Debt Relief Is Bad Means Testing |
January 22nd, 2013 |
ea, money |
The "give people money and they will be better off" approach is a good one, but who should get the money? Student loan forgiveness primarily helps people who went to college; what about people who couldn't afford college in the first place, even without loans? People with mortgages to forgive are people with houses, but lots of people are too poor to own. The "has debt" criterion is not a good proxy for "needs our help".
If we're going to give people money, the government would do better to expand the EITC (or institute a negative income tax). Individual donors would do better with unconditional cash transfers with targeting like "people in Kenya with thatch roofs". Targeting based on "do you have debt" is worse than our societal default of "is your income below $X".
[1] A major lender in itself.
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