Yesterday, the Democratic candidate for President of the United States, a long-time member of the United States Senate, tweeted this message to his “followers,” and also, given the nature of Twitter, the nation:
“You have families out there paying 6, 8, 10 percent on student debt but you can refinance your homes at 3 percent. What sense is that?”
Now, if you don’t instantly recognize why this is an astoundingly ignorant statement, especially for a Presidential candidate running on a platform of economic restructuring, that’s okay. Don’t feel badly. It’s a weekend, you’re probably groggy from all the holiday cheer, and most important of all, you aren’t presuming to hold yourself out as qualified to be President, or constantly lecturing about the evils of capitalism. Sanders is, however, and this cretinous statement is signature significance. Nobody who understands loans, interest, collateral, banking, or economics would say, write or publish such a fatuous statement, even once. This is signature significance: an informed, logical, attentive, competent individual will not make such a bone-headed mistake…never. Sanders, however, has said this at least twice; in October, he tweeted a variation on the same economically ignorant theme:
“It makes no sense that students and their parents pay higher interest rates for college than they pay for car loans or housing mortgages.”
Actually, it does, Senator; it makes perfect sense, unless you are twelve. The concept is called “collateral.” That is something of value that a lender can take if a borrower defaults on the loan. The deal is interest, plus security, the collateral. A house or a car are tangible collateral, so the interest rate can be lower. When the loan is for college tuition, however, there is no collateral. If the borrower defaults on the loan, the bank can’t take the student’s diploma, or education, or download all of the alleged knowledge the loan paid for from brain to laptop. Of course the interest rate is higher. That is, “of course” if you know anything at all about finance.
The unavoidable and shocking conclusion: Sanders is holding himself out as the leader to revolutionize how the U.S. economy works, stimulate growth and jobs, and show the way to a fairer and more just financial system, yet he is stunningly uninformed about the basics of finance, hasn’t learned a thing in all his years in the Senate, and worse, lacks the diligence to learn what he has an obligation to understand in order to justify having a vote on economic matters in the U.S. Senate, never mind setting policy as President.
This is bad.
Is there any excuse or defense for that tweet? No. Should anyone trust an elected official this ignorant and so lazy and arrogant that he makes no effort to disabuse himself of financial illiteracy? No. Does such a bone-brained misunderstanding mean that no intelligent person should listen to or take seriously any of his pronouncements about the economy? Yes.
To be fair to the Senator, let’s try to find some explanation for this that doesn’t prove that he couldn’t pass Economics 101 at a community college: Continue reading →
I’ve been reading and marveling at Robert J. Samuelson’s commentary on economic matters for decades. He lacks the panache of George Will, the certitude of E.J. Dionne, the passion of Charles Krauthammer, the comforting wishy-washiness of Kathleen Parker, and the partisan alliances of almost everybody. He’s just smart, articulate, observant scholar who gives his readers a sharp and objective analysis that often defies conventional wisdom. He annoys conservatives and liberals in equal measure, and I suppose is not a scintillating presence, since he is almost never on TV talking head panels.
Ethics Alarms 