Here is my reaction to the vote on extending low interest rates on student loans:
I just don’t understand how it is a good thing to put struggling students further into debt, thereby decreasing their buying power (which would further problematize our demand problem), but it is a bad thing to make the wealthy pay at least what those struggling students (at least the ones who are able to find jobs) have to pay in taxes. A healthy economy is, by at least partial definition, an economy in which their is an efficient flow of goods between producers and consumers. For that efficient flow to be maintained over time, consumers must continue to have the ability to obtain goods, which means that they must have the money to spend to buy those goods. It would, therefore, be a good thing to keep money in the hands of those who purchase, and students (current and graduated) do purchase under favorable conditions. The problem is that right now they can’t purchase because they have a lot of debt AND they can’t find good jobs that pay enough money with which to pay off debt and live off of and purchase all the goods that the economy has produced. On the other end, companies can’t sell their products, so they cut some employees’ pay and lay the rest off. Then there are more people who can’t purchase goods, and companies then have to make further cuts because they can’t sell their products, and then there are even more people who can’t purchase goods….
That is the rough model of a downward spiral situation, and it captures somewhat of what is going on now (yes, I am aware that it does not fully capture our current situation, but I’m going to keep things as simple as possible). So here is where the Republicans say, “Well, we’ll just put more money in the hands of companies so that they’ll hire more people and then those people will buy the goods.” The problem is that in the short term (i.e., right now while people are struggling to survive and others are starting to struggle), companies do not have any economic incentives to pass along to consumers (by hypothesis, the passing along happens when companies hire more employees) those dollars the Federal government is letting them keep in their pocket through low tax rates and those dollars that they are taking from the taxes that the lower classes are paying and just giving to the companies. What those companies have are short term incentives to hoard as much capital as possible to insure that they can survive the recession and come out ahead when the recession ends. Remember, a corporation’s NUMBER 1 purpose is to be profitable for share holders. You can fulfill that purpose two ways: 1) be profitable in the present by selling a lot of products, or 2) if you are not able to sell a lot of products right now, find a way to stay in business long enough to sell products in the future.
Are you beginning to see the way out of the predicament? It is very basic: companies do not currently have any economic incentives to do the things that would insure that money injected at the top flows down to the bottom; they only have incentives to keep money injected at the top at the top. On the other hand, those at the bottom do have economic incentives to do the things that would insure that money injected at the bottom flows up to the top. What are those incentives those at the bottom have, you ask? Well, they’re all in debt and losing their homes and aren’t able to pay their medical bills and starving, among other things. Those are surely major incentives to spend money…
Finally, your next question might be, “Well, what happens if the money that gets to the top after being injected at the bottom doesn’t turn out to be as much in the hands of the corporate executives and majority share holders as it would have been if we had injected it at the top and waited years and years for it to magically start trickling down to the bottom?” I hope that you see the silliness in such a question. Why, you person reading this who almost definitely is a member of the lower class, do you give a flying f*ck about whether or not corporate executives and majority share holders (and their upper class ilk) have MORE money one way or the other? One way or the other, they’ll be able to pay off their student loan debt and their medical bills and send their kids to upper crest schools without the need to borrow and feed themselves well and all those of other things that you aren’t able to do. So what possible reason could there be for injecting money at the top, and not the bottom? That is one question. The more relevant question, however, is how anyone could possibly think that it is a good thing to inject more money at the top while at the same time taking more and more money from the bottom, over and above the amount you are not going to give them?
On the off chance that my little post has attracted a reader who is a member of the upper class, here is my question for you: Why DON’T you care about those who are struggling at the bottom? The problem with the targets of this post who are members of the lower classes is that they are not supporting policies that are in their interests, because they don’t know what policies are in their interests. They do not have a moral problem. But you, member of the upper class who supports things like increasing interest rates on student loans, you do have moral problem; you know what your interests are, and you are more than willing to sacrifice the interests of the disadvantaged in order to fulfill your interests.
DISCLOSURE: I am a recent college graduate who has a mountain of debt and has struggled to obtain employment. So yes, I am biased, but I hope that I have provided an argument for why this bias has more going for it than the bias in favor of the upper class.