The Libertarian Case for Debt Forgiveness

One of Leftist Jill Stein's proposals as running for president is to forgive student loans, where those who took out student loans don't have to pay them back. Dr. Stein's way to handle this is by engaging in quantitative easing (political speak meaning "counterfeiting" in plain and honest English) by having the government print trillions of dollars or so and make up the loans that way, as opposed to getting the money back by having those who took out the loans pay them back. This "solution" is utterly immoral and only a statist, ignorant in the laws of economics (or an evil opportunist who understands the law of economics) would advocate it. The way to forgive student loans is NOT to make the majority of the population poorer by inflating the dollar even further, thus decreasing people's purchasing power. If this is the only way government would forgive student's debt, then the debt should not be forgiven. There is however a moral way to forgive student loans and that is for the government to simply say, "We cancel all debts those who took out student loans gave us. From now on, no person has to pay back the loans." It's unlikely the government would ever actually do that, but it would not be unlibertarian if they did.

First of all, voluntary debt forgiveness is perfectly compatible with libertarian principles. If I borrow money from someone and promise to pay him back with interest, if for some reason the lender says that the borrower doesn't have to pay him back there is nothing wrong with this. It is wrong to force someone to cancel any debts owed to them, which is why bankruptcy laws are not compatible with libertarianism, but voluntarily cancelling debts owed is. If the government is the one who lent out the money and is owed it back, if the government decides to voluntarily cancel the debts that is similar to an individual saying, "Forget it, you don't have to pay me back."

Now some may say that the government has no money of its own and that the taxpayer was forced to loan the money out so canceling the debts is stealing from the taxpayer, but that is not true. Once government taxes people the money goes into the bureaucratic black hole and is destroyed. If you think that the same taxpayers who were forced to give student loans to people will get the money back, you are deeply naive. The reality is that the government will not give the taxpayer a check in the mail with a note saying, "This is your part of the loot," but would pocket the money themselves and use it for their own purposes. Therefore not paying back student loans is not stealing from the taxpayer. At best, it's stealing from the government.

I would go further and say that not only is debt forgiveness (if the debt owed is to the state) fully compatible with libertarianism, so is a person who refuses to pay off their student loans. There have been cases of people who flee to go to Europe in order to not pay back their student loans. I'm on their side. Good for them. 

The state is a bunch of thieves. Suppose for example a bunch of thieves rob a bank and say to someone on the street, "We will give you some of the money we stole from the bank if you pay us back with interest." Suppose such a person agrees and then welshes. Did the person do something wrong? I would say no since he didn't steal from anyone. The bank robbers are the thieves and hence the money they dole out is not rightfully theirs. Since they shouldn't have such money in the first place anyone who "steals" from them is not really a thief. Theft is taking money from someone to whom it belongs and to give it to someone to whom it does not belong. The money the bank robbers stole does not belong to them, so anyone who takes the money from them is not stealing. In fact, taking money from a thief teaches the thief that theft does not pay and is a moral thing to do. "Stealing" from a thief is perfectly ethical, as long as what you steal is not rightfully his. If someone stole a car but didn't steal his home, it would be wrong to steal his home, but not wrong to steal his car. Since the government is a thief, taking as much as you can is perfectly moral. The more money taken from them, the less money they have to bribe people with stolen goods, hire goons to lock people up for victimless crimes, and hire soldiers to bomb strangers in foreign lands. 

Now that I've explained why canceling student debt (or even people in debt to the state refusing to pay it back) is perfectly compatible with libertarian principles, let me briefly explain another benefit of the state engaging in debt forgiveness.

If the government engaged in student loan debt forgiveness, what would be the likely result? The likely result would be that private insurance companies would cease to loan out money to the state, knowing that it won't be paid back. The way the college and university scam works is that the state takes out loans from "private" insurance companies at an interest rate of 2%, then the state sells the loans to students at a higher interest rate, such as 6.8% for graduate students. If the insurance companies see the government forgiving student loans to pretty much everyone, it seems unlikely such companies would continue giving out loans, for fear that they wouldn't be paid back. One possible result of this is the government no longer giving out loans to people, making it where college and university tuition is no longer artificially subsidized by the hapless taxpayer. As a result of students being denied loans, the price of college would have to fall where supply meets demand in order to induce people to go to college. With no student loans, students couldn't afford to pay for college and universities at the artificially going rate, so colleges and universities would have to lower their prices to be at the actual market rate.

In other words, canceling debts "owed" to the state is perfectly compatible with libertarianism. It also has the added benefit of making schools cheaper, instead of at the artificially inflated prices they are at now. I also advocate government defaulting or repudiating the debt they owe other people for the same reason. And if you lend money to the state, you lend money to a group of liars and thieves, so you deserve to be screwed. Perhaps that will teach you to not lend money to the biggest criminal syndicate around, and only lend money to peaceful, honest people in the future.