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  • COMMENTARY: The Three Amigos Of Economic Destruction

    As I listened to the rhetoric coming out of the most recent Democratic presidential debates, one word sticks out and terrifies me. Both Bernie and Hillary, when speaking about new programs, use one word that I’ve heard before that was the precursor that almost brought the world economies to their knees.

    Both Democratic candidates, when speaking about free college tuition and healthcare, use the word “right.”, as if everybody in the nation has a right to unlimited healthcare and unlimited education.  We know that Democrats have a difficult time in accurately estimating the cost of anything, just look at Obamacare, so when Hillary says that the right to free education will cost $350 billion over the next 10 years, she is just wrong, and she is lying to the American people.

    According to the National Center for Education Statistics (NCES) for the academic year 2010 and 11 the total amount of money spent in both public and private institutions for tuition, room and board, was just under $400 billion for the year.  That would mean if tuition, fees, room and board, do not go up in the next 10 years the total cost over the 10 years would be about $4 trillion, not anywhere near the $350 billion Hillary and Bernie are talking about. Perhaps the Democrats are misleading Americans as to who will get free college and who will not, or they have no idea what it actually cost. What do you think?

    A new federal program that offers $35 billion a year would only cover about 8% of the college expense, assuming no increase in college costs over the ten years. They both claimed that the rich 1% must pay more income taxes to offset the budget shortfall caused by the right of free college. If the Democrats truly want to make college free, then in reality, we’re looking at a $4 trillion program not $350 billion. With the current budget at approximately $4 trillion a year, this educational program could in fact be the most expensive right benefit in the history of the country. The true cost to provide free college is 12 times what they have projected. Just how silly is Hillary’s projection?  Well, given current costs, Mrs. Clinton’s entire 10-year projection of cost would be eaten up in less than 11 months of the first year.

    The last time the Democratic Party said that Americans had a right it almost destroyed the world’s economy. President Clinton signed into law the community lending legislation that was designed to make housing more affordable for the poor and required lending institutions to set aside certain amount of money to lend to poor families. Two Democratic Congressmen and one Democratic Senator were responsible for almost bringing the world’s financial markets to its knees because they felt that every American Family has a right to own a home. The three amigos were Maxine Waters, Christopher Dodd, and Barney Frank.  These three legislatures demanded that the Presidents of Fannie Mae and Freddie Mac must make more loans so that every American could have a home regardless of their ability to pay the loan back.  Ms. Waters said that she didn’t care if the loan could be paid or not, poor people had a right to a home.’ In fact on September 2, 2011 “Maxine Waters said,  “Government should extort banks to make mortgages affordable.”

    The only way that lenders could have the ability to raise enough money to fund mortgage programs was through the process of securitization, lenders would sell the loans in packages and generate more capital to make more loans.  A lot has been said and written about the abuse that took place in the mortgage market that almost led to the collapse of all the worlds’ economies.  Go see the movie the Big Short to see how this played out. Our three amigos started the ball rolling and now new Amigos what to try it again with college loans.

    The assumption of the original Three Amigos we’re flawed, just as the assumptions of the new amigos, Sanders and Clinton are also flawed. College debt has exploded for various reasons the principal reason is that it’s taking 5 to 6 years to earn a four-year degree.  The Federal Reserve Bank of St. Louis reports that almost a third of all outstanding student loans are delinquent. The Bank also reports that the class of 2015 graduated with the highest debt in the history of higher education at over $40,000 per student.  Of course if you go on for Masters or PhD the cost of credits are much more expensive and it would not be uncommon for an individual graduating with a Masters degree to have student loans of between $80,000 and $100,000.

    So, you two new amigos have so blatantly underestimated and misled the American people as to the cost, it will require the issuance of bonds secured by these loans in order to have a pool of capital large enough to fund 400 billion dollars college expense on an annual basis.  These loans like the mortgages before them will be packaged and sold as safe and secure investments.  At the height of the mortgage collapse according to the Federal Reserve Board the delinquency default rate on residential mortgages was 10.2%.

    As was pointed out above, approximately 30% of all student loans are delinquent and if the students can’t make the payments the government will have to step in and bailout the bondholders, or let the government guarantee bonds go into default and investors loose their investment.  Let me ask the two amigos, “are student loans the next “to big to fail” institutions?”

    My dear two amigos we have been down this path before when Democrats wanted to institute a program of providing something for everybody, a right and the rest of us we’re left with cents on the dollar.

    The American people know that Democrats hearts are in the right place, we know it sounds great to say, “You have a right and we are going to give to you for free.” The problem is that Democrats were out protesting while the professors we’re teaching mathematics.  For some strange reason they just don’t do math very well. America needs new leadership that knows how to add.


    Dan Perkins

    Dan Perkins is a novelist who has written a trilogy on a terrorist attack against the United States. The Brotherhood of the Red Nile series is available at Amazon.com. Mr. Perkins book web site is www.danperkins.guru.

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