Student Loan Fairness Act: America - what have you wrought?!?

I'm not a subscriber to MoveOn.org but several friends are and they forwarded me a recent email from Robert Applebaum, a MoveOn member in Staten Island, who created a petition on SignOn.org.

You've never heard of Applebaum? He's the founder of an organization called StudentDebtCrisis.org.

The complete email is below, but here are a couple of excerpts:

Student loan debt now exceeds $1 trillion. Millions are buried under student debt, forced to put off major purchases and life decisions.

Put off major purchases?!? Oh, the humanity!

Let's put this in perspective: students voluntarily took on huge amounts of debt for schooling, choosing to borrow instead of working to pay for their college educations - you know, like of many of used to do.

They then graduate and have to begin paying off that debt. But, because they have financial obligations, they have to make choices and that means they can't go out and purchase a new car or a new TV, or a new anything because they're expected to cover this obligation before taking on others?

Why is that a bad thing? Isn't that called 'life' and part of being an adult?

The good news is that this week, legislation has been reintroduced in Congress that would provide student loan forgiveness to responsible borrowers drowning in debt.

How in the world can you be called a 'responsible borrower' if you are drowning in debt?

Wouldn't the fact that you are "drowning" in so much debt clearly indicate that you weren't very responsible about your borrowing in the first place?!?

The Student Loan Fairness Act would create a new "10-10" standard for student loan repayment, in which an individual would be required to make ten years of payments at 10% of their discretionary income, after which their remaining student loan debt would be forgiven.

So if I pay 10% of my "discretionary" income toward my loan for 10 years, I won't have to pay anything else on it forever?

What a bargain!

And why in the world would any college student, educated in today's schools that teach self-gratification and dependency on government, ever pay more? Why would they make sacrifices of 'major purchases' if they know they can skate by with paying only 10% of their discretionary income?

If all they have to pay is 10%,why pay more? That would be foolish!

And only 10% of their discretionary income?

That means they can spend as much as they want on a house or apartment, food, utilities, etc... They won't be forced to balance their desire for a larger place to live with their ability to pay all their financial obligations. They won't be forced to eat hamburger instead of steak for dinner. They won't be forced to wear sweaters in the winter or go without air conditioning in the summer in order to keep their utility bills lower.

In other words, they won't be forced to make the same decisions adults have always been forced to make, learning to balance their ability to pay with their wants and desires.

Is this really the lesson we want new adults in our (supposedly) productive society to embrace?

"Further, this legislation would...allow those eligible to convert their private loan debt into federal direct loans

Why? Why would we want students who have private loans to convert them to government loans? Would the bank that issued the private loans be paid off with tax dollars? And then the tax payers would never be paid back???

And what about our huge national debt? Won't putting more college students on the government rolls negatively impact the nation's debt?

What about the sequester? According to President Barack Obama, there's not enough money so he had to end tours of the White House - the people's house. We don't have enough money for air traffic controllers - clearly a vital service to the nation and our economy - but we have the funds to add more people to the government student loan program only to allow them to never repay the debt?!?

In what world would this ever make sense?

And yes, this definitely qualifies for 'stuck-on-stupid' designation!

Student loan debt causes an undeniable and significant drag on the economy. The Student Loan Fairness Act directly addresses this enormous boot on the neck of the middle class and represents a glimmer of hope for millions of Americans who, with each passing day, find that the American Dream is more and more out of reach.

It may be true that having to pay student loans causes a drag on the economy. The 'logic' is that having to pay back the money borrowed means the student isn't spending elsewhere, and without that elsewhere spending, the economy suffers.

What is never mentioned is the loss to the economy when the taxpayer, the original supplier of the funds, had to pay extra money to the federal government to provide the funds to be borrowed in the first place.

I had to forgo spending and helping the economy in order to pay taxes that are higher than necessary because of the need to fund this government program.

Now 'they' want to complain that repaying that money will hurt the economy? Providing the money in the first place hurt the economy - where was the concern for the economy then?

In a normal world, a student would get a private loan. Under this process, a bank would accept deposits from people in the community, pool those resources, loan the funds for various purposes, charge an interest rate and collect repayment over time.

The bank would then turn around and pay part of that interest back to the original depositors, who would then have additional funds to spend.

The government action distorts and perverts the normal process of money movement - and this act would corrupt the process even further, if that's actually possible.

So far over 200,000 people have signed the petition supporting the bill

Of course they have! They don't want to be responsible for the meeting the obligations they've incurred.

And why would they? We've grown generations who have been trained to believe that nothing is their fault; they are the victim of some evil entity; government will take care of them so they don't have to take care of themselves.

And this doesn't even get into the choice of majors with so many graduating from college with degrees that won't help them get a job or support themselves.

Nor does it delve into the Orwellian Newspeak (control the language) efforts of naming this horribly unfair and economic perversion the "Student Loan Fairness Act."

Oh, America, what have you wrought?



Here is the complete email:

---------- Forwarded message ----------
From: Robert Applebaum <moveon-help@list.moveon.org>
Date: Mon, Apr 22, 2013 at 4:20 PM
Subject: Support the new Student Loan Forgiveness Act

Below is an email from Robert Applebaum, a MoveOn member in Staten Island, New York, who created a petition on SignOn.org. Robert is also the founder of the organization StudentDebtCrisis.org.

---

Dear MoveOn member,

Student loan debt now exceeds $1 trillion. Millions are buried under student debt, forced to put off major purchases and life decisions.

In short, student loan debt has become the latest financial crisis in America. If we do absolutely nothing, the entire economy will eventually come crashing down again, just as it did when the housing bubble popped.

The good news is that this week, legislation has been reintroduced in Congress that would provide student loan forgiveness to responsible borrowers drowning in debt. So far over 200,000 people have signed the petition supporting the bill. Will you sign and share it with your friends?

Click here to support the Student Loan Fairness Act, which would provide loan forgiveness for borrowers drowning in student debt.

The Student Loan Fairness Act would create a new "10-10" standard for student loan repayment, in which an individual would be required to make ten years of payments at 10% of their discretionary income, after which their remaining student loan debt would be forgiven. Further, this legislation would:

• ensure low interest rates;
• allow those eligible to convert their private loan debt into federal direct loans;
• reward graduates for entering public service professions;
• provide a lifeline for student borrowers who have fallen on difficult times;
• encourage delinquent and defaulted borrowers to re-enter repayment;
• replace the current, ten-year "Standard Repayment Plan" for the full amount of the loan balance with the "10-10" plan as the default repayment option for borrowers entering repayment.

Student loan debt causes an undeniable and significant drag on the economy. The Student Loan Fairness Act directly addresses this enormous boot on the neck of the middle class and represents a glimmer of hope for millions of Americans who, with each passing day, find that the American Dream is more and more out of reach. 

Click here to sign the petition in favor of the Student Loan Fairness Act.

Thanks!

–Robert Applebaum, StudentDebtCrisis.org

This petition was created on SignOn.org, the progressive, nonprofit petition site. SignOn.org is sponsored by MoveOn Civic Action, which is not responsible for the contents of this or other petitions posted on the site. Robert Applebaum, StudentDebtCrisis.org didn't pay us to send this email—we never rent or sell the MoveOn.org list.

Want to support our work? MoveOn Civic Action is entirely funded by our 8 million members—no corporate contributions, no big checks from CEOs. And our tiny staff ensures that small contributions go a long way. Chip in here.

Just what is this 'fiscal cliff' thing and what does it have to do with addiction?

To understand what the 'cliff' is and why everyone is worried and talking (not actually doing anything) about it, you have to go back to the Bush tax cuts of 2001 and 2003.

In 2001, President George W. Bush pushed for - and Congress passed - tax cuts for all income brackets. The Democrats demonized the package claiming it was 'for the rich' and the media happily went along with the spin.

In 2003, there was some follow-up legislation and, again, the left howled about 'tax cuts for the rich.'

Unlike other programs and laws which go on and on forever (whether they should or not), these measures had a sunset clause. They were all set to expire in 10 years. So, unless Congress acted, as of January 1, 2011, taxes for everyone in all income brackets, as well as taxes on capital gains, dividends and estates, were going to rise - or, more specifically, go back to the higher rates under Pres. Bill Clinton.

So in 2010, realizing that they weren't tax cuts just for the rich like they'd told everyone originally, Congress extended the cuts for two years - until January 1, 2013, which is just 14 days away.

If it were just the Bush tax cuts, they might manage to work out a deal to extend them again, even with Democrats and Pres. Barack Obama demanding that millionaires and billionaires pay more. Oh yeah - those millionaires and billionaires are people (and many small business owners who file as individuals) making $250,000 a year - not $1,000,000.

But there's more.

In 2011, the United States was about to reach it's debt limit. For those of you who are unsure, that's like the maximum amount on your credit card. You can spend up to that amount, but they don't let you go over it. In the case of the U.S. government, that's the amount of money the nation has the authority to borrow. We borrowed to the max and, unless we raised the limit so we could borrow more, we wouldn't be able to pay the bills (like to social security recipients, medicare providers, contractors and employees).

This is different than the yearly deficit which is the amount of money government spends every year that is greater than the amount of money it takes in. Spending more than you take in results in a deficit that must be covered, so the U.S. government borrows money to pay the bills. The cumulative amount of money borrowed over the years to cover the individual yearly deficits gives us the debt, which was $14.294 trillion in 2011. We hit that mark on May 16 of that year.

Clearly, cutting spending wasn't an option for Washington so Republicans and Democrats struck a deal. We'll raise the debt ceiling now and form a committee to identify what cuts should be imposed, they told the American people. The normal process in which congressional committees make such decisions was bypassed in favor a "super committee" consisting of 12 individuals and named the Joint Select Committee on Deficit Reduction.

They were supposed to reduce the deficit by $1.2 - $1.5 trillion over the next 10 years.

What made us think that this committee was going to be different than the regular congressional committees? Congress included the policy of sequestration - automatic cuts that would kick in if other cuts were not identified and passed.

As Idea Money Watch explains, the 'super committee' was no different than the other congressional committees and they failed:

Announcing its inability to reach an agreement on November 21, 2011, the members of the bipartisan committee stated that "after months of hard work and intense deliberations, we have come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee's deadline."

So, as established in the BCA, sequestration was triggered when the super committee failed to reach an agreement. Sequestration generates automatic cuts for each of nine years, FY 13-21, totaling $1.2 trillion. Without Congressional action to prevent sequestration, the first round of cuts will take place Jan. 2, 2013.

The 2013 cuts apply to “discretionary” spending and are divided between reductions to defense ($500 billion) and non-defense ($700 billion).

So, taxes are scheduled to go up and spending is scheduled to be cut as of the first of the year.

That's the cliff - a double whammy on you and me and everyone else in the nation.

But that's not all....

Our current debt limit is a whopping $16.394 trillion - and, as of Tuesday, we were just $63 billion short of reaching it. Since the government spends about $10.5 billion a day, we'll reach the debt limit Dec. 23. Merry Christmas!

Of course, there are things the government can do to postpone actually hitting that limit, but Pres. Obama doesn't want to deal with those. He'd rather bypass Congress and have the ability to raise the limit all by himself.

This new power is part of the “deal” the President offered to House Republicans on the fiscal cliff. His “deal” is massive tax hikes, more government spending, and the ability for him to send that government spending skyrocketing through the stratosphere without any vote of Congress. One White House official describes this proposal as “resolv[ing] the debt limit without drama.”

See? It's easy - raise taxes on the 'rich,' spend even more money, and let Obama borrow whatever he wants without limit or check&balance by Congress.

Now Republicans - well, House Speaker John Boehner, specifically - are talking about pushing off the debt ceiling debate for another year, so long as they get spending cuts greater than the debt increase.

But remember - the spending cuts from the last increase are the ones they're trying to avoid taking now!

The American people were promised cuts in spending at least equal to the amount of additional borrowing granted in 2011. Those cuts are supposed to happen, but politicians in DC are trying to stop them.

It has been reported that one of President Ronald Reagan's biggest regrets was agreeing to small tax increases 'now' for cuts in spending over time. The cuts in spending never came.

The same holds true today. Just last year Congress and Pres. Obama agreed to spending cuts in exchange for being able to borrow more money. Now they're talking about borrowing even more money and raising taxes in order to avoid those 'future cuts' from 2011.

It never ends.

Terry Jeffrey puts numbers to the madness, proving that government doesn't have a revenue problem, since revenue has actually increased - they just spend a lot more (and that 'more' amount continues to grow) than they collect.

According to Obama's OMB, federal revenues will be $2.57 trillion this year. In nominal terms that is about $1.58 trillion more than the $991.1 billion in federal revenue for 1989. Even adjusted for inflation, it is $830 billion more.

But, again, federal spending has grown faster. According to Obama's OMB, the federal government will spend $3.83 trillion this year, running a deficit of $1.27 trillion.

Adjusted for inflation, the $152.6 billion deficit of 1989 equals $268.4 billion in current dollars. That means the $1.27 trillion deficit Obama plans to run this year is almost five times larger in real terms than the deficit Reagan ran the year he left office naming the deficit as the only regret in his farewell address.

When Reagan left office in 1989, federal spending was 21.2 percent of gross domestic product. This year, the Obama administration plans to spend 25.1 percent of GDP.

The spending is growing faster than the revenue, which means even more borrowing to cover the expanding gap. Yes, this qualifies as 'stuck-on-stupid.'

And Boehner seems poised to agree to this instead of holding the line, not just for the conservatives who helped elect him, but for our nation and our children.

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies.

...

Leadership means that “the buck stops here.” Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.

That was Barack Obama in 2006 when he was a senator from Illinois and Bush was president.

Obama was correct then, but he - and just about everyone else in Congress - have succumbed to the spending addiction that hits individuals once they get to the logic-free zone of Washington, D.C.

Now we - and our children and grandchildren - are going to suffer, one way or the other, because those people we elect to represent us just can't make the hard decisions necessary to return fiscal sanity to the government. They keep kicking the can down the road, think the road will go on forever.

It doesn't - and that's where we are today.

For another perspective on this, be sure to check out this post by Tom Blumer at Bizzy Blog.