As this is a big political news item in the US regarding a government policy:
I’m assuming this would please the young in general, but upset capitalists and the wealthy (capitalists think debt should be repaid, the wealthy see their taxes going to bailing out people who got into debt).
The big question is how it would impact poverty, and the poor. One could make the argument that the truly poor did not get loans to go to colleges/universities, so they would be angry at their taxes paying off the debts of the middle-class students?
But if the policy is targeted correctly, it would reduce poverty for those who would otherwise be stuck with large debt?
And I suspect it would also be a boost to inflation, as people who expected to be in debt now have more spending money.
Perhaps impacts on Poverty and Poor could depend on Education? If you have high Education, that would suggest most of the country are going on to higher education, including lowest incomes, even if they can’t afford it. So high Education rate would mean the Poor are happier with the policy? Perhaps a good start is having the opposite effects to Graduate Tax? It would also need to increase national debt a bit too.
Is Poverty linked to Low Income? Because, if so, a temporary rise for Low incomes should cover the impact to Poverty.
This does then make me wonder if University Grants should reduce poverty as education increases - since more people are going to uni and leaving without massive debts?
Inflation impact is trickier, because IRL it depends on what the “extra” money is being spent on by those benefiting from it. If the debt forgiveness simply makes it easier for people to buy essentials and pay bills without going into further debt, then it’s going to have minimal impact on inflation, whereas, if it is just more spending money for the middle class, that will see inflation rise a bit. I guess that in terms of game mechanics, Inflation increase would be proportional to _inv_PovertyRate.
Well technically if all it does is make it easier for people to buy products they already buy (essential items), then that still means that (absent some change in supply) the price of those goods can then rise, which would cause inflation still.
Ultimately, government debt forgiveness is no different to quantitative easing, except instead of handing taxpayers money (probably future taxpayers…via debt) to people who own stocks, it hands it to students and ex students.
IMHO both policies make no sense. They are incredibly poorly targeted ways for the government to funnel money to vague groups. It would be better for the government to spend that money on investments that will definitely pay off, such as better infrastructure (schools/hospitals/roads)
Oh that’s cool !
This mod could address the shortcomings of a “low” or non-existent college scholarship policy and a “low” or “average” public school funding policy. In Belgium, university fees are generally between 300 and 600€, and are sweetened if you have a scholarship (but university funding is not optimal, so the infrastructure is not quite efficient).
In the US, those who cannot take out bank loans for their education can do so through a public agency. Biden has proposed that student debt repayment should be doubled for all those who have taken out government loans, the poorest of them all.
This may increase the income of the young and poor a little bit and make them happy. But I believe that these effects cannot be as great as indirectly if we effectively finance university scholarships, education, health and culture, and social assistance, all together reducing unemployment by rebound effects.
It seems to me that this is a political decision made in an attempt to repair a historical mistake, that of having built an extremely unequal educational system, obviously generating a perpetuation of precariousness, preventing a part of the people from emancipating themselves. It is also a system where education is structurally built to be the launching pad on the job market, with the salary serving to repay its debt. You have to calculate your move ahead of time haha. But for me university is not about producing turnkey workers ready to serve in the “job market” ^^. I think the best thing would have been to make sure that these debts don’t exist.
But now, if the repayment is high enough, it can clearly change things and give much more bargaining power to workers and job seekers. And it can generate new business creation through innovation by those who could start up on their own, free of debt.
The danger with both student debt repayment and quantitative easing is that the corrective measure is “too little, too late” : if it’s too late, we need to put a lot of money on the table. If it’s too little, it’s better to do it early before the problem gets out of hand
I think its interesting that the debt forgiveness happens at the same time as the hilariously named ‘inflation reduction act’. Both of these seem to pump more disposable income into a market with fixed production so… higher inflation!
Politicians seem very focused on demand side economics and never supply. The best way to solve inflation is to boost productivity, and increase supply.
The trouble is, as the game shows, it is very hard to correctly design policies that improve productivity, especially in the short term. Any politician that increases the skill level of the workforce, or boosts adult education and retraining will definitely be retired by the time the fruits of those policies become clear