Two All-Beef Patties, etc.

The Boston Globe put this silly little bit online, illustrating the opportunity costs of the stimulus package:

The slideshow

("Opportunity Cost" is Econo-mese for "buyer's remorse.")

Some of it was just fluff: Billions of Big Macs, a Plethora of Pontiacs, Countless Converters, and my favorite - Uber-Tenure.  

Some of the alternatives were semi-serious:  Teachers' salaries for a decade, wiping out student loans, and Other.  Presumably, the "Other" category included making the world's largest Jell-O slide, establishing human colonies on Mars, and buying Sweden.

But look at what the graph reveals as the overwhelming preference of the fair and clearly unbiased readers of this ridiculous little slideshow.  Student loan forgiveness, according to the slideshow, would take up just over 2/3 of the stimulus package.  Ergo, the Jell-O slide would probably still be doable.

First, full disclosure: I am currently scheduled to pay off my education over the next 30 years.  Naturally, I am not unbiased, but think about this just for a second.  Millions of Americans paid too much for their education over the past 20 years (arguably, myself included).  All the consolidation and refinancing options that were once available are gone.  Private sources of education loans have dried up.  Any of this sound familiar?

Now, let's examine where the student loan issues depart from the housing boom issues.  We still have no idea how the Treasury and the Fed are going to fix the banks, and the President's new homeowner assistance program has yet to be fleshed out.  So who knows what the immediate effect (let alone the end results) are going to be?  On the other hand, I think we could pretty clearly predict the short term effect of wiping out student loans.  What would happen if suddenly millions of Americans had their student loans wiped out?  The answer to that question lies in the answer to this question: who are these people with the loans?  

They are young, entry level, fledgling professionals who can't find work in this economy and will probably defer or default on the loans.  Ergo, the government will be subsidizing them.  The ones who have jobs are probably barely making ends meet - they are eating at Wendy's, not Ruth's Chris.  The creme-de-la-creme, like newly-board-certified doctors and lawyers who just made partner, are watching practices wither in front of their eyes.  

On the "justice" side of the ledger, I would rather bail out people who over-optimistically borrowed to finance their education than people who speculated on a real estate bubble.  Bailing out real estate borrowers (and lenders) will unquestionably reward irrational behavior - borrowing (lending) more than you (the customer) could afford on the assumption that the asset will always appreciate.  At least students borrowed money on the slightly more reasonable assumption that more education generally leads to higher future earnings.  The US Department of Education is already on the hook for most of the money anyway - as the guarantor of many of the loans.  So it seems to me that we're merely bowing to the inevitable in a timely fashion, rather than riding to the rescue of the undeserving.

On the "practicality" side of the ledger, it would put disposable income in the hands of people most likely to spend it - young people.  The art history major pouring coffee might be able to afford to move out of Mom's basement.  The engineer who finally landed a job after a year of looking can afford the monthly payment on a reliable car to get to work.  And the snobby lawyer who just made partner can afford that country club membership.  You stabilize rents, get GM back into the manufacturing business, and equip a smoke-filled back room for deal-making.  I didn't say you had to like any particular economic outcome of the increase in marginal consumption; I covered "justice" in the previous paragraph.

("Increase in Marginal Consumption" or "Marginal Propensity to Consume" is Econo-mese for "$20 in my old jacket pocket?  B Double E Double R-U-N!")

Bottom line, wiping out student loan debt is the single most likely way to get dollars out of banks and into circulation in the "real" economy.  We all collectively benefit from having teachers, engineers, accountants and doctors - yes, even lawyers and art historians - in society.  Therefore, this type of loan makes the most sense - of any - to socialize.  As noted above, I am swimming in student loan debt myself.  But that doesn't change the facts or my argument.  And at least 1,000 other people agreed with me as of yesterday (closer to 5,000 as I finalize this), according to the survey.  But the Big Macs were tempting...