Saturday, September 08, 2007

Bush Caves Again

By Richard Vedder

I have always been amazed at how an American President can be so macho and threatening towards his foreign political enemies (the likes of Osama bin Laden or Saddam Hussein), but be so conciliatory and wimpy when confronted by his domestic political enemies like Nancy Pelosi or Teddy Kennedy. Whenever the Democrats start to pass something the President doesn't like, he starts out by threatening to veto, but ends up calling a French white flag factory to purchase their "I surrender" product.

This was repeated for the umpteenth time recently. The House passed a bad higher education budget bill. The Prez sensibly said "it better be changed or I will veto it." As the Senate seemed ready to pass a similar bill, Mr. Bush repeated his threat. The Senate went ahead anyway, both houses arrived at a blended bill with all the disagreeable things in it that the Administration does not like, and the President has announced he will sign. So much for American presidential leadership. Ronald Reagan is probably in Heaven asking God's forgiveness for inflicting the Bushes on the American people (because his making George the Elder veep in 1980 began their reign). It is all too bad because the President appointed a good Secretary of Education, Margaret Spellings, who is asking the right questions and trying to make progress in improving accreditation, reporting of information, simplification of the FAFSA form, etc., etc. She is being thwarted by her boss's indifference or unwillingness to help her fight the battle.

What does the bill do? It does increase Pell Grants measurably, a Spellings Commission recommendation that was widely accepted on both sides of the aisle. But it does nothing innovative to make them more effective. It still gives most Pell money to the schools to give to supplicants who go the monopolistic and, if news stories are to be believed, increasingly morally and ethically challenged financial aid offices. Better would be to give vouchers to kids to be usable for tuition at accredited institutions. This would empower students to shop more for the right school and cut the power of the individual colleges over students.

The bill engages in inane interest rate subsidies, and reduces interest rates on student loans. Government should not be setting interest rates or administrative fees. It is probably true that at the present financial situation institutions make above competitive rates of return on student loans, while after its passage they will make below competitive profits, which is not sustainable in the long run. In the long run, students will feel the squeeze in some fashion --fewer lenders available, less availability of individuals to talk about loan options, etc.

Then there is the idea that there are good majors and bad majors, good jobs and bad jobs. If you become a teacher, a good and noble job whose holders are selfless and humanitarian, you will pay less for your loan than if you become an accountant, engineer, or doctor, jobs whose holders are more selfish and greedy and thus should pay more. This is complete utter bull, and distorts market actions in highly inefficient ways. If you want more teachers, pay them more. Teachers are not underpaid in America, they are mispaid because of inane, viciously anti-market and anti-merit pay schedules inflicted on us by teacher unions. If you want better teachers, do something about that, rather than use loan forgiveness.

Moreover, provisions favored by persons like Buck McKeon of California, implementing some of the Spellings Commission recommendations on transparency and accountability, were thrown out. The colleges, for all their lip service to these concepts, are still fighting providing consumers and policymakers with information on what they do with the money that society showers on them. What do students learn? Who knows? Who cares? Certainly not the U.S. Congress or George W. Bush, because they took out of the bill any attempts to provide that information.

All in all, a bad bill. More of the same. Spend more money. Impose no penalties for inefficiencies or rewards for efficiency and innovation. Make no changes in the system. The Congress gets a second chance with the Higher Education Reauthorization bill, and maybe the President will get some spine and not allow George Miller and Teddy Kennedy to determine higher ed policy. But I am not optimistic. As Kelly Field of the Chronicle of Higher Education observed to me recently, GOP aspirants for president are saying almost nothing about higher ed, unlike the Democrats. They are missing out on a golden opportunity. Americans love higher education, but they are increasingly unhappy with the way it is delivered. It is time to stand up and effect change. The budget bill certainly does not do that.

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