By Tom Ozimek
Economist Nassim Nicholas Taleb, author of the bestselling book “The Black Swan” that deals with the extreme impact of rare events, has criticized President Joe Biden’s student loan debt forgiveness plan.
Taleb, whose book argues that systems should be designed to be “antifragile” and build resilience when subjected to stress from adverse events, said in a post on Twitter that the cost of Biden’s “debt jubilee should be borne by universities, not taxpayers.”
The White House says Biden’s student loan forgiveness scheme is estimated to cost $24 billion per year, or $240 billion over a 10-year period. Projections by the Penn Wharton Budget Model and the Committee for a Responsible Federal Budget put the figure at between $330 billion and $500 billion over a decade, respectively.
Under Biden’s sweeping forgiveness plan, taxpayers will absorb up to $10,000 in outstanding student debt for individual borrowers earning less than $125,000 per year or $250,000 for married joint filers.
Republicans have panned the debt wipeout as unfair to people who sacrificed to pay off their student loans or never racked them up in the first place but now have to foot the bill for other people’s debts.
“President Biden’s student loan socialism is a slap in the face to every family who sacrificed to save for college, every graduate who paid their debt, and every American who chose a certain career path or volunteered to serve in our Armed Forces in order to avoid taking on debt,” Senate Minority Leader Mitch McConnell (R-Ky.) said in a statement.
“This policy is astonishingly unfair,” McConnell added.
Taleb did not weigh in on the fairness of the forgiveness scheme itself but aimed his criticism chiefly on the U.S. education industry.
The economist said in a separate post on Twitter that “middle class parents were tricked & fleeced” by the implicit promise that a U.S. college degree would guarantee a good job.
“If a U.S. college degree appears to be useless, it is by design,” he said, arguing that liberal arts degrees amount to “training for upper class free men (liber) who were above having a profession.”
Vocational and professional schools, on the other hand, are meant to prepare people to take on jobs that pay money, he added.
Taleb’s remarks that universities—rather than taxpayers—should bear the cost of the student debt jubilee dovetails with the view that it’s unfair for America’s working class taxpayers who didn’t go to college to have to pay for the student loans of those who racked up debt for advanced degrees that have proven of little value on the job market.
It’s a view McConnell echoed in his statement, in which he said that “experts who studied similar past proposals found that the overwhelming benefit of student loan socialism flows to higher-earning Americans.”
Countering claims that the debt forgiveness benefits higher-income individuals while putting the cost burden on working class Americans, the White House has said that “no high-income individual or high-income household—in the top 5 percent of incomes—will benefit” from the student loan forgiveness program.
The Penn Wharton Budget Model confirms the Biden administration’s position that none of the benefit will go to the top 5 percent.
However, the Penn model also estimates that between 69 percent and 72 percent of the forgiven debt accrues to borrowers in the top 60 percent of the income distribution.