This crap is going around the facebook.
Other than the obvious, government can't really stimulate the economy and the more subtle that if this were done lenders would stop lending to students, what are some other ways to counter this argument?
How is that supposed to be a stimulus? I thought "stimulus" was "pumping in more money"...now all you need for stimulus is just letting people keep more of their own income? This doesn't exactly sound like a road those who argue for "stimulus" would want to go down.
Forgiving student loans would be the exact opposite of an economic stimulus. It would cause even more economic dislocations. Some creditors could even be wiped out entirely.
People buy into this stuff because they see themselves as being better off if they didn't have to make student-loan payments. This is akin to the parable of the broken window. The glazier may have been better off because the village boy broke the baker's window, but the village as a whole was not better off. Breaking the window didn't produce any new wealth - it destroyed a piece of existing wealth. It also led to a redistribution of the remaining wealth that presumably wouldn't have happened otherwise.
Likewise, forgiving student loans wouldn't produce any new wealth. While it also wouldn't destroy any existing wealth, it would simply lead to a redistribution of it. The people who owed money for student loans would be better off, but the country as a whole would not be.
Of course, the individualistic rationale ("I'll be better off!") is next to useless when one wishes to convince others to do something. He'll have better luck using a collectivistic rationale ("We'll be better off!"). This is why things like student-loan forgiveness are pushed as "good for the economy".
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I followed the link and this goes beyond the facebook. Turns out there is a petition to sign.
http://signon.org/sign/want-a-real-economic.fb1?source=s.fb&r_by=699197
For over 30 years, the rich have gotten richer, the poor have gotten poorer, and the middle class is slowly but surely being squeezed out of existence. Instead of more of the same corporate welfare/"trickle-down" economics that have been an abysmal failure for the middle class, why not try a trickle-up approach to rebuilding our economy by targeting relief at those most likely to actually help grow the economy?"
"Forgiving the student loan debt of all Americans will have an immediate stimulative effect on our economy. With the stroke of the President's pen, millions of Americans would suddenly have hundreds, or in some cases, thousands of extra dollars in their pockets each and every month with which to spend on ailing sectors of the economy."
Replace the first 5 words with "cutting taxes", then ask them how the argument changes.
They're obviously on a different order of magnitude, but it's funny to see this after all the hysterics of the federal government defaulting.
If we set parameters to what is a "student loan", which i would take to mean as money that has been loaned by the federal government to a university, it would. It would replace debt payments to the government with personal spending. The deal is that most people don't look at debt payments as productive. And when they come from the government, the institution where most people think money comes from, it seems unfair to be made to pay money back when they just 'print' it to loan. Even Ron Paul suggests that we not pay the FED the money the the government says we have to pay to it. So what if it destroys our credit rating and hikes interest rates, that is what we want any way, is it not?
Loans made on the private market cannot be tampered with like government loans.
The student loan pipeline should definitely be shut off. I would back a proposal for no new student loans to anyone who hasn't already begun college. I think going cold-turkey would be unfair as someone who has already invested three years of their life into a degree only to find they won't be able to pay for the final year of school is an unnecessary and destructive disturbance of existing economic calculation. But the higher education bubble needs to be burst and those in high school today need to re-calculate the costs and benefits of getting a degree. I'm 6 years down the road from graduation and still have student loans hanging around my neck. And my degree (computer engineering) is not one of these unemployable things like Lit majors and so on. I don't know how all these people getting psych, lit, and sociology degrees plan to ever pay off the damn loans they're taking out to get the degree.
Clayton -
This would make lending to students an even riskier endeavor than it already is. Such a decree would limit the supply of credit available to students and increase the interest rates on student loans. In short, the more the government does this sort of thing, the more difficult it will be for students to get loans.
Either way, it's unfair to those who went to affordable schools in order to avoid such loans (like me). This may create an incentive to go to the best school you can possibly go to, no matter costs, and in turn hurt the more affordable ones. There's probably hundreds of unintended consequences that may be a result of this policy.
"If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion."