Category Archives: Economics

States to Ban Gas-Powered Cars Despite EVs’ Human, Environmental Costs

Facts? What facts? mrossol

Source: States to Ban Gas-Powered Cars Despite EVs’ Human, Environmental Costs

By Katie Spence, September 12, 2022

In Chile’s Salar de Atacama, locals watch helplessly as their ancestral lands wither and die, their precious water resources evaporating in briny salars.

In the Democratic Republic of Congo, hope for a better life dissolves as well-funded Ugandan-led extremist groups force children as young as 6 to work in cobalt mines.

Closer to home, Nevada’s Fort McDermitt Tribe and local ranchers fight to protect a sacred burial site and agricultural lands set to be sacrificed by Lithium Nevada, a mining company, in the coming days.

Meanwhile, in California and other states, politicians such as Gov. Gavin Newsom (D-Calif.) pat themselves on the back for their “aggressive” environmental stance and boast that their gas-powered vehicle bans are leading “the revolution towards our zero-emission transportation future.”

The Hidden Costs

According to politicians like Newsom and President Joe Biden, electric vehicles (EV) are “zero-emission” because they use lithium-ion batteries—consisting of lithium, cobalt, graphite, and other materials—instead of gas.

Thus, starting in 2035, California will ban gas-powered vehicle sales, while several other states plan to follow suit, citing that as a goal and “critical milestone in our climate fight,” on Twitter.

Additionally, according to a statement from Biden, banning gas-powered vehicles will “save consumers money, cut pollution, boost public health, advance environmental justice, and tackle the climate crisis.”

John Hadder, director of the Great Basin Resource Watch, disagrees, pointing out to The Epoch Times that “industrial” nations might benefit from the transition to EVs, but it’s at the expense of others.

Kamala Harris charges an electric vehicle
Vice President Kamala Harris charges an electric vehicle in Prince George’s County, Md., on Dec. 13, 2021. (Manuel Balce Ceneta/AP Photo)

“This expansion of [lithium] mining will have immediate consequences for front-line communities that are taking the ‘hit.’”

For example, Copiapó, the capital of Chile’s Atacama region, is the location of one of the world’s largest known lithium reserves.

“We used to have a river before, that now doesn’t exist. There isn’t a drop of water,” Elena Rivera Cardoso, president of the Indigenous Colla community of the Copiapó commune, told the National Resources Defense Council (NRDC).

She added that all of Chile’s water is disappearing because of the local lithium mine.

“In all of Chile, there are rivers and lakes that have disappeared—all because a company has a lot more right to water than we do as human beings or citizens of Chile.”

unique lithium technology

 

Brine pools from a lithium mine that belongs to U.S.-based Albemarle Corp., are seen on the Atacama salt flat in the Atacama desert, Chile, on Aug. 16, 2018. (Ivan Alvarado/Reuters)

In collaboration with Cardosa’s statement, the Institute for Energy Research reports that 65 percent of the area’s limited water resources are consumed by mining activities.

That’s displacing indigenous communities who have called Atacama home for more than 6,000 years, because farmers and ranchers have cracked, dry soil, and no choice but to abandon their ancestral settlements, according to the U.N. Conference on Trade and Development (UNCTAD).

Mine Proposed in Northern Nevada

Saying goodbye to an ancestral homeland as a local lithium mine destroys it is something the communities in northern Nevada are fighting to avoid.

“The agricultural communities on either side of the pass are likely to be changed forever,” Hadder told The Epoch Times. “The [Thacker Pass mine] could affect their ability to farm and ranch in the area. The air quality will decrease … and increased water scarcity is likely.”

Epoch Times Photo

 

Thacker Pass. (Lithium Americas)

Hadder pointed out that the Quinn-Production well in Orovada Subarea Hydrographic Basin, which supplies water to Thacker Pass, is already heavily overallocated.

But, lacking water isn’t the only concern locals have with Thacker Pass, he says.

“[The National Congress of American Indians] are deeply concerned that the mine will threaten the community with man-camps and large labor forces,” Hadder said. “The introduction of man-camps near reservations has been shown to correlate strongly with an increase in sexual assaults, domestic violence, and sex trafficking.”

That concern has merit. In 2014, the United Nations found that “extractive industries,” aka mines, led to increased instances of sexual harassment, violence, rape, and assault, due to “man-camps” or workers at the mine.

Epoch Times Photo

 

Tesla Motors Inc. plans to build a 6,500-worker “gigafactory” to mass produce cheaper lithium batteries for its next line of more-affordable electric cars near the center. (AP Photo/Scott Sonner)

In 2019, the U.S. Bureau of Justice Statistics published a study validating the above information. It found a 70 percent increase in violent crime “corresponding to the growth of extractive industry in the areas, with no such increase observed in adjacent counties without extractive industries.”

Experience of Congolese Miners

That’s something the people of the Democratic Republic of Congo (DRC) know from first-hand experience.

In its 2022 report, the U.S. Geological Survey reported that in 2021, more than 70 percent of the global cobalt production came from the DRC and that southern Congo sits atop an estimated 3.5 million metric tons—almost half—of the world’s known supply.

It’s also one of the world’s poorest countries, according to the nonpartisan Wilson Center, and plagued by humanitarian crises, some of which are directly caused by mining.

Epoch Times Photo

 

A child walks past a truck carrying rocks extracted from a cobalt mine at a copper quarry and cobalt pit in Lubumbashi, Democratic Republic of the Congo, on May 23, 2016. (Junior Kannah/AFP via Getty Images)

In December 2021, researchers at Northwestern University conducted an environmental life cycle assessment on extracting raw materials needed for EVs and published their paper in One Earth’s Journal.

They found cobalt mining was associated with increased violence, physical and mental health challenges, substance abuse, and food and water insecurity, among other issues. They further noted that community members lost communal land, farmland, and homes, which miners dug up to extract cobalt.

“You might think of mining as just digging something up,” said Sera L. Young, an associate professor of anthropology at Northwestern University. “But they are not digging on vacant land. Homelands are dug up. People are literally digging holes in their living room floors. The repercussions of mining can touch almost every aspect of life.”

That “every aspect of life” includes children. In the DRC, an estimated 40,000 children are working in the mines under slave labor conditions—some as young as 6. Initially, there was hope that DRC President Felix Tschisekedi would curb the abuses, but now those hopes are dwindling.

Epoch Times Photo

 

People work at the Kalimbi cassiterite artisanal mining site north of Bukavu, in the Democratic Republic of Congo, on March 30, 2017. (Griff Tapper/AFP via Getty Images)

In her address before the U.S. Congress on July 14, Crisis and Conflict Director for Human Rights Watch Ida Sawyer stated that “child labor and other serious human rights abuses in the mining sector remain widespread, and these challenges only become harder to address amidst rampant corruption.”

“The Allied Democratic Forces (ADF), a Ugandan-led armed Islamist group with ties to the Islamic State (ISIS) … as well as their backers among the Congolese political and military elite, control lucrative mineral resources, land, and taxation rackets.”

The Wilson Center reports that there are an estimated 255,000 Congolese miners laboring for cobalt, primarily using their hands.

“As global demand for Congolese mineral resources increases, so do the associated dangers that raise red flags for Congolese miners’ human rights,” it said.

And human rights violations aren’t the only concern with cobalt mining. Wilson Center states: “The extraction of DRC mineral resources includes cutting down trees and building roads, negatively impacting the environment and biodiversity … Cobalt mining operations generate incredibly high carbon dioxide and nitrogen dioxide emissions and substantial electricity consumption. These emissions contribute to the fact that Africa produces five percent of carbon dioxide emissions globally.”

Epoch Times Photo

 

California Gov. Gavin Newsom speaks in Los Angeles, on Sept. 29, 2021. (John Fredricks/The Epoch Times)

Meanwhile, in California, Newsom extolled his state’s move away from fossil fuels.

“This plan’s yearly targets—35 percent ZEV sales by 2026, 68 percent by 2030, and 100 percent by 2035—provide our roadmap to reducing dangerous carbon emissions and moving away from fossil fuels. That’s 915 million oil barrels’ worth of emissions that won’t pollute our communities.”

Katie Spence

 

Katie covers energy and politics for The Epoch Times. Before starting her career as a journalist, Katie proudly served in the Air Force as an Airborne Operations Technician on JSTARS. She obtained her degree in Analytic Philosophy and a minor in Cognitive Studies from the University of Colorado. Katie’s writing has appeared on CNSNews.com, The Maverick Observer, The Motley Fool, First Quarter Finance, The Cheat Sheet, and Investing.com. Email her at katie.spence@epochtimes.us
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How a CEO Rescued a Big Bet on Big Oil

Source: How a CEO Rescued a Big Bet on Big Oil; ‘There Were a Lot of Doubters’ – WSJ

Occidental Petroleum Corp. OXY 1.75% entered the thick of the pandemic among the worst prepared of its U.S. oil-and-gas peers. Struggling with debt from an ill-timed $38 billion deal, Chief Executive Vicki Hollub was fending off activist investor Carl Icahn, who controlled two board seats.

Two years later, the company has emerged as the top performer in the S&P 500, and Ms. Hollub has traded Mr. Icahn, who sold all of his Occidental shares in March, for Warren Buffett, whose Berkshire Hathaway Inc. BRK.B 0.86% now owns nearly 27% of the company.

It was touch and go for a time. Months before the pandemic took hold, she implemented widespread layoffs. To stave off bankruptcy after oil prices collapsed in 2020, she slashed spending and nearly eliminated Occidental’s once-sacrosanct dividend—“the biggest and toughest decision that I made and I’ve ever made in my career,” she said in an interview.

Her 2019 acquisition of rival Anadarko Petroleum Corp., which Mr. Icahn called a “disaster,” has given Occidental the dominant position in the largest U.S. shale-oil field, the Permian Basin. Lifted by climbing oil prices, Occidental generated a record $4.35 billion in free cash flow and $3.7 billion in profit in the second quarter. It has cut its debt to $22 billion from nearly $36 billion a year ago.

Shareholders initially punished Occidental for the Anadarko purchase, although the comeback in oil prices has since helped lift the company’s stock.

Oil-and-gas producers have reported banner profits this year, even as a global energy crisis sparked by Russia’s invasion of Ukraine has threatened to derail European industries, left the U.K. facing its worst economic crisis since the 1970s and forced the Netherlands, Germany and India to rely heavily on coal to make up for a dearth of natural gas.

But Ms. Hollub, the first woman to be CEO of a major U.S. oil company, says she doesn’t feel vindicated. “I just feel relief,” she said. “There were a lot of doubters.”

Mr. Buffett has publicly lauded Ms. Hollub’s leadership. After she detailed the company’s future plans for analysts in February, Mr. Buffett told his own shareholders, “What Vicki Hollub was saying made nothing but sense.” Last month, Berkshire received regulatory approval to buy up to 50% of the oil company’s shares, spurring speculation it might seek to purchase all of Occidental.

On Friday, the conglomerate reported it has bumped its stake in Occidental to 26.8% from a little over 20%, according to regulatory filings.

Mr. Buffett declined to comment for this story. Ms. Hollub said she has “tremendous respect” for Mr. Buffett, adding that “he will be very beneficial for us as we go forward.” She declined to discuss the possibility of Berkshire purchasing the entire company.

Some former investors remain skeptical, saying a spike in oil prices has rescued the company, not Ms. Hollub.

“I have nothing personal against Vicki,” Mr. Icahn said in an interview. “However, that will never change my mind that she should not have made a bet-the-company investment by way of overpaying for Anadarko.”

A University of Alabama graduate, Ms. Hollub joined Occidental in 1982 and soon found herself running operations in Russia and Venezuela. She almost got laid off in 2003, but Todd Stevens, an executive at the company who had followed her rise, arranged for her to lead a team evaluating acreage in Colorado, said Mr. Stevens, who has since left.

Equipment used to process carbon dioxide, crude oil and water at an Occidental Petroleum project in Hobbs, N.M.Photo: Ernest Scheyder/REUTERS

Ms. Hollub became known as a hard worker, once spending three weeks straightening out operations at a new gas field’s first well, said Donnie Enns, a former geophysicist who worked under her. “Nobody worked harder than Vicki,” he said. She also found time to run an office March Madness basketball pool.

After being named CEO of the company in 2016, Ms. Hollub departed from her predecessor’s preference for low-risk, “bolt-on” transactions. A little over a year into the job, she started courting Anadarko, an oil producer of comparable size, for a deal.

She outflanked larger Chevron Corp. in a bidding war that riveted the oil patch, offering $5 billion more than her rival for Anadarko and its prized assets in the epicenter of U.S. shale production. Yet victory came at a steep cost.

Some of Occidental’s largest shareholders decried the deal—especially a pricey loan from Mr. Buffett in the form of $10 billion in preferred stock paying 8% annually in dividends, or $800 million. Ms. Hollub negotiated the funding at the eleventh hour after meeting with the financier in Omaha, Neb. Mr. Icahn, who first bought stock as the Anadarko bidding war came to a close, wrote to Occidental shareholders that “Buffett figuratively took her to the cleaners.”

Ms. Hollub acknowledged the deal damaged the company’s standing with some investors. “I was never offended at the fact that our shareholders were skeptical,” she said.

Vicki Hollub said she never doubted the wisdom of the Anadarko acquisition.Photo: Angela Owens/The Wall Street Journal

But she said she never doubted the wisdom of the acquisition, even after it sparked an investor revolt that created an opportunity for Mr. Icahn.

Central to Ms. Hollub’s strategy was building on Occidental’s already-large position in the oil-rich Permian of West Texas and New Mexico. She believed purchasing and drilling a huge swath of new acreage, much of it near the company’s existing assets, would give Occidental economies of scale and allow it to outperform Permian rivals. Occidental, she said, was one of the most technologically advanced drillers in the field; it would turn Anadarko’s undeveloped assets into oil-gushing wells.

By the end of 2019, the oil producer said it was making progress on its merger goals. It had divested itself of more than $6 billion in assets, including stakes in a liquefied natural gas export project in Mozambique and in a Houston-based pipeline company. Occidental recorded single-day and monthly production records in the Permian and other oil fields. Occidental announced its 182nd consecutive quarterly dividend, which Ms. Hollub noted at the time that “few other companies can claim.”

Ms. Hollub believed the merger was on track, but investors remained skeptical. From the time of Occidental’s counteroffer for Anadarko in April 2019 to February 2020 Occidental’s stock fell around 35%. Then the global pandemic took hold.

As billions of people around the world began to lock down, demand for oil plummeted. In the spring, oil prices reached historic lows, briefly turning negative for the first time ever as traders paid counterparties to take oil off their hands. Falling demand for their product hammered oil-and-gas companies, forcing dozens into bankruptcy.

Every day, Ms. Hollub would drive to Occidental’s Houston offices in her red Jeep Wrangler, said Glenn Vangolen, a former senior vice president at Occidental and close adviser to the CEO. Mondays and Fridays, she and her lieutenants would mask up and gather in a conference room to discuss operations. Her office was spartan—a mostly bare room, except for a TV playing business news on mute, and a plush stuffed version of a costumed elephant, the Alabama Crimson Tide’s mascot, Mr. Vangolen said.

Occidental was in a worse situation than many of its peers: At the end of 2019, its long-term debt of about $39 billion was equivalent to roughly four times its earnings, excluding interest, taxes and other accounting items, quadruple the ratio from a year earlier, S&P Capital IQ data show. The divestitures it had planned on to pay it down were no longer viable as assets were losing value.

Ms. Hollub said that Occidental made a lot of the difficult decisions before the pandemic to mitigate the downside risks of the Anadarko acquisition, including hedging a portion of its oil production and bumping its line of credit to $5 billion. But the company still faced painful months ahead as it had barely enough cash on hand to meet debt maturities coming due in 2021 and was later forced to hire restructuring advisers.

Ms. Hollub moved to cut her executives’ salaries—including her own by 81%—offer employees voluntary buy-outs, slash expenses in the oil patch and cancel employee perks. She also cut the dividend, which rankled investors.

Mr. Icahn amplified his calls for Ms. Hollub’s ouster and said he would seek to replace the entire board of directors at the company’s annual meeting. As the oil producer’s stock plunged to under $10 from around $45 before the pandemic, Mr. Icahn—facing paper losses of about $1 billion—doubled down on his shares, boosting his stake to roughly 10% from about 2%.

After a price war between Russia and Saudi Arabia caused oil prices to plunge below $25 a barrel in March, Occidental reached a settlement with Mr. Icahn. The deal gave board seats to two of his deputies and added another director, required Occidental to create an oversight committee that must be informed of any offers to acquire the company or its assets, and replaced the board chairman with Stephen Chazen, Ms. Hollub’s predecessor as CEO.

Mr. Icahn’s camp pushed for Occidental to give its shareholders warrants that could allow them to buy discounted shares in the future. After he prevailed, Mr. Icahn received roughly 11 million warrants initially and bought more when they were worth around $3.

Mr. Vangolen said Mr. Icahn’s demand for warrants was part of the investor’s “raider playbook,” which he described as “trying to extract as much cash out of the business as you can before you bail.”

Mr. Icahn said that all the shareholders who rode the stock down deserved something for their loyalty.

As the pandemic dragged on, Occidental logged a roughly $14.8 billion loss for 2020, its largest on record, according to S&P Capital IQ data. Still, it continued to whittle down its mammoth debt, closing around $2.5 billion in asset sales at the end of 2020. Anadarko’s assets, meanwhile, were starting to shine, with production in the Permian reaching the high end of company estimates.

Even as Ms. Hollub wrestled with Mr. Icahn, she was building a relationship with Mr. Buffett.

In 2020, she traveled to Omaha to discuss Occidental’s long-term strategy with Mr. Buffett, according to a person familiar with the meeting. The investor expressed a strong interest in the company’s goal to become a leader in carbon capture, this person said.

Occidental says it has no plans to stop producing oil but also aims to be a leader in “carbon management.” It wants to develop 70 plants by 2035 to suck carbon dioxide out of the air, store it in the ground and sell carbon credits to businesses seeking to offset their own emissions—a technology still in its commercial infancy that received a boost thanks to tax credits included in the climate package President Biden signed into law last month. The company also plans to use the gas to squeeze more oil from underground.

Then, in late February of this year, Russia invaded Ukraine.

The war propelled oil prices to their highest level in years, with Brent crude oil topping $120 in March, translating into a windfall for oil companies. In the first quarter of the year, Occidental made roughly $4.9 billion in profit, its highest quarterly earnings on record, according to S&P Capital IQ.

The company now holds the most acreage across the Permian, with leases covering about 2.8 million net acres, according to data firm Enverus. Its domestic oil output in the second quarter of this year was up roughly 80% compared with before it acquired Anadarko, Occidental reported.

As Occidental’s stock rose above $50 a share in March, Mr. Icahn sold his common stake. The investor’s two representatives on Occidental’s board also resigned, as was required by the settlement agreement. Mr. Icahn made over $1.5 billion on his investment and still holds some warrants, according to public filings and people familiar with the matter.

As Mr. Icahn got out of the stock, Mr. Buffett bought in. In May, Berkshire reported it had purchased roughly $8 billion worth of shares.

Mr. Icahn said that Mr. Buffett’s investment could be ill-timed. “I respect Buffett a lot but I think buying this stock at this level is obviously not like buying warrants at $3,” he said. “I made a great deal of money on my investment in Occidental, especially with the warrants, and activism worked in that regard,” he said.

Ms. Hollub and Mr. Buffett have developed a personal relationship and the two talk periodically, said Mr. Vangolen. Ms. Hollub said in an interview she had no personal relationship with Mr. Icahn when he was an investor, and that he turned out not to be the kind of long-term shareholder the company prizes.

Mr. Icahn’s retort: “She came very close to not being a long-term shareholder also, because her ill-timed investment put the company on the brink of bankruptcy.”

Akane Otani contributed to this article.

Write to Benoît Morenne at benoit.morenne@wsj.com and Cara Lombardo at cara.lombardo@wsj.com

Appeared in the September 10, 2022, print edition as ‘A CEO’s Big Bet On Big Oil Pays Off’.

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Policies Pushing Electric Vehicles Show Why Few People Want One

Source: Policies Pushing Electric Vehicles Show Why Few People Want One – WSJ

An electric vehicle gets charged up at RingCentral Coliseum in Oakland, Calif., Aug. 25. Photo: john g mabanglo/Shutterstock

We constantly hear that electric cars are the future—cleaner, cheaper and better. But if they’re so good, why does California need to ban gasoline-powered cars? Why does the world spend $30 billion a year subsidizing electric ones?

In reality, electric cars are only sometimes and somewhat better than the alternatives, they’re often much costlier, and they aren’t necessarily all that much cleaner. Over its lifetime, an electric car does emit less CO2 than a gasoline car, but the difference can range considerably depending on how the electricity is generated. Making batteries for electric cars also requires a massive amount of energy, mostly from burning coal in China. Add it all up and the International Energy Agency estimates that an electric car emits a little less than half as much CO2 as a gasoline-powered one.

The climate effect of our electric-car efforts in the 2020s will be trivial. If every country achieved its stated ambitious electric-vehicle targets by 2030, the world would save 231 million tons of CO2 emissions. Plugging these savings into the standard United Nations Climate Panel model, that comes to a reduction of 0.0002 degree Fahrenheit by the end of the century.

Electric cars’ impact on air pollution isn’t as straightforward as you might think. The vehicles themselves pollute only slightly less than a gasoline car because their massive batteries and consequent weight leads to more particulate pollution from greater wear on brakes, tires and roads. On top of that, the additional electricity they require can throw up large amounts of air pollution depending on how it’s generated. One recent study found that electric cars put out more of the most dangerous particulate air pollution than gasoline-powered cars in 70% of U.S. states. An American Economic Association study found that rather than lowering air pollution, on average each additional electric car in the U.S. causes additional air-pollution damage worth $1,100 over its lifetime.

The minerals required for those batteries also present an ethical problem, as many are mined in areas with dismal human-rights records. Most cobalt, for instance, is dug out in Congo, where child labor is not uncommon, specifically in mining. There are security risks too, given that mineral processing is concentrated in China.

Increased demand for already-prized minerals is likely to drive up the price of electric cars significantly. The International Energy Agency projects that if electric cars became as prevalent as they would have to be for the world to reach net zero by 2050, the annual total demand for lithium for automobile batteries alone that year would be almost 28 times as much as current annual global lithium production. The material prices for batteries this year are more than three times what they were in 2021, and electricity isn’t getting cheaper either.

Even if rising costs weren’t an issue, electric cars wouldn’t be much of a bargain. Proponents argue that though they’re more expensive to purchase, electric cars are cheaper to drive. But a new report from a U.S. Energy Department laboratory found that even in 2025 the agency’s default electric car’s total lifetime cost will be 9% higher than a gasoline car’s, and the study relied on the very generous assumption that electric cars are driven as much as regular ones. In reality, electric cars are driven less than half as much, which means they’re much costlier per mile.

In part this is because electric cars are often a luxury item. Two-thirds of the households in the U.S. that own one have incomes exceeding $100,000 a year. For 9 in 10 of electric-vehicle-owning households, it’s only a second car. They also have a gasoline-powered car—usually a bigger one, such as an SUV, pickup truck or minivan—that they use for long trips, given its longer range. And it takes additional costs to make electric cars convenient—such as installing a charger in your garage. Those who can’t afford it, or who don’t have a garage, will have to spend a lot more time at commercial chargers than it takes to fill up a car with gasoline.

This is all why electric cars still require such massive subsidies to sell. Norway is the only country where most new cars are electric, and that took wiping the sales and registration tax on these vehicles—worth $25,160 a car—on top of other tax breaks such as reduced tolls. Even so, only 12.6% of all Norwegian cars on the road are electric. The country has the wealth to pay for them partly because of its oil revenue, and the trade is dubious: To cut one ton of CO2 emissions through the subsidization of electric cars, Norway has to sell 100 barrels of oil, which emit 40 tons of CO2.

Needless to say, other countries’ car stocks aren’t likely to be anywhere close to 100% electric anytime soon. The U.S. Energy Information Administration estimates that barring new legislation only about 17% of all new U.S. cars will be electric by 2050, which translates to 13% of the total American car stock. As consumers continue to vote with their wallets against electric cars, it is hard to imagine places like California continuing to demand that they can purchase only electric ones.

Electric vehicles will take over the market only if innovation makes them actually better and cheaper than gasoline-powered cars. Politicians are spending hundreds of billions of dollars and keeping consumers from the cars they want for virtually no climate benefit.

Mr. Lomborg is president of the Copenhagen Consensus, a visiting fellow at Stanford University’s Hoover Institution and author of “False Alarm: How Climate Change Panic Costs Us Trillions, Hurts the Poor, and Fails to Fix the Planet.”

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Student-Loan Forgiveness and the National Debt

Source: Student-Loan Forgiveness and the National Debt – WSJ

Illustration: Chad Crowe

The colorful Ohio Gov. Jim Rhodes once likened George Romney’s run for the presidency to “a duck trying to [make love to] a football.” I wish he had been around to put a label on the federal student-loan program. In the sad catalog of its failures, the federal government has set a new standard. President Biden’s debt-cancellation announcement represents the final confession of failure for a venture flawed in concept, botched in execution, and draped with duplicity.

The scheme’s flaws have been well chronicled. It’s regressive, rewarding the well-to-do at the expense of the less fortunate. It’s grossly unfair to those who repaid what they borrowed or never went to college. It’s grotesquely expensive, adding hundreds of billions to a federal debt that already threatens our safety-net programs and national security. Like so much of what government does, it’s iatrogenic, inflating college costs as schools continue to pocket the subsidies Uncle Sam showers on them. And it’s profanely contemptuous of the Constitution, which authorizes only Congress to spend money.

When the federal government took over the loan program in 2010, President Obama claimed it would turn a profit of $68 billion and that “we are finally undertaking meaningful reform in our higher education system.” Credit where due: a dead loss of hundreds of billions of dollars and tuition costs that continued to soar can fairly be described as “meaningful.”

There are, and long have been, better ways. Colleges should always have been at some risk for any non-repayments by graduates. One can view such defaults as a breach of warranty, as degrees could be thought to imply that their bearers were prepared to be productive citizens, with the market value and personal character to live up to their freely chosen obligations.

Even a modest percentage of shared liability for non-repayments would have significantly affected schools’ behavior. The financial exposure and potential embarrassment would have driven material changes in the rigor of teaching and the amounts they charged and encouraged students to borrow. Such a system would have amounted to a fair request that institutions stand behind their product.

Of course, much of this unpaid debt would never have been accrued if colleges hadn’t raised their prices at the highest rates of any category in the economy. Thanks to the subsidy gusher, that was easy to do. But it wasn’t right or necessary.

I have been asked countless times about Purdue’s record of holding tuition and fees flat since 2012 while lowering room, board and book costs. It is less expensive to attend our university, in nominal dollars and for all students, in-state or out, than it was a decade ago.

I’d like to claim that this was a triumph of managerial brilliance, but I can’t. We simply asked ourselves each year, “Can we solve the equation for zero?”—meaning what would it take to avoid a fee increase? Placing top priority on containing student costs has driven lower ratios of administrators to faculty, less gold-plating on new buildings, modernized and consumer-driven health plans, and other simple changes. Meanwhile, not coincidentally, enrollment and revenues have surged.

Ten years on, more than 60% of our students graduate debt-free. Debt per student has been cut in half, to just over $3,000. Had Purdue raised tuition at the national average, students’ families would have sent us more than $1 billion more than they have.

Along with marketable knowledge and skills, Purdue aspires to foster character in its students. Watching each year as more than 99% of our graduates honor their student-debt obligations, we take pride in them. But I’m uncertain what to say to them as they see their less-responsible contemporaries bailed out—with, adding insult to injury, a portion of the tab handed to them as taxpayers.

When, not if, our national debt forces a traumatic reckoning, asset sales will likely be part of the emergency plan to preserve safety-net payments and some vestige of discretionary government. Along with surplus federal land and structures, it will make sense to sell whatever remains of the student-loan portfolio. That will be a fitting end to a bankrupt lending system born of bankrupt policy choices.

Mr. Daniels is president of Purdue University. He served as governor of Indiana, 2005-13.

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