Entrepreneur Mark Cuban made headlines Wednesday morning when he weighed in on President Biden’s proposal to “cancel” $10,000 in debt for borrowers, telling Business Insider he supports the policy—with a caveat.
“It has to be fixed,” the Dallas Mavericks owner said in an email. “As far as how much should be forgiven, I’m good with the Biden proposal.”
The caveat, Cuban said, is that the “ridiculous tuition fees” colleges are charging students must be addressed so students drowning in debt doesn’t become “a perennial problem.”
Cuban is right that the student loan bubble needs to be fixed. There are also several problems with his comments, however.
For starters, there is no indication that Biden is tying education reforms to his proposal to “absolve” student debts (the debts are not truly canceled, they will simply be passed on to taxpayers who didn’t borrow the money or receive the service). The closest thing Biden has proposed on this front was his doomed proposal to make community college “free,” which was scrapped along with most of Biden’s $3.5 trillion proposed spending bonanza. (Again, tuition would not have been free; it would simply be shifted to taxpayers.)
Second, Cuban may be right that college is too expensive and a bad bargain for many students. After all, we often hear that students are being “exploited” with exorbitant tuition fees. But if one accepts this linking, it’s important to ask: exploited by whom?
Colleges and universities are the ones charging the eye-popping tuition, which even Cuban calls “ridiculous”—but they are only able to do so because the federal government created a virtually infinite supply of student loans.
So let’s be clear. If any exploitation is occurring, it’s only happening because the federal government created a massive bubble by extending large loans to eager 18 year-olds with virtually no strings attached.
The funny part is, Cuban knows all this.
“At some point, [the bubble] is going to pop,” Cuban told Business Insider in 2015 while discussing the flood of student borrowing.
Cuban also pointed out that having taxpayers pick up the student loan tab was “the worst thing you can do.”
“All it does is bail out the universities,” he noted in 2015.
The Business Insider article quoting Cuban is short and poorly written, so it’s hard to tell precisely how Cuban’s former views mesh (or don’t mesh) with his current views.
My hunch is that Cuban supports a bailout for students along the lines Biden proposes, so long as it’s accompanied by a major reduction in tuition costs. But that requires serious reforms in higher education policy and—if the reforms are to be helpful—an admission that the federal government is responsible for the student loan bubble and the student debt explosion.
Don’t bet on any such reforms or admission, however.
The Business Insider article makes it clear that student loan “cancellation” is simply a step toward free college, a perennial goal of progressives. (Cuban’s idea is not universal free college, but a subsidized model that would have a few “free” colleges set tuition rates with the goal of creating more competition.)
Americans can and will debate the pros and cons of free college and student debt cancellation—which disproportionately helps wealthier Americans—but as they do, we’d be wise to remember the words of the economist Frédéric Bastiat.
“The state is the great fictitious entity by which everyone seeks to live at the expense of everyone else,” Bastiat wrote in 1848.
Rampant money printing, historic inflation, and the $30 trillion federal debt are all the evidence we need to know how right Bastiat was nearly two centuries ago.
And while Mark Cuban is a smart guy, my hunch is he hasn’t read Bastiat.
If that’s the case, I hope he lets me know. I’d be happy to send him a copy of Bastiat’s book The Law and his essay That Which Is Seen, and That Which Is Not Seen.
This article was adapted from an issue of the FEE Daily email newsletter. Click here to sign up and get free-market news and analysis like this in your inbox every weekday.
The post What Mark Cuban Gets Right (and Wrong) about Student Debt "Cancellation" was first published by the Foundation for Economic Education, and is republished here with permission. Please support their efforts.