Governments are Not Households

[craigr]

I wonder how much the 50,000 Vietnam war draftees who died would pay in taxes to get their lives back.

How'd they fund Vietnam anyway? How'd they fund Iraq? You are mixing issues. They were all funded with deficit spending. How many times have I heard Keynesian economists imply that wars/destruction were good stimulus for an economy? Too many to count.

Government debt will have repercussions. Always has and always will. It's an immutable law of the Universe really. I just don't see it ending in anything but tears.

[moda0306]

Craig,

I'm not mixing up issues.  People today lament about the ever-expanding role of government, but forget that for over a century the government could force men to fight in war at gunpoint.  Other injustices reinforced by government were wide-spread.  This idea that government is consuming our lives is a joke to those who were forced to give their lives, or those returned to their southern slaveowners, or the women who couldn't own property unless a man gifted it to her.

This part isn't about Keynesianism so much as the role of government.

Further, one can be Keynesian and still favor small government.  Even if all our government did was run the military, build roads, and police our towns, one still could argue to have the government invest more in those roles during recessions than during full employment.

It's a counter-cyclical thing, not a big government thing.

[Pointedstick]

If you want a better example, the student loan crisis is one of the biggest examples of damaged private sector balance sheets whose direct root cause is the government.

Many of the student loans were explicitly made by federal agencies, while the remainder were made by private banks but explicitly guaranteed by the feds. Furthermore, the loans are not dischargeable in bankruptcy. What's the downside to lending $80,000 to a liberal arts moonbat if they can't get rid of it through the normal channels and government will make up the difference anyway even if they become quadriplegic and a bankruptcy judge has pity on them?

In any event, Obama nationalized the previously government-backed student loans anyway so now they're all issued by government agencies that hand the money out like it's candy.

As a result, the outstanding balance on student loans recently exceeded credit card debt. In a true free market, it would be insane to loan money to people wanting to major in subjects with few to no career prospects. But what does the government care? It's got a printing press and a mandate to increase college tuition costs enrollment rates!

[stone]

To me the key problem is government initiatives to expand private sector debt. It looks as though Craigr is saying that that is bad and shows government is bad whilst Moda is saying that that is bad and shows that the private sector finance industry is bad. Its a chimaera of the finance industry and government.  From what I can see, the financial institutions would have been a lot less reckless in making unpayable loans if they were unable to securitize them and pass them on using government schemes.
I think the government gets embroiled in this kind of mess because politically we don't face up to the requirement to direct tax only at where it doesn't constrict the real economy (ie tax asset values). If the taxes were not on jobs then people could afford an education and housing without going unrealistically into debt. Probably the private sector would then make a better job of providing what we all need and so the government would be less compelled to fill in the gaps left by private sector failings (such as destitute, uneducated, people, poor transport and utilities, lack or research and investment, you name it).

[moda0306]

The subsidized student loan market is a result of a compromise between liberals who think that education should be accessible to all, and conservatives who don't want to lay for it.  Basically, now conservatives are pointing at them, crying socialism, and basically saying students should be on their own.  Liberals point at them, crying lack of opportunity and middle-class burden, and think cheaper education access, not every student for themself, is the answer.

Basically, any bastardized abhoration of both private and public activity is going to result in problems.  However, I don't think education being a huge burden to students is conducive to a growing middle class.

[Benko]

However, I don't think education being a huge burden to students is conducive to a growing middle class.

Has it occured to you that a college education as college is currently implemented is not anywhere near optimal for training a significant percentage of the population e.g. many blue collar jobs.

OTOH it does ensure a steady supply of people indoctrinated in progressive thought, and helps keep college professors off the street.

[Pointedstick]

The subsidized student loan market is a result of a compromise between liberals who think that education should be accessible to all, and conservatives who don't want to lay for it.  Basically, now conservatives are pointing at them, crying socialism, and basically saying students should be on their own.  Liberals point at them, crying lack of opportunity and middle-class burden, and think cheaper education access, not every student for themself, is the answer.

Basically, any bastardized abhoration of both private and public activity is going to result in problems.  However, I don't think education being a huge burden to students is conducive to a growing middle class.

You're absolutely right! But I don't find it terribly helpful to make distinctions between republicans and democrats in situations like these. Conservatives prefer it to go through the private sector, while liberals prefer the government to do it itself, but the end result in this situation is the same no matter who gets their way: bad loans get made to uncreditworthy people, driving them into debt peonage and bidding up the price of the good or service they needed a loan to be able to afford in the first place.

Both parties deserve blame for the disastrous situation we find ourselves in where a 4-year college degree costs more than a house and unserious students with no prospects can borrow more than they ever have any realistic ability to repay. That's why I blamed "the government" rather than either political party. 

If you want to expand educational opportunity (a goal widely shared, including by many conservatives), the absolute worst way to do it is to tilt the playing field so as to encourage uncreditworthy people to take out government-backed loans. It never ends well!