Student Loan Forgiveness Is Downright Daft

Upon checking my inbox this morning, I saw an e-mail from the campus student government saying that there would be a protest about student loans on campus. Apparently, this has been going on throughout the country today. As to why we should forgive student debt, the e-mail read like this:

"The higher education system in the United States is in crisis. College tuition has gone up more than 400% since the 1980s, an increase that has far outpaced inflation or household income. Corporation and unaccountable administrators are turning college and universities from sites of higher education into debt factories for Wall Street speculators. Tuition increases year after year, forcing students to choose between their education and crushing debt. As a college education becomes more important, it becomes less and less affordable."

I don't deny that college tuition prices are out of control. The statistics on student debt are anything but inspiring. However, when I saw that there was a "forgive student loan debt" movement that is actually picking up some momentum, especially after Obama's recent speech, I began contemplating the ramifications of this ill-informed proposal. A few things came to mind:

1. Students were not forced at gun-point to take out loans. They chose to take out the loans. Bearing the consequences of your actions is part of personal responsibility and should thus be incurred as a private cost, not a social cost. How is creating a social cost for private gain any different than bailing out the banks with TARP?
2. Taking out student loans is like any other investment. It comes with risks. Not only that, some jobs come with higher rates of return than others (see Oct. 2012 data I added after initial publication of this blog entry). A major in a low-yielding field such as Creative Writing or Gender Studies is not going to earn you nearly as much money as a field such as Engineering or Computer Sciences, which is another way of saying that a college degree does not automatically guarantee monetary success. When choosing a major, the individual should assess the costs, the current job market (e.g., median salary, job perks), and what skills would be transferable to another career path in the event that the currently desired career path takes a hit in terms of job quality and/or number of jobs available. 
3. Do you think that "debt forgiveness" honestly makes the debt disappear? For private loans, the government would be the one to reimburse the banks. For government loans, the student loans would just get added on the debt that is already over $15T and soaring ever-higher. In either case, the taxpayers, 70% of whom do not even have a college education, are footing the bill.
4. If this actually passes, it would negatively impact lending in this country. Interestingly enough, Jewish law dealt with this issue more than 2,000 years ago. In Deuteronomy 15, Jewish law dictates that every seven years, all loans will be forgiven. However, Jewish society was running into a problem. As the seventh year approached, rich people didn't want to make loans, and as a result, the poor suffered. What happened was that a legal fiction called the prozbul (פרוזבול) that essentially postponed the payment in such a way that protected the rich person's investments that still enabled lending to the poor. What the rabbis two millennia ago realized is just as relevant today. Banks would never want to issue student loans again if student loans were forgiven, even if it were just for this one time. And it's not just the banking industry that would be adversely affected. Think of how much more difficult it would be to finance higher education without loans.  
5. If you are going to complain that student debt cannot be forgiven under bankruptcy, which is a valid complaint, that is a matter of reforming bankruptcy law. Forgiving student loans would have no bearing on the law for future debtors. 
6. People have been taking out loans for houses, cars, and for many other reasons. Why should those who currently own student debt be forgiven when people have been paying loans for years? Paying loans is a part of life. 
7. Who is to say that this would be a one-time occurrence? This would set legal precedence to subsidize such consumer debt. If this ends up being a repeated policy, you will adversely affect the higher education market. Not only do you dealing with affecting the banking industry (See Point #4), but you distort consumer's decisions. Rather than take personal responsibility (See Point #1), the mentality will be "Oh, hey, I can go to whatever college and obtain whatever degree. If it doesn't work out, that's OK. The government will bail me out." Not only would individuals be risk-neutral, if not downright risk-seeking, but there would be a huge market inefficiency created.
8. My final reason is that providing a lump-sum transfer to debtors who need to pay off student loans does absolutely nothing to improve the higher education sector.

How does forgiving student loans address, let alone solve, any of the issues plaguing higher education? Student loans do not lower tuitions to make college more affordable. They don't increase the quality of higher education or deal with the declining value of having a Bachelors Degree. This call for debt transfer is nothing more than special interest politics. The only decision that ends up being more idiotic than actually forgiving student loans is permitting the government subsidies that allowed this tuition inflation to occur in the first place. The bailout mentality is one that will create an increased burden of debt and ultimately leave to insolvency. It would be fantastic if the politicians in Washington could understand this, but the recently-drafted H.R. 4170 would suggest otherwise.

Examining Arizona's Immigration Law As It Heads to Supreme Court

This must be the year for major Supreme Court cases. Tomorrow, the Supreme Court will be hearing open arguments for Arizona v. United States on the constitutionality of Arizona's immigration law, better known as Arizona's SB 1070. Governor Brewer's administration will be arguing that the measure is essential to fight illegal immigration, which disproportionately affects Arizona. Brewer is not arguing that the federal government doesn't have any jurisdiction, but rather that the state wants to assist the federal government in upholding federal immigration laws. The Obama administration is arguing that the federal government is the only entity that can enforce immigration laws, and that Arizona cannot "take the law into its own hands." The case will certainly set interesting precedent for what federalism looks like in modern-day America. In addition to the federalism argument, which is the facet in question, I want to take a look at a few aspects of the law that make me wonder not only the law's constitutionality, but also its effectiveness.

Federalism: The argument that the Obama administration is going to make is that the Constitution grants sole jurisdiction to the federal government. This, however, comes up against two main obstacles. The first is that the Supreme Court already ruled in Hampton v. Mow Sun Wong that regulating immigration is relegated to Congress per the Nationalization Clause in Article I, Section 8 of the Constitution. This point brings me to my second issue, which is Congress already passed a law in the United States Code, Title 8, Section 1357(g), as well as Section 1373(c), that the states can enter into agreements with the federal government to enforce immigration laws. The Brewer administration will essentially have to prove that they were not "going rogue" and instead prove that they were at least making attempts to work together with the federal government on immigration that would satisfy federal law.

Racial profiling: This is an issue brought up by those on the Left that actually merits reflection. They are up in arms that checking a suspected illegal immigrant for their proof of residency, per Section 2(B) of SB 1070, will lead to racial profiling. The Right will assert that there is nothing to worry about because the law explicitly states in Section 6(B) that one cannot discriminate based on ethnicity or national origin. The question is how the police officer would suspect someone of being undocumented. Since those who are undocumented are coming from "south of the border" and are Hispanic, the only distinguishing commonality of suspects is that they would be Hispanic. So unless I'm missing something key here, anyone who is Hispanic can potentially be harassed under this law, which is a violation of Equal Protection Clause of the Fourteenth Amendment. Although the de jure "color-blind" provision is in the law, there is no way that will take place in practice. Therefore, in this instance, I have to give kudos to the Left for the better argument.

Crime rates: The primary reason for enacting the bill was to lower the crime rates that were brought on by illegal immigration, and more specifically, the drug war in Mexico. The best way to determine the validity of this claim is to see Arizona's crime statistics. The U.S. Department of Justice provides a database that that dates from 1960-2010. Not only do they provide the number of crimes, but they provide the crime rate per 100,000 population, the latter of which accounts for population growth and proportionality. Upon looking at the statistics, they show that crime rates overall had been dropping in the latter half of the 2000s, long before any SB 1070 was passed. The overall property crime rate for Arizona hasn't been this low since the 1960s. Even with murder, rape, and theft, the rates have not been this low for a few decades. If SB 1070 was created to lower crime, that surely was a lousy reason to draft SB 1070. And if you were worried about a rise in illegal immigration, which SB 1070 doesn't even prevent, then you'll be equally disappointed by the recent study by Pew Hispanic Center that shows that net migration has not been positive since 2007.

Warrantless searches: Section 2 calls for warrantless searches if someone is suspected of a crime that could merit deportation. Especially since the bill puts an disparate impact on the Hispanic community, I hope it is self-explanatory how such a provision blatantly violates the Fourth Amendment rights of Arizonian citizens.

Economy: In addition to civil rights infringements, the bill also has brought about unintended economic consequences. I know everyone likes to talk about the "stopping suspected undocumented workers for identification" part, but then realize that the latter part of the bill has to do with labor regulation, mainly through the E-Verify program in Section 8(B) of the bill. The program is a database that requires employers to do background checks to verify the documentation of current employees. This provision not only translates into more red tape, regulatory costs and bureaucracy, but it either drives labor underground or out of the state of Arizona. The law requires employers to ask the government the permission to hire an employee. Considering that even if they did hire an undocumented worker, the act itself has no spillover effects. Whether or not the government likes it, the labor market has a high demand for such workers. More on the economic effects at this Cato Institute Daily Podcast.

Postscript: If proponents of SB 1070 think this bill has an effect on net migration via "attrition through enforcement," they must be dreaming. The recession and the Mexican Drug War are much bigger factors, which means its effect on illegal immigration is minimal at best. The claim for lowering crime rates because "undocumented Hispanics are causing crimes" is folly. This bill does nothing to address immigration reform, which is sorely needed. All the bill does is open the door for civil rights abuses and damper Arizona's economy. I'm hoping that the Supreme Court does the right thing and vote that SB 1070 is unconstitutional.

Government Projections on Social Security Take a Beating

The Social Security Administration (SSA) recently published its annual report for 2012. The single most important finding from this report is that the SSA will have exhausted its funds for Social Security by 2033 (p. 3). This is in contrast with the 2011 annual report, where the SSA only projected last year that we had enough funds until 2036. The biggest factor for hastening the exhaustion of funds is unquestionably the weak economy, although other factors include increased life span, more recipients, increased cost-of-living adjustment (COLA), and rising disability costs, the latter of which is putting a strain on SSDI to the point where the disability program is going to have its funds exhausted by 2016.

A few other perturbing findings from this year's SSA report:

1. The SSA ran a deficit a $148B in 2011, and is projected to have a $165B deficit in 2012 (p. 2).
2. Through the perpetual projection beyond 75 years, there are $20.5T of unfunded liabilities (p. 15).
3. The "actuarial deficit," which projects shortfalls in funding for the next 75 years, is slated at 2.67% of the total wage base, which puts the total wage base at $9.1T (p. 64). In layman's terms, this says that if we set $9.1T aside now, when it grows with interest over 75 years, we could pay off Social Security. Who has $9.1T lying around? The U.S. government surely doesn't have that kind of money. To add insult to injury, the "actuarial deficit" only a couple of years ago was at 1.92%, which means that the amount was only $5.7T (p. 3). 
4. In order for Social Security to be solvent for the next 75 years, the 2012 annual report projects that either there need to be alternate sources of revenue, benefits would have to be reduced 16.2%, or the payroll tax will have to be increased from 12.4% to 15.01% (p. 4).  

For those who are anti-reform, they tell us not to worry because we can sustain Social Security without cutting benefits. If they are looking at the same numbers that I am, the numbers clearly do not resonate for them as they do with me because they keep saying that Social Security is solvent. For anti-reformers, it's simply a matter of raising revenue, which is Left-speak for "let's raise taxes, especially on the rich." Ahhh, the good-old "tax-and-spend"method. Like I didn't see that one coming. 

And it's not merely the government figures themselves that bother me. It's knowing the fact that when the government projects something, such as the overstated benefits of Obamacare, it will most probably not be as good as it sounds. Even when the government says "Social Security exhausts its funds in 2033," we shouldn't be at all surprised if it collapses beforehand. Although 2033 might seem like the distant future, it will come before we know it. We are aware that this is a problem, and if we come up with actual Social Security reform, we can mitigate the issue. However, I have the unsettling feeling that politicians will simply kick the can down the road and screw over future generations.

It Would Be Sweet If the Government Stopped Regulating Sugar

"Government knows best." 

"Government must do something."

I hear it all the time. People think that the government is some omniscient, omnipotent entity that can solve our woes. The sugar industry doesn't get a pass. The government thinks it can manage sugar. "Sugar is a fragile commodity, so we need some form of protectionism." Or in a similar vein, "Sugar is causing the obesity epidemic. Government needs to step in and make sure people are consuming less sugar." I know this is going to shock some people, but not only is government intervention in sugar not necessary, but it's not helpful. What I would like to do here is look at two facets of government controlling sugar: the tariffs for Big Sugar and the attempts to control citizenry's sugar consumption. 

Sugar Tariffs

The American government has been regulating sugar since the inception of this country, and has continued ever since. Currently, the government imposes a tariff-rate quota on foreign sugar in hopes to protect the American sugar industry. For those who are familiar with economics, it shouldn't surprise us that as a result, U.S. prices are higher than the world average (note Tables 2 and 6 in USDA data). Higher prices do not only affect consumption. If prices are higher, then confectionary companies feel the need to move their production elsewhere since it's cheaper, which translates into less employment in America. 

As the International Trade Association, which is part of the U.S. Department of Commerce, released an indicting report against sugar protectionism. It was not simply the millions of dollars that this policy costs us, and that eliminating the program would provide us $1B per annum. My favorite line from the study is that economic literature "suggests that eliminating sugar quotas and tariff rate quotas and allowing sugar to enter the United States duty free would result in economic gains in the form of increased domestic food manufacturing production and U.S. exports, gains for consumers, taxpayer, savings, and a net positive effect on U.S. employment (p. 11)."

What we see right now is yet another example of "crony capitalism," or an instance in which Big Business colludes with Big Government. The only ones who benefit here are Big Sugar and the government officials who receive political contributions. If we do away with this protectionism, we not only help the food industry, but we also provide the consumer more affordable food.

Controlling Sugar Consumption 

It's simply not enough for the government to pick winners and losers in the market. There is also a call to "regulate sugar like alcohol." A sugar tax, or more specifically, a soda tax, is a "popular idea." Since the demand for sugar is highly inelastic, then a tax on sugar in going to be highly ineffective. Furthermore, you have to deal with unintended consequences, the primary one being that it will disproportionately affect the poor because they disproportionately consume soda. Plus, the effects of weight loss as a result of the tax have been marginal at best. 

Advocates for the soda tax have also not considered the substitution effect. In the off-chance that the tax is so high that soda becomes unaffordable, don't you think people will find something else to drink that will taste just as good and comparably unhealthy? If the government decides to heighten its crusade against sugar, won't people find substitutes, such as fatty or salty foods, because they want something just as tasty to eat? There are plenty of foods that can decrease overall health quality. How far will the government have to go in order to fight obesity? 

The causes of obesity are complex. However, does that mean the government should be thinking of increasingly invasive ways to regulate sugar? Of course not! It's not as if someone was forcing Americans to consume such high levels of sugar. Consumers consciously make those decisions. This is where freedom comes into play. In a relatively free country such as this one, we choose what we want to eat. What accompanies that choice is consequences of that consumption. If you want to stuff your face with fatty and sugary foods because it tastes better, that's fine. If your medical bills increase as a result, that is something you would need to deal with. In a free society, those costs would be private costs. We do have Medicaid and Medicare, which makes many of those costs spill over into society and turn into social costs (i.e., our health care system is not completely free). If we scaled back or completely eliminated these programs, sugar consumption would go back to being a private cost, which would make such regulations completely unnecessary.

Individuals are ultimately responsible for their diet, and as such, consumers should be informed of what constitutes a healthy diet. The Internet provides us a wonderful opportunity to self-educate. After a brief search, I found this site from Web M.D about healthy diets. It's easier than ever to find information, which minimizes the excuse of "information asymmetry." But again, this does not give the government the excuse to excise further taxes or come up with more failed ideas that make our government more and more intrusive. In a free society, one can complain about someone's dietary practices until the end of time, but that doesn't mean altering individual's consumption patterns and forcing one's idea of what a good diet onto society. 

It would be sweet for the government to stop finding new ways to regulate citizen's health and diet. Awaiting the Supreme Court decision on Obamacare makes me wonder about the direction of this country's healthcare system, but can't a guy dream for less government intervention in the meantime? Come on, gimme a break!

9-8-2014 Addendum: I would like to add this study from the American Enterprise Institute, as well as a recent report from AEI.

An Orange on the Seder Plate: Creating New Traditions in Jewish Law

During the Passover holiday, I managed to find myself in the middle of an argument as to whether adding an orange on the seder plate is "kosher." To provide a bit of background information on this custom, it started back in the 1980s by Susannah Heschel, a Jewish feminist scholar. Initially, Heschel wanted to but bread crumbs on the seder plate to communicate the notion "that there is as much room for a lesbian in Judaism as there is for bread crumbs on a seder plate." However, this would have caused problems because it would have violated Passover dietary restrictions. So instead, Heschel opted with an orange to symbolize the fruitfulness for all Jews when gay men and lesbians are free to be contributing members of Jewish society, as opposed to the oppression that comes with the current status of halacha (Jewish law), as well as what would be defined as the societal norms in [traditional] Jewish society (a.k.a. "heteronormativity") that puts homosexuals into a state of being that is akin to slavery. The orange has not only been a symbol for inclusivity of LGBT members of the Jewish community, but to keep in mind anybody else who is marginalized in a similar fashion. More on the custom can be read here.

In the midst of the argument, a traditionalist/Orthodox Jew, who happens to be a local, Jewish authority figure, said that "Having an orange on the seder plate makes as much sense as having a 'Vote for Scott Walker' flag on your seder plate. Making such a political statement is simply not halachic, and if you do it, it's as if you were no longer practicing Judaism." I'm going to set aside the irony of that statement for a moment, and going to ascertain whether such a practice is acceptable under Jewish law.

In Jewish law, adding an orange to the seder plate would have to be considered a custom (מנהג, minhag). Minhagim are practiced on multiple levels. Some are "universal" in nature, such as wearing the kippah. Others are practiced based on the sub-groups of origin, such as the Ashkenazi prohibition of kitniyot on Passover. There are certain minhagim that are practiced on the familial or even the individual level, such as the practice I developed of studying the character trait (מדה) of gratitude on Thanksgiving. The primary criterion for a halachically valid custom is that it does not violate Jewish law. Otherwise, it would be considered a "mistaken custom," or מנהג טעות.

The main objection of adding the orange to the seder plate [in the aforementioned argument] is that one cannot add to the seder [plate], because if you do, you are violating halacha. The word seder (סדר) literally means "order." In order for this claimed level of meticulousness to be true, not only would the seder plates have to have been homogenous throughout history, but also the seders themselves would have to be homogenous in nature. Another way of saying this is "If I end up finding historical deviations from what is considered a 'normal seder,' then the statement is false."

Let's start off with the karpas. Initially, celery was used, although many have been accustomed to using parsley as karpas. Furthermore, the Ashkenazi are accustomed to dipping karpas into salt water, whereas Sephardim dip their karpas into vinegar. There is a longer list of such variations, but it can be argued that variations do not take any of the actual steps of the seder out of its "well-defined chronological order." However, Passover traditions vary in more than in terms of the dishes themselves.

There are multiple Passover traditions that have been added to the seder itself. In North African Jewish communities, it is common to pass the seder plate over the heads of everyone at the table in a circular motion to represent the transition from slavery to freedom. Afghan Jews added the custom of whipping themselves with scallions to represent the slavedrivers' whips against the Israelites. Certain Polish Jews add a re-enactment of the crossing of the Red Sea. In certain Sephardic communities, it is customary for the seder leader to walk around the table three times and tap the heads of the guests as a way to bless the guests. There are other practices that are similar to these in terms of their uniqueness.

What do all of these practices have in common? They were additions to the tradition of the seder, and to be able to add such traditions is a well-established practice. To add an orange to the seder plate is anything but a violation of Jewish law. It is a 21st-century manifestation of the evolution in Jewish practice that has been occurring since time immemorial. For certain Jewish individuals, putting an orange on the seder plate is their way of making a connection between the Exodus of the past and making it relevant to the current state of [Jewish] society, particularly with the treatment of LGBT individuals. It is a reminder that because "we [Jews] were strangers in the land of Egypt," we shouldn't subject individuals to such marginalization. It is a message that I hope resonates so much that rather than treating individuals as "the other," we treat them as human beings.

Kvetching About Kitniyot

Given the meticulousness involved, one would think that the facet of Passover that annoys me most is Passover cleaning. However, I found one that tops Passover cleaning: the prohibition of kitniyot (קיטניות). On top of chametz (wheat, oat, barley, rye, and spelt) that cannot be consumed on Passover, kitniyot adds additional prohibited foods, including rice, corn, soy, lentils, buckwheat, sesame seeds, mustard, green beans, lentils, and sunflower seeds.

Since much food in 21st-century America is processed with either corn syrup or soy, it certainly makes me wonder about how excessive the prohibition is. For those who are vegetarian, such as myself, the prohibition seems all the more punitive.

It's not simply a matter of me having next to nothing to eat for Passover. The practice of kitniyot gets to me on a halachic level, as well. Some Jews prefer the mentality of "this is the way we have always done it, so I'm not going to even bother questioning it." Individuals like me, on the other hand, get a kick out of studying the legal history behind a given practice. Not only does finding out its origins give me a stronger knowledge of why we have such a practice, but I can better discern its legal status, which gives me the ability to figure out how much hold it has under the halachic system.

In the instance of kitniyot, we are dealing with a minhag (custom) practiced by Ashkenazi Jews. Prohibiting kitniyot never had a stronghold in the Sephardic community, and is thus permitted in Sephardic households. Reading the Encyclopedia of Jewish Food by Gil Marks gave me some insight into the origins of kitniyot (p. 315-317). The first reference to the advocacy of prohibiting kitniyot does not even come until the 13th-century in Sefer HaMinhagot. The practice did not even originate as a prohibition on Passover, but for the entire year since legumes were considered "the poor man's food," and in some communities, it was considered a food eaten during mourning. Some have considered kitniyot as being similar enough to chametz that adding the strictures of kitniyot was preferable to violating the prohibition of chametz. Some were worried that chametz would be mixed in with the kitniyot.

Then we have to look to see what rabbis in the days of yore had to say. Maimonides, for instance, said that kitniyot could never become chametz because it cannot become leavened, and kitniyot was thus permitted (Mishne Torah, Laws of Chametz, 5:1). Rabbi Josef Karo, who authored the famous halachic corpus of Shulchan Aruch, also permitted the consumption of kitniyot (Orach Chayim 453:1). Rabbi Samuel ben Solomon of Falaise called the prohibition a "minhag ta'ut" (erroneous custom), whereas Rabbeinu Yerucham ben Meshulam called the prohibition a "minhag shtut" (idiotic custom [without basis]).

How does one approach the prohibition of kitniyot? Normally, a minhag would be considered equally binding as rabbinic law (d'rabanan) or Biblical law (d'oraita). However, as Rabbi David Bar-Hayim brings up, the practice is based on the misconceived notion that kitniyot is assur (prohibited), as opposed to the reality of it being mutar (permitted). As such, a minhag that is based on error or foolishness (e.g., kapparot) can simply be dropped. Just because kitniyot is permissible does not mean that it's automatically "case closed." For those who consume it on Passover, kitniyot still has to be checked to make sure that the product doesn't have chametz.

If you want to not consume kitniyot because you feel that it is minhag avoteinu, Torah hu (the custom of our forefathers is Torah) or prefer the chumra (legal stricture), that's fine. I'm not here to dictate how you should go about celebrating Passover. However, the main point I want to convey is for those who want to or do eat kitniyot on Passover, there is legal permissibility to practice such a leniency.

Whether you eat kitniyot or not this Passover, I hope that you enjoy the holiday. חג שמח!

Addendum 3/10/13: I recently read a well-written article by R. David Golinkin of the Masorti movement, and this passage summarizes up the sentiment nicely: "There are many good reasons to do away with this particular custom. It detracts from the joy of the holiday by limiting the number of permitted foods. It causes exorbitant price hikes, which contradicts that 'the Torah takes pity on the people of Israel's money.' It emphasizes the insignificant (legumes) and ignores the significant (chametz from the five types of grain). It causes people to scoff at the commandments; if we observe this custom that has no purpose, there is no reason to observe other commandments. And finally, in Israel it causes unnecessary divisions between Askhenazim and Sephardim."