Breaking Down Democrats Disastrous Student Debt Bill

Bernie and ElizabethBernie Sanders has slipped in the polls. It still feels weird to watch polls closely this far away from any actual voting, but here we are. Elizabeth Warren has gone on a tear announcing a bunch of policy. Rational Americans have cringed the whole way, but the rabid Bernie bros are being tempted by her empty promises. The pressure is on, so Bernie is going to have to announce some policies of his own.

That’s why he started with a new plan for student loans. It’s his desperate attempt to retain relevance going into the Democratic primaries. Bernie is determined that this is going to be his election, and he can finally bring true socialism to our country. He’s long wanted to introduce bread lines to America. He’s chomping at the bit to get started, and his first step will be towards college campuses.

The Promise

Bernie announced his new plan for student loan debt. It’s not surprising. Elizabeth Warren delighted the SJW crowd recently when she released a proposal to cancel the majority of student debt in the country. Bernie had to one-up her because he has to protect his position as the supreme socialist of America.

His proposal has two parts. First, he wants to cancel all student debt. Warren included a cap in her proposal that would only cancel about $1.2 trillion in debt. Bernie, never one to consider fiscal caution, sees no reason to stop shy of cancelling the full $1.6 trillion that exists in the country.

His second plan is to follow up on forgiving student loans by making college tuition free. To be specific, he proposed that the federal government should cover roughly two-thirds of tuition for all students at public universities. The states can cover the rest.

One this is for sure. This is an ambitious plan to spend a lot of tax dollars.

The Cost

How many tax dollars is he suggesting we throw at college? Well, the debt total is pretty easy. It will cost $1.6 trillion. Actually, it’s more complicated than that, but we’ll cover that part in a minute. For now, we’ll consider this part of the bill to be clear.

The more complicated cost is making tuition free. If the plan were to go into effect tomorrow, we’d be looking at spending $355 billion on tuition in the first year. That comes out to $3.5 trillion every 10 years. The problem is that Bernie’s plan is almost hilariously short-sighted. It doesn’t account for increased demand.

If all public college were free, we can expect a sharp rise in demand. That doesn’t just increase the tuition bill by the number of new students. It increases the overall cost of running colleges (you need more professors, administrators, janitorial staff, etc.). So, when you factor in the inflated cost of tuition plus the huge numbers of new students, you find that within the first 5 years, the price tag on Bernie’s free college could rise to $500 billion each year.

The even better part is that Bernie’s plan makes no changes to the student loan system. Students have expenses beyond tuition, and since Bernie wants to leave federally backed loans in place, you can bet students will turn to them to subsidize their living expenses while they study. One meta-analysis suggests that Bernie’s plan could actually double the rate of student borrowing.

In other words, we’ll spend trillions of dollars to make school free and cancel debt only to grow the student debt problem. Socialism is fun!

How We’ll Pay

This is probably the best part. Bernie’s plan is to pay for all of this stuff by bankrupting the stock exchanges. Seriously. He wants to impose a transactional tax on all stock, bond and derivative trades. Every time someone buys or sells on an exchange, the government will charge a fee.

According to Bernie, this will raise $2.4 trillion in 10 years. That hilariously optimistic number is still less than half of the $5 trillion his plan is going to cost in the first 10 years (if we use the most optimistic estimates). How is someone this bad at basic addition a Senator?

What’s worse is that this transaction fee will wreak havoc on the markets. One of the reasons they are more stable than they were in the past is because technology enables a lot of trades to happen very quickly. This allows valuations to reach their true numbers in a shorter time and prevents gross over and underestimates.

Bernie’s tax would incentivize slower trading. This bleeds money out of the exchanges and creates instability. Bernie wants to pay for free school by destroying one of the key resources our economy has to generate capital.

The Sweet Irony

Clearly, there’s a lot wrong with Bernie’s proposal. The funniest part of this stupid plan is that it doesn’t do what Bernie thinks it does. By cancelling debt, Bernie is proposing we levy taxes that will disproportionately help wealthy Americans.

People who don’t make very much money typically have smaller student loans. The big, runaway loans are mostly tied to affluent students attending private universities. Bernie is actually proposing a trickle-up tax that will help wealthy Americans get free college at the expense of poorer Americans.

It’s hard to imagine a single proposal that can be wrong about so much, all at the same time. If everything worked the way Bernie wanted, he would tax Wall Street to pay for half of an extremely expensive program that mostly benefits wealthy Americans.

If you sprinkle even a dose of reality into it, you get a policy that will cripple our economy and skyrocket our debts, all in the name of cancelling debt.

Sadly, this is where we have to stop laughing. Somehow, we’ve reached a point where tens of millions of Americans actually like this moron. They’re cheering for this proposal, even as it does everything they claim to be against.

Bernie’s zombie followers will support anything he says, and that makes him extremely dangerous. We’re not actually far away from a government that would pass this proposal. If we aren’t careful, we’ll lose this country to the cheap promise of free stuff.

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