Economist Thomas Sowell once said that the first lesson of economics is that nothing is free, and that the first lesson of politics is to disregard the first lesson of economics.
Elizabeth Warren, taking the first lesson of politics to heart, proposed this week forgiving student loan debts and making public universities “free.” This would be righteously magnanimous were it not for the first lesson of economics. The only way a loan can be forgiven is for the person who made the loan to stop trying to get it repaid. The federal government guarantees student loans, and the federal government is funded by taxpayers. So what Senator Warren is proposing is that the government give up trying to get taxpayers’ money back from college graduates. Because Congress shows no signs of tightening the government’s belt, this leaves the taxpayers holding an empty bag. The proposal will have government digging deeper into taxpayers’ pockets to make up for the money it won’t be collecting on student loans.
What “loan forgiveness” really means is that the government will either raise taxes or add to the already unfathomable $22 trillion debt. Taxpayers will either pay now, or pay later. But they will pay.
It is true that Warren’s plan calls for “the rich” to do the paying. But she’s calling for a 2 percent wealth tax, and it’s unclear whether a wealth tax is even constitutional. An additional 5 percent income tax on one-percenters would do it. But that’s only if Warren’s cost estimates are correct, if the government doesn’t have to subsidize private universities to stem the wave of students transferring from private to public, and if making all of this education “free” doesn’t increase the number of students looking to go to college in the first place. Since all of these things are likely to happen, the “5 percent tax on one-percenters” could easily become a 10 percent tax on everyone.
This is exactly what happened with the federal income tax, after all. Politicians promised that it would only be 1 to 7 percent, and would only apply to the rich. Within four years, they had expanded the income tax to the middle class and the poor. As for the “only 1 to 7 percent,” we all know how that story ended.
Politicians hate hearing the plain truth, but here it is: The only way to make college free is to recruit faculty who are willing to work for free, contractors willing to build for free, utility companies willing to provide power and water for free, and support staff who are willing to labor 40 hours a week for, you guessed it, free. As long as anyone involved in the building, maintaining, and staffing of universities wants to eat, college cannot be free. “Free college” simply means that people who don’t attend college pay for those who do — because that’s what happens when the government raises taxes to make college “free.” The plain truth doesn’t sound nearly as righteous or magnanimous as Warren’s version of the story.
Behind all of this is the unspoken assumption that college is a worthwhile investment in the first place. But is it? There are only two possible answers to this question, and neither bodes well for Senator Warren. If a college education is worth its price, then there’s no need to subsidize it because it pays for itself. But if it isn’t, there’s no point in subsidizing it, because it’s a waste of money.
This level of common sense is often in short supply in the halls of Congress, and the reason should be clear. Politicians who propose making college “free” are not primarily concerned with the cost of higher education; they are primarily concerned with pandering to enough people to win the next election, even if that means misrepresenting reality and heaping additional burdens on taxpayers. Politicians of both parties have pandered like this so well and so often that we now have a government debt that threatens to overwhelm us.
Thomas Sowell was right. The obvious truth is that nothing is free, certainly not college. He also is right about what to expect from the political class. They will do everything in their considerable power to get the electorate to overlook this truth. But basic math and common sense are powerful forces, too. Eventually, basic math will overwhelm politicians promising ever more “free” things. Our hope is that, before that happens, voters’ common sense will kick in and they will hold politicians accountable.