Friday, February 12, 2010

Charles Miller is Right

By Richard Vedder

Charles Miller is one of the most perceptive persons I know, and he shares my passion about the need for change in higher education. He sent one of his emails to, roughly, everyone of importance in higher ed in the past 24 hours, and he was on a tear --ripping apart the federal government for many things. I will just talk about one or two of them.

Charles thinks the proposal to completely federalize the student loan program is a disaster. As he points out, the same folks that sent Fannie Mae and Freddie Mac into the ground screwing around with home mortgages now want to become monopolists in the student loan business.

The current federal student aid program is, as Charles says, totally dysfunctional. We have a multiplicity of programs when we should have one. We have had an irrationally complicated form that requires completion before aid is granted, perhaps the single most important obstacle to lower income Americans from applying. We had a 1,000 page higher ed reauthorization that Congress liked --but almost certainly few if any had actually read it. Bills over 50 pages in length should be banned. Bills longer than the Constitution are unwieldly and unmanageable.

The alleged savings from moving to exclude private lenders are illlusionary in any sensible way of calculating costs and benefits, and saying a single provider approach works best is like saying the Bureau of Motor Vehicles/Post Office model is the ideal of America because of economies of scale --never mind the fact that Americans usually find these agencies inefficient, uncooperative, with Soviet-style approaches to customers.

The intensely anti-capitalist views of the Obama crowd along with a total disregard for federal fiscal responsibility have contributed to gold prices being 50 percent higher than they were election day, for the dollar being weak against the Euro (Greece nothwithstanding) and against the yen, and for the inflation-adjusted Dow Jones Industrial Average being 30 percent below what it was a decade ago. A neutral to pro-capitalist president would be running a nation with at least two trillion dollars more in wealth (via higher equity prices), more business confidence, and a faster rising GDP (the stimulus approach, of course, being a dismal failure).

What is worse, as we treat our young persons with contempt (via our awful public schools and so-so universities), we are doubling ripping them off as the present generation pays out entitlements to the elderly etc. that we cannot afford, and we increase our nation's unfunded liabilities that our undereducated youth will have to pay.

Prediction: U.S. sovereign debt, for the first time in American history, will undergo a downgrading --and the day of its happening is growing nearer by every policy disaster emanating from Washington --in higher ed and in the broader macro economy. Charles Miller is right.


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