Student Loans vs. Guaranteed Income

Forgiving student loans, as proposed by Pres. Biden, would cost taxpayers about $420 billion. A graduate with a four-year degree earns, on average, $1.4 million more over her career than someone with a high school diploma. Meanwhile, helping the poorest American families with $500 a month would cost one-tenth as much.

The other day the Supreme Court heard arguments in cases challenging Biden’s action to cancel student debt up to $20,000 per customer. This is a horrible idea on multiple levels, but the Court will most likely kill Biden’s plan on the basis of the argument that a president can’t spend a half trillion dollars of the public’s money without authorization from Congress. (Unless they can’t get over the standing question. Biden has set this up so that it’s hard to show specific damages to states or individuals.) If you’re a liberal and you like student loan forgiveness, consider what it would mean if Pres. DeSantis was able to spend a half trillion on anything he wanted. Like, I don’t know. shuffling migrants all over the country or building walls around Disney theme parks.

But there is another liberal idea out there that I don’t hate. I don’t necessarily love it either, but I think it’s worth considering. That idea is the guaranteed income. Madison and some other cities are experimenting with this using private money. Under the Madison program 160 families are getting $500 a month, no strings attached. These families will be “studied” to see how the free money is impacting their lives. I put “study” in quotes because those running the program freely admit that their goal is to provide data that would support making this a publicly funded program. When researchers start with a bias like that the results will be next to useless.

Nevertheless, I think guaranteed income might have some merit. While I am concerned about the cost, the numbers seem manageable. There are 7.4 million families in America under the poverty line. If we were to give all of them $6,000 a year that comes to around $42 billion or about 10% of Biden’s student loan giveaway. (It’s also a fraction of Donald Trump’s big tax cut for the rich.)

True, the price tag on loan forgiveness is supposed to be a one time event, while that’s $42 billion every year for guaranteed income. But what do you think will happen when a fresh group of grads demands that its loans be paid off by the taxpayers? Student loan forgiveness will become a permanent program and a whole lot more expensive than even $420 billion.

There are also likely to be cost-savings for reducing poverty under guaranteed income. You can bet that that “study” will include all kinds of numbers purporting to show that this will save us billions of dollars in the long-run through better performance for kids in school, lower incarceration rates, etc., etc. The specifics won’t be worth anything, but I buy the basic argument. Even a properly done study would produce projections that are just guesses, but it makes sense that this would result in lower financial stress which would in turn have positive societal benefits, even if they can’t be quantified.

Put simply, the student loan bailout is a huge transfer of wealth from the less well-off to the better-off, while the guaranteed income is a modest transfer of wealth to the poorest people, including children, in our society. And guaranteed income would have a much bigger bang for the buck in terms of broader benefits to society.

Despite its modest cost, I still have doubts about the guaranteed income. I want Democrats to win more elections, but the guaranteed income just reenforces the image of my party as wanting to give stuff away for free. Just when the party should be trying to reestablish an image as being for rewarding hard work, this cuts in the other direction. It’s money just for breathing.

And, of course, the Catch-22 here is that this idea will go nowhere until Democrats control the White House and both houses of Congress by significant margins. But they can’t get there as long as they have this give-stuff-away-to-everybody tag on their backs.

All of which is to say that I don’t have much confidence that the guaranteed income will become a reality anytime soon. And, it appears, nor will student debt forgiveness. But guaranteed income is not a half bad idea while I can’t find a single thing to like about loan forgiveness.

With both ideas not likely to move forward, the Democrats would be better off setting them aside and instead focussing on programs that assure that anyone working full-time can achieve a comfortable middle-class lifestyle.