What Chicago mayor Rahm Emanuel’s famous line that “you should never let a crisis go to waste” really means is that politicians who want an excuse to expand the power of government shouldn’t pass up any opportunity to do so. A crisis is one of the best opportunities because worried people are apt to fall for weak arguments and let the politicians have their way. (A great book on that theme is Crisis and Leviathan by Professor Robert Higgs.)
Now, to work this way, the crisis doesn’t even have to be real. So long as many people think there’s a crisis, that’s good enough.
Here’s an example: the supposed student loan crisis. Leftist politicians (most notably right now Hillary Clinton) want to capitalize on the widespread belief that the steep rise in student loan defaults indicates a looming economic crisis because these debt-strapped young people can’t buy houses, cars, or start businesses. That’s dragging down the economy, ruining what would otherwise be a vigorous recovery.
In this Washington Post column, Robert J. Samuelson calls this notion “a political cause célèbre.” But evidence that this is sheer bunk just came from an unexpected place, namely the president’s Council of Economic Advisers (CEA).
This new study by the economists on the CEA should damp down the rhetoric from Hillary Clinton and the higher education establishment that it’s imperative for the government to give students more relief from their student loans.
Crucially, the study shows that the debt burdens facing college students are greatly exaggerated. We hear about the occasional sob story where a student managed to rack up debts well into six figures in pursuit of some low-value degree (here is one the Pope Center published a few years ago by a student with debts of over $200,000 and a sociology degree from Northeastern University to show for it), but such cases are very rare. The report informs us that “debt owed by the typical student remains modest.”
For students who graduated from two- and four-year colleges, more than half were less than $20,000 in debt and 42 percent less than $10,000 in debt. Only ten percent had debts of $40,000 or more.
A relatively small number of recent college grads who might be struggling with their student loan debts (some of those with high debt levels might also have high-paying jobs and no struggle) will not have any appreciable impact on the vitality of the U.S. economy.
Hillary Clinton declaims that college graduates need relief from their high debt levels (here is my recent article on her higher education proposals) and wants voters to think that she isn’t just pandering for their votes, but is motivated by concern for the health of the economy. But no, it’s just pandering. Reducing or forgiving student debts merely puts some additional dollars in the pockets of students who borrowed for college (wisely or not), but those dollars will come from taxpayers who will have to pay for the government’s “generosity.”
Samuelson is right: “The young today don’t need debt relief. They need good jobs.” Clinton’s economic plan won’t create such jobs, but that’s another topic entirely. The point to keep in mind is that although a few students have unwisely borrowed huge amounts for college, most have not and the student debt crisis is a myth.