What Warren And Piketty Missed
I was afraid that Warren and Piketty would miss the point that taxes are not needed to fund federal government spending. My fear was realized when Elizabeth Warren talked about her bill to ease student loans by allowing the borrowers to refinance their government student loans at the lower interest rates that new government student loans are charging.
She pointed out that even on a small segment of the population’s loans the government was getting $60billion dollars a year in interest payments on those loans. She then said that the money that would be forgone by lowering the interest would have to be made up in some other part of the budget. She recommended raising revenue by closing loopholes for the rich and powerful as a way to make up for the loss in revenue on the student loans.
Whether you believe in Modern Monetary Theory’s explanation of why raising taxes is not needed to fund new spending, the fact remains that the Fed created trillions of dollars out of thin air to bail out the banks. Why can’t the Fed do the same thing to bail out the students, graduates, and their parents and grandparents who signed up to back these loans? The total student loan debt at the moment is only $1.2trillion.
When I talked about the money created to bail out the banks, I said trillions. That was not a typo. I did not mean billions. Same goes for the total student debt.
If the Fed can do it for the banks without causing any inflation, doesn’t that sound to you like proof that the Fed could do it for students?
Closing the tax loopholes for the very wealthy is a laudable and necessary thing to do for the health of our society, but it is not needed as a way to fund student bailouts.