On Tuesday, April 22, 2014, Senator Elizabeth Warren appeared on two television programs, the Rachel Maddow Show and with Jon Steward on Comedy Central. She was promoting her new book, A Fighting Chance, and in approximately fifteen minute interviews explained her position in the Senate and the meaning of her book, which, from what I understand, deals with the great financial burdens the Federal Government places upon those youngsters with their college loans, charging them extensive interest when they pay them off over goodly periods of time. She concentrated upon the unfairness of this.
(As a footnote it is interesting to remember that the reason the college loan interest rates are so high is because the Republican dominated House of Representatives refused pass a bill to lower them. Both the Democratic majority in the Senate and the President wanted to lower the rates.)
I sent the following letter to Senator Elizabeth Warren.
April 28, 2014
Dear Senator Warren:
I felt a need to communicate with you for two reasons:
First to tell you how much I enjoyed watching you on the two Tuesday broadcasts stating your position and promoting your new book. My son-in-law, who was present for the Maddow interview, said he would vote for you for president.
My second, and more important reason, was your position on education and student debt. This obviously was one of the main purposes of your new publication. I particularly appreciated your point about paying $15 a semester as an undergraduate and comparing that amount with the current costs of a college education.
If we go back to the 1950s and 60s many cities and states valued an educated citizenry and were willing to pay for it from a far smaller GDP than we have today. The Federal Government in 1945 also inaugurated the GI Bill which allowed a large number of returning veterans to go back to school and eventually graduate from college. At that time the country on all levels put money behind its words.
Today, with an irrational distribution of the national income, the majority of college students, with help from their parents, do not have the funds available to go to college. The Federal Government has allowed them to borrow the money with usurious rates of interest. This puts the student after graduation in a position where most of their newly earned income is devoted to paying back debt for a large number of years. They cannot really get on with their lives, living the American dream, instead they are debt encumbered.
The overall effect of this upon the society is also very negative. This process impedes economic growth. These graduates cannot afford to buy houses, decent auto-mobiles, or what is needed for middle-class living. A large
Percentage of their earnings go back to the government limiting economic growth in the economy. Money spent in the general society is re-spent a number of times generating six to eight times the initial amount while money used to pay off debt remains at the initial level. In addition these students will live for years in this fashion.
In your comments you spoke of lowering student debt by new legislation and you also stated that the funds spent for any purpose have to be made up. You suggested closing tax loopholes. While this would be worthwhile it is not really necessary. The two items are not interdependent or are they in any way related. One can be done without the other. For example a massive rebuilding of the infrastructure of the United States does not require new taxes. In fact if it were done it would generate, after an initial increased expenditure, a great deal of new wealth and probably lower the national debt below its present level.
Historically, the only time the country spends freely without any concern to debt is during time of war. Where did all the money expended during World War II come from? The Government created it and the nation became more prosperous. How was the Government able to pay for the GI Bill after the end of the Second World War and the Marshall Plan in 1948 that brought Europe out of the decay caused by W.W.II? We can also consider George Bush’s two wars in Afghanistan and Iraq or, for that matter, the Korean and Viet Nam Police Actions.
These were done by the government simply creating the funds needed. The money was not the wealth; it was and is the productivity. The goods and services brought about by the expenditure of these funds is the real wealth. It would be the new and refurbished bridges and roads, the new electric grids and structures that would bring the country into the 21st Century. All this would increase the wealth of the United States and its people. Fiscal policy expenditures would actually decrease the dollar value of the national debt. It would act similar to the Kennedy tax cut which substantially increased the GDP.
A bill that would begin this process would be one that forgave most of the student debt. One, for example, that wiped out the student debt of all students who graduated with a C or better average or who completed training for some specific occupation. The money these individuals would spend over the years becoming and being part of the middle-class or better would more than pay for the small amount of the GDP the government would have spent on their educations.