Student loan forgiveness program is an example of perverse incentives

Washington, D.C. is so corrupt and corrupt, because it is a place where we reward vice and punish virtue. For decades, the welfare state has rewarded not working and government dependence. And look where that has gotten us. The tax code punishes work, thrift enterprise and economic activity i.e. The building blocks for a prosperous economy are the ones that are built.

The plan to bail out millions of student loan borrowers by paying $10,000 in outstanding student loans if the borrower has an income below $125,000 per year is the latest example of perverse incentives. As an aside: Is it true that Congress is not the president who has the power of the purse? The White House describes the loan forgiveness program as a program of loan forgiveness. But nobody bothers to ask the taxpayers who are going to pay the cost of the $300 billion program, whether or not they want to forgive the deadbeats that IS the correct term for someone who doesn't pay back a loan? I don't think that the people who are most griest about this forgiveness policy are the millions of Americans who have done the responsible and morally righteous thing to do. These are the people who made the financial sacrifice to pay off their debts.

These student loans already come with taxpayer subsidies in the form of super-low interest rates. Many millions of college graduates don't pay back what they owe because of the low rates.

One wonders whether this group has been cleverly waiting for a Joe Biden to come along and deem them forgiven. Will they knock on Washington's door and request forgiveness of their mortgage, car loan, or credit card debt?

This program also creates perverse incentives for the nation s universities and colleges whose outrageous tuitions put these students into six-figure debt in the first place. If taxpayers are going to pay the cost and universities become free to the students, this only incentivizes the schools to raise tuition, which has grown three times the rate of inflation over the past thirty years. If this program is implemented, we will see colleges charge tuitions of $100,000 a year.

Universities are sitting on more than $700 billion of tax-free endowments to add insult to injury. Why don't THEY forgive the debts of their graduates?

If this program is implemented, the most perverse incentive is that almost no American won't repay a student loan in the future. We will have to do away with the fa ade that this is a loan and not a trillion dollar money transfer money from the roughly half of Americans who DO go to college, to the half that don't. In other words, this program robs the poor and middle class to pay the rich.

Does that sound fair or logical?

What we have here in the president's loan forgiveness program is an example of where forgiveness is nothing but divine.

Stephen Moore is a senior fellow at the Heritage Foundation and an economist with Freedom Works.