April 16, 2010

The Way to Government Ownership

Justin Katz

Since I mentioned, earlier this morning, the government's "overtaking of healthcare," it's relevant to point out an explanation offered in a recent National Review, in the magazine's short-take "The Week" section (subscription required):

American college-loan policy offers an illustration of how the government can absorb an activity incrementally, claiming to cherish the benefits the private sector provides until the bait has worked and it's time for the switch. Government support for student loans began in the form of subsidies for private loans, much as the Democrats' health-care bill would succor the insurance industry by subsidizing its product while forcing people to buy it. In the 1990s, Democrats added a "public option" — making government the direct provider of some student loans — with the Clinton administration claiming that "students and schools are served by healthy competition" between the private sector and the government. This is the same rhetoric Obama used when he tried to sell us a public option for health care. And now we see how quickly Democrats dispense with the rhetoric of competition when a government takeover seems viable: The new student-loan bill would make the public option the only option, thus completing the absorption of the activity. In a similar way, the current health-care legislation isn’t the endgame.

Government ownership of student loans gives politicians strong influence over your career. Healthcare will do the same to your body.

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Of course, in attempting to appeal to simple minds, you leave out the small detail....very small detail....that all the private loans were made solely BECAUSE THE GOVERNMENT GUARANTIED THEM.

Seems like that is a relevant point. And if you start there, you come up with the question of why banks should be able to make money without taking ANY risk.

What is your take on that?

Oh, and the bank/student loan industry was investigated by Newsweek a couple years ago with the conclusion:
"Their front-page story found that much like old-time political ward bosses, the student loan industry “used money and favors, along with their friends in Congress and the Department of Education, to get what they wanted.”

Again, inconvenient facts which you either must support....or come out against. So let's hear it clearly - do you support the old system where the student loan industry received free fed. backing of their loans, made profit for no risk and lobbied to get what they wanted (more profit, of course)?

You can't have it both ways. If you want big daddy government to stand behind all the loans (under GW Bush, etc.), then you are taking a hypocritical stance...or, more accurately, taking a anti-responsibility, pro-corporate view - as usual.

Posted by: Stuart at April 16, 2010 10:42 AM

Wooooooosh - the sound of Justin's point soaring right over Stuart's head. What else is new?

Through student loans, a Congress totally ignorant of basic economics has actually harmed the students it meant to help. Colleges charge what people are willing and able to pay to attend them. Before federal loans, people had X amount of money to spend on college. Congress makes Y amount of loan money available, so colleges realize this and increase their tuition to X+Y. Now students have to spend the original amount X, and also pay back all the additional loan money Y after they graduate. With friends like government...

Posted by: Dan at April 16, 2010 11:26 AM

Bravo Stuart,
You apparently have joined a long line of people who write into this blog that Justin fails to answer or acknowledge. This, of course, means your points have gotten to him and he remains dumb regarding them.

The Anchor-wavers like Dan line up in front of him to take the bullets. Stay on it Stuart and bravo.

Posted by: OldTimeLefty at April 16, 2010 12:02 PM

I want to commend all of you for working so hard and being so strong at helping the whitehouse and congress begin to address our U.S. and Global healthcare crisis. You have been AWESOME! my fellow Americans and peoples of the World. America and the World is better and safer for it. My greatest pride is the knowledge that I am one of you. And that you really get it. You really understand the importance of it all.

There are some potentially very good things in the healthcare legislation. Especially with the reconciliation fix's. The Democrats, Bernie Sanders and the Whitehouse did a GREAT! job of fighting to produce the best healthcare legislation that they could. They have earned all our strong support. And we should give it to them.

But it was your relentless pressure and hard work that made the difference. Whatever good comes from this healthcare legislation, America and the peoples of the World will have each of you to thank. You were smart, creative, courageous and relentless. You fought together for the best legislation possible. And when you had to, you fought alone. No matter who stumbled and fell you continued to push and forge ahead. Fighting for the lives and health of the American people and the World. YOU SHOULD BE PROUD OF YOUR-SELVES :-)

It may come to pass that future generations will look back on us and say that we were ALL Americas Greatest Generations. And that healthcare reform was our finest hour. You should be proud of our leaders President Obama, Speaker Pelosi, Majority Leader Reid and the many other Democratic and independent fighters for the people in congress. They proved them-self worthy of the leadership of a GREAT! PEOPLE.

But we are not done yet. This was just the beginning of healthcare reform, not the end. WE THE PEOPLE OF THE UNITED STATES, ARE NOT! divided on healthcare legislation. The vast majority of you have been consistently crystal clear that this legislation does not go far enough. You want a strong Government-run Public Option CHOICE!! available to everyone on day one. And you want it NOW! YOU MUST NOT ALLOW AN INDIVIDUAL MANDATE TO STAND WITHOUT A STRONG GOVERNMENT-RUN PUBLIC OPTION CHOICE! AVAILABLE TO EVERYONE.

WE THE PEOPLE have been crystal clear that we want an end to dependence on for-profit healthcare and the for-profit proxies called private for non-profit healthcare. The American people want the CHOICE! of a strong Government-run Public Option to replace their need or dependence on healthcare providers whose primary motivation is profit. Rather than providing the highest quality, easiest accessible and most affordable medically necessary healthcare possible. This is what the rest of the developed World has. And the American people want it too. They want healthcare ASSURANCE! Not, for-profit health insurance. And they want it NOW!

Now is the time to continue the push for a strong Government-run Public Option CHOICE! available to everyone that wants it on day one. Rationally it's clear what we have to do to get this done. SUPPORT THE DEMOCRATS that supported you with a Public Option, and REMOVE as many republicans as you can. Not one republican in congress was willing to step across the isle to support a strong Government-run Public Option CHOICE!! available to everyone on day one. NOT ONE! Let no candidate prevail this November that does not support a Strong Government-run Public Option.

47,000 AMERICANS die each year from lack of healthcare. 120,000 die from treatable illness that don't die in other developed countries. Hundreds of thousands of you are dieing from medical accidents in a rush to profit. And Millions are injured. Millions are driven into bankruptcy. All for the privilege of paying two to three times as much as any other people in the developed world for healthcare. HOGWASH!

Additionally, tens of thousands of you and your children were killed and millions sickened and injured from a terror attack with H1N1 (swine flu). Released on the American people and the World by the for-profit healthcare industry. All in an attempt to panic and frighten you into accepting the oxymoronic criminal enterprise of private for-profit healthcare (The most costly, deadly, dangerous, and disgraceful product sold in America). H1N1 is still sickening people and killing them. Especially children, the young and the middle aged. And there will be a third wave. These are the terrorist you need to worry about the most. Even the so-called international terrorist would not do something so INSANE! But greed driven medical profiteers would and did.

Apparently as far as republicans in GOVERNMENT are concerned, YOU! my fellow Americans - CAN JUST DROP DEAD! Including their own family members. Fools! Hundreds of thousands of you, and possibly millions of you will die from the long-term effects of your infection and poisoning with H1N1.

So my fellow Human Beings. Rest-up, Take good care of the basics (Balanced nutrition, hydration, exercise, rest and POSITIVE emotional supports). Then wade back into the FIGHT! for a strong Government-run Public Option CHOICE! available to everyone on day one. Drug re-importation, Abolishment or strong restrictions on patents for biologic and prescription drugs. And government controlled and negotiated drug and medical cost, NOW! You must take back control of your healthcare system from the Medical Industrial Complex. This is a matter of National and Global security. There can be NO MORE EXCUSES.

God Bless You My Fellow Human Beings. I'm glad to know of you. And proud to be one of you.

See you on the battle field.


jacksmith - WorkingClass :-)

Posted by: jacksmith at April 16, 2010 1:44 PM

What relevance does the above tirade on healthcare have on the topic of student loans. Maybe reading the actual post may help before posting comments.

Posted by: steadman at April 16, 2010 2:00 PM

OTL, Stuart is the resident ranting whacko on this blog. His brand of ALL CAPS raving lunacy knows no political boundary. Before you commend him, you might want to actually read a dozen or so of his posts to save yourself some embarrassing associations.

Not sure what an "anchor-waver" is. Any of the posters here can tell you that I openly disagree with this blog on most social and military issues.

Posted by: Dan at April 16, 2010 2:16 PM

"The new student-loan bill would make the public option the only option, thus completing the absorption of the activity"

Huh. What happened to the "healthy competition" between the public and the private sectors that the Clinton admin referred to? Looks like it was the camel's nose under that particular private sector enterprise.

Posted by: Monique at April 16, 2010 3:34 PM

Monique, that's an easy question and answer.

If I have cancer, where is the "competition" of health care companies fighting for my premium dollar? Of course, it goes without saying that there is none! No one wants bad bets! So the system fails someone with medical problems who needs insurance....

Now- stay with me a second......

Students are probably the worst bets in the world - no bank or individual would lend to them for less than 15% or more...given the fact they have no job, no house, etc.
In other words, these are unsecured loans.

So, since this cannot be a money making venture - IF we want to push higher education, then we have to make low interest loans available. The only way to do that is for the government to be involved in one way or another.

If you have a truly better idea, let use know. But having our medical students and other college folks paying 15-25% per year would destroy them, and we'd have a less educated populace as a result.

BTW, one of my daughters took out a student loan in her last years of grad school- and the Big Bad Government State University actually made her payments after she graduated as long as she worked in public service!

Maybe someday y'all can join us in civilization and stop promoting the Law of the Jungle as being good for everything!

Posted by: Stuart at April 16, 2010 8:30 PM

Stuart's argument will change for argument's sake, so I'm not responding to him in the sense of expecting dialogue, but his statement entirely ignores the premise of widespread college attendance. College is supposed to be a sure investment for future earnings, so lenders should certainly not lack incentive to provide funding.

Implicit and explicit government financing of education drives up the price and deflates the value of higher education, ensuring that more students need loans and that investors have less incentive to provide them. Another self-fulfilling prophecy of government.

As for the government's loan forgiveness for people who enter a preferred field, as "public service" --- at least for a time --- well, that's the point. The government's financing comes at the price of doing what the government wants.

Law of the Jungle... autonomy... freedom... whatever. Welcome to the centrally planned state.

Posted by: Justin Katz at April 16, 2010 8:52 PM

What a load of bull****. All of you are treating the article Justin cites as fact. Bull****. I went to Boston U. in 1972 with the help of a federal loan. The history of direct federal loans precedes the fabricated history modern conseratives want to advance. Major problems (theft, graft )occured when the fed program was privatized in the 2000's with the Nelnets and others. But
to the Justin point of justification of loans in the first place. Without the loans, tuitions may or may not have risen to the same levels. But the larger picture at the time was a desire to advance learning and the skilled professions in order to - as a nation - compete in a worldwide marketplace. Does this notion have any relevance to you?

Posted by: David S at April 16, 2010 9:26 PM

"Healthcare will do the same to your body."

Funny you should say that, Justin. On Wednesday, while Michael Graham was at the Boston Tea Party, his fill-in ("Huggy" or something?) invited callers to come up with their own slogans or bumper stickers for the Tea Party. Harking back to the slightly snippy pro-abortion slogan, mine was

"Keep your healthcare reform off my body"

Posted by: Monique at April 16, 2010 9:34 PM

>>College is supposed to be a sure investment for future earnings, so lenders should certainly not lack incentive to provide funding.

Sadly, Justin, your current outlook will never land you success in the world of business or finance!

Repeat after me - someone who after they owned two houses, many cars, had three kids and two businesses....
"Banks do not provide unsecured loans"

Repeat that 20 times until you understand it. I once asked my bank officer why I had to sign my life away (house, business, personal, etc.) for a relatively small loan...when obviously, I was good for it. His reply "Our bank president signs the same multiple notes when he gets a loan here, so he expects our clients to do the same"

Of course, if you support the irresponsible bank behavior of recent years, which is appears 100 percent of the GOP in Congress does, then this type of common sense or responsible behavior might not appeal to you.

But trust me, Justin! Unsecured loans to people in their early 20's are not happening without either 20 percent plus rates or government backing.

I know reality is tough to grasp, but I feel very confident that doing so will improve your life in terms of financial matters. You can thank me later.

Of course, anyone reading this with even the slightest experience in finance or business does not need to be told of the above. It is as obvious as....well, evolution!

Posted by: Stuart at April 16, 2010 11:07 PM

>nvited callers to come up with their own slogans or bumper stickers for the Tea Party

Sadly, Monique, slogans and talking points seem to be your stock in trade.

There is an entire other world out here - one in which education, experience, reality and logic prevail. Please join us. Please?

Posted by: Stuart at April 16, 2010 11:09 PM

David, go read my post again and tell me why you agree with it or disagree with it. The economic principles are not exactly complicated. You can even plot it out on a price curve and see that it is mathematically true. We learned about government loans driving up the cost of tuition in my first economics class in college, and my professor was very mainstream. Government often harms the people it intends to help, either by making them dependent or literally just by costing them extra money, as it does with students. The fact is that if we had left college tuition up to the wicked free market to sort out, we would have paid about half of what we ended up paying after government got involved with it.

Posted by: Dan at April 16, 2010 11:26 PM


A quick scan of Google results suggests that, while there were direct loans available from 1958 to 1965, the program shifted to government-backed private loans thereafter.

The more important point, though, is that there are only a handful of categories of students:

  • Those who could otherwise have paid outright.
  • Those who could have gotten private loans, anyway.
  • Those who could have gotten private loans with their parents' inclusion in the loan.
  • Those who would not have been able to acquire loans in any case.

By decreasing the risk to the lender and lowering rates, the government increased the cost-ceiling of an education and widened the circle among the above list that found it financially beneficial, and then necessary due to inflation, to take out loans in the first place.

Moreover, with the broadened acquisition of higher degrees, their value has deflated such that a college degree, today, is arguably no more valuable than a high school degree a generation or two ago.

The critical point, here — one that goes directly to the flawed impulse of contemporary liberalism — is that the motivation of legislation does not dictate the method. Even if our nation effected a brief boost in educational attainment, in the '70s, if the cost was the corrosion of the educational system and the general culture, the trade was not a good one.

That you sought a federally backed loan does not mean that you wouldn't have found a more economically and socially advantageous way to finance a higher degree had the government stayed out of it.

Posted by: Justin Katz at April 17, 2010 8:40 AM

Justin, can you explain in a couple words what is the difference between government backed and government direct in terms of actual government fiscal involvement and the moral and ethical problems you seem to indicate that is causes?

It seems to me the only difference is adding MORE layers of offices and paying more interest because the banks need to make some money.

Sounds like you are standing up Straw Men and burning them down!

There are many real problems in society and in this country - and addressing ones which actually affect people might be a better use of your time.

You also have not addressed the abuses of the Student Loan privatization.....I've heard all kinds of commercials on the radio about Student loan finance and refinance. Who was paying for those?
(Answer, the students and all of us!)

Here's a little hint, Justin. But once again, you stand by Citi and the other criminals!

"According to recently released court documents, Citigroup, JP Morgan and the education finance company Nelnet are being sued by the federal government for fraud of nearly $280 million from their participation in the Department of Education’s Federal Family Education Loan program (FFEL). FFEL provides billions in annual bank subsidies to private lenders for making student loans"

You, my friend, are on the wrong side of history!

Posted by: Stuart at April 17, 2010 9:42 AM

Dan, you are right. Lets leave it at that. Its your world now. Have at it. You too Justin. Everything you say has that ring of biblical certainty. But you missed the point. No Whoosing over the head. But what govt helped do with student loans and expanding the knowledge base wasn't about the individual, it was about a worldview. We, as in OUR NATION, were able to compete globally. You young ingrates were able to grow up under that protective wing. It does not come as a surprise that you want to deny this. So make your own bed now. And good luck to you.

Posted by: David S at April 17, 2010 7:04 PM


We, as in our nation, were already competing globally before 1958, certainly before 1972, and that government backing for education loans may have helped some people be a part of the process doesn't mean that the process would have been diminished otherwise.

As for the generational remarks, well, I wouldn't say that your generation is quite done with us, yet. You've still a comfy and long retirement to enjoy on our backs as we struggle to get by with worthless four-year degrees and a dependency on debt and government that fewer and fewer young families will escape with any real social advancement.

Posted by: Justin Katz at April 17, 2010 7:32 PM

C'mon Justin. Its at your feet now. Can't go back to Bush, right? That's the stock AR answer. You guys want to take charge and throw out everything? Then Own it. But it will be the first time some responsibility will be required. I wonder how Dan the Libertarian will feel about that! It is easy to throw the blame around.

Posted by: David S at April 17, 2010 7:52 PM

David, I have no interest in how you and your fellow progressives want to run things. I simply wish to be left alone and given the option to opt out of your system.

Unfortunately for me and other self-sufficient and responsible individuals, the entire progressive platform is built on the violent coercion of everyone else, forbidding us from opting out.

How can we solve issue X?
Oh, we'll just pass a new law and force everyone to do A.

How can we solve issue Y?
Oh, we'll just pass a new law and force everyone to do B.

How can we solve issue Z?
Oh, we'll just pass a new law and force everyone to do C.

It's an unsustainable system of governance. Eventually the laws become too complicated and voluminous and the weight of the administrative state becomes too heavy for the private sector to support. It then either moves elsewhere or collapses in upon itself, which is what is happening in Rhode Island.

Posted by: Dan at April 17, 2010 9:34 PM

Dan.Dan the caveman, it ain't that easy. Go read English poetry about feudal kingdoms and transport yourself back to another time. I'll repeat-GOOD LUCK. I would like to take the same advice for myself. Today's world is so different from the hoped for one promoted on this site- The Tea Party nonsense. Better to go into this new world. All of you newbies are here with your precious gadgets that you cannot do without, but at the same time you wish for simplicity. You want to go back to log cabins and self sufficiency? Do you ever realize the major flaws in your argument? No. I guess not.

Posted by: David S at April 17, 2010 11:02 PM

You misunderstand, David. I embrace technology, sophistication, specialization, socialization, even complication. You are the one who wishes to simplify everything through strong, centralized government - wielded by none other than yourself, of course. You only have one tool at your disposal - the use of force - and every problem now looks like a nail to you. That you seem to think comfort and technological innovation come from enlightened government rather than private innovators shows how warped your worldview is. By self-sufficiency, I mean that I am not dependent upon government or being an insider or welfare economics. I can take care of myself by dealing with others on a voluntarily basis, and need not resort to FORCE.

Posted by: Dan at April 17, 2010 11:52 PM

>>>>you seem to think comfort and technological innovation come from enlightened government...bah humbug

Sure, like GPS (government), the Internet (government), the space program (government) and vast numbers of other modern technological wonders....ALL a function of an enlightened government.

Posted by: Stuart at April 18, 2010 4:26 PM

Stuart, the government did not invent anything even remotely resembling the modern internet, private companies did. You can keep your space program, it should have been cut two decades ago when the Soviet Union collapsed (largely due to their own bloated space and military programs).

Posted by: Dan at April 18, 2010 4:59 PM

Sure, Dan, we should hire you to develop your time machine, then you can go back into history and try all your suggestions and we will know if they work.

But, until then - as it stands now - the government gave us the internet and GPS and all the other technology which you are using to yell about how bad the government is!

That is just a bit ironic...after the fact!

Obviously there is no person named "big government" that sits in a machine shop or with a soldering iron and creates a GPS satellite. I get the sense that you consider it educational to us when you tell us such a person does not exist.

Well, Dan, we are not all as stupid as some of your friends. We understand that human beings create things. That is as evident as the sun coming up in the morning and heaven not existing above the cloud layer.

But the point is that governments were created to use our - yours and mine - pooled resources to create BETTER things than we could have created by our lonesome selves. In fact, good systems of government like that of the USA are the biggest friend of capitalism because they create the conditions and mitigate some of the risks where capitalism can flourish.

The libertarian ideals of each man being an island and sinking or swimming take us far back to the ages when people did not accomplish much. It is precisely the specialization of labor which our system of big government allows and enhances which cause our forward progress. You simply cannot have one without the other.

The libertarian world, on the other hand, sees us each heavily armed and bartering our slaughtered sheep out on the dirt road (can't be paved since there is no money)

Posted by: Stuart at April 18, 2010 5:31 PM

What Stuart and David think libertarians believe is a caricature, nothing more. Let's leave it at that.

Posted by: Dan at April 19, 2010 1:46 AM
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