Bill Poulos is an investor, financial educator, and the president of Profits Run, Inc. The company gives investors the tools to make proper trades with minimum risks. Bill shares his investing experience with many online platforms, like this article on Medium. Below, Poulos gives insight to the proposed “Sanders Plan.”
It seems that politicians are set on coming up with ways to eliminate the ever growing student debt our country’s young adults are incurring. Bernie Sanders has now announced his own “Sanders Plan” to eliminate student loan debt, just a week after Elizabeth Warren introduced her reduction plan. While Warren’s plan forgives $50,000, depending upon your income, Sanders’s plan aims to eliminate student debt – completely.
In the “Sanders Plan”, all $1.6 trillion in student loan debt would be forgiven under one new legislation. Sounds like a dream come true, right?
That is, unless you are the one paying for it.
Under this proposed plan, Sanders wants to place a new tax on all transactions generated by Wall Street – which Bernie tends to think of as greedy, thieves. He hopes that by implementing this new law, we will see an end to “the student debt crisis,” as Sanders puts it. When student debt surpasses credit card and auto loans, and 28% of those borrowers are delinquent or in default, there does seem to be a reason to want to resolve this issue, so why wouldn’t we eliminate their debt and “even the playing field”?
On top of giving them a “free-pass”, Sanders also aims to make two- and four-year public colleges FREE. He told the Washington Post, “This is truly a revolutionary proposal…In a generation hard hit by the Wall Street crash of 2008, it forgives all student debt and ends the absurdity of sentencing an entire generation to a lifetime of debt for the ‘crime’ of getting a college education.”
His plan is also being supported by representatives Ilhan Omar (D-Minn.) and Pramila Jayapal (D-Wash.), co-chairwomen of the Congressional Progressive Caucus. Supposedly, this proposed tax on Wall Street would pay for all of America’s student debt by taxing 0.5% on all stock transactions, as well as 0.1% tax on all bond transactions.
But, it is not just the big investment firms that will “Feel the Bern.” Retail investors are likely to also be engulfed. By taxing 0.5% on every stock transaction, and 0.1% on all bond transactions, we are likely to see a devastating effect on the markets – affecting all investors, large and small.
If we thought that interest rate increases were something to worry about – this new tax would resemble an interest rate increase on steroids.
Institutional investors are also likely to be taxed for their transactions too. Does the 2008 Lehman Brothers collapse ring a bell? And even if retail investors are excluded from the tax, they will still feel the heat as market value starts to decline – potentially up to a $1.6 trillion loss.
At that point we would be begging for an interest rate increase instead.
So, even though Bernie may feel he is making a solution for the people, the student loan debt “problem” cannot be solved like this. It is counterproductive and will lead to a whole new set of problems – potentially greater than this “student debt crisis”.