The solution to America’s student debt problem. Wednesday, Nov 18 2020 

My favorite fountain of economic ignorance, the Libertarians, write about the student debt problem.

Senate Democrats Want Biden To Unilaterally Forgive Billions of Dollars in Student Loans
Legally, he might be able to do it. Fiscally, he shouldn’t.
MIKE RIGGS | 11.17.2020 3:10 PM

With Democrats staring down the possibility of Republicans maintaining control of the Senate, Sen. Elizabeth Warren (D–Mass.) and 12 other Democratic Senators want President-elect Joe Biden to forgive hundreds of billions of dollars in student loan debt by using the Education Department’s power “to modify, compromise, waive, or release student loans.”

Warren promised during her own presidential campaign that she would, if elected, “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).” It appears she’d like Biden to do the same.I Have No Budget, am Buried in Debt, but I'm Going on Vacation : Enemy of Debt

Aside from the question about whether a President has the power to cancel any amount of student loan debt, why just $50,000? Why only 95% of students?

Much of the rationale probably goes to the “Who will pay for it?” question, a question that in itself demonstrates ignorance of federal financing.

Just to reiterate what has often been revealed in this blog, no one pays for a Monetarily Sovereign government’s spending. To pay for anything, our federal government, which unlike state/local governments is Monetarily Sovereign. To pay for anything, it creates brand new dollars, ad hoc.

Despite those misleading “debt clocks,” and warnings about federal debt being a “ticking time bomb,” your federal taxes do not pay for federal financial obligations.

In fact, federal taxes pay for nothing. Future generations of federal taxpayers will pay for nothing. Federal tax dollars, unlike state/local tax dollars, are destroyed upon receipt. The moment they are received they cease to exist as part of any money-supply measure.

This would be quite a gift for many student loan borrowers who still have outstanding balances (myself included).

As the Manhattan Institute’s Beth Akers noted last year, the typical four-year college graduate completes their degree with less than $30,000 in student loan debt.

Meanwhile, the College Board’s most recent effort to calculate the lifetime earnings premium of a college degree finds that the average four-year degree holder makes $400,000 more over their working lifetime than someone with just a high school diploma.

In 2015, researchers Christopher R. Tamborini, ChangHwan Kim, and Arthur Sakamoto published a paper in Demography that measured the 50-year lifetime earnings gap between high school graduates and bachelor’s degree holders at $896,000 for men and $630,000 for women.

In 2011, Georgetown University’s Center on Education and the Workforce pegged the B.A. earnings premium at $964,000. Whether the premium is shrinking or we’re just getting better at measuring it—or some combination of both—it’s still a good return on what comes out to roughly $7,000 in interest for borrowers who repay the average-sized loan in the standard 10-year timeframe.

While the “typical” (median?) four-year graduate may owe “only” $30,000, that isn’t the whole, financial point.

  1. Many students graduate owing far more than $30,000
  2. Even students with “only” $30,000 in debt may have been depleted financially if they paid cash for as much as they could, so as to minimize the student debt.
  3. Some students can’t afford to repay even $1 in debt.
  4. Attending college also has a hidden cost: Students are less able to earn money while in school, so the difference between what they could have earned and actually earned is one, often unrecognized, cost of college. It is the reason for Step #5 in the Ten Steps to Prosperity — Salary for Attending School (below). Many families do not want their children to attend college, because of the need for current income.

While federally issued and guaranteed loans have made it possible for the poorest Americans to attain education, those subsidies have also driven up the cost of education at a rate multiple times higher than inflation.

It is also now quite clear that making student loan debt easy to accumulate but nearly impossible to discharge in bankruptcy has helped millions of students get ahead while enabling a smaller (but still large) number of students to borrow money they can’t repay in order to purchase degree programs they can’t complete, can’t utilize, or can’t recognize as crap.

Loans have not made it possible for the poorest Americans to attain education. Some families need their young people to work, and bring dollars into the family. These families discourage finishing high school, much less than attending college.

The U.S. federal government never should lend dollars to anyone, much less to students. The government neither needs nor uses paid-back dollars. It already has infinite dollars. If the government deems any project to be worth financial support or encouragement, it should give, not lend, money to that project.

The sole function of lending to students is to tie a repayment anvil to their ankles at the time of their greatest money need for business creation and entrepreneurship.

As for the “degree programs they can’t complete, can’t utilize, or can’t recognize as crap,” this is akin to the old, childish, “Why do I have to learn algebra” complaint. Schooling has many benefits, most of which are realized only much later, if ever.

For many students in elementary school, algebra, history, art, sports, etc., etc. never are used in later life. Yet they are taught. Why? Because no one knows which people will benefit from which courses. The same is true of a college education.

The more people who attend college, the more likely some of them will use what they learn, and the more likely benefits to society will accrue.

Additionally, college is a time of life-learning and maturation, among young people of common ages, while being instructed by adults. It is a time of learning how to learn, rather than merely carrying forward ignorant beliefs from generation to generation.

Actually people who borrow the least amount of money that have the hardest time repaying it:

Defaults are concentrated among the millions of students who drop out without a degree, and they tend to have smaller debts. That is where the serious problem with student debt is.

Students who attended a two- or four-year college without earning a degree are struggling to find well-paying work to pay off the debt they accumulated.

That is the “anvil tied to the ankles” we mentioned. These drop-out students struggle to find well-paying jobs, even under the best of situations. But being also liable for debt repayment can lead to destitution.

And many of the drop-outs occur for financial reasons, a self-fulfilling burden on the poor, whose major crime is wanting to extricate themselves from poverty and believing a college education could help.

If the Education Department forgave up to $50,000 in student loan debt for every borrower, it would be helping many people like myself who don’t need it at the expense of the public fisc (and where is the “free” money for people who paid off their student loans, or haven’t gone or won’t ever go to college?).

The “public fisc” presumably is the U.S. Treasury, which never can run short of dollars. The “public fisc” easily could fund millions, billions, or trillions in additional expenses, simply by creating the money.

And then the author, Mike Riggs, offers the, “If I can’t get mine, he shouldn’t get his” reason for the elimination of federal spending.

The foundation of Libertarianism is to oppose all government and all government spending as being “too much. Because all government spending goes to some people and not to others, it all can be criticized on the basis of “If I can’t get mine, he shouldn’t get his.”

This devolves to zero government and zero government spending, which presumably is what Libertarians want.

The stimulus effect would likely be small, considering that the money a liberated borrower would now have to spend on something other than student loans is not the full amount of the loan, but the monthly payment.

As with the COVID-19 stimulus checks, borrowers might bank that amount or put it toward other debts.

The first sentence is a confused mystery. The stimulus effect would be the amount of each loan plus future anticipated payments.

From Forbes, “There are 45 million borrowers who collectively owe nearly $1.6 trillion in student loan debt in the U.S.”

If 45 million students each were given $50,000, that would be an immediate infusion to the economy of $2.7 Trillion. Or if those students merely were given what they owe, that would amount to a $1.6 infusion to the economy. This is not “likely to be small.” It would be a significant stimulus to the American economy, as well as to the individuals receiving the money.

And even if much of the money is banked or used to pay off other debts, it still is a stimulus to the economy.

The most libertarian policy preference in my view is two-pronged: get the federal government out of the lending and guaranteeing game, and make student loan debt reasonably dischargeable in bankruptcy.

These two policies would realign the incentives of colleges, lenders, and students to bring down prices and saddle fewer potential students with loans they are unlikely to repay.

The Libertarian policy always is to reduce government, no matter the current size. They have the weird belief that federal spending takes away their freedoms, which is utter nonsense.

Do government-funded roads, bridges, dams and streets take away your freedoms? What about the government-funded military, fire departments, and police departments?

How about the government agencies that assure safe food, safe air travel, national parks, museums, and schools. And then there is the government-funded judiciary, Congress, national banks, CIA, FBI, NASA, and the myriad other government agencies that protect our lives?

And then comes the Libertarian solution: Make bankruptcy easier. That is, cheat non-government lenders while lowering your credit score, making future borrowing more difficult. Perfect.

If that is a bridge too far for Biden and a Democratic Congress—and it probably is, considering those policies would also make it harder for low-income students to borrow and the market upheaval would probably snuff out a significant number of schools—Dynarski’s writing has convinced me that rethinking repayment timeframes is an acceptable middle way:

One solution is to lengthen the timeframe of loan repayment. In the U.S., the standard is for borrowers to repay their loans in ten years. Other countries let students pay back their loans over a far longer horizon. In Sweden, students pay their loans back over 25 years. For a $20,000 loan with an interest rate of 4.3 percent, this longer repayment would mean a monthly payment of $100 instead of $200.

This is the classic “Lower your payments” scam, which is accomplished by lengthening the payment period. The credit card companies use this scam when they tell people they can pay a minimum amount every month for many years.

Borrowers with very low earnings will struggle with even a payment of $100. Some countries, including England and Australia, therefore link payments directly to income, so that borrowers pay little to nothing during hard times.

Income-driven repayment (IDR), various forms of which U.S. borrowers have been able to apply for since 2009, caps your monthly payment as a percentage of your income and extends the repayment period from 120 months to 300 months. Make 25 years’ worth of payments under any one of several IDR plans, and your balance is forgiven, with the forgiven amount taxed as income.

People with very low incomes, who barely can pay their rent or put food on the table, will be required to pay an unaffordable amount for the rest of their lives, thereby dooming them to poverty, forever.

Some estimates predict 33 percent of IDR participant will fail to pay off their balance after 25 years, but the amount they pay over 300 months could still exceed the amount they borrowed for all but the poorest loan holders (and you’re not getting blood from those stones no matter how hard you squeeze).

Based on typical Libertarian economics ignorance, the author thinks liberty and freedom must be paid for by impoverishing the populace, rather than by a government that cannot be impoverished.

In summary:

  1. All school loans should be paid off
  2. Free school should be made available for all ages, all income groups, and all levels, not just for grades K-12. This will enhance America’s  standard of living and international competitiveness.
  3. The dollars spent will stimulate economic growth
  4. The federal government easily can pay for it all without levying any taxes.
  5. The cost of scholarships will be eliminated, allowing schools to devote more financial resources to teachers’ salaries and to educational hard assets (modernization of buildings, electronics, student transportation, etc).
  6. Contrary to popular wisdom, federal spending for college does not represent a transfer of funds from the middle-classes to the upper classes. It does not represent a transfer from anyone. It represents a transfer from the federal government to the economy.

Rodger Malcolm Mitchell

Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all or a reverse income tax
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

Wanted: A leader. Monday, May 4 2020 

Recently, I’ve been watching the television documentary, “The Last Dance.” It is the story of the Chicago Bulls basketball team during two three-year periods in which they were a great team — perhaps the greatest ever — with the great leadership of Michael Jordan and Phil Jackson.Bulls Jordan 1984

When these two men were forced out by a greedy, and jealous management, the team which they had rescued from mediocrity, returned to mediocrity, from which it still has not escaped and perhaps never will.

We, in the Chicago area, felt great, chest-puffing pride in having that team as part of us, though we ourselves had accomplished nothing. We were just floating in the current of greatness created by Jordan and Jackson.

Similarly, all mighty nations are composed of weak, or at best, ordinary followers of a mighty leader.

Great leaders lead a nation to greatness. Courageous leaders give us courage. Moral leaders give us morals.

George Washington led us to freedom from Great Britain. James Madison and Alexander Hamilton were among those who gave us the Constitution.

Abraham Lincoln led us to end the moral blight of slavery. Franklin Roosevelt led us to WWII victory, and gave us Social Security. Lyndon Johnson gave us Medicare and Medicaid.

Though leaders all have human foibles, their leadership directs us to be what we are: Wood chips floating with the current.

A few of America’s leaders have been great. Most mediocre. Some terrible.

When America is admired, it is only because we have had enough great leaders to direct the current admirably, not because we, as people, were born admirable.

As humans, we all are born equal, every city, every nation. 

Today, we lack great or even mediocre leadership. The “accomplishments,” (if one can call them that) of our current leadership are to build a useless barrier between the U.S. and Mexico, to foment hatred of minorities, foreigners, and non-Christians, to normalize the illegal, the immoral, and the mean-spirited, and to widen the income-wealth-power Gap between the rich and the rest.

At times in our past, we have been admired — now we may be feared perhaps, but we no longer are admired. Our leadership combines all the worst characteristics of humanity, and so, that is who we are: A psychopathically weak nation.

Yes, we have many rich people and a powerful military, but history will not remember this generation or this decade as great.

Millions of us are poorly educated. Millions have poor healthcare. Millions live in poverty, hunger, and misery. Millions are treated poorly by our laws.

We have the power to overcome those outrages, but we have chosen not to lift even a finger in support.

We were great in WWII when we defeated the fascists and rescued the East from a marauding Japan. It cost us many lives and much money. But we were great.

We were great after WWII when we helped to reconstruct our allies and our enemies (What nation ever does that?)

And now, when misery and poverty and bigotry and sickness agonize so many Americans, our leaders tell us to turn away. They tell us to blame the victims. They divide us into “me” (not even “we”) and “them.”

So we do not provide health care for all, though we easily could.

And we do not provide education for all, though we easily could.

And we do not provide good housing for all, though we easily could.

And we do not provide financial support for all, though we easily could.

As a Monetarily Sovereign nation, we could do all these things without taking a single tax penny from any American. Instead, out of ignorance and meanness, we levy regressive taxes we neither need nor use — taxes that punish the poor and reward the rich.

And no great leader, recently has emerged, to speak and act against these travesties.

As just one, microscopic example in a sea of examples, I give you this Email recently received:

News from Senator Bernie Sanders
Student Debt Relief During COVID-19
Millions of Americans’ economic security is being threatened due to this crisis.

During this difficult time no one should have to worry about going into default or making additional sacrifices to make their student loan payments.

The federal emergency relief bill (the CARES Act) suspends payments and interest accrual for federal student loans through September 30th.

I’ve called on the Department of Education to cancel monthly student loan payments for the duration of the national emergency, and to cancel $10,000 in student loan debt for all federal student loan borrowers.

While I’m proud the CARES Act provides much needed relief for federal student loan borrowers, we must do more for the millions of Americans with private student loan payments.

We must cancel all student loan payments and halt interest accrual for the duration of this crisis.

As we work to address the debt crisis and immediate needs of American families during this pandemic, I will also continue to fight to make college accessible and affordable, and to cancel all student loan debt in the United States.

Cancel student loan debt “for the duration“? Cancel just $10,000 permanently? Apparently, Senator Sanders timidly subscribes to the realpolitik notion that “Congress would never” do what is right, so he asks for something meager: “For the duration.”

But in doing so, he actually helps perpetuate the notion that the federal government “can’t afford” such “giveaways.”

If he were a great leader, he would propose a law that reads something like this:

Whereas the United States government is Monetarily Sovereign and so cannot run short of its own sovereign currency, the U.S. dollar, and

Whereas, the United States benefits from an educated populace, and

Whereas, there are millions of intelligent people, who otherwise would contribute to America’s greatness, but are unable to afford the education that would make this possible,

Therefore, be it enacted by the Senate and House of Representatives of the United States of America that every American student of every college or university in the world, shall receive from the federal government a tax-free stipend to equal the tuition, supplies, room, and board paid by that student, and additionally a tax-free stipend as salary for being a student.

In short, it would formalize Steps #4 and #5 of the Ten Steps to Prosperity (below)

It’s not difficult. It’s quite straightforward. It requires money, of which the federal government has infinite.

And all it requires is a leader who is not afraid to tell the truth.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

Guess which nation offers free college to everyone. Friday, Jan 31 2020 

Before we answer, let’s make one point very clear: The U.S. federal government, being Monetarily Sovereign, has the unlimited ability to create U.S. dollars.

It never can run short of dollars. It can pay any bills of any size, instantly, and without collecting a single penny in taxes.

Further, and contrary to the popular myth, federal deficit spending does not cause inflation. Instead, inflations are caused by shortages, most often shortages of food or energy (oil), not by “excessive” federal deficits or debt. (Ironically, shortages often are cured by federal deficit spending.)

Consider Japan, which has a much-derided Debt/GDP of 240%:

Japan General Government Gross Debt to GDP

Chart: Japanese debt/GDP ratio for 25 years.

America’s debt terrorists would claim that level of debt must lead to inflation.

But Japan’s inflation generally has languished below 1% and often has been below 0%:

Chart: Japan’s inflation rates for 25 years

In summary, the U.S. government easily could provide a free college education to everyone in America, who wanted one.

So, if a college education benefits not only the students, but everyone in the nation, why doesn’t the U.S. federal government fund college for everyone?

The reason: Our deficit terrorists persist in telling you that despite the American government being Monetarily Sovereign, while the public is monetarily non-sovereign, funding college would be unaffordable for the government.

Oh, really?

How US students get a university degree for free in Germany
By Franz Strasser, BBC News, Germany, 3 June 2015

While the cost of college education in the US has reached record highs, Germany has abandoned tuition fees altogether for German and international students alike.

An increasing number of Americans are taking advantage and saving tens of thousands of dollars to get their degrees.

Before we continue with excerpts from the article, keep this in mind: Unlike the U.S. government, which has the unlimited ability to pay for anything, without collecting taxes, the German government is monetarily non-sovereign.

It does not have a sovereign currency. It uses the euro, which is the sovereign currency of the European Union.

When Germany spends, German taxpayers pay.

So why are German taxpayers willing to pay for college, while the American government is not?

Germans have a greater belief in the importance of education than do Americans.

Some Americans believe a college education is an unnecessary, but expensive, form of elitism. They don’t understand that the competitive future of America will be determined by the educated.

Other Americans adopt the “If I had to pay, they should have to pay” attitude, a kind of cutting one’s nose to spite one’s face.

And it hurts us all.

In rural South Carolina one night, Hunter Bliss told his mother he wanted to apply to university in Germany. Amy Hall chuckled, dismissed it, and told him he could go if he got in.

“When he got accepted I burst into tears,” says Amy, a single mother.

“For him to stay here in the US was going to be very costly,” says Amy. “We would have had to get federal loans and student loans because he has a very fit mind and great goals.”

More than 4,600 US students are fully enrolled at Germany universities, an increase of 20% over three years.

At the same time, the total student debt in the US has reached $1.3 trillion (£850 billion).

Health insurance for students in Germany is €80 ($87) a month, much less than what Amy would have had to pay in the US to add him to her plan.

To cover rent, mandatory health insurance and other expenses, Hunter’s mother sends him between $6,000-7,000 each year.

At his nearest school back home, the University of South Carolina, that amount would not have covered the tuition fees.

Even with scholarships, that would have totalled about $10,000 a year. Housing, books and living expenses would make that number much higher.

We interrupt again to remind you that sometimes even a college scholarship isn’t sufficient, when one needs to pay ancillary expenses, and when one must forego a regular paying job.

That is why in the Ten Steps to Prosperity (below), one step is for the government to fund school tuition, and another step is for the government to provide a salary for attending the school.

The financial advantages of studying in Germany have not been lost on other US students. Katherine Burlingame decided to get her Master’s degree at a university in the East German town of Cottbus.

A graduate of Pennsylvania State University, Katherine spent less than €500 ($570) a month in Cottbus, which included housing, transportation and healthcare.

On top of that she received a monthly scholarship by the DAAD (German Academic Exchange Council) of €750 ($815) which more than covered her costs.

“When I found out that just like Germans I’m studying for free, it was sort of mind blowing,” Katherine says.

“I realized how easy the admission process was and how there was no tuition fee. This was a wow moment for me.”

In the 2014-2015 academic year, private US universities charged students on average more than $31,000 for tuition and fees, with many schools charging well over $50,000.

The lie that federal debt is “unsustainable” “unaffordable,” and somehow immoral, has prevented many thousands of bright, ambitious, future American leaders from fulfilling the destiny that would have benefited them and America.

We cannot know how many potential American scientists, mathematicians, inventors, business leaders,  etc. America has lost for lack of education funds. We cannot know what it has cost us as a nation and as individuals.

But we do know this. The cost has been enormous, especially when compared to the zero cost to us of federal spending.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

Why does the federal government resist education? Sunday, Sep 8 2019 

Intelligent Americans long have recognized that our future national success rests on the shoulders of our educated populace. They are the ones who will lead us.

That is why today, every municipality offers free education for grades K-12.

On April 23, 1635, the first public school in what would become the United States was established in Boston, Massachusetts. Known as the Boston Latin School..

After the U.S. Revolution, northern states especially emphasized education and rapidly established public schools.

By the year 1870, all states had tax-subsidized elementary schools. The US population had one of the highest literacy rates in the world at the time.

Private academies also flourished in the towns across the country, but rural areas (where most people lived) had few schools before the 1880s.

By the close of the 19th century, public secondary schools began to outnumber private ones.

We live in the 21st century, when a widespread college education is as important to America’s success as a high school education was in the 19th century. Yet still, we cling to the archaic notion that while elementary school and high school are paid for by governments, college and beyond must be paid for by individuals.

The time has come to realize that American leadership always has required universal education, the only difference being that in the 1800’s an elementary school, and then later a high school education were sufficient, while here in the 2000’s, advanced education has becomes necessary.

Sadly, we have not yet learned that lesson. We insist on making it difficult for American students to receive the best possible education:

Bloomberg: U.S. Student Loan Debt Sets Record, Doubling Since Recession
By Alexandre Tanzi, December 17, 2018, 4:00 AM CST
Student debt outstanding reaches a record $1.465 trillion
Borrowers over age 50 debt rises by $28.8 billion in one year

U.S. student loan debt outstanding reached a record $1.465 trillion last month.

Image result for student debt 2019

American college students are drowning in debt.

“Over 90% of student loans are guaranteed by the U.S. Department of Education, meaning that if a recession causes a rise in youth unemployment and triggers mass defaults, this contingent liability could prove burdensome for the U.S. government budget,” said Paul Della Guardia, economist at the Institute of International Finance in emailed comments.

Get it? Mr. Della Guardia is more concerned about a non-existent burden on the U.S. government than on the real problems of youth unemployment and mass defaults.

The so-called “burden” on the U.S. government is non-existent because the U.S. government is Monetarily Sovereign. It never can run short of its own sovereign currency, the U.S. dollar. It can pay any size debt denominated in dollars. Federal debt, no matter how large, never can be a burden on the federal government.

Federal Reserve Chairman, Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”

By contrast, indebted students are monetarily non-sovereign. They can and often do, run short of dollars and become insolvent.Related image

A Bloomberg analysis found that students who took a loan in 2012 have had a much more difficult time making their monthly payments compared to students who received loans shortly before and after — students who have had a similar amount of time to pay them down.

A large percentage of those who took out loans in 2012 are currently 24-33 years old, an age where many are generally establishing themselves in their careers.

Borrowers in this group entered the labor force when the unemployment rate was twice as high as today and may have found it difficult to find a career track in their desired field.

Further adding to the difficulties faced by this group was that finding a position in 2012 took almost three times longer than today, according to data from the Bureau of Labor Statistics.

The interest rate for a direct student loan disbursed on or after July 1, 2018, and before July 1, 2019, is more than 100 basis point higher than those issued in 2012 adding to the concern about the size of student loan debt outstanding.

Many student loan borrowers face significant debt burdens. Over 2.7 million borrowers owe in excess of $100,000, of which, about 700,000 owe $200,000 or more, according to data from the U.S. Department of Education. One year earlier, 2.5 million owed in excess of $100,000.

The single largest asset on the Federal government’s balance sheet is Student Loans— the amount students owe to the federal government, which neither needs nor uses the money.

By not recognizing the national importance of advanced education, we have doomed an entire generation to failure — a failure that significantly will reduce America’s competitive and strategic successes.

This is more than shortsighted. It is part of the same plan that attempted to eliminate ACA (“Obamacare”), cut Medicare, cut food stamps, cut Social Security, and cut consumers’ protections against business fraud.

It is a reflection of the Gap Psychology of the rich who run America.

Gap Psychology is the desire to distance oneself from lower-income/wealth/power people, while coming closer to the higher income/wealth/power people.

There were times in America, when Gap Psychology ruled:

When it was a crime to teach slaves how to read and write.

When women were not allowed to vote.

When immigration from Ireland was blocked: “The refugees seeking haven in America were poor and disease-ridden. They threatened to take jobs away from Americans and strain welfare budgets. They practiced an alien religion and pledged allegiance to a foreign leader. They were bringing with them crime. They were accused of being rapists. And, worst of all, these undesirables were Irish.” (Does this sound familiar?)

As is usual with the very rich, Gap Psychology is far more important than compassion for the less fortunate or concern for America’s future. Thus anything that would benefit the middle- and lower-income groups, i.e. narrow the Gap, is strenuously resisted.

Even some in the middle-classes are complicit, when they adopt the shortsighted, “If I had to pay, they should pay” position.

It’s the old question,  “Why can’t crabs escape a bucket? Answer: When some try to climb out, the others pull them back down.” That is a version of Gap Psychology in which a man doesn’t want former peers to succeed, opening a new Gap between him and them (aka, “envy.”)

And that is why today, we do not have a national system of free advanced education. It’s urgently needed, but the rich don’t want it.

Most parents can’t afford to place their children in exclusive, private or preparatory schools.

For the majority of U.S. families, public education is the only option. Public elementary and secondary education money usually flows from three sources: the federal, state and local governments. According to the U.S. Department of Education, states contribute nearly as much as local governments, while the federal government supplies the smallest share.

Yet, it is the federal government that is best able financially to pay for education.

We’ll close with excerpts from the following article:

The former student loan ombudsman for the Consumer Financial Protection Bureau (CFPB) believes that agency has been a “complete failure” over the last year and has “completely walked away from its mission” regarding student loan borrowers.

Seth Frotman, who resigned in protest in August 2018, expressing outrage at the then-leadership’s treatment of the nearly $1.5 trillion student loan industry, asserted that things have gotten even worse since his departure.

“I honestly don’t say this lightly, but I don’t know how you could look at the things that have happened over the last year … [and] under the new leadership of the bureau and not say that it is a complete failure in doing its job on behalf of student loan borrowers,” Frotman said. “The current political leadership at the CFPB has prioritized the interests of the student loan industry over the very real plight of the 44 million Americans who have student loan debt.”

We have suggested as part of the Ten Steps to Prosperity, Steps #:

See: 4. Free education (including post-grad) for everyone (Tuition, supplies, transportation, meals, etc. all should be funded by the federal government.)
See: 5. Salary for attending school (Many students drop out of high school to enter the employment world early because they and their families need the money. Even with scholarships, many families cannot afford to send their children to high school, let alone to college and beyond.)

In summary
Millions of our best and brightest young people are hamstrung by lack of money. Not only do finances force children to leave high school or college early, but those who are able to attend college face onerous loan repayments to a government that has unlimited money and does not need to collect money from students.

These loan repayments prevent many young people, who are in the usually most productive growth years of their lives, from investing time, money, and talent into businesses and scientific pursuits that would have benefitted America. Lack of finances turns productive years into lost years.

America is forgoing the national benefits that these young brains could provide.

As a result, America no longer is a world educational leader.

Excerpts from 11 FACTS ABOUT EDUCATION IN AMERICA

–30 years ago, America was the leader in quantity and quality of high school diplomas. Today, our nation is ranked 36th in the world.
–1.3 million high school students don’t graduate on time yearly. States with highest rates (80-89%) are Wisconsin, Iowa, Vermont, Pennsylvania and New Jersey. States with lowest (less than 60%) are Nevada, New Mexico, Louisiana, Georgia and S. Carolina.
–A student living in poverty is 13 times less likely to graduate high school on time.
–In the workplace, 85% of current jobs and 90% of new jobs require some or more college or post-secondary education.
–Only half of the students who enter a 4-year school will receive a bachelor’s degree within 6 years.

Advanced education is as important a protector of America’s future as is the military. The government should be doing everything possible to fulfill this need.

The federal government should stop resisting education, and pay off all student loans, then eliminate the need for student borrowing and student indebtedness. America needs an educated populace.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

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The most important problems in economics involve the excessive income/wealth/power Gaps between the richer and the poorer.

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

MONETARY SOVEREIGNTY

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