Onetime President Clinton political advisor and reelection campaign manager and Fox News contributor Dick Morris has been among the most strident popular conservative pundits, but his argument in favor the college student loan takeover (including in the recently passed partisan budget reconciliation potpourri, principally focusing on health care policy deformation) reflects an aberration of free market principles is simply untenable. Personally, I think that Morris' position is philosophically inconsistent and self-serving, because the student loan program in particular expanded under Bill Clinton.
I will not bore my readers with a full rehash of Morris' column cited above; he basically slams the student loan industry with broad strokes of windfall profits, corruption (e.g., college administrators bought off to steer students into comparably higher-interest private loans than low-rate federal loans) and guilt by association in terms of lobbyist leadership. Others (e.g., Jacob Levy) point out that the private sector isn't really shut out: only out of the subsidized market; of course, this argument depends on the nature and extent of federal funds available for loans: if a student has a choice between a guaranteed full-coverage 4.5% subsidized federal loan (versus, say, a 7% market based loan), there is no real competition. The federal government has to assume the same risks of default.
Levy brings up the issue of moral hazard; for example, the fact that the FDIC guaranteed depositors was a contributing factor to the savings and loan crisis, as the lender management increasingly took on risky investments. A similar thing occurred with the GSE's Freddie Mac and Fannie Mae as they snapped up nontraditional mortgage loans for their mortgage backed securities, implicitly guaranteed by the federal government and financed in part by cheap Treasury loans. We might see a similar situation in this context if, say, some colleges, looking to bulk up enrollments to maximize revenues, recruited dubious high school graduates and steered them to ready lenders, whom are in it for the short-term profits, not really worrying about student graduation and long-term repayment, because the government has their backs.
I was looking for a more forceful defense of the private sector in this market (although my Internet search was only cursory in nature). Kevin Guess does express a more skeptical view than Morris or Levy, not confident that federal bureaucrats will operate with the industry knowledge, responsiveness and cost efficiency of the private sector.
I do not have specific industry knowledge of the student loan market, but let me provide an outline of a response. First of all, I believe Morris' analysis is fundamentally flawed because I believe that the the aberrations of student loan market he cites can be attributed to bad public policy; if the loan program is "unfair" as Obama and other progressives assert, the issue is to reform the policy, not to undercut the private sector (with decades of related market expertise and customer service), which (without public sector subsidies) has to provide a higher rate to accommodate risk. One of the goals of student loan legislation was to make student loans, intrinsically risky in nature, more affordable. There are a number of ways to implement that goal; for example, the government could have provided funds at subsidized low rates, on a cost-plus or competitive bid basis using private sector loan management services. (In essence, that's what the current legislation does.) Alternately, the federal government could let the private sector use its funds and provide students with loan subsidies (this allows the government to leverage its resources, especially given a massive federal debt). But comparing the two approaches (as Morris seems to do) is disingenuous. The government is not a fair competitor, a fact that Morris understands in other contexts (e.g., the infamous public option to health care insurance, the fact that it dictates versus negotiates reimbursement rates with providers, etc.)
Second, I think the federal government subsidies (direct or indirect) should be called into question. Keep in mind that part of what led to the housing bubble was the fact that there were a number of high-risk applicants (e.g., without a traditional down payment or proof in steady income) with mortgage money to bid up houses. Is it possible that part of the problem with escalating college costs is the ready availability of financial assistance, enabling ill-suited students to attend college, amassing debts that may never be paid off, at the expense of the American taxpayer?
Third, as Mr. Guess points out, the federal government is not in its core competencies in being a lender (in fact, it has done a lousy job balancing its budget for decades and its entitlement problems are essentially insolvent). I think college loans need to be made like other types of loans, just like I think that health insurance should be like other types of insurance. As Mr. Levy notes, there will still be a niche for the private market; perhaps, for instance, there may be restrictions on the amount of loans, eligibility for loans, etc. (It would not surprise me if progressives would means-test subsidized loans based on family income.) So loan money will likely be available, but at a market rate more reflective of intrinsic risks.
I am also somewhat frustrated that my fellow conservatives are also not drawing the implicit salient distinction between positive and negative rights. I discussed this distinction during the 2008 campaign, in particular with respect to the 2001 WBEZ interview. Obama was discussing a predominant focus on negative rights in the Bill of Rights (e.g., the government cannot prohibit your freedom of expression or to worship), although there are some positive rights (e.g., in the event you cannot afford an attorney, one will be provided for you). Progressives particularly focus on positive rights, e.g., providing unemployment assistance, free public education, a retirement or disability pension, health care, etc. Is it really a coincidence that the same mechanism used to establish a new health care entitlement was used to further entangle the federal government in the business of student loans?
Furthermore, I was hoping that my fellow conservatives would also point out that there are often strings attached with federal money in education and the susceptibility of the student loan business to political considerations (if, for instance, interest rates skyrocket, will the college loan interest rates be mitigated by pandering for the highly motivated college student vote?)
It may sound counterintuitive that a former professor like me argues the exact opposite of Dick Morris; my response to the student loan kerfuffle is privitization. [In fact, I earned 4 degrees only accumulating about $1600 in loans (I financed my education through work-study, scholarships, fellowships, and modest grants and personal savings, without employer or family assistance.)] Whereas Levy and Guess are justifiably worried about moral hazard in providing federal subsidies to the private sector, I argue that there's also a moral hazard with the American taxpayer propping up the unsustainable college spending bubble. But then we have seen the same type of Alice in Wonderland thinking where allegedly to "control costs", progressives want to add 30 million uninsured, with "free" preventive health care for all, eliminating "doughnut holes" in Medicare drug coverage (heaven forbid that senior citizens should have saved for their own retirements and chip in for their own share of medical expenses!), etc.
Conservatives need to point out that there's no such thing as a free lunch, that the emperor is wearing no clothes. This is not play money that progressives have been spending like crazy these past four years under a Democratic Congress; maybe someday soon, all these idealistic college students who bought into the seductive siren calls of Obamanamia will one day discover they have been left with the nation's credit card bills, with credit exhausted, nobody left to lend to us, and struggling just to make federal interest payments, never mind covering their own government operational expenses or paying down on the public debt. Maybe one day they'll figure out that the same progressive government that gave them health care deformation is demanding that they buy health insurance, not at a premium reflecting their intrinsically lower health risks, but subsidizing the higher costs of older Americans.... Maybe instead of letting the progressives run up spending on dubiously cost-effective "free" mammograms, younger Americans should insist on preventive fiscal health checks and not rely on gimmicky PAYGO schemes, innumerable budget shell games, and countless blue-ribbon panels and commissions. The situation of federal employees making more money with superior benefits than those in the private sector, getting annual, step or merit raises while federal revenues drop off the cliff and those in the private sector have go cope with pay cuts, reduced hours and employer retirement matches or layoffs, is unsustainable in the long term
Sarah Palin's New Fox News Channel Prime Time Show:
Thumbs Down
We remember the joint appearances of McCain and Palin on the campaign trail. While warming up the crowd for McCain's speech, Palin would invariably reflect on McCain's reluctance to use his experience as a POW in North Vietnam for political reasons and the fact that he refused to be released earlier than longer-tenure POW's. Then there's also Sarah Palin's laudable decision to carry to term her Down syndrome son. So when Fox News signed Sarah Palin as a contributor and looked for vehicles, the series it has been developing on "real American heroes" seemed to be particularly suitable.
There is a lot to be said about Horatio Alger-style "rags-to-riches" stories celebrating accomplishing the American dream, self-sacrifice on the battlefield, the inspirational teacher in an inner city classroom, and countless other individuals whom devote their own time and resources in servicing a perceived need. But this is a very difficult concept to pull off in practice; for one thing, virtuous individuals aren't driven by a need for external recognition. They are driven by principle; a soldier, a policeman, the teacher, and a fireman see themselves as doing their job. (It's possible they do recognize the value of modeling virtuous behavior to others.)
I have been a frequent critic of Sarah Palin on this blog. I certainly think she has a proven ability to communicate in a way that speaks for a number of people, but I consider her to be more effective as a "red meat" speaker versus an uplifting, unifying speaker in the mode of Ronald Reagan or Barack Obama. I don't perceive her as a particularly kind, empathetic individual; for example, I think she could have and should have taken the higher road when it came to the leaks from anonymous staffers at the end of the campaign and the infamous Letterman Alex Rodriguez joke. I'm not saying she didn't have a right to defend herself and her family, but I didn't care for the manner in which she handled them. Saying she wouldn't trust David Letterman around her underage daughters was unnecessary.
I don't think Sarah Palin has decent interviewing skills, and some of her interactions with featured guests just didn't work. She has this rambling, stream-of-consciousness style of speaking which I find exasperating (and I have a reputation for being long-winded...) At least to my ears, the interviews came across as stilted and awkward.
I'm not a producer, and Fox News didn't ask for my input in designing an inspirational television series. I think the concept is workable but probably in a different format, without Sarah Palin. I have been a subscriber to Guideposts for decades. There are a number of human-interest stories from that and other sources which would be fascinating. For example, Christian singer Mark Schultz could do a voice-over over photographs, explaining the inspiration behind his adult contemporary hit "He's My Son"; ordinary people could tell us about random acts of kindness in their lives; vampire novelist Anne Rice could speak of her return to Christianity; Bill Gates could describe some of the early years of Microsoft; inventor Dean Kamen could discuss the story behind the Segway; Jenna Bush could tell us personal stories about her dad and grandfather; what motivated the creation of Doctors without Borders? Granted, 60 Minutes and other news magazines often do human interest stories, but a more focused format might be interesting. And while we're at it, why not have someone like Speaker Newt Gingrich narrate a series on little known stories in American history
Political Cartoon
Lisa Benson is succinctly pointing out that Obama, consistent with past behavior, pays lip service to conservative themes (remember how Obama has targeted $17B and $100M budget cuts, in the fact of $1.42T deficits? Watered down versions of risk pools or tort reform? Arbitraging between the lowest manpower/highest risk numbers for the Afghanistan surge?), but it's little more than window dressing. He talks the talk, but he doesn't walk the walk.
He's opening up a limited amount of offshore production: in the chart (see right), the colors other than light green reflect areas that Congress authorized in 2008 in the aftermath of $150/barrel oil, but which Obama is not opening by 2012, the end of his first term: areas that could contain up to 17 billion barrels of oil and over 75 trillion cubic feet of natural gas. And we aren't even beginning to talk about 13 million acres, many of which are rich in shale oil sands, that the administration is trying to lock up from exploration. We are running roughly a 15-million barrel daily deficit. There is no doubt that aggressive action by Obama in the aftermath of Congressional action not only would have brought us closer to an ideal of oil independence and less vulnerability to oil exporting despots like Chavez, but would have yielded good-paying American jobs. This is one of the prices Americans are paying for this President's ideological politics.
We remember the joint appearances of McCain and Palin on the campaign trail. While warming up the crowd for McCain's speech, Palin would invariably reflect on McCain's reluctance to use his experience as a POW in North Vietnam for political reasons and the fact that he refused to be released earlier than longer-tenure POW's. Then there's also Sarah Palin's laudable decision to carry to term her Down syndrome son. So when Fox News signed Sarah Palin as a contributor and looked for vehicles, the series it has been developing on "real American heroes" seemed to be particularly suitable.
There is a lot to be said about Horatio Alger-style "rags-to-riches" stories celebrating accomplishing the American dream, self-sacrifice on the battlefield, the inspirational teacher in an inner city classroom, and countless other individuals whom devote their own time and resources in servicing a perceived need. But this is a very difficult concept to pull off in practice; for one thing, virtuous individuals aren't driven by a need for external recognition. They are driven by principle; a soldier, a policeman, the teacher, and a fireman see themselves as doing their job. (It's possible they do recognize the value of modeling virtuous behavior to others.)
I have been a frequent critic of Sarah Palin on this blog. I certainly think she has a proven ability to communicate in a way that speaks for a number of people, but I consider her to be more effective as a "red meat" speaker versus an uplifting, unifying speaker in the mode of Ronald Reagan or Barack Obama. I don't perceive her as a particularly kind, empathetic individual; for example, I think she could have and should have taken the higher road when it came to the leaks from anonymous staffers at the end of the campaign and the infamous Letterman Alex Rodriguez joke. I'm not saying she didn't have a right to defend herself and her family, but I didn't care for the manner in which she handled them. Saying she wouldn't trust David Letterman around her underage daughters was unnecessary.
I don't think Sarah Palin has decent interviewing skills, and some of her interactions with featured guests just didn't work. She has this rambling, stream-of-consciousness style of speaking which I find exasperating (and I have a reputation for being long-winded...) At least to my ears, the interviews came across as stilted and awkward.
I'm not a producer, and Fox News didn't ask for my input in designing an inspirational television series. I think the concept is workable but probably in a different format, without Sarah Palin. I have been a subscriber to Guideposts for decades. There are a number of human-interest stories from that and other sources which would be fascinating. For example, Christian singer Mark Schultz could do a voice-over over photographs, explaining the inspiration behind his adult contemporary hit "He's My Son"; ordinary people could tell us about random acts of kindness in their lives; vampire novelist Anne Rice could speak of her return to Christianity; Bill Gates could describe some of the early years of Microsoft; inventor Dean Kamen could discuss the story behind the Segway; Jenna Bush could tell us personal stories about her dad and grandfather; what motivated the creation of Doctors without Borders? Granted, 60 Minutes and other news magazines often do human interest stories, but a more focused format might be interesting. And while we're at it, why not have someone like Speaker Newt Gingrich narrate a series on little known stories in American history
Political Cartoon
Lisa Benson is succinctly pointing out that Obama, consistent with past behavior, pays lip service to conservative themes (remember how Obama has targeted $17B and $100M budget cuts, in the fact of $1.42T deficits? Watered down versions of risk pools or tort reform? Arbitraging between the lowest manpower/highest risk numbers for the Afghanistan surge?), but it's little more than window dressing. He talks the talk, but he doesn't walk the walk.
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| Courtesy of Tusconcitizen.com |
Quote of the Day
What does it matter how one comes by the truth so long as one pounces upon it and lives by it?
Henry Miller
Musical Interlude: Songs of the Heart
Backstreet Boys, "Shape of My Heart"
Kenny Loggins, "Conviction of the Heart"
Bee Gees, "How Can You Mend a Broken Heart?"
Toni Braxton, "Un-Break My Heart"
