Thursday, December 31, 2015

Why Bernie Shouldn't be President in One Tweet

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?

— Bernie Sanders (@SenSanders) December 26, 2015

For those who are not familiar with how interest rates work, home mortgages are secured loans meaning that they can take your house if you don't pay. You can't even get a mortgage without showing the bank that you are able to pay (that rule was relaxed during the first part of the 21st century which led to the Great Recession). College loans are unsecured and are given to students in the hope that they will complete their degree and use it to get a job that allows you to repay the loan. People default on college loans far more often than they do on mortgages. That is why mortgage rates are much lower. The higher rate for college loans pays for the people who default.

You would think that a member of the senate and a leading candidate for President would understand how these things work. In fact there is a good chance that Bernie is aware of all of this and rejects it. That's what being a socialist means: You ignore economics and order things the way you think they should work.

If Bernie had his way then the government would lose money on student loans (Obama already decided that it was immoral for banks to profit from student loans and nationalized them). If Bernie wants to subsidize student loans then he should say so instead of making false comparisons.

It doesn't really matter if Bernie doesn't understand basic economics or if he rejects it. Either would be disastrous in the President of the United States.

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