Student Debt Cancellation: Charity or Force?

University, Lecture, Campus, Education

Jacob G. Hornberger – May 30, 2019

During commencement exercises at Morehouse College, a historically black college or university (HBCU) located in Atlanta, billionaire Robert F. Smith announced that he was paying off all student debt for graduating seniors. According to the Atlanta Journal Constitution, the gift is estimated to be worth up to $40 million. Needless to say, the students who will be receiving the benefit of Smith’s gift are ecstatic.

Not surprisingly, leftists are using Smith’s generosity to buttress their position that the federal government should do the same thing for other student debt. What they fail to recognize, however, is the fundamental difference between voluntary charity and mandatory “charity.” (Note the quotation marks.) Smith’s act is an example of voluntary charity. The federal government’s welfare state is an example of involuntary “charity.”

Let’s assume that a student borrows money from the federal government to finance his education. A question naturally arises: Why should the federal government be in the business of lending people money, for any purpose? Morally speaking, lending people money isn’t within the array of legitimate functions of government, especially since it involves the forcible taking of one person’s money for the purpose of lending it to someone else. Moreover, lending people money isn’t among the delegated powers of the federal government enumerated in the Constitution.

It’s easy to forget that government gets its money in only two ways: Taxation and borrowing. In order to pay back the government’s debt, the government must tax people. So, for all practical purposes taxation is the only means by which government gets its revenue. While the federal government gets some of its money from tariffs and excise taxes, most of its revenue comes from the federal income tax, which is enforced by the IRS.

Contrary to representations made by the IRS, the payment of income taxes is not voluntary. If a person refuses to pay his taxes, the IRS will initiate force against him to collect it. That force comes in form of garnishments on bank accounts, liens on real and personal property, attachments, and even criminal prosecutions, fines, and imprisonment. If a person resists with violence, the government will meet force with force. In extreme cases of income-tax resistance, the resister will find himself dead for “resisting arrest.”

Thus, with a student loan the government is taxing Mary in order to use her money to lend to John, a student. Where is the justice in such a process? In a free society, John would be free to approach Mary and ask her to lend him the money to pay for his education. Mary would be free to say yes or no.

In a society based on mandatory “charity,” Mary has no choice. The federal government forces her to turn over some of her hard-earned money so that the government [can] deliver it to John in the form of a loan. In the process, the government portrays itself as a caring, compassionate entity. Oftentimes, Mary, as part of American society, is told this makes her caring and compassionate as well.

But there is nothing caring or compassionate about the IRS or the system it enforces. The IRS is one of the most brutal, vicious, and terrifying agencies in U.S. history. It stops at nothing to extract the money from Mary and every other U.S. taxpayer, which is then used to fund welfare-state programs.

Now, let’s say that the federal government decides to do what billionaire Smith has done — cancel all students debts owed to the government. What that amounts to then is just another welfare-state dole program, one in which the federal government is taking money from one group of people in order to dole out money to another group of people.

At the moment of the debt cancelation, it would seem like the government is simply forgiving a loan. If its budget was balanced and if it reduced federal expenditures by the amount of the loan amounts that are being forgiven, that would be one thing. But that’s not what happens. The government simply maintains or even increases its level of spending, which means that Mary and every other taxpayer are going to have even more of their money confiscated by the IRS to make up for the amount of money that is being lost through debt forgiveness. How is that fair to Mary or the many people who struggle to pay for their children’s education without student loans? Why should they be forced to pay for other people’s education? Why shouldn’t that choice be left up to them? Isn’t that what genuine freedom is all about?

That’s not all. Once people see that the feds are cancelling student debt, people are going to be rushing to the student loan office to get in on the welfare gravy train, with the expectation that the government is going to do it again and again and again. Over time, the entire student loan program will become nothing more than another welfare-state dole program, one that plunders one group of people to whom the money belongs in order to give the loot to another group of people to whom it does not belong.

I’ve got a better idea: Let’s restore a limited-government republic to our nation, one where there is no IRS, income tax, or welfare state. That would mean that everyone would now be free to keep everything he earns and free to decide what to do with it.

Let’s assume that we libertarians had prevailed with that idea 29 years ago, when FFF was founded and advancing it. Let’s assume that a family has paid an average of $30,000 a year in income taxes. Multiplying $30,000 times 29 years gives us $870,000. With compound interest, that would be around $1 million. That’s a lot of money to fund college, healthcare, a new car, donations, loans, and other expenses.

Of course, America didn’t adopt FFF’s idea 30 years ago. That’s water under the bridge. But it’s still possible to adopt the idea today. If an income-tax-free and welfare-state-free society was good enough for our American ancestors for more than 100 years, it’s good enough for us today.

This article was originally published at FFF.org. Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch.  

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