Edited to keep within copyright rules.
Is this "Debt Jubilee" possible with some debts or is this just more campaign cycle false promises?
Regardless, student loan and medical debt can affect individuals and perhaps an economy that is 71% by consumer spending.
Feasible? Consequences?
Opinions?
If debts were wiped out or some of the debts written off the system would need to be changed to keep these debts building up again.
I'm skeptical of this.....
A 5,000-Year-Old Plan to Erase Debts Is Now a Hot Topic in America
Bloomberg
Ben Holland
BloombergDecember 10, 2019
A 5,000-Year-Old Plan to Erase Debts Is Now a Hot Topic in America
More
(Bloomberg) —
In ancient Babylon, a newly enthroned king would declare a jubilee, wiping out the population’s debts. In modern America, a faint echo of that idea -- call it jubilee-lite -- is catching on.
Support for write-offs has been driven by Democratic presidential candidates. Elizabeth Warren says she’d cancel most of the $1.6 trillion in U.S. student loans. Bernie Sanders would go further -– erasing the whole lot, as well as $81 billion in medical debt.
But it’s coming from other directions too. In October, one of the Trump administration’s senior student-loan officials resigned, calling for wholesale write-offs and describing the American way of paying for higher education as “nuts.’’
Real-estate firm Zillow cites medical and college liabilities as major hurdles for would-be renters and home buyers. Moody’s Investors Service listed the headwinds from student debt -– less consumption and investment, more inequality -- and said forgiveness would boost the economy like a tax cut.
While the current debate centers on college costs, long-run numbers show how debt has spread through the economy. The U.S. relies on consumer spending for growth -– but it hasn’t been delivering significantly higher wages. Household borrowing has filled the gap, with low interest rates making it affordable.
And that’s not unique to America. Steadily growing debts of one kind or another are weighing on economies all over the world.
The idea that debt can grow faster than the ability to repay, until it unbalances a society, was well understood thousands of years ago, according to Michael Hudson, an economist and historian.
Last year Hudson published “And Forgive Them Their Debts,’’ a study of the ancient Near East where the tradition known as a “jubilee” -- wiping the debt-slate clean -- has its roots. He describes how the practice spread through civilizations including Sumer and Babylon, and came to play an important role in the Bible and Jewish law.
Rulers weren’t motivated by charity, Hudson says. They were being pragmatic -- trying to make sure that citizens could meet their own needs and contribute to public projects, instead of just laboring to pay creditors. And it worked, he says. “Societies that canceled the debts enjoyed stable growth for thousands of years.’’
Forgiveness was good for the economy, would be a modern way of putting it. In an October paper, Moody’s examined how that might apply if America writes off its student debts.
Moral Hazard?
There would likely be a “modest increase’’ in household spending and investment, and eventually higher rates of home-ownership and business-formation, it said. Buying up student loans would increase the government’s own debt -- but “only marginally,” since it already owns three-quarters of them. After that one-time hit, budget deficits each year would be slightly bigger because of the lost revenue from loan repayments, equal to 0.4% of GDP in 2018.
Critics usually raise two key problems with debt forgiveness. One is about fairness. The other is known as “moral hazard’’: Will write-offs today lead to more reckless borrowing tomorrow?
These questions “need to be carefully thought through” for student loans, says William Foster, a senior credit officer at Moody’s and the report’s lead author. “Who would benefit, who would miss out, what attempts at equal treatment there should be.’’ Any plan would also have to address “what the situation would be for the next generation of students with regard to accumulating debt,’’ he says.
Sanders and Warren plan to remove moral hazard by making state college tuition-free. But they’ve caught flak on the fairness question.
‘Bigger Debate’
A study by the Urban Institute said that wealthier households hold more student loans –- so writing them off would be regressive. Pete Buttigieg, another Democratic presidential contender, wants to direct financial support toward poorer students, saying there’s no reason to subsidize richer ones.
Link:
https://finance.yahoo.com/news/5-000...6.html?soc_src
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
