Green Party presidential candidate Jill Stein has her own plan to make America great again. That's turning it into Venezuela.
That, at least, is what her proposal to have the Federal Reserve pay for everybody's student loans and perhaps their healthcare too would do to our economy. Inflation would skyrocket, the dollar would collapse, and the inevitable price controls would create shortages of basic goods. In other words, the full Chavez.
Not that Stein seems to get any of this. Indeed, she thinks that quantitative easing—which is when the Fed buys bonds with freshly-minted dollars—is just "a magic trick that basically people don't need to understand any more than that it is a magic trick." According to her, it "canceled" the "debt of Wall Street" by "essentially writing it off as a digital hat trick." So it's only fair, she says, that we do the same for student loans.
This is wrong. QE didn't buy bonds that the banks owed to other people. It bought bonds that the banks were owed from other people—specifically, homeowners and the U.S. government. Paying a bank $100 for $100 worth of bonds is no more a bailout than paying Starbucks $5 for $5 worth of lattes is. Still, though, Stein's not wrong that there is some magic to this. Just not the kind she thinks. What do I mean by that? Well, when the Fed buys a U.S. Treasury bond from a bank, it turns a debt that the government owed to somebody else into a debt that it owes to itself—so it's like it doesn't exist. QE, then, didn't erase Wall Street's debts, but Uncle Sam's.
Pretty neat trick. But it's one we can't use that often. That's because creating more money usually just creates more inflation. Now, that's actually what we've wanted the last 8 years—prices have almost been falling, which can make wages fall, and debts that don't fall harder to pay back—but even then, the Fed has been careful to say this was only temporary. It was only printing money as an emergency measure to help the economy, not as a permanent one to pay for the government.
That last part, after all, is how governments have destroyed their economies and their currencies since time immemorial. The latest example, of course, being Venezuela. To be fair, it never really had an economy so much as an oil exporting business that subsidized everything else, but even triple digit prices weren't enough for it to do much of that after its government mismanaged it so much. Which is to say that the regime really had to resort to the printing press to pay its bills once oil prices crashed two years ago. The result has been an inflation rate that the International Monetary Fund expects will hit 1,600 percent next year, and a currency that's lost 99 percent of its value since the start of 2012. The government's attempt to deny this reality by forcing businesses to sell things at a loss hasn't worked either. All it's done is get businesses to stop selling things, period—and for the country to run out of everything from food to beer to medicine and even toilet paper.
This is the economic model Stein seems to want to copy. She not only says the Fed should print $1.2 trillion to pay for everybody's student loans, but also that we should "definitely" look into having it print enough to pay for everybody to get Medicare and a check from the government every month. That'd probably be another $4 trillion or $5 trillion it'd have to print every year. By point of comparison, that's about how much money the Fed created in total the last 8 years. Now, as we said before, a little more inflation would in fact be a good thing right now. But what Stein wants wouldn't create just a little more. It'd make inflation go up, and up, and up, and, well, up as long as the Fed was printing money—which, if she had her way, would be forever.
This is about as serious a proposal as you'd expect from a medical doctor who winks and nods at anti-vaccine conspiracy theorists like Stein does. She's telling people that they can have something for nothing. The only question is whether Stein doesn't know the facts or just chooses the ignore them—although, in the final analysis, it doesn't really matter which.
She wants to do to America's economy what the worst economies in the world have done.