Thursday, April 08, 2010

Proof that Conservatives have brains...

It's deceptively easy to slip into the liberal mindset and dismiss all conservatives as right-wing idiots. One of the major benefits of this blog is that I've learned not to dismiss the right so easily; since sometimes they happen to be right.

[Or, in the case of Occasional Professor Tom, all the time - Editorial Bear]

It's also worth noting that even dyed-in-the-wool conservatives have to capacity to surprise you; as my amiable nemesis CK did in this post: I, a conservative, agree with Barack Obama (I think.)

The issue CK was discussing was an recent bill Obama passed which turned responsibility for student loans over from private companies to the government: Socialism in it's purest form.

I will admit that I was astonished to see CK advocating such a position; although he was undoubtedly right to do so. As he eloquently explained in his post, the 'deal' with student loans in America is absolutely absurd.

Unlike mortgages, medical bills or credit card debt, student loans are 'teflon.' They stick with you for life. Even if you file for bankruptcy, you're still left owing whatever you borrowed to go to college (and with a law degree costing at least $100,000, that's not chump change.)

Formerly, banks gave students the loans, and collected interest and profit on them. If the loans defaulted, however, the federal government stepped in to cover the debt with taxpayer's money. Basically, it was a risk-free loan for the banks; a license to print money. Unlike mortgages or personal loans, which could be wiped clean by bankruptcy, there was no way to wriggle out of your student loans and even if you could, the government was there to cover the shortfall.

Which was an absurd situation. Since the government was covering the risk, why did arbitrary banks get to make a profit off of it?

President Obama, who has established education as the cornerstone of his presidency, simply corrected that absurdity. The government now gives out, owns and collects on student loans; which means more students will be able to have access to them and profits will be used to ensure that taxpayers aren't left bailing out the defaulters.

As I said above, it is socialism. The government took a private enterprise (student loans) and nationalized it. The fact that CK agreed with this act astonishes me; but it also enthuses me. It's living proof that conservatives do have their heads screwed on and liberals would be well advised not to dismiss them as idiots quite so easily.

[Especially not while we have Joe Biden as Vice President - Editorial Bear]

Perhaps it's also the first step towards making sure that the next generation of young Americans are smarter and better educated than their Japanese, Indian and Chinese peers; which is the only hope we have for keeping America's position as the #1 economy in the world.


One Salient Oversight said...

In Australia we have HECS which is a government run and operated system of paying university tuition fees.

Essentially the government foots the bill for the student to start off with, and then causes the student to pay off this debt once they have finished university and have entered the workforce. Since it is part of the tax system, people with HECS fees owing end up paying more "tax" until their fees are paid off.

The amount of money charged depends upon the course studied (ie how much it costs to run per student) as well as the expected financial reward to the student. Basic humanities degrees lead to low HECS fees, while high paying courses like Actuarial studies or Medicine result in higher fees payable later on.

It's a form of Market socialism in that the government funds government institutions with taxpayers money directed according to student (ie market) demand.

This system was instituted by the Australian Labor Party in the 1980s and replaced a more socialist "free education" system also set up by the ALP, but in the 1970s when Australia experimented with Democratic Socialism under the Prime Ministership of Gough Whitlam. Previous to Whitlam, the university system was full fee only and set up to serve Australia's elite (who could afford it).

So Australia has moved its tertiary system from elitist-rich to Democratic-Socialist to Market-Socialist - and the conservative government instituted more market and less socialist between 1996 and 2008.

Do I think it has worked? Well it's better than the elitist system which rewarded only the rich, and it's better than the Democratic Socialist system which made everything free and rewarded less useful areas of study. But I think it could be changed even further.

You see I think that a workforce containing more university educated people is more likely to generated wealth as a result of Research and Development, and that wealth can be tapped to provide governments with tax income. So I think that university study should be less costly but the means of paying it made indirect rather than direct (the "user-pays" philosophy). If a better educated workforce does create more taxable wealth, then a more pragmatic solution might be to focus on more tax revenue generated throughout the economy rather than charging the individual - since charging individuals may end up "punishing" them for choosing to enter higher education.

So I wouldn't just forgo charging people to study at university, I would seriously consider PAYING people to pass university subjects, so long as the right sort of subjects are taken (more $ for more practical / in demand courses such as engineering or mathematics, less $ for less practical / low demand courses such as humanities and sociology).

ck said...

One correction (still reading)... and it is an error on my post... banks get a servicing fee, not the interest.

The servicing fee is near $90 Billion a year I believe...

ck said...

Second error.

I'm not sure how long the student loan situation has been how it is... but they didn't privatize a public institution. They just stopped outsourcing a government institution. For a savings of $90 Billion.

ck said...

Now, only if liberals would have brains...

Andy said...

That's interesting OSO. Is it a guarantee to every student that wants to participate, or is there a criteria? (Academic achievement, personal financial situation, etc.)

ck said...

Student loans have a few stipulations to them. No drug convictions, not in default on other student loans, and a lifetime max based on the type of degree.

But financial need, I don't believe is one of the requirements.

Susanne said...

Interesting post. I don't think I mind the gov't doing this as long as people pay back what they owe.

The socialist stuff I don't like is when you take a cut from Militant Ginger's hard work to pay for MY education or MY food stamps or MY new baby. How is that fair when HE did the work? I like how Walter Williams (a black libertarian professor) says this is a form of slavery. You work for my benefit.

Paying back taxpayers? Eh, it's not so bad.