Zach Johnson:
Hey hippies,
Here's the article I was drunkenly referencing earlier: Jacob Sullum's "Jumping the Loan Shark" (http://www.reason.com/news/show/117910.html). I'd be interested to hear your objections to this. My blog convo re this can be found here: http://www.journeytothemiddle.com/index.php?p=942
Please comment if you're interested. Holla.
John$on
Joel Przybylowski:
Nice article. I'm especially moved by convincing passages such as this:
"In a 2005 Cato Institute paper, Hillsdale College political scientist Gary Wolfram reviewed the relevant studies and concluded 'there is a good deal of evidence suggesting that federal financial assistance has the unintended consequence of increasing tuition for all students.'"
Surely someone writing for the Cato Institute (a popular BIG government defender) who has reviewed "the relevant" studies and cites "a good deal of evidence" has objectivity as his focus. I would be more inclined to take this seriously if the writer had the courage to undertake an honest review of the issue.
I'm curious as to how the money I borrow from the government and pay back with interest is "aid," as the blogger repeatedly insists. In addition to the interest I pay, will not my seven figure "average" income further strengthen the state coffers in taxes I pay (and thus allow us to wage more wars on behalf of [cough] small-government "conservatives")?
I tire easily listening to fake-ass small-government types who think they got where they are all on their own and the government they claim they want to "drown in a bathtub" isn't just something they want to manipulate to their own benefit. They talk a good game and then throw it all out the window when they take office (see: every "conservative" that has been in power in my lifetime). They gather all the racists together by convincing them their taxes are paying for welfare moms and then ship them off to die in Iraq so Cheney et al can grow fat. Brilliant. So called small government types don't hate government, they hate when the people at the bottom get something out of the deal. They view themselves as independent bootstrap hikers living some American dream fantasy only to manipulate the government to their liking when they grab power.
The author would rather I borrow money from "private" (FEDERALLY insured [subsidized risk aversion]) lenders, and uses the argument that they would keep the price down. It takes but own trip to an ATM to realize how sure you should be of private lender profit motives. Credit card rates, anyone..? Oh if only I could strap that rate on to a juicy student loan principal. Please, my guess is tuition would remain inflated (or rise) as these jackasses lick their chops at the site of the revenue my debt would create.
My suggestion would be to practice what you advocate. Cast aside the taxpayer funded TA position you hold (full benefits for a part-time job!?) and go take out a loan at Bank of America. It should only cost you about 60k (not, in fact, the price of a Hyundai), plus interest. Be a shining example of the beautiful free market system the hippies so foolishly misunderstand. The students would benefit by getting an actual professor to teach their classes and the people of WI would benefit by paying less in taxes. Last but not least, the folks at the Cato Institute would be happy as another scum-sucking ivory tower liberal is plucked from the big government teat. (You do know these people despise you, don't you?)
I agree, access to easy money only enables colleges to raise tuition. I disagree that the obvious answer is to privatize lending. That doesn't address the operating costs at a place like UW, it only switches who benefits from my misery.
United we stand! (rhetorically speaking, of course)
jap
8 comments:
Joel:
Without actually addressing the issues raised in the article, your rant raises a number of issues that deserve responses.
1. You don't trust the Cato Institute.
This is a non-starter and there's no real response that I can give. I have read other articles that take the exact other view. Bob Herbert wrote recently in the NY Times that "we’re making it more difficult for American youngsters to afford college at a time when a college education is a virtual prerequisite for establishing and maintaining a middle-class standard of living." This article (times select unfortunately) was picked apart fairly well IMO by Cato's Tom Firey (http://www.cato-at-liberty.org/2007/03/22/bob-herbert-what-are-you-talking-about/). According to Firey: "Herbert’s column strikes me as yet another example of the all-too-common “progressive” lament that not enough money is being redistributed to the upper middle class. He would tax people (including many with no college degrees) to help out the soon-to-be-well-off." But if you don't trust anything the Cato Institute says then this will not convince you to change your mind.
2. You are tired of fake-ass small government types.
I'm sorry. I promise that when I am elected president I will not abandon my small government views. I think you unfortunately conflate libertarians, the Cato Institute, and the Reason Foundation with Republicans. As you rightly point out, Republicans have hardly been conservative for years. I blame this on the odd grouping of theocons with economic conservatives in the Republican Party for the past 20 years. The Libertarian Party is actually its own party and has never had a President, so I'm not sure where your criticism is coming from.
3. You distrust the profit motives of private lenders.
Well sure. They're out to make a profit. It is up to us to read the fine print and agree or disagree to the terms. Luckily, they are constrained by the laws of supply and demand. Current market rates for student loans are between 7 and 11 percent. As this article points out, the average college graduate makes something like $20,000 more per year than the average high school graduate. Yes this can vary, and it depends on your major, school, and many other factors. Is the investment in a college education only worth it, then, if it is at 3.4% interest? Or is it still an extremely good investment even at 11% interest? The answer to these questions seems obvious to me, but I suppose there is room for disagreement. But it seems even more obvious when you consider the other negative effects of this over-investment in higher education (most notably that it increases tuition rates for all students and attracts "marginal" students who do not finish college but are still stuck with the tab).
4. I am a hypocrite (as a small government, classical liberal) for accepting taxpayer money to attend a public university.
This is the only response of yours that I actually agree with, at least partially. But in my defense, I am operating under a system not of my choosing. I am trying to get ahead, studying what I wish, in a system that is publicly financed, that does take taxpayer money to fund my education. But of course my students are also paying quite a bit for their education, and I believe they are receiving a value from my teaching. In the world I describe above, students would take out private loans to go to private colleges, where TAs are paid a share of the tuition money based on their services. You are right that this market TA rate would almost certainly be lower than what I am being paid (esp. with health benefits). But this would be a different world. If this were the world we lived in, and I were actually paying for my cartographic education, I would probably have a greater right to demand more instructors and more cartography courses. As is, I don't. In other words, if a private college offered a two-year cartography and graphic design degree at market rates, I would be more than happy to take out a loan and attend it (unless it was in Kansas).
**
Somehow a discussion of a specific issue (whether federally subsidized student loans need to be further subsidized by taxpayer dollars down to 3.4%, or whether 6.5% is actually good enough) has turned into a debate between libertarianism and ???. I would rather discuss this as a specific issue. Even the most liberal Democrat acknowledges that there should be limits to government spending. And all moderate libertarians admit that the government should have a small role and that some taxes are valid. Therefore, we are not arguing between two different political philosophical positions, but rather a specific policy issue. We are not arguing whether poor people should get an education, or whether education is good, but rather how best to facilitate loans for a college education. So please actually consider the points of the original article. I wonder, is it that you just don't trust an analysis by the Cato Institute? Or even if you believed in their findings, would you still disagree with their conclusions?
This is not really my mug, so I won't say much, and what I do say will probably be entirely wrong. But I'm interested in the part of the argument in the Sullum article that is sort of summarized thus:
"Yet easy money at taxpayers' expense fuels this escalation [of college costs]. Basic economic theory tells us that boosting the demand for a product or service, which is what government loans and grants effectively do, tends to raise its price."
Unless I'm mistaken, the gist of it is that we should decrease demand for college education using market-rate loans. It seems to me that this will be accomplished by weeding out the poor people and reserving higher education for those who aren't intimidated by higher rates. And surely whatever decrease in college costs this effects is still not going to make college much more affordable for the less affluent.
I know the whole "not everyone should go to college" thing has been argued a number of times over beer, so I don't mean to raise it again. I just get the impression that the present debate involves the notion that the market, not merit, should determine who gets to go to college. Not to be a dirty pinko commie, but higher education is not something that should be treated so capitalistically; it needs the best brains, not the wealthiest brains, in order to be productive.
Sorry, I'm sure I am straying from the topic immediately at hand, but I wanted to give those two cents and make Robjob feel stupid for being the only one not involved in this.
Again, I think we're arguing different issues. Poor people are not stupid. They are able to make cost-benefit analyses just like the rest of us. The extra $20K a year a college graduate will earn is definitely worth the interest on a college loan, whether it is assessed at 6.5% or market rates of 7-11%.
Yes, further subsidizing student loans down to 3.5% would increase the demand for a college education. But would this increased demand be from the "best brains" as you suggest? I would think not. Anyone who considers the issue and does not believe that a college education is worth it if they have to pay 6.5% interest, but does believe that it is worth it at 3.5% interest is not part of this "best brains" class.
Yes, it will make it easier for that student to pay off their loans after graduating. But how easy does it need to be? And this method of making it easier does not come without its own costs (as noted before).
Maureen mentioned that "poor people have difficulty getting private loans regardless of what it's for". First of all, I'm not sure how true this is (seriously, I just don't know). But I must insist that this is a separate issue. Access to loans is not the same as subsidization of loans. One can certainly hold different views on these issues without cognitive dissonance.
It seems callous to not want to help out poor people. But there are such things as inefficient mechanisms for helping poor people. And the articles I've read seem to suggest that further subsidization of student loans is at best unnecessary and at worst counterproductive.
I can't counter you with any strong and informed points, but I just suspect that there is more (or less) to it than a well-reasoned cost-benefit analysis when someone is weighing whether to go for the college education. I agree that a rational conclusion is that it's still "worth it" with higher interest, but I think that plenty of people, even the smart ones, for whatever reason can be deterred with increasing rates. It seems accepted here that lower rates will in fact increase demand and higher rates will in fact decrease demand; I doubt that the difference is only the stupid people. I'm certainly willing to believe that there are benefits to doing away with the subsidies, but overall I feel that the benefit to society is greater when there are more incentives to pursue a college education. I'm really only looking at half the issue here, though, which is merely the existence of subsidies rather than the proposed increase in subsidies.
Also, question of my own: are access to loans and subsidization of loans truly separate matters? Is there perhaps a difference in accessibility with or without subsidies? Just wondering, because I don't know anything about it.
"are access to loans and subsidization of loans truly separate matters?"
I don't know either. I'm sure they are connected (loan access guaranteed within the same policy as student loan subsidization). But I think we can both agree that, conceptually, they are separate. In other words, I can envision a government policy that subsidizes student loans, or even provides no-interest student loans, while NOT guaranteeing access to them to all (but rather only making them available to certain students who meet a certain GPA or something). And I can envision a policy that guaranteed access to/availability of student loans to poor people while not subsidizing them (for example, by requiring private lenders to make a certain amount of loans to citizens below a certain income level). I'm not taking a position on either of these hypotheticals. I'm just saying that for the purposes of this argument access and subsidization can be thought of separately.
Just a couple comments/questions for clarification. First, this $20k increase in salary post-graduation ... that must be an average of all academic fields? Therefore the one student with the Engineering degree who makes $100k/year is perhaps pushing that number up while ten social scientists are making $2k more a year? I'd be interested to see that figure disaggregated.
Secondly, it's true we began the discussion talking about a specific issue. And we should be careful as the arguments about that issue easily spill over into larger ones of economics and politics. However, specific issues are always situated within a broader context, as are the discourses we invoke to argue one way or another. The one lurking under our specific issue here, I believe, is liberal economic theory (of which some variants, as our yi-fu speaker summarized on friday, have troubling connections with globalized free trade, re/degregulation, and privatization ... all of which are bemoaned by liberal hippies because of the resultant tendency to exploit the poor and make the wealthy even more wealthy).
So, our respective beliefs about whether or not the State should subsidize students loans is in fact related to our larger assumptions about the role of the State in regulating capitalist markets more generally.
DonoHuge's stance on this particular issue can be inferred from his position somewhere between social liberalism and social democracy ... one that believes the State must play a strong role in regulating capitalism for the greater good. This includes busting up large trusts (I think we call them corporations these days), and ensuring positive freedoms for the poor and disadvantaged through providing education, health care, sunshine, and all those other liberties that allow a person to pursue a happy and fulfilling life.
Of course, no sooner can one state such a position before the word "bureaucracy" springs forth from the conservative free-market types as the ultimate evil and a justification for sidelining any effort to manage the government's relationship to capitalism in a productive and equitable way.
Then, casting myself as a liberal hippie or Marxist, I respond by pointing out how the rhetoric of free-market, Laissez-faire, rational-choice individualism continues to fail a growing poor and dispossessed population. Why? Are they stupid and lazy? Maybe they are, but I'd rather pay into a bureaucratic system that actively intervenes in that condition than threaten them with starvation and poverty until they figure out how to determine an effective interest rate or derive security values as non-assets.
Oh, and interestingly, social liberalism in Europe is also called ... libertarianism.
3. You distrust the profit motives of private lenders.
"__snip__Luckily, they are constrained by the laws of supply and demand. Current market rates for student loans are between 7 and 11 percent."
Supply and demand? Who doesn't buy into the bs that college is the best thing a person can do? Shit, your article (er..blogpost) says I can make a million more dollars in my lifetime with a degree. That seems like a guaranteed demand-- forever. Personally, however, I find it obscene to suggest the market will decide if someone can attend college. Asshole fuckfaces like George Bush (and me, to an extent) can piss away an elite education while some poor slob with goals is denied because the rates don't favor his attempt at this time!? I'm sorry, Murder, but that's fucked up. I want no part of that country you long for. There are other ways to bring down the cost of an education without turning it over to private lenders.
NO. I don't trust the Cato Institute, much as I don't trust the Washington Times or Fox News. This doesn't mean I can't debate issues but I'd rather we talk facts over opinions (Bob Herbert) or politically motivated "think" tank offerings.
It saddens me to imagine the world you dream of. I have a hard time understanding how generally well off people become fixated on how they are getting fucked over, rather than taking time to think about what they can do to change things for the better. The whole libertarian, "I'm in it for ME" mantra makes me kind of sick. Maybe it's never caught on because deep down most people are giving and care about their friends and neighbors, even if they don't always show it. When this became a country where you step over your brother to get a fucking flat screen tv for yourself, I don't know. Personally, I can eat bologna for a month if it means the kid on the east side will learn how to fix engines rather than decide to randomly shoot me in the face. It's called investing in your country.
UNITED we stand. Has a nice ring to it. United we educated white people stand?? I leave that for you and Lyndon LaRouche to pine for.
I was sort of done with this whole thing, assuming we were at a standstill but Joel's comments are so ridiculous that they deserve a response.
1. "I find it obscene to suggest the market will decide if someone can attend college."
Why is this obscene? A lot of people want to go to college. A lot of people don't. A college education will make you more money in the long run. So there's the demand. Luckily, anybody (even your "poor slob with dreams") can afford college, even if they have to take out an unsubsidized loan. Yes, they will be in debt. But, assuming they get a job, they will be able to pay this debt back. And (given statistics USED by the Cato Institute, NOT generated by the Cato Institute) they will still be WAY better off, even given that fat 11% interest they're paying off.
I think we're off topic, though. This issue is not whether a poor person (or anyone who takes out a college loan) should have to go into debt to go to college (I suppose that could be AN issue, but it is not THIS issue). The issue is what is a fair interest rate for them to pay on this debt. So what criteria should we use? The only sensible and fair criteria IMO is to look at the value of this loan to the individual receiving it. If the value of the education the person will get for the loan is incredibly high, then perhaps we don't need to use collective money to make it EVEN LOWER.
What other criteria would you suggest? It seems that you, Huge, and Andy just think that anything that makes it easier on poor people is good, even if it involves taking money from the collective and giving it to individuals (individuals who will soon be much more well off). To me, this is only fair if it is necessary. In other words, I am not such a libertarian that I don't believe in any intervention into the market. If market interest rates for a college education were extremely high and evidence showed that loans were not worth the payoff of a college education, then I would support FURTHER subsidization (sorry for the capitalization, I'm too lazy to do tags here).
2. "I'd rather we talk facts over opinions (Bob Herbert) or politically motivated "think" tank offerings."
Again, I don't really understand this, since it seems like all you've been giving out are opinions. It's fine if you don't trust the Cato Institute. Of course they are politically motivated. I should make it clear that I don't NECESSARILY trust the Cato Institute either. I happen to agree with some of what they currently say. But you have not countered the statistics given in their blogs/articles with any of your own. Statistics can of course lie, but I don't assume that the statistics are lying just because they are being used by a politically motivated outfit.
3. "I have a hard time understanding how generally well off people become fixated on how they are getting fucked over"
Is this referring to me? I don't think I'm getting "fucked over" and have never said such a thing; I'm living the dream.
You straw man libertarians so ridiculously. They don't necessarily think they're getting fucked over. And they DO care about poor people. They actually believe that they're less constrained capitalist system will HELP poor people. They may be wrong, but it is unfair to characterize their philosophical political positions as simply not caring about poor people.
Luckily, since "deep down most people are giving and care about their friends and neighbors", they will help one another REGARDLESS of whether they are being compelled to by their government. Yes, you can eat bologna and help that young east sider get an education EVEN IF those monies do not first travel through the government's hands.
4. "United we educated white people stand??"
Come on, Joel, this is just ridiculous. As you said, we can debate this issue with ideas and numbers. Implying that the other side is racist and only cares about itself is the opposite of this.
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