President Joe Biden introduced new provisions to his student debt relief plan earlier this month, and the primary beneficiaries are high-income earners, according to a new analysis released by the Wharton School of the University of Pennsylvania.
While Biden’s 2023 SAVE Plan already put taxpayers on the hook for $475 billion, the new plans add another $84 billion to the tally — largely by “canceling” the student debt of some 750,000 households making more than $312,000 a year on average.
The average debt relief for these households is $25,500, the study found.
In June 2023, the Supreme Court struck down the Biden administration’s previous loan forgiveness program, which was implemented without congressional approval. And like Biden’s previous attempt to stick taxpayers with hundreds of billions of dollars of student loans via executive action, the latest attempts have sparked numerous lawsuits and appear headed for a legal showdown.
“This latest attempt to sidestep the Constitution is only the most recent instance in a long but troubling pattern of the President relying on innocuous language from decades-old statutes to impose drastic, costly policy changes on the American people without their consent,” one of the lawsuits reads.
Whether the White House’s latest scheme fares any better in court than the previous one is yet to be determined. What’s clear is that it is a dreadful, immoral, and dangerous policy.
For starters, the public treasury is being used to pay off the student loans of families who represent the top 5% of earners in the United States. This would be an unjust, senseless, and reckless policy even in fat economic times. But the times are hardly fat.
The national debt stands at nearly $35 trillion right now, and payments to service that debt are surging at a historic rate. Meanwhile, inflation in the U.S. remains stubbornly high. Consumer prices were up nearly 4% year-over-year in February, nearly double the Federal Reserve’s 2% target.
Biden’s student loan forgiveness scheme is likely to goose consumer spending, which economists say will make inflation even worse.
“I think there’s real concern among economists in that [debt forgiveness] is just going to create more of an inflationary problem,” University of Cincinnati economist Michael Jones toldCincinnati Edition, an NPR affiliate, last year.
Higher inflation and more debt are not the only consequences of debt forgiveness.
The Bennett Hypothesis, named after former Education Secretary William J. Bennett, states that one of the reasons tuition is so high in the first place is the steady flood of federal dollars for college-bound students, which allows universities to jack prices higher and higher.
An abundance of peer-reviewed economic research supports this thesis, including a study conducted by the Federal Reserve Bank of New York that found colleges hiked tuition by 60 cents for each dollar of federal aid doled out. Loan forgiveness is likely to have a similar effect.
All of these examples illustrate what we already know. Waving a wand to strike the outstanding $250,000 loan of the musician who wants to take a sabbatical to India to meditate isn’t consequence-free. It comes with economic trade-offs, just like everything else.
And loan forgiveness shouldn’t be confused with charity. In fact, making taxpayers pay back loans they never took out is nothing short of legalized plunder.
The 19th-century economist Frederic Bastiat wrote at length about legalized plunder, and he reminded us that there are just two ways that wealth is acquired. One way is through voluntary exchange and individual activity. The other is through theft and coercion.
Voluntary is a key word here. A philosopher no less renowned than Aristotle observed that for an act to be virtuous, it must bevoluntary. This is why freely paying off your nephew’s student loan with your own money is a virtuous act of charity, while using money taken from your neighbors under duress is not.
Despite those letters sent to debt relief recipients that read, “Congratulations! The Biden-Harris Administration has forgiven your federal student loan(s),” loan forgiveness is not an act of charity. Nor is it sound policy.
Yet Bastiat likely would not have been surprised to see U.S. presidents taking credit for using the public treasury, funds obtained from the people under the threat of government force, to cover the loans of wealthy, highly educated families with vast earning power.
“When plunder becomes a way of life for a group of men in a society,” he wrote in Economic Sophisms, “over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.”https://www.youtube.com/embed/aro6vBg1y1s?feature=oembed
One of my favorite movies growing up was RoboCop, Paul Verhoeven’s 1987 dystopian classic.
The movie, which was probably way too violent for a 10-year-old, depicts a fictional future in which Detroit is ravaged by violent crime and on the verge of social collapse. The police are virtually powerless against the criminals, who are too numerous and better armed. Led by a particularly nasty crime lord named Clarence Boddicker (Kurtwood Smith), the crooks prey on helpless citizens.
In one memorable scene, a member of Boddicker’s gang rolls up to a Shell station where a bespectacled clerk is doing geometry.
“Give me all your money, bookworm, before I blow your brains out,” the gang member says, tapping his automatic weapon against the plexiglass.
The clerk quickly puts down his compass and turns over the cash. Moments later, after filling up his motorcycle, the crook again approaches the clerk and appears poised to shoot. That’s when RoboCop shows up.
“Drop it,” he orders, raising his three-round burst pistol. “Dead or alive, you’re coming with me.”
The scene has always stuck with me for some reason. Maybe it was the cruelty of the sawed-off gang member (“You a college boy or something?”). Maybe it was the patheticness of the mute clerk, who seemed so weak and helpless. But mostly, I think, it was the feeling of utter lawlessness the scene evoked.
Lawlessness is an overarching theme in RoboCop. The city is out of control. Citizens can’t protect themselves, and the police aren’t much help. We see this early on when Murphy, the hero of the movie, tries to stop Boddicker’s gang and is blown to pieces (literally). What remains of Murphy’s body is reconstructed into a law-enforcing cyborg — RoboCop, half machine, half man — who is going to take on not just Boddicker and his gang but Dick Jones (Ronny Cox), the corporate villain who heads up OCP, the corporation that created him.
RoboCop is a good enough flick for a kid, but the older I got, the more absurd the film felt. The villains are cartoonish, and the idea of a society imperiled by helpless citizens and weak police forces always seemed detached from reality.
At least it did.
Toronto, Police, and Rotten Incentives
A couple weeks ago news broke that Toronto police, facing a crime wave, have offered new instructions to citizens: leave your keys at the front door for criminals.
“To prevent the possibility of being attacked in your home, leave your [key] fobs at your front door,” Const. Marco Ricciardi is heard telling citizens and reporters at a recent community meeting.
When I first saw these claims on social media, I thought it must be fake news. But Toronto police confirmed it in a statement.
“Police are concerned about an escalation in violence, where all sorts of weapons and firearms are being used to steal vehicles, and that includes during home invasions,” the statement reads.
Police have a point about surging crime. Car thefts are up 25 percent over the last year in Toronto, news agencies report, and many of the crimes involve crooks breaking into homes and snagging car keys.
When you watch the footage of masked attackers kicking in doors — many of whom are armed, according to police — one can see a certain logic to the guidelines. If the invaders find the keys quickly, it reduces the likelihood of an encounter between a homeowner and a potentially armed group of criminals.
Still, there are obvious problems. Put aside for now that your car (and everything in it) is being stolen. There’s also the problem of incentives.
We talk a lot about incentives (and disincentives) in economics. They are the drivers of human action. We make countless decisions every day, consciously and unconsciously, based on incentive structures around us. You needn’t be an economist to appreciate their power.
“Incentive structures work, so you have to be very careful of what you incent people to do,” Steve Jobs told author Brent Schendler many years ago, “because various incentive structures create all sorts of consequences that you can’t anticipate.”
The late Charlie Munger once said that if you showed him the incentive, he’d show you the result. And though incentives can get rather complicated, at their most basic level they are rather simple. A good incentive structure rewards good behavior and punishes bad.
Anyone who has trained a dog or raised a child understands this. You don’t give a dog a treat after he poops on your carpet; you give him a treat after he sits (or does whatever task you want him to do). You might reward a child with ice cream for getting a good grade on a spelling test, but not for throwing a tantrum at the grocery store.
Which brings me back to Toronto. By telling residents to leave their key fobs at the front door for criminals, police are essentially incentivizing burglary and theft. They are making it easier, not harder, to steal vehicles, diminishing the time it takes to commit the crime, thus lowering the risk involved.
One needn’t have a Ph.D in economics to understand this is likely to have an obvious adverse effect: an increase in car theft and home invasions in the city.
‘The Inviolable Domicile’
All of this is eerily reminiscent of RoboCop.
When you watch the Toronto police video footage of criminals kicking down doors of homeowners, and you combine that with police officers telling homeowners simply to give their keys to car-jackers, I’m reminded of the lawlessness of RoboCop and the mute gas station attendant who was helpless against it.
There’s something dystopian in normalizing this kind of violence, and in some ways it is darker and more depressing than RoboCop.
The police in Verhoeven’s film may have been ineffective, but at least they were trying to fight back. This is in contrast to the Toronto Police Service, whose lengthy list of home invasion tips was conspicuously absent an obvious response: homeowners exercising their right of self-defense.
This is strange, because the inviolability of the home is a legal concept that stretches back to before the birth of Christ.
“What is there more holy,” asked Cicero, “than the house of each individual citizen? Here is his altar, here is his hearth, here are his household gods; here all his sacred rights, all his religious ceremonies, are preserved.”
What we sometimes today refer to as the “castle doctrine” existed in the days of the Roman Republic.
“The domicile was seen as inviolable,” the French historian Numa Denis Fustel de Coulanges wrote in his celebrated history The Ancient City. “According to a Roman tradition, the domestic god repulsed the robber, and kept off the enemy.”
The Not-So-Inviolable Domicile
The legal right to protect one’s home, with defensive violence if necessary, is a concept more than 2,000 years old in the Western tradition. And it’s a legal precept you’ll find not just in the US but in Canadian legal charters.
“A person’s home is inviolable,” Sec. 7 of Quebec’s Charter of Human Rights and Freedoms explicitly states.
Apparently, not everyone sees the home as inviolable, even against violent intruders.
“You can’t use a gun for self-protection in Canada,” Prime Minister Justin Trudeau flatly stated in 2022. “It’s not a right that you have.”
This isn’t true, however. The Canadian government might not allow you to cite self-defense as a reason to obtain a firearm, but Canadians do have the right to defend themselves and their property, so long as the actions are deemed “defensive” and “reasonable.”
This right was recently tested when a 22-year-old Ontario man, Ali Mian, opened fire on a group of men who broke into his home and attacked his mother. One intruder was killed, and Mian was charged with second-degree murder. The charge was later withdrawn, however, apparently after prosecutors realized the shooting was a textbook case of self-defense.
Canada’s demonstrated legal protections for self-defense only make Trudeau’s callous dismissal of them all the more peculiar.
After all, the right to self-defense has a broad popular appeal and a rich intellectual tradition. It is present in the Bible and defended by thinkers as diverse as Confucius, Mencius, and Malcom X, who bluntly stated, “I am not against using violence in self-defense.”
The philosopher John Locke carved out perhaps the most robust defense of the right of self-protection in his Second Treatise on Civil Government:
I should have a right to destroy that which threatens me with destruction: for, by the fundamental law of nature, man being to be preserved as much as possible, when all cannot be preserved, the safety of the innocent is to be preferred: and one may destroy a man who makes war upon him.
Despite the rich tradition and popular appeal of the right of self-defense, Trudeau and many others remain hostile to it, which is no doubt why Toronto police declined to recommend defensive force as a deterrent to home intrusion.
This hostility likely stems from a number of sources, but in Trudeau’s case it is perhaps best explained by his disdain for individual rights, particularly property rights and the right to bear arms.
Critics of self-defense and gun rights have noted that for many, “the gun is the premier mark of individual sovereignty.” Yet many progressives see individual rights and individual sovereignty as a threat to the collective good; so the rights of individuals must be curbed and subordinated, as Trudeau has done with recent gun control legislation.
Unfortunately, placing the “collective good” above individual rights is a path toward dystopia and dysfunction. Individual rights — including the right to protect oneself and one’s home, and also to bear arms — are the wellspring of freedom. And freedom is the fountain of prosperity, civilization, and progress.
Departing from this tradition is how you end up with a society where individuals are unable to legally protect their own homes from violent criminals. Many will argue that this is why we have police, but the obvious problem is that police cannot protect everyone, certainly not with the immediacy that is needed in the midst of a burglary.
Unlike the citizens in RoboCop, Canadians can’t count on a cybernetic policeman to defend them from violent actors.
Even worse, they’re being discouraged from protecting themselves and their homes by a government so hostile to individual rights and self-defense that it’s advising them simply to turn their property over to their attackers.
It’s not hard to see where this will go if Canada continues down this path.
It’s safe to say that diversity, equity, and inclusion is one of the more controversial ideas of our time (and a multibillion-dollar industry).
Some such as Elon Musk argue that DEI — which definitionally speaking means addressing structural inequalities in society — constitutes blatant racism. Others contend that DEI is simply about creating more equitable and harmonious workplaces, and offers clear financial benefits to companies, as well. “Study after study has proved that diverse companies perform better than their more homogeneous counterparts,” Inc.reported in 2023. “Companies that don’t foster an inclusive environment or prioritize diversity initiatives do so at their own peril.”
“Proved” is a heavy (and inaccurate) word here, but Inc. isn’t wrong about the abundance of evidence showing that DEI initiatives make companies more profitable. From 2015–23, McKinsey & Company, a multinational strategy and management consulting firm, released four separate studies showing that DEI initiatives boost corporate earnings. Unfortunately for DEI advocates, the research appears to be bunk.
A new study published in Econ Journal Watch, a semiannual peer-reviewed academic journal, shows that researchers were unable to replicate the results of all four McKinsey studies.
“[O]ur results indicate that despite the imprimatur often given to McKinsey’s 2015, 2018, 2020, and 2023 studies, McKinsey’s studies neither conceptually … nor empirically … support the argument that large US public firms can expect on average to deliver improved financial performance if they increase the racial/ethnic diversity of their executives,” professors John R. M. Hand and Jeremiah Green found.
This is not the only research that shows DEI initiatives are not the panacea for corporate earnings supporters claim them to be. Writing in the Harvard Business Review, Robin J. Ely, a professor of business administration at Harvard, and David A. Thomas, the president of Morehouse College, point out that “the rallying cries for more diversity in companies” are not supported “by robust research findings.” Ely and Thomas add, “We say this as scholars who were among the first to demonstrate the potential benefits of more race and gender heterogeneity in organizations.”
The idea that all these studies showing clear financial benefits to DEI are rubbish might be shocking to some readers, but it’s a familiar academic pattern. For well over a decade, scholars and media have publicly worried about the “replication crisis” in science. It turns out that an astonishing number of findings in various fields — from psychology and economics to sociology, medicine, and beyond — fail to hold up when other researchers attempt to replicate the findings, as Voxhas explained.
None of this is to say that diversity and inclusion are inherently bad, of course.
I value diversity and am an inclusive person, and I encourage others to be the same. It’s the means we choose to achieve diversity and inclusion that are the problem, as well as that word wedged in between them: equity. To many, advancing social equity is a paramount value. Because of this, many support illiberal means (in the classical sense) to achieve this end—including supporting policies that actively discriminate on the basis of race.
Coleman Hughes, a fellow at the Manhattan Institute and author of The End of Race Politics, recently appeared on The View and offered a better approach. “My argument is that we should try our very best to treat people without regard to race, both in our personal lives and our public policy,” Hughes told the hosts (who accused him of being “co-opted” by the Right). Hughes is right to say that this is the North Star we should be aiming for: the equal treatment of all people regardless of race or class.
The great orator and abolitionist Frederick Douglass saw that such a view is the true path to progress. “In a composite nation like ours, as before the law, there should be no rich, no poor, no high, no low, no white, no black, but common country, common citizenship, equal rights, and a common destiny,” Douglass noted in a speech in 1867.
The ethos of DEI runs counter to this, which is precisely why both the concept and industry should be scrapped. A good place to start would be to dispense with the fiction that DEI programs are a rainbow leading to a pot of gold in corporate profits.
