Free Money

People Think Government Money is Free

Andy Kessler is a free market thinker and inspired this post with his article in the WSJ today.

The other day, I got into a Twitter repartee with a young wealth manager I met years ago. He latched on to the Stocktwits crowd when he was in college at UCLA. He has not been taught the finer points of classical economics. He is representative of a lot of people in his generation.

Harris and her ilk keep trying to curry favor with college students and college grads by forgiving their student loans. Even though the SCOTUS says the action is unconstitutional, it also sends terrible economic incentives to the economy. Yesterday, Harris texted U of Arizona and Arizona State students telling them to register in AZ and vote in AZ. Of course, the Harris campaign would help them do it!

It’s illegal to do that and I am sure the Federal Elections Commission will be on it.

Not.

My friend Nicole Sherrod was to the point, “Your mortgage identifies as a student loan.”

My young UCLA friend clearly shows he has no understanding of how government finance works, nor the an understanding of opportunity costs.

Government money is free and, there is no expectation that government debt will be paid off in his view.

Hence, the government ought to loan money to college students for tuition at 0%.

In the same vein, Kessler writes,

The progressive vibe is that big government will take care of you. It knows what’s best for you. It will redistribute money how it pleases. You need to put a smile on your face while it takes away your laurels, guns and money. “We believe in the collective,” Ms. Harris declared, much like Hillary Clinton’s “it takes a village.” Equity in Schenectady. Handouts for all.

You want proof? Ms. Harris’s Senate voting record is leftward of socialist Bernie Sanders. Vice-presidential candidate Tim Walz fawns over China, saying “everyone is the same and everyone shares.” Viva la revolución and Che Guevara T-shirts for all.

It’s not just students who are totally misguided because their teachers have no concept of how the world actually works. Millennials who have entered the workforce have a hard landing as well. They are difficult to manage.

VC Marc Andreessen said, “The big AI labs are a grindingly woke millennial monoculture the way the big Internet companies are (were). It’s the water they swim in so they can’t see it. It’s also a tiny niche of national and world opinion.”

They are so deep in their bubbles that they don’t see it through their swim goggles.

It is sad because right now due to technological advances, it will be possible to have several great leaps forward to rapidly increase the standards of living for all of mankind.

A couple of responding tweets: My theory: A successful AI lab is six right-wing engineers keeping their heads down, surrounded by 4,000 woke parasites who consume the output of the six engineers. And, “Insert any of the following for "the big AI labs" and you'll have an equally true statement: academia, the entertainment industry, the mainstream press, govt bureaucracies, NGOs & most non-profit organizations.

Leftists have no problem laying a tax or taking credit for someone else’s labor. Thomas Sowell talked about this over the course of his life.

Sowell defines “fair share” as follows: “Fair share is whatever you can get away with without getting caught or without arousing enough public indignation to make it politically dangerous.” In other words, your fair share of something is not necessarily determined by what’s objectively fair or ethical; it’s determined by how much you can take without facing repercussions.

Sowell argues that “fair share” is rooted in envy and resentment. He suggests that people who demand others’ “fair share” are often motivated to punish those who have achieved success and to reward those who have not, regardless of whether they deserve it. This thinking leads to arguments favouring redistributive taxation and other policies meant to level the playing field between the haves and the have-nots.

But Sowell cautions against such policies. He points out that when governments try to implement them, they almost always do so in ways that are inefficient, ineffective, and unjust — often hurting the very people they’re intended to help while going easy on those who can navigate the system and take advantage of loopholes or political connections. This system rewards dishonesty over hard work and incentivizes people to game the system rather than trying their best at honest labour.

But what about embracing diversity? Diversity brings up one of my favorite Sowell quotes: “The next time some academics tell you how important diversity is, ask how many Republicans are in their sociology department.”

Yes. At Brown University, that beacon of knowledge that embraces tolerance and freedom employees gave 225 more times to Harris than Trump. Also, 96 percent of all Ivy League professor political donations went to Democrats. This includes Columbia ($520,000), Harvard (almost $500,000), Yale ($340,000), and Princeton ($176,000).

Donation percentages outside the Ivy League follow a similar pattern. Ninety-six percent of donations from Arizona university faculty went to Democrats, 99 percent from those in the U. Wisconsin system, 94 percent from faculty at Michigan colleges, and 92 percent from those teaching at Ohio higher ed. institutions.

Is it any wonder that kids are in bubbles that don’t pop? They are inescapable and reinforced by the mainstream media.

Government largesse and money have a direct cost and opportunity costs. Just because it is the government doesn’t mean that they can avoid the iron laws of economics as irrational as they can be. Eventually, things will catch up to them.

One of the bargains the government makes with citizens and bondholders is that the debt is expected to be paid. If that bargain is broken, situations like Argentina, or post WW1 Germany develop.

Virtually all the bullshit that Harris is serving up breaks that bargain. Student loan forgiveness is just one part.

Governments cannot “create” money. Where do they get those dollars? Their citizens. Every dollar and corresponding interest paid on that dollar borrowed is satisfied by the future earnings of citizens via their taxes. Hence, it’s a tax on your future income, your kid’s income, and your grandkid’s income.

That’s why a 0% loan from the government is stupid and totally illogical. There is a cost to that money. It goes without saying there is time value of money as well and that adds to the cost. Forgiveness of debts to the government is the same and acts as as an indirect tax on everyone else who didn’t get their loan forgiven.

Kessler sums it up well so I will quote him, “To aggressive progressives, government is simply a magic money tree. Vote left and dollars appear. The gross incompetence of government—think billions for eight electric vehicle chargers—destroyed healthcare (thank you, ObamaCare) and education (assisted by Randi Weingarten’s teachers union) and is close to destroying energy (net zero), even while the Biden-Harris administration works hard to destroy Big Tech—one of the few productive industries. And I’ll never forgive progressive Hollywood for turning “Star Wars” into unwatchable wokey Wookiee drivel.”

He should have added the millions spent on illegal aliens who shouldn’t be here instead of US citizens victimized by hurricanes. I don’t think it’s just “aggressive progressives”. I think it is the whole of the Democratic Party and a segment of the Republican Party.

What’s the cure?

• School choice. Fortunately, there is a nationwide movement happening in the free states to jump-start this. In the non-free states, the teacher’s union has too much power and it isn’t happening. Soon, people will move not only for tax relief, but to better educate their children because parents have an incentive to invest in their kids so they have more opportunities than they did.

• Ending the funding of systems by the federal government and this means getting rid of the entire Department of Education, along with their rules and mandates.

• Ending the subsidies in all industries. Farm subsidies, green energy subsidies, fossil fuel subsidies, and on and on. Let the market speak because it allocates capital and helps people make decisions better than a centralized government authority. Centralized authorities have their own agenda and own interests.

• Taking a meat cleaver to the Executive Branch of government and shrinking it. Force the Legislative Branch to do its job which it can now easily outsource.

• Deregulate the entire economy. Make it cheap to do business in the US. Don’t use tariffs as a first-strike weapon. Tariffs are an indirect tax on consumers and they don’t make indigenous industries more competitive.

It frosts me when people think government money is free. There ain’t no such thing as a free lunch.