RE: Rubio states how he paid off his student loans. Media mocks him for it
“most of the news that we see these days are not meant to inform anyone of anything.”
This says it all. So I was interested in the details of how student debt works. I already know how debt works, so student debt is not much different. So I googled it, and most of the information was from the major media networks. I skipped all of them. And I sifted through Brookings and Rand Corporation (think tanks)...to improve my understanding of all of this.
I don't mind Biden forgiving some student debt. Nations sometimes do this to avoid depressions. But what I do mind is how the government plans on paying for it (more debt), if they fixed the underline problem (they didn’t) and is it going to help Americans decrease their debt to income ratio which is incredibly important for financial stability (no, it is not).
The government is going to be paying for this with debt. They drop the income that they would receive from student borrowers, and they have to compensate for that lack of income with more debt (issued bonds and cashed in by the Federal Reserve), because they need to continue to pay for programs, Medicare, Medicaid, defense, Social Security, etc… so we will all have to pay for this in debt service payments.
Did they fix the underlying problem? No, the Department of Education nor Congress have cut the amount of money to universities to retire outdated and obsolete education programs and amenities which contributes a great deal to education inflation...which prices out a lot of students. Demand pull inflation, or in the education field, it's called the Bennett Hypothesis.
And last but not least, will this put Americans in a better financial position by lowering their debt to income ratio for their household? Federal reserve data suggests no. Even though debt has become cheaper over the past 40 years, the past year excluded, Americans debt to income ratio has increased from 40% in 1980 to 160% today. Free money, whether it's cash or credit, without education and stipulations attached to it, does not improve Americans financial position. So most of those borrowers that received debt relief, will just spend the balance up to their debt to income ratio prior to the debt relief...buying a house, a new car, more stuff on a credit card, essentially swapping one debt for another. The savings rate over the past 3 years is a testament to that phenomena.
And since spending money adds to inflation, this debt relief is going to help push inflation higher.
This may or may not have been a good political move, but it was a pretty fucking stupid economic one for American households, federal debt, and the status of our world reserve currency.
All that said...media doesn't cover any of these economic consequences.
Good post buddy.
An amazing and informative response. Thank you for that.
I think that for anyone that doesn't have their political bias blinders on (which unfortunately a lot of people do) this move to "eliminate debt" is purely a political move to try to win over young voters in November. It could end up working to some degree to score some votes, but younger voters are notorious for not showing up in very good numbers anyway. There could be a backlash from people who paid their student loans already and now feel as though they are being required to pay for other people's as well. This demographic likely votes in much greater numbers so this is a double-edged and dangerous sword for them to wield for purely political vote-buying methods. It could backfire is what I am trying to say even though the media is working overtime to try to paint it in a positive light.
Simple economic understanding would tell a person right away that there is no such thing as "debt elimination" but rather, just a transfer of the debt to another entity. It is alarming to me the amount of people that think that there is just a magic wand that "poof!" the debt just goes away! That's dream-land stuff man.
Unless it is a conservative website, nobody is even mentioning the stuff you posted above and they never will because if they did post objectively people would look at this and realize that it is not a good idea at all.
Anyway, the original point of the article I wrote was to highlight that the leftist media is already using this to target higher profile conservatives even though if they were to look at Democrats, they would find out that exactly the same thing that happened with Rubio, happened with people that have a (D) next to their name as well.
I agree…Rubio, Republicans and Democrats…write books, give luncheon speeches, etc…to accumulate wealth and pay off debt. I'm under the firm belief that people are people, no matter what their political affiliation is, politics seems to muddy the water of that reality, but people are the same. Philosophies may differ a little bit, but whenever it's faced with reality, pretty much everybody's on the same page, even if they don't say so on TV :)
I also agree about voting demographics, as people get older, they vote more. The federal budget is a classic example of this, that's why Social Security and Medicare persist…don't piss off the older voters :)
Yep, debt isn't eliminated, it is either transformed into less income (accounts receivable), lower asset prices (debt asset values), or other types of debt (debt swaps). I like Warren Buffett’s philosophy on free money…”nothing sedates rationality like large doses of effortless money.” This debt relief is not going to help Americans. And the politics of this is just going to make it worse.