Browsing the blog archives for October, 2011.

Ron Paul & student loans


Student loan debt is receiving a lot of attention, especially with the 2012 election cycle in full swing and President Obama struggling to retain his strength with college students and young voters.

In early 2010, President Obama and the Democrat-controlled Congress (completely) forced banks out of the student loan program.

Many in the Occupy Wall Street crowd have been fuming about student loan debt over the last few weeks.

Last week it was revealed that student loan debt in the US will exceed $1 trillion this year.

A few days ago Ron Paul called for an end to the federal student loan program.

Yesterday Obama announced a plan to lower the debt and payments on existing loans.

He claims it will cost the taxpayers nothing. If so, I can’t figure out who’s going to pay for it…

Meanwhile, many on the left are calling for complete student loan forgiveness under the guise of “economic stimulus.”

While it’s easy to offer sympathy for unemployed college graduates straddled with student debt, we must not lose sight of 2 points

  1. Borrowing money to go to college is not necessarily a bad thing, but those who choose this route do so with the understanding that a high paying job is not guaranteed.
  2. When you take out a loan, you agree to pay it back. If you don’t, someone else must accept the loss.

As a university professor, I believe in the value of a college education. But someone must pay the bill, and the American taxpayer simply can’t afford it. Prospective college students have an obligation to make smart choices when it comes to going to and paying for college. Payoffs associated with a college education accrue to the graduates, so they must be held accountable for their repayment. There is no middle ground here.

I applaud Ron Paul for having the courage to address this thorny issue. With the federal government in complete charge of the student loan program, I expect the money to keep flowing. I also expect that taxpayers will end up with a significant portion of the bill.


Cain’s 9-9-9


I like Herman Cain, and I really like his boldness in the campaign. But I’ve had some misgivings about his 9-9-9 proposal for a while now. And the more I think about it, the more concerned I become.

First and foremost, we have one major political/economic problem in our country—the size and scope of the federal government. No magic potion or tax reform idea will fix it. We must DRASTICALLY cut government spending and regulations, and insist that Washington do ONLY what it has been authorized to do in the enumerated powers. Tax reform can be an important part of the solution, but the core part is philosophical. Let’s not think that a create tax proposal can solve this problem. It can’t

Nonetheless, the means by which taxes are collected has contributed to the massive spending we see today and changing the system can make solving the problem a little easier. For example, WITHHOLDING income taxes and then “giving us refunds” every year masks how much the federal government is actually confiscating from our wealth AND how much the tax code is being used as a form of wealth redistribution. Requiring employers to pay half of our social security taxes creates the illusion that we are not really paying all of it. It’s no doubt that the system has been deliberately obfuscated so that average Americans think they’re getting a better deal than they really are. This is why many in the left are infatuated with a VAT.

With a more transparent system, average Americans would begin to see how much they are really paying, how little they are really getting, and how much is being redistributed and squandered. Questions of Constitutionality and the enumerated powers would make more sense to them if they really understand how much of their wealth is being extracted in the first place. I’m convinced most people are clueless to this reality.

An overhaul of the tax code/system could help. A national sales tax is more transparent than an income tax because we see it every time we make a purchase. It also reduces the social engineering and misallocation of resources by eliminating the tax brackets and deductions. While replacing the income tax with a national sales tax would not solve the spending problem, it could make the problem more apparent. The left would have to invent other ways to hide the EITC and other wealth redistribution schemes.

The 9-9-9 is an interesting proposal. It cuts corporate taxes—a definite positive. It would create a flat income tax rate and replaces much of the income tax burden with a national sales tax. These changes would make taxpayers out of the roughly one-half of Americans who have no responsibility to pay for the programs they demand from their politicians. That makes sense to me. But the 9-9-9 has no major problems. First, by ending payroll taxes, it would create a total disconnect between one’s individual contributions to retirement benefits and their distribution. Social Security and Medicare are in dire need of serious reform. Folding them into the general budget only guarantees that this will never happen.

Second, the 9-9-9 plan would create a new tax without ending an old one. Cain’s stated objective is to replace the income tax with a sales tax, eventually. But history tells us that taxes are usually raised and rarely eliminated. If a sales tax is introduced without simultaneously abolishing the income tax, I’d bet the farm that neither would ever go away.

I am a strong proponent of REPLACING the income tax with a national sales tax because for fairness, efficiency, and transparency reasons. If that’s where Cain wants to go, then why not propose the entire package now? Alternatively, if getting there from here is too difficult politically, then why not simply (1) reform Social Security and Medicare with a separate proposal, (2) create a low, flat corporate tax rate, (3) create a low, flat income tax rate with deductions only for income up to the poverty line and charitable contributions, and (4) outline a plan for real spending cuts. These changes would represent a massive improvement and could set the stage for replacing the income tax with a sales tax in the near future.

Thank you, Herman Cain, for putting your proposal on the table. It has some merit, and it’s certainly moving the conversation forward. Unfortunately, the more I consider it, the less I can support it.


The left’s tea party


The Occupy Wall Street movement has been a fascinating exhibition to say the least. We’re told that the motley crew gathering in New York’s financial district is organic and represents average folks from all walks of life. Obama’s spin on this circus is that it typifies a growing frustration with corporate America. But this protest—as Herman Cain put it—is simply an attack on capitalism.

So what do these protestors want anyway? Many struggle to answer this question, while others claim only to be “raising awareness.” One posted a fascinating set of demands ranging from free college education to a guaranteed living wage regardless of employment to the immediate forgiveness of all debt to open borders migration.

For the record, this list of demands does not necessarily represent the fantasies of all of his comrades. But while there’s no official voice representing the protestors, myriad interviews and blogs paint a clear picture. Most of these guys aren’t seeking any kind of middle ground. They want the fundamental change candidate Obama promised. They’re Marxists.

Given the sad state of economic affairs, this disorganized, confusing and far left protest does little to legitimize Obama’s agenda. In my view, the spectacle known as the Wall Street occupation is just what the conservative doctor ordered—the left’s version of the tea party. Rather than preaching the Constitution and limited government in an era of skyrocketing national debt, these protestors appear to be unfamiliar with the Constitution, the enumerated powers, or the notion of personal responsibility. Nothing gives more credence to the conservative/libertarian worldview than an eclectic parade of far left protestors proclaiming the opposite.

Obama’s greatest strength is his oratorical acumen. To many “non-partisans,” Obama’s smooth calls for equality, spreading the wealth, and change in general sound moderate and mainstream. The more we hear from others in his camp who are less skilled in masking Marxist rhetoric, the better. I’m hoping these protests don’t lose steam anytime soon. The more they say, the better we sound.