We all don’t benefit equally from government aid — it’s not just student loans
Student loan forgiveness is only one form of government aid that directly benefits some Americans but not others. (Photo by Peter Dazeley/Getty Images)
President Joe Biden’s decision to cancel up to $10,000 in federal student loans for many borrowers is fair game for vigorous debate — and disagreement.
Americans have been debating and disagreeing for 246 years. What jumps out in this latest dispute is how some politicians are blind to the inconsistencies in their arguments against this economic shot in the arm when, through the years, they have supported other government incentives to various groups.
To hear the comments of Iowans in Washington, you might think they have long been strong advocates for government butting out of the personal financial decisions Americans make. But you would be wrong.
Rep. Ashley Hinson of Marion said waiving repayment of $10,000 of federal student loans would be a “handout to the wealthy and a total slap in the face” of people who did not go to college or who already repaid their loans.
Sen. Joni Ernst of Red Oak asked why Iowans who go straight from high school into the workforce or pay for their own education should foot the bill for other people having $10,000 of their student loans forgiven. She said Biden is “passing the buck to hardworking Americans.”
One flaw in such thinking is that the beneficiaries will be ordinary Iowans who are neither wealthy nor elites. They will be nurses, teachers, bookkeepers, cops, farmers and store managers who graduated from Iowa colleges and universities and then went out and found jobs — in some cases, jobs employers have struggled to fill.
Yes, these graduates will personally benefit from a smaller debt. The typical Iowa college loan borrower owes about $30,000.
But the rest of us without college debt will benefit, too. The money borrowers would have used for interest and principal on their loans will be used, instead, to buy goods and services at retailers and restaurants — all things that will create more jobs and more demand for the products and services that keep Iowa’s economy ticking.
The Biden directive applies to student borrowers who earn less than $125,000 per year or couples whose annual income is not more than $250,000. Students from low-income families would be eligible to have an additional $10,000 forgiven.
Those six-figure income ceilings have been criticized, and rightfully so, as too high — especially when the average household income in Iowa is about $60,000. “It’s bad policy, as well as bad politics,” national Democratic strategist Paul Begala said on CNN.
Here’s the inescapable reality about the reaction: Republican critics who think debt cancellation or six-figure income ceilings are unfair have voiced nary a peep of opposition in the past when there are proposals that benefit certain groups but not others.
Like it or not, government has long favored some of us with special programs and policies, while the rest of us have to fend for ourselves. In the last half of the 1800s, the government encouraged settlers to move West by giving them up to 160 acres if they lived on the land and farmed it — even though millions of other people wanted land but were left out of the dirt-cheap deal.
During the Great Depression, about 3 million unemployed men were hired to work in the Civilian Conservation Corps — although there were not nearly enough jobs to satisfy the demand.
More recently, two federal government programs have been immensely popular with large groups of Iowans: the federal farm assistance programs and the $800 billion Paycheck Protection Program.
The government-backed PPP loans went to many employers who agreed to keep employees on the payroll in the early months of the COVID outbreak and use the loan proceeds for business expenses. The loans did not have to be repaid if businesses used the money as promised.
Of course, countless small businesses were left out of the Paycheck Protection Program. But those owners’ taxes were used to help cover the cost of the loans that far bigger, and much wealthier, businesses did not have to repay.
Forgiving the PPP loans was carried out, in the current student-loan-forgiveness terminology, on the backs of hardworking small-business owners.
The federal government’s farm programs have been a lucrative source of revenue for farmers for the past quarter century. Look at the federal crop insurance program. Hardworking taxpayers with no ag holdings are having their taxes pay for nearly half of the premiums, with farmers taking care of the other half.
The cost of this crop insurance subsidy is not pocket change. The Congressional Budget Office says it will be $9.5 billion this year.
Supporters are quick to remind us crop insurance is important to everyone, because we are talking about food. Most of the insurance covers just three crops: corn, soybeans and wheat. Most of the fruits and vegetables we eat are not covered by the federal insurance.
But crop insurance is far broader than buying just-in-case protection against an unexpected weather calamity. Seventy percent of the crop insurance policies taxpayers subsidize actually provides guaranteed revenue from each acre covered by the policy. If market prices at harvest time are below that target, the policy makes up the difference. If market prices at harvest time are higher than the target, the farmer gets the higher price.
No other merchant in Iowa has the luxury of having the taxpayers cover half the cost of a guaranteed revenue policy like crop insurance — a guarantee that effectively transfers the risk of crop prices onto the backs of working Americans.
KCAU-TV in Sioux City had a report last week that Sen. Chuck Grassley’s family has received $1.75 million in government farm assistance payments since 1995. People concerned about college grads having $10,000 in college loans forgiven might be interested to know the Grassley farm payments come out to about $67,000 each year.
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