Mises: Obamaschool A Threat Just Like Obamacare

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This article, written by Against Crony Capitalism co-founder Hunter Lewis, originally appeared on the Mises Institute’s website on August 30. 

The President gave a speech on August 22 in Buffalo outlining his proposal to “reform” the student loan program. He acknowledged that the program has some problems, but assured the audience they are easily fixed. Just take the principles behind Obamacare and apply them to education. The President personally “guaranteed” that his proposals would make college more affordable.

Here’s the plan. The government will rate colleges based on fees (the lower the better) and graduation rates (the higher the better) and student success in finding a job. Then student loan funds will be allocated to schools according to the rating. Students will also be guided to the best-rated schools via government web sites. And schools will get more funding if they set up demonstration projects to reduce costs. This will all encourage more “competition” among schools. Yes, you heard that right: more government control of colleges will increase market “competition.”

We don’t have a 2,000 page bill in Congress yet, but it’s all quite familiar: government will take even tighter control of higher education just as it has taken even tighter control of medicine, and use Obamacare as its operating manual. Of course, Obamacare not only rated medical insurance policies; it mandated what would be in them at what prices, which in effect put government in charge of defining what healthcare is. Presumably, the government rating of schools will in due course also lead to mandates and the government defining what higher education is. Obamacare also set up government sites where people would be steered to buy government approved policies, and set up demonstration projects, even though the history of government-inspired healthcare demonstration projects has been dismal.

There is a lot more in common between Obamacare and Obamaschool than these superficial characteristics. Obamacare came into being because of a crisis in medical care. As usual, that crisis had been caused by earlier government interventions in medicine, especially price controls. At present, Medicare price controls about 7,500 medical procedures. Because payment varies by location and practitioner (e.g., doctors employed by hospitals get paid more than other doctors), it has been estimated that Medicare price-controls six billion medical transactions at any one time. As government has come to dominate medicine and price-control it, prices have inevitably risen at a rate that threatens to bankrupt the economy. Obamacare has doubled down on the price controls, mandating allowed price increases under Medicare and installing a price control board. All of this will no doubt lead to the kind of legislation recently passed in Massachusetts where any “material” change in a medical practice, in either prices or services, must be approved by the state.

Obamaschool is coming into being for similar reasons. In this case, the government set up a student loan program which was ostensibly designed to subsidize students. But whenever government subsidizes demand without increasing supply, prices inevitably rise, and this was no exception.

As President Obama pointed out, “Over the past three decades, the average tuition [and fees] at a public four-year college has gone up by more than 250 percent. 250 percent. Now a typical family’s income has gone up 16 percent. That’s a big gap.” Yes it is.

In reality, both the 250 percent and the pitiful 16 percent have been caused by government policies, especially price manipulations and controls. The 250 percent increase in fees (mitigated somewhat by increases in student aid) has specifically been driven by government’s mistake in flooding schools with student loan money. That money did not help students; it enabled schools to keep raising fees. What students mostly got out of the loan program was an early initiation into massive debt. If leaving school with heavy debts is not exactly slavery, it certainly represents some kind of indentured servitude.

Obama was more than a bit mendacious about this debt burden. He took credit for keeping student interest rates down. He even said that “government shouldn’t see student loans as a way to make money; it should be a way to help students.” But the reality is that his administration is currently borrowing money at negligible interest rates and then relending it to students at much higher rates. The difference is booked elsewhere in the federal budget under “deficit reduction.” If that isn’t a clear case of using student loans as a way to make money, then what is?

What will really happen if the federal government completes its takeover of higher education pricing? The certain result will be even higher prices, which will then lead to calls for a complete federal takeover, just as advancing prices under Obamacare are now leading to admissions by Senator Reid and Congresswoman Pelosi that it was only intended to be a stepping stone to a “single payer” system in which government in effect nationalizes all healthcare. Nationalizing healthcare would make the crisis worse, not better, but Reid and Pelosi don’t understand that.

The President’s specific proposals for student loans will have some other presumably unintended effects as well. If schools get more federal money as their graduation rate increases, they will simply stop taking students who are more likely to drop out. That of course means they will stop taking disadvantaged students who need help the most.

The administration says that it will get advice from schools in devising the rating system. This is all we need: closed door meetings in Washington between the government and special interests with the consumer excluded. This is exactly how Mussolini ran Italy and Roosevelt tried to run the U.S. with the National Recovery Act. The results of dismantling a consumer-driven market economy will be no better now than they were then.

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The Ludwig von Mises Institute

was founded in 1982 as the research and educational center of classical liberalism, libertarian political theory, and the Austrian School of economics. It serves as the world's leading provider of educational materials, conferences, media, and literature in support of the tradition of thought represented by Ludwig von Mises and the school of thought he enlivened and carried forward during the 20th century, which has now blossomed into a massive international movement of students, professors, professionals, and people in all walks of life. It seeks a radical shift in the intellectual climate as the foundation for a renewal of the free and prosperous commonwealth.

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  • Brandon Campbell

    I’m with you on most of this, but mentioning Roosevelt in the same breath as Mussolini is going too far.

  • wavesofgrain

    Goodbye America!! Where are our Representatives?????

    • Liz

      Probably hiding under the table. If they protest they will be called a Racist!!!!!

  • mark

    Great to hear from the Von Pisses corporate support agency. Everything to the rich! Zero to the poor! has been their motto for years. They are all neo-Confederate, laissez-faire capitalist extremists who would bring back slavery if they could. In fact so many of their writers sing the constant praises of slavery and the Confederacy from their headquarters in surprise, surprise, Alabama – dead last in income, living standards, life expectancy, education, health care in the U.S. Well, I’m being prejudiced, occasionally Mississippi inches past Alabama to claim the Dead Last in America trophy. Ah, the glories of a minimalist state! Avoid these guys like the plague. They want to bring us all back to the 18th century the glory days of serfs and slaves.

    • Ronr

      I wonder how an extreamist organization like this could get space here on this site? Oh , my bad. Birds of a feather.

      • disqus_mo8ewPYVck

        Yep.

    • TheOriginalDaveH

      Actually, mark, it is you Liberal Progressives who have made it difficult for the poor to advance. Licensing laws, regulations, and a myriad array of hoops designed to discourage competition for the benefit of the politically connected folks, have combined to make it difficult at best for the poor to succeed.
      Some reality:
      http://library.mises.org/books/Kel%20Kelly/The%20Case%20for%20Legalizing%20Capitalism.pdf
      Especially read Chaper 7 — “the Morality Of Capitalism” where it is explained how the well-meaning, or not so, folks have doomed the poor to their poverty.

    • TheOriginalDaveH

      mark says — “They are all neo-Confederate, laissez-faire capitalist extremists who would bring back slavery”.
      Bring back? It’s already here, thanks to Liberal Progressives like mark who think they are “compassionate” for helping themselves to your money. The Government now consumes 40% of our GDP. In 1900 they only consumed 5% of the GDP. Are we really 8 times as needy as the people were in 1900? Hardly, but since when has that stopped the enslavers, like mark?
      Those people who would like to get a better grasp of the concept of money and how to get us back to a thriving economy should read this excellent article by Murray Rothbard:
      http://mises.org/daily/2882/Taking-Money-Back
      Yeah, mark will call you names, and use other adolescent manipulative techniques on you, but just ignore him. He has his own best interests at heart (probably a Government Employee), not yours.

    • Robert Messmer

      Well mark gee whiz any time you are making rankings there can only be one number 1 and someone has to be last. So Alabama isn’t number 1 like Detroit is, so what? Still better conditions than in Somalia and much of the world.

  • JimH

    Some of the Jr. colleges in our area offer 4 year degrees.
    The classes are offered through other universities at the Jr. college tuition rates and the degree’s are just a valid.
    Instead of interest rates being lowered to pay for high tuition, this may be a better route to follow.

    • Don 2

      Today, a “valid” degree does not mean that the holder of that degree actually knows anything about anything. It is past the time for higher education institutions to get rid of curriculums that lead to nowhere except indebtedness and a career at Starbuck’s.

      • JimH

        I agree. Education should focus on teaching people a skill to do a job. Like a vocational school.
        If a student wants to learn computer programing, they shouldn’t have to take oceanography, to get a degree.
        Some employers want applicants to have a degree, even if it isn’t related to the job they would be doing.
        This needs to go.
        Spending money on books and tuition to learn things unrelated to the students career path is a waste of money and time.
        Some things that take four years could be done in two.
        The person gets out owing less and gets to work sooner.

        • Michael Shreve

          Universities SHOULD teach people to think, though they CHOOSE to indoctrinate them. Students must CHOOSE to secure a future for themselves rather than an EASY path to a degree or merely massaging their egos by choosing to learn ONLY irrelevant information.

          • Robert Messmer

            Actually they shouldn’t be getting out of high school without being able to think. A lot of the “courses” offered are crap and yes some students will take them just for the easy grades.

        • laura merrone

          The college my son is going to has an eighteen month course to finish instead of 4 years. Of course, there is little time off and you put in about 8 hours a day, but you get your degree a lot faster…

          • JimH

            I’m glad he found that school.
            Less money, out sooner on the job sooner.
            I hope more students find out about this school.

  • shafawn

    This will somehow lead to outlawing home schooling. They HATE Christians having a positive influence on their own children.

  • Jeff Noncent

    well the president is a joke, that’s all I have to say on these

  • WiSe GuY

    0bama: the new definition of idiot.

  • denise0513

    Yes, tuition has increased due to the government flooding the market with student loan money. However, tuition has also increased due to the fact that more colleges had to hire instructors for the remedial classes as far too many graduating high school seniors are far from being ready for college. Almost 40 years ago, a high school student had to prove to a prospective college that they were ready for tougher classes. Their high school record was used to show their academic ability and then there were interviews with the college. Once accepted to a school, the student was awarded a Pell Grant based on need and student loans. Those students wanting to continue their education but didn’t have the grades were encouraged to attend community college, prove their worth and then apply to a 4 year school. Now, the government has said,”Everyone goes to college.” Funds were made available to everyone even if their academic record was not worthy of the funds. Of course the colleges weren’t going to turn down free money and what did they care if the student failed out as they still got the money for the semester. The federal government screwed up the public education system, caused the incredible increases in tuition of college and now they want to totally screw up the college education system. We need to take a step back. We need to assist the best and brightest. Community colleges need to return to a 2 year program for those students not quite ready for college or not sure college really is for them. Community colleges can be the stepping stone to a 4 year school. As a taxpayer, I don’t have a problem assisting a kid going to college but ONLY if their academic record proves they are worthy of the funds. Joe, who has screwed off for 3 years in high school should not receive college funds because as a senior in high school he suddenly decided he wanted to go to college. Joe wants to go to college, Joe needs to pay for community college and show me he is worthy of assistance for 2 years at a 4 year school. I am not trying to deny anyone a chance to better themselves. I believe in college education! I just don’t believe EVERYONE should receive immediate funding simply because they say they wish to go. I have been told by college administrators that 98% of incoming college freshmen are not college ready and need remedial math and English.

    • Robert Messmer

      Isn’t is strange that so many college freshmen are not ready for college after all the work that the Department of Education has done for decades now? Remember those jokes about new math—Old math if it takes a day for a lumberjack to cut 1/4 acre how long will it take 4 lumberjacks to cut an acre? New math it takes a day for a lumberjack to cut 1/4 acre, how do you feel about that and should he be allowed to destroy trees?

    • laura merrone

      My son is in college right now. He was not homeschooled per se, but he is in his late twenties and went to public schools about 20 years ago when they weren’t quite as bad as today’s schools. He said his courses are so easy, its easier than high school. This is from a college that costs about $20,000 dollars a year. Fortunately, he is going on the GI bill so its not costing us anything and there are no student loans involved. Still, the tests are open book so its little challenge to him there. It is teaching him some technical skills so he is getting something out of it, but still, for that price, it would be expensive if he didn’t already have the GI component… Again, I’m glad no student loans were involved…By the way, he’s making straight “A”‘s…of course.

  • Liz

    I thought O’Bamaschool was already here. I’ve seen some of my grandchildren’s college books. They were home-schooled until college and believe me they not only had a better education but their testing scores were such they immediately got accepted to college and all are in the Honor Society. Because their home-school curriculum was not always Christian based, I firmly believe this Administration doesn’t want anyone home-schooled at all. They cannot start brain washing these students from their first days in a government school. My grandchildren were quick to point out that in their Humanity’s Class they were shown Michael Moore movies with no rebuttal text.

  • Michael Shreve

    The BEST way to promote FAILURE in any program of institution is government involvement. By THAT measure, the FAILURE of our society is the government’s GREATEST success.

  • TheOriginalDaveH

    This is a promising course of action for those who would like to protect their kids from violent public schools with the added benefit of being able to better monitor what is being taught to your children:
    http://distancelearn.about.com/od/onlinepublicschools/a/OnlinePS.htm