Elizabeth Warren's Plan To Cancel Student Debt Helps the Well-Off
The unintended consequences of helping students with the brightest futures.
Elizabeth Warren likes to say she's a champion of the little guy. But she recently announced a major policy proposal to provide more than a trillion dollars in aid. Much of that money would disproportionately benefit the relatively well off and well connected.
The idea is to eliminate student debt up to $50,000 for people with households incomes under $100,000, and more limited debt cancellation for households between $100,000 and $250,000 a year. By her own estimates, the full plan, which also includes funds for Pell Grants and historically black colleges, would cost about $1.25 trillion.
But the nature of college attendance and student loans means that Warren's loan forgiveness plan is actually a massive giveaway to the relatively well-off.
Only about a third of people over 25 have a college degree, making them a comparatively elite group, whose elite status is reinforced by, among other things, the connections they make while at college.
College graduates earn about $1 million more during their lifetimes than non-college graduates, according to a Georgetown University study. A separate study from Pew found college graduates typically earn about $17,500 more annually than people who only had high school degrees.
College graduates aren't, for the most part, super rich. But generally speaking, they are far more comfortable than the majority who lack such degrees. And while many of the people who would benefit from the plan currently have modest incomes, that's partly because many of them are young people with relatively high future earnings potential. This is a plan that would spend taxpayer money to benefit them.
Warren's defenders might respond that it's still a downward transfer, since the whole thing will be paid for by a new tax on the super wealthy.
There are, however, a few problems with using a wealth tax as a financing mechanism.
The first is that the tax might not be constitutional. Even if it is, another problem is that it's likely to raise far less money than projected. That's why most countries that have tried wealth taxes over the last two decades have abandoned them.
The third, as the The Washington Examiner's Philip Klein points out that, is that Warren has also suggested that this same revenue tax could be used to help pay for a whole slew of other progressive policy ideas. Those include Medicare for All, the Green New Deal, and subsidized child care, which, all together, would cost tens of trillions of dollars—far more than even the most generous wealth tax would raise.
Ultimately, what Warren wants to do is tax the wealthy to help the merely well off, rather than prioritize programs that help the truly needy. Warren isn't helping the little guy—she's helping the folks already on top stay that way.
Music: Pomp and Circumstance, by Edward Elgar. Performed by Eastern Wind Symphony. Path to Follow—Jingle Punks https://youtu.be/CEek1N4wSHA
Produced by Todd Krainin. Written and narrated by Peter Suderman.