Trying to mask the ugliness of the Biden administration’s student loan “forgiveness,” the president’s Democratic friends are comparing it favorably to the Payroll Protection Program (PPP), a program that extended loans to businesses during a pandemic and then forgave them. Loans if companies keep their employees. here Sen. Bernie Sanders (I-VT) Comparison:
“If we can cancel hundreds of billions in PPP debt when business owners need it, please don’t tell me we can’t cancel all student loans for 45 million Americans.”
This argument is lame. In this case, the massive $800 billion PPP that the government can “afford” is an inefficient and unfair distribution of funds that the government is able to make because it has access to other people’s money – i.e. taxpayers’ money. . What happened with PPP does not excuse doubling down or passing even worse programs like ‘forgiveness’ student loans.
This is also a bad comparison. The student-loan forgiveness move was made unilaterally and perhaps on very shaky legal ground when the PPP was passed by Congress with bipartisan support – and passed when the economy was forced into lockdown. Also, student-loan forgiveness only helps children who went to college using borrowed funds voluntarily. These loans are now being repaid by many people who did not go to college because they could not afford it and who have already paid off their collegiate loans in full.
In theory, PPPs apply to all “small” businesses, not just green energy or other preferred industrial companies. (FYI, according to the Small Business Administration, 99.7 percent of businesses are “small” thanks to a ridiculously large definition of the word. Incentives for companies to keep their employees. There was no such expectation or requirement for student loans to go to college.
Now, many are foolishly glorifying PPP as if it is a wonderful program. As I’ve written here (and many other places since the PPP announcement), it was nowhere near surprising. By most accounts, the PPP was an $800 billion failure. That was regressive in its own way, because the companies most likely to apply for PPP loans were those big enough to know how to navigate the bureaucratic nightmare that is the Small Business Administration’s application process. Also, many companies that received loans under PPPs that were later forgiven did not risk having to lay off their employees, as these employees were easily shifted to work from home. Most of the loans went to economic sectors that were least economically affected by the pandemic. Also, a lot of PPP loans went to big companies (shocking!) Finally, the whole point of PPPs was to get companies to keep their workers, but as is always the case with bailouts, it mostly benefits shareholders, not workers. Peter Suderman wrote:
The jobs kept by PPP were saved at a very high cost — somewhere between $170,000 and $257,000 a year, much higher than the typical earnings of affected workers, which is around $58,000 per year.
Although the PPP was able to save some jobs, albeit at great cost, the overall results of the program were exactly the opposite of its intentions. The purpose of the program was to preserve the jobs of wage workers, not to allocate money to business owners. David Ottor, an economist at the Massachusetts Institute of Technology and lead researcher behind the paper, said The New York Times Recently, “it turned out [the money] Primarily did not go to workers who would have lost their jobs. It went to business owners and their shareholders and their creditors.” The program, he added, was “extremely regressive.”
So there you have it; PPP and student loan forgiveness is Comparable after all. They are both terrible principles. Student loan forgiveness is simply a lot worse.
Veronique de Rugy is a senior research fellow at the Mercatus Center and a syndicated columnist for Creators.