The talk of the town this evening is President Joe Biden's announcement a little over an hour ago to cancel student loans to a large number of people who are mostly concentrated in the upper reaches of our national income.
I'm being a bit vague here because I'm seeing a lot of numbers bandied about, but so far, no official scorecard price-out from the CBO. Essentially, it sounds like a married couple earning $250,000 a year would be eligible for a bailout of roughly $20,000 dollars.
There are provisions for people working in nonprofits, there are Pell Grant loans involved and enormous complexity from the White House fact sheet and other sources. My take is, this is a bad idea. Biden is using questionable COVID health emergency authority, a very shaky assumption, to hand out this election-year relief.
More or less, 70% of predominantly middle-class taxpayers are going to be bailing out something like 30% of those best well off. Oh, and that's right, it does sound like an election year handout, doesn't it? Think of this.
With the Schumer-Manchin bill and its business tax hikes, and its IRS assault squad, the government is coming after typical families and working folks. That's the way this shakes out and there's no debt reduction because in four years the student debt volume will be back to $1.6 trillion. Is this inflationary? Well, yes, at least indirectly. If the interest and principal on your student loan is canceled, then you'll have more money to spend elsewhere.
It bids up demand while Biden's enhanced tax and regulatory strangle holds down supply. I oversimplify here, but that’s one way to look at it.
If this whole student bailout business costs $300 billion over 10 years as some are estimating, then that wipes out Schumer-Manchin deficit reduction, but I never bought into their deficit reduction anyway.
One last thought. The Education Department does not remotely have the expertise to handle a $1.6 trillion student loan portfolio. It's a regulatory and policy agency, it's not a bank. Shades of the EPA running a $27 billion national "climate bank." Same nonsense.
It was President Obama who ended private lending by banks and others for student loans and moved the whole sorry story into the federal government, into the Education Department. We in the Trump administration wanted to pull out, including education secretary Betsy DeVos. Get it out of there, because those educrats don't know anything about banking and nowadays spend most of their time on critical race theory.
Plus, why not move student lending back to the private lending sector, banks, at all? They know how to judge credits and evaluate future earnings streams. Maybe not perfectly but a lot better than the educrats, but team Biden doesn't like the private sector, does it?
That's why they spend their time trying desperately to overturn Donald Trump's pro-growth, tax, regulatory and energy policies. Instead, the Bidens love federal central planning, jamming their faux, progressive policies down our throats, aka "big government socialism."
Former Trump senior advisor and good friend Jared Kushner will be here a bit later to talk about the many achievements of the Trump administration, which brings me to a last economic thought. Unfortunately, more bad news from purchasing managers and slumping business investment spending, and the Bidens have just published their mid-year budget and economic review that marks down growth and increases inflation, but here's the tragedy: for the next 10 years the Biden economy, by their own estimates, is projected to barely grow by 2% per year.
You know, if all this big government socialism was such a great economic tonic, then why doesn't it produce the goods? Literally. It's like buying an expensive car that's always in the repair shop. Who needs it?
Long-term growth in America used to run around 3.5% yearly. That's when free enterprise capitalism was still in the driver's seat. I mean, what good are socialists that can't produce? How about growth incentives rather than bailouts?
How about "leave us alone" to work, produce and invest instead of strangling our hopes and dreams? How about a free capitalist economy to get us back toward full-throttled 4% prosperity? Save America. Repeal socialism. The cavalry is coming.
This article is adapted from Larry Kudlow's opening commentary on the Aug. 24, 2022, edition of "Kudlow."