Year of Jubilee and Debt Forgiveness

[TGHusker]

Here is a very interesting article.   Should we take the old Middle East and Old Testiment Biblical approach to debt forgiveness in our society - a jubilee - forgiveness of debt?

Several of the Dem presidential candidates believe there should be debt forgiveness for school loans.  Bernie believes their

should be debt forgiveness for medical bills.  Others, in the article, bring up mortgage debt forgiveness for upside down

home owners.   Others propose 'equity based' home financing and also 'equity based student financing' in this article.

 

There are those in the article that argue that debt forgiveness would actually help the economy.  My only question is - what about those organizations to whom the

debt is owed??  How are they 'made whole' and not hurt by such an exercise?

 

Back when I was much younger, we practiced a sort of jubilee on the farm - the diverted acres program (prior to 1973 I believe).  Yes that was a govt program

to keep corn, oats, etc prices up but it also gave the soil a 'rest'.  We didn't deplete the soil year in and year out with the same crop.

Now we cultivate every acre possible but counter the over use wt massive amounts of chemicals, etc. 

 

 

 

 

https://finance.yahoo.com/news/5-000-old-plan-erase-100000406.html

Some Quotes:

 

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In ancient Babylon, a newly enthroned king would declare a jubilee, wiping out the population’s debts. In modern America, a faint echo of that idea -- call it jubilee-lite -- is catching on.

Support for write-offs has been driven by Democratic presidential candidates. Elizabeth Warren says she’d cancel most of the $1.6 trillion in U.S. student loans. Bernie Sanders would go further -– erasing the whole lot, as well as $81 billion in medical debt.

But it’s coming from other directions too. In October, one of the Trump administration’s senior student-loan officials resigned, calling for wholesale write-offs and describing the American way of paying for higher education as “nuts.’’

Real-estate firm Zillow cites medical and college liabilities as major hurdles for would-be renters and home buyers. Moody’s Investors Service listed the headwinds from student debt -– less consumption and investment, more inequality -- and said forgiveness would boost the economy like a tax cut.

While the current debate centers on college costs, long-run numbers show how debt has spread through the economy. The U.S. relies on consumer spending for growth -– but it hasn’t been delivering significantly higher wages. Household borrowing has filled the gap, with low interest rates making it affordable.

And that’s not unique to America. Steadily growing debts of one kind or another are weighing on economies all over the world.

The idea that debt can grow faster than the ability to repay, until it unbalances a society, was well understood thousands of years ago, according to Michael Hudson, an economist and historian.

Last year Hudson published “And Forgive Them Their Debts,’’ a study of the ancient Near East where the tradition known as a “jubilee” -- wiping the debt-slate clean -- has its roots. He describes how the practice spread through civilizations including Sumer and Babylon, and came to play an important role in the Bible and Jewish law.

Rulers weren’t motivated by charity, Hudson says. They were being pragmatic -- trying to make sure that citizens could meet their own needs and contribute to public projects, instead of just laboring to pay creditors. And it worked, he says. “Societies that canceled the debts enjoyed stable growth for thousands of years.’’

Forgiveness was good for the economy, would be a modern way of putting it. In an October paper, Moody’s examined how that might apply if America writes off its student debts.

Moral Hazard?

There would likely be a “modest increase’’ in household spending and investment, and eventually higher rates of home-ownership and business-formation, it said. Buying up student loans would increase the government’s own debt -- but “only marginally,” since it already owns three-quarters of them. After that one-time hit, budget deficits each year would be slightly bigger because of the lost revenue from loan repayments, equal to 0.4% of GDP in 2018.

Critics usually raise two key problems with debt forgiveness. One is about fairness. The other is known as “moral hazard’’: Will write-offs today lead to more reckless borrowing tomorrow?

These questions “need to be carefully thought through” for student loans, says William Foster, a senior credit officer at Moody’s and the report’s lead author. “Who would benefit, who would miss out, what attempts at equal treatment there should be.’’ Any plan would also have to address “what the situation would be for the next generation of students with regard to accumulating debt,’’ he says.

Sanders and Warren plan to remove moral hazard by making state college tuition-free. But they’ve caught flak on the fairness question.

 

 

 

 

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Forgiveness isn’t the only big idea out there for reducing the economy’s reliance on private debt. Another one is to pay for things like homes or education with instruments that look a bit more like equity, and less like debt.

Mian and Sufi suggested a type of mortgage in which the lender shares risks if prices fall, and rewards when they rise. Some lawmakers, educators and investors are applying a similar model to college financing too.

Mitch Daniels,(TG: who I think the GOP should have as one of the possible candidates to replace Trump)  head of Purdue University and a former Republican governor of Indiana, is one of the champions of Income Share Agreements. They work like this: investors fund students, and get repaid -– hopefully with a return on their equity –- when graduates start earning the higher wages that a degree should bring.

Hudson, the historian, also says equity-financing is better. But he thinks the government should play a role. In a 2018 paper with Charles Goodhart of the London School of Economics, he proposed public-equity funds to help first-time home buyers, students and small businesses. By edging out debt-financing, the authors argued, it could be a modern version of the ancient jubilees.

“The fact is, debt causes instability for a society,’’ Hudson says. Another lesson he’s drawn from studying credit over thousands of years: “Debts that can’t be paid, won’t be paid.’’

 

 

[funhusker]

Can I request another option for each?

 

College: Forgiveness for approved programs at state universities.  (e.g.: Wildlife Management as part of a National Parks Restoration Bill, Structural Engineering as part of an infrastructure bill, etc...)

 

Medical:  Forgive medical bills for non-elective procedures and preventative care for people below a certain income level.  Provide these services for free from now on as part of a new MFA type legislation.

 

That's how I'd like to vote.

[TGHusker]

1 hour ago, funhusker said:

Can I request another option for each?

 

College: Forgiveness for approved programs at state universities.  (e.g.: Wildlife Management as part of a National Parks Restoration Bill, Structural Engineering as part of an infrastructure bill, etc...)

 

Medical:  Forgive medical bills for non-elective procedures and preventative care for people below a certain income level.  Provide these services for free from now on as part of a new MFA type legislation.

 

That's how I'd like to vote.

Now edited wt your additions

[Ratt Mhule]

These policies would be the equivalent to a tax cut for the rich only for the middle class.  Only it would actually boost the economy.