the five went to college, while the other three started their adult lives working in trades. All five siblings live at home with their parents in their large house, and pay rent.

The two who went to college each borrowed $50,000 from their parents in order to obtain their degrees. So, in addition to paying their parents $700/month for rent, they shell out an additional $300/month in loan payments. That’s $1,000/month, respectively.

The two college-educated siblings are struggling, so their parents decide to “cancel” their collective debt. At this point, the combined debt of the two siblings stands at $60,000.

In order to recoup their investment, the parents who have “cancelled” the debts of their college-educated children raise the rent on all five siblings to $820/month, thus equally distributing the collective debt. Now, the college-educated siblings only pay an additional $120/month, but the three siblings who never borrowed any money in the first place have the $120/month burden as well.

This is a stripped down version of how such debt “cancellation” would work in a system in which individuals borrow money from the government.

Debt does not disappear, but is simply redistributed.

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