Wednesday, March 01, 2023
Panem et Circenses
I am generally in favor of government giving out free money to people in case of need. However, money is never really free. Somebody else will always have to pay for it. Still, redistribution can be justified in some situations. For example many governments gave people money during COVID; the population as a whole will one day have to pay that back, but with everybody getting a COVID cheque and richer people paying more taxes than poorer people, it works out as a relatively fair distribution from rich to poor.
Now imagine you threw free money out of a helicopter over San Francisco. Some of the money would end up in the hand of the homeless that are pretty frequent there, so you might be tempted to justify that helicopter money that way. But obviously the distribution would be relatively uneven, unequal, and some of the money would end up in the pockets of people with 6-figure salaries.
The US student debt relief plan that is now in front of the Supreme Court is more akin to that sort of helicopter money. Yes, some of the money will go to people who deserve it. But that is not the primary criterion on which that money is paid. The money doesn't go to everybody, but to a select group with federal debt. And while there are criteria that prevent people above a certain income to get that debt relief, there will still be a lot of people who were doing relatively okay who get that money. And there will be a lot of other people who would have needed that money a lot more who will not receive any, either because they didn't go to college in the first place, or because they did, but with a different sort of student loan. Which means that in the end *some* of the flow of money will go from poorer people's taxes to the pockets of people who were already a bit better off.
So why would the government distribute free money in an unfair way? The first explanation is that the president of the United States normally doesn't have the power to distribute free money. But existing legislation allows him to forgive student debt in case of a national emergency. Basically, he is giving out that specific form of free money, because that is the only channel open to him. The second explanation, and that is in addition to the first, not instead, is that elected politicians since that job was invented have liked to give free money to voters that are likely to vote for them. The ancient Romans had "panem et circenses", free bread and circus games. In the US, then president Trump made sure that the COVID cheque bore his name. Student debt relief will not only please millions of Americans who receive it, it will particularly please Democrats, because the majority of the money will go to them.
US media are full of sob stories about people from minorities going to scam for-profit colleges and ending up with either no degrees or useless degrees and a lot of college debt. But student college debt relief isn't going *only* to these people who probably deserve it. It is helicopter money that sometimes by pure chance falls onto somebody deserving. If the US wanted to fix its higher education system, it should do like most other countries and provide higher education at subsidized rates to everybody who wants it, killing off the business model of the scam for-profit colleges and universities. One-time student debt relief will not fix the problem, and might well increase the future cost of higher education, producing even more problems down the line. The $30 billion per year over the next decade that student debt relief would cost could be spent in better ways, with more of it going to the people who really need it, and ensuring that more talented but poor people end up with a viable college degree.