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0215-Elizabeth-Warren

It is a burden to go through life being entirely predictable, so now that I’ve defended the seemingly indefensible Donald Sterling and opposed the seemingly unopposable concept of net neutrality, allow me to close the deal on the widely applicable rule of three by supporting a proposal by one of Washington’s newest leftist icons.

In the category of a stopped clock being right twice a day and even a blind squirrel occasionally finding an acorn, Hitler was nice to animals generally, dogs especially, and his last dog Blondi most of all.  Al Capone is credited with introducing expiration dates on milk, and Stalin helped us kill Hitler.  On a smaller scale, Bill Clinton signed welfare reform, promoted free trade and oversaw a balanced budget. Proving that even the most detestable or objectionable people in the world have the capacity to lurch uncontrollably into good ideas.  So we shouldn’t be too surprised when we find ourselves agreeing with one – even though it can, at first blush, be quite disconcerting.  That’s how I felt upon reading about Sen. Elizabeth Warren’s bill on federal student loans (and before those of you in the ever-expanding PC-compliant crowd get all hot and bothered, no, I’m not comparing her to Hitler, Stalin or Capone…or even Clinton).  Fact is, she’s right that there is a huge problem that needs to be remedied, and Republicans should quickly embrace or even champion the legislation she has introduced for both policy and political reasons.  It is good policy, and would remove the issue as a weapon in the battle for control of Congress.

By the end of this month the US will hold well over $1,000,000,000,000 of federal student loan debt – that is, student loans which are made directly with the federal government, or guaranteed by the federal government.  One of the many problems with the various and sundry student loan programs is that borrowers are locked in to the interest rates at which they borrow.  This means that those unlucky enough to borrow when rates are high face the prospect of repayment over their entire working lives at rates that look fairly ridiculous given current conditions.  Congress sets the interest rates for these loans with rates fixed on the majority of loans at 6.8 and 7.9 percent.

Since the rate is set by congress, this becomes a political football.  It was last year, and in 2012, and it certainly will this year.  With headlines like “Dems Plan to Use Elizabeth Warren’s Student Loan Bill Against the GOP in November,” the writing is quite literally on the wall.  Young people are showing up as increasing percentages of the electorate, and they care about the issue.  Why not take it away from them?  Democrats have few, if any, other issues to run on in this cycle.  Obamacare is a millstone around their necks, a feckless foreign policy is really starting to take its toll, and the IRS and Benghazi scandals continue to damage their credibility and brand.

The political goal, of course, is to demotivate these voters who have turned out strong for the Democrats since Obama’s nomination.  The youths (or “utes” as they were famously called by Joe Pesci in My Cousin Vinnie) came out for Obama twice in significant numbers.  But the left has lost ground, and while they had enough votes to beat Romney, the trend is now moving in a direction favoring Republicans, if only because they are not Democrats.  Other than offing the Koch Brothers, there doesn’t seem like an easier way to take a weapon away from them.  All we have to do is let the borrowers refinance at lower rates.  And with rates at historically and shockingly low levels, why not do it?  Does it make sense to allow home buyers and banks to borrow at low costs, while making students pay through the nose?

Of course, Sen. Warren could not just come out with a solid proposal and leave it be.  No, she had to couple it with a proposal consistent with her socialist bonafides.  On Sunday during her appearance on CBS’ “Face The Nation”, Bob Schieffer said  ”Your fans say you’re a populist, but your critics say you’re basically a socialist,” – “I just don’t know where they get that,” (boy, Bob, I have no idea either).  Warren’s reply carried the poison pill. In order to “pay for” the student loan rate decrease, Warren wants to – and here’s a shock – soak the rich.  A new tax on anyone who makes more than one million dollars a year.  Often referred to as the Buffet Rule, this new tax basically says if you make more than 1 million a year, you get to pay even more money because – well, because obviously allowing successful people to keep a significant amount of their money is unfair.  That’s not socialist at all.

Republicans can in fact do way better than Professor-turned-Senator Pocahontas, saving money for the taxpayers, and eliminating one of the worst examples of crony capitalism.  Currently, most of these subsidized loans are terrible deals for the taxpayers because they do just what the bailouts of the mortgage securities did – privatize profits and socialize losses.  Banks make the loans which are backed by the government.  If the borrower pays then the bank gets paid and makes a handsome profit.  If the borrower defaults, the U.S. treasury pays and the banks still make a handsome profit.  See the problem here?  Why are the banks in process to begin with? You be the judge.  The argument here is not that the U.S. government should give out student loans – but if we are going to do so, and taxpayers are assuming all the liability, then we should not privatize the profits and create a zero downside proposition for banks.

Another change Republicans could make that is sound policy, would get them support from young voters, and undercut Democrats in the student loan area is to try and change the law back to allowing the loans to be discharged under bankruptcy proceedings.  These loans are currently almost impossible to discharge.  The policy implications of this rule are troubling, especially considering the near economic collapse from which we are trying to recover.  If it is healthy for banks and brokerages and car companies, why not young people trying to learn and prepare themselves for productive careers?  Right now, if you enter bankruptcy, your debts will be forgiven for gambling, breast implants and maxed out credit cards for mall shopping sprees, but not education.  Does that make any sense at all?

We would all be better off if the federal government was out of the education business altogether.  No money, no regulation, no nothing.  Congress’ limited and enumerated powers do not provide for any of these programs and regulations.  And many of those attending college would be better off not doing so.  But those are arguments for another day.  For now, the bottom line is, if the government is to be involved in the business of student loans, we should try to ensure best practices are used, and if we can use them to disarm socialist political opponents, then so much the better.

  • Antoninus

    As a former student loan borrower who repaid his loans in record time, I agree that student loans should not be locked in at whatever rate one was unlucky enough to be stuck with given whatever progressive regime happened to be holding office and wreaking havoc with the economy. Student loan borrowers should have the same access to refinancing that home mortgages have, and I do not agree with Fauxcahontas nor give her any credit for doing the right thing since this is merely a ruse to tack on some far more sinister socialist policy under the guise of helping students. Conservatives should take this issue away from her quickly and do much better. However, the establishment GOP will probably get in a bidding war with Maude Frickert and end up forgiving a big portion of student debt given their track record.

  • Matt G.

    Yes getting the federal government out of student loans is a great thing. Full Disclosure – I did receive an ROTC scholarship. What really should be happening is that tuition rates need a serious overhaul. NRO had a great article on how college tuition from the 70′s would cost $10K in todays dollars if not for gov’t intervention. I’m too lazy to link to it but its on the national review online website. Bottom line though, the government should have nothing or barely anything at all these days to do with higher education and education at all.

  • Cowabunga1000

    That 2005 bankruptcy “reform” bill making student loans practically impossible to discharge was a Chuck Grassley production, pushed by Jim Sensenbrenner and signed by George Bush. Why would any self-respecting Republican fix a mistake just because it’s good policy to do so? COMPLETELY out of party character…I’m surprised the bill didn’t re-establish debtor’s prisons.

  • WorriedinVA

    The government’s involvement in student loans has led to the ballooning tuitions at these schools. When you have GUARANTEED payers – the wealthy (who don’t care what it costs) and the people getting loans/subsidies/grants/scholarships,etc. the colleges can charge whatever they want. Notice all the AMAZING student centers, student athletic centers, luxury dorms…etc.? They are now competing with each other in terms of amenities. Where does the middle class student fit into this equation? no where. Many of them choose state institutions, because the private colleges aren’t in their budgets. When the government is involved and gives “free stuff” or “guaranteed stuff” – costs escalate…..The colleges should be cut off from this gravy train. Then, there would be some who would reduce tuitions to attract students. Some colleges would necessarily fail….capitalism….What a novel idea! Competition!