The Latest Poison Pill In The Health Care Debate

It appears that if the House passes the Senate version of the Obamacare bill and it goes to the reconciliation process – which is unlikely both because the Democrats don’t currently have the votes in the House and also because it’s of dubious likelihood that there will be any reconciliation at all once President Obama gets the bill on his desk – a government takeover of student loans will be larded into the reconciliation bill.

As Francis Cianfrocca notes on

There’s been a lot of talk about student-loans since the current Administration came to power. The two key features that reportedly will make it into the healthcare legislation are:

1) Putting an end to the subsidized private student loan industry. Citibank, Sallie Mae and hundreds of others will be out of this business (except possibly as servicers rather than finance providers). From now on, the money will go directly from the Federal government to schools.

Senator Tom Harkin says this step is long overdue to stop wasting the taxpayers’s money. I say that if the government really wants to be a bank, they should first prove how they’re going to be any better at it than real banks are.

2) Sharply increasing the maximum amounts of Pell grants for low-income students, and automatically indexing the maximums for inflation every year. Some eight million Pell grants are awarded each year. Economists have been saying since I was in college that federal supports for higher education are the reason that, as with healthcare, the costs have been rising at far more than the general rate of inflation for decades now. We’re going to be kicking those cost increases into a higher gear now.

Why attach this thing, which upends and federalizes a quite substantial industry, to the on-again, off-again healthcare reform effort? That’s easy. To avoid both a public debate of the issue, and also the need to get 60 votes to pass it in the Senate.

The reason the Democrats think a student-loan takeover belongs in a reconciliation package is that it’s scored as a big budget win. According to Washington’s calculations a direct loan program will save some $87 billion over the current loan subsidies to the banks – but of course given the federal government’s abysmal record for budget discipline that figure is destined to disappear in an instant.

With so much more federal swag in the education market and the resulting loss of a transactional relationship between student and college, of course, Cianfrocca is right that already-unacceptable levels of inflation in higher education will only get worse if this goes through.

But more than that, if the federal government becomes a primary funder of college tuition what are the implications as to control? We’ve seen that when the federal government primarily funds highways it has implications on things like speed limits and the drinking age. What ultimate effect, then, of this proposal on things like curriculum?

These are issues which should be debated in full. The idea that legislation involving scores of billions of dollars per year could be jammed through Congress with no debate and only 51 Senate votes on a party-line basis is a poison pill, indeed.



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