●The more budgets are cut and taxes increased, the weaker an economy becomes.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Austerity = poverty and leads to civil disorder.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
My senator, Dick Durbin, has proposed new legislation. Here is what he says on his web site:
Many students turn to private student loans to help finance their education. Traditionally, private student loans issued by for-profit lenders have been—appropriately—treated like credit card debt and other similar types of unsecured consumer debt in bankruptcy.
If student debt became so overwhelming that a graduate had to declare bankruptcy, private loans could be discharged like any other debt. But in 2005, a provision was added to bankruptcy legislation that protects the private lenders that extend private credit—not federally guaranteed student loans—to students.
Where students could once find relief from suffocating debt, there is now no escape from high-interest, predatory student loans. And the student lending industry has not been the same since the law was changed–it quickly exploded from $11.8 billion the year before 2005 to a peak of more than $23 billion just four years later.
Today, a significant portion of students are burdened with tens—or even hundreds—of thousands of dollars in student loan debt, and, in our current economic climate, too many are struggling to make timely payments on these loans.
Senator Durbin’s proposed solution: Change the law to allow students to go bankrupt. According to Bloomberg:
The largest private student lender is SLM Corp., (SLM) known as Sallie Mae, which made $2.7 billion in private education loans last year, up 19 percent from a year earlier, the company said in a statement in January. It expects to originate about $3.2 billion this year.
Sallie Mae’s portfolio of private student loans was about $36 billion, and loans to students at for-profit colleges account for about 10 percent, according to the Newark, Delaware- based company.
“Sallie Mae supports reform that would allow federal and private student loans to be dischargeable in bankruptcy for those who have made a good-faith effort to repay their student loans over a five-to-seven year period and still experience financial difficulty,” Patricia Nash Christel, a spokeswoman for the company, said in an e-mail.
While being able to go bankrupt is better than not being able to go bankrupt, encouraging thousands of college students to put a bankruptcy on their credit history is not desirable. Further, maintaining barriers to school attendance, makes no sense for our nation. The future survival and growth of America requires us to make school an affordable and attractive option for as many people as possible.
Here are some facts that bear on this subject:
A. Most elementary school and high school education is provided free, courtesy of the states.
B. But, states are monetarily non-sovereign, and cannot create dollars at will. Most have serious financial problems. Supporting lower education is a large burden for the states. By contrast, the federal government is Monetarily Sovereign, having the ability to create dollars at will.
C. Even with free education available, many students opt out of elementary and, especially, high school. One reason: Families cannot afford to support the students. They need the students to go out and earn money.
D. College education is important to U.S. economic growth in this increasingly technical world, where machines do more of the “grunt” work, and brains increasingly are more important than brawn.
Given these facts, I’ve proposed this solution to the student loan problem:
1. The federal government should take over the funding of elementary and high school education. Because the states are strapped for funds, lower education funding may take a back seat. Every day, America loses the value of one of our most important resources: Our young people.
2. For the same reasons, the federal government should take over the funding of college education, including advanced degree education.
3. The federal government also should pay each student a salary for attending school. [See link for more details]
Finally (note to Warren Mosler and Randy Wray), though I have criticized Modern Monetary Theory’s (MMT) Jobs Guarantee (JG), I could visualize paying a salary for attending school, as a partial solution to the unemployment problem.
The negative would be the probable requirement that the “employee” attend full time and pass the course, which would preclude finding a full-time job, elsewhere. The positive would be that attending school would be more beneficial than typical minimum wage jobs — more beneficial to the worker and more beneficial to America.
Rodger Malcolm Mitchell
No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports