The Republican Party is fond of telling voters that their goal is to expand the economic pie, and as the size of the pie grows, there will be more for everyone, no redistribution required. But when you get down to their actual policies, there are two standards for how this pie is shared: one for the rich, and a very different standard for everyone else.
For the rich, it’s always more tax breaks, fewer restrictions and no accountability for looting — i.e., eating more of the pie than you deserve. If there’s any economic growth — and the primary GOP policy is the failed model of austerity, so there’s no prospects for growth in Mr. Romney’s radical platform — the goal is to maintain control over the flow of wealth and income towards the top. So, yeah, increase the size of the pie, but the 1% get most of the increase, and the top 0.1% do extremely well. That’s the GOP’s whole economic plan.
For everyone else, it’s a zero-sum game, and the portion of the pie available to them keeps getting smaller, because there’s no check on the looting and the ability of the top 1% or so to siphon off economic gains. That’s been going one now for decades.
So here’s example #48,392: Should we reduce the immediate costs of those going into higher education? And how should we pay for it? The immediate issue is whether we should continue to subsidize student loans or allow those rates to double back to what they were before 2009. Obama says extend the low rates; Romney seems to agree, sorta, but what about the GOP Congress?
The enlightened general principle for hundreds of years begins with this: an educated population is the foundation not only for democracy, hence a free, self-governing people; it’s also essential to a vibrant economy — something our competitors clearly understand. It’s also a foundation for a humane society.
For these obvious reasons, America has from it’s beginnings supported public education with public dollars, collected by government via taxes. This is so fundamental, so obvious, so compelling, that we do it at the local level, augment it at the state level and provide additional federal funding, especially when states and local governments are struggling during economic downturns. We continue that with public Universities and Community Colleges. Americans historically believed that educating the populace is part of what it means to be an American.
So it was that a mostly Democratic Congress and the Obama Administration agreed in the 2009 Economic Recovery and Reinvestment Act — the so-called stimulus — to provide additional funding to states to keep them from firing teachers and closing schools during the recession. There were additional subsidies for student loans, both because student loan burdens are already excessive and shouldn’t be exacerbated with high interest rates, and — pay attention, Ms. Virginia – because student jobs would be scarcer than before and thus less able to support much higher college education costs.
As we were in a deep recession that might take years to reverse, the Act paid for these subsidized interest rates by borrowing money. That’s standard economics for people who remember economics, and as the standard texts predicted, during a recession and recovery period those interest charges for federal borrowing have remained in real terms at or near zero and are likely to remain there for a while, unless the Federal Reserve does something incredibly stupid and harmful. (If the GOP and the Dem deficit hysterics get their way, the recession could easily return and make any recovery even longer and harder.)
Now the period specified by the stimulus Act for the extra interest rate subsidies are about to expire, and the Administration and most Democrats in Congress want to extend those subsidies to prevent student loan interest rates from doubling. All of the logic that applied when the subsidies were first increased apply now, because the job situation has only slightly improved but not for graduating students, which means work-study/student jobs are also still limited. College costs have continued to climb, but the real cost of paying for this via borrowing is still essentially zero.
In other words, this is what scarecrows call a no-brainer. The United States now confronts an opportunity to invest in the education of its youth at historically low borrowing costs, but with a potential payback that would be the envy of the most avaricious Wall Street banker. It’s a great deal, and only a very stupid or evil nation would decline to make it.
Enter the Republican Party and the shockingly unenlightened members of the GOP House. In their universe, which can only be understood if you smash through to the other side of a black hole, public education is not that important, college is elitist and thus not important to a democratic republic or the economy, borrowing is sinful even when it’s virtually free and the investment payoff is big, and government shouldn’t be involved in student loans because it was better when banks could charge more interest and make more money.
But the public supports subsidized student loans. What should a stupid party do? If politics forces the GOP to subsidize those lazy human kids, then by God they’re going to extract a pound of flesh — almost literally, as ThinkProgress’ Igor Volsky reports, because they want to pay for this by taking money from highly effective preventive health care programs they once claimed to support.
The idea is to make the Dems pay for this by doing something unpopular. It’s always a zero sum game, but none of the players who can afford this stupid game — via higher taxes on the rich — are required to play. It’s a game for victims only, and the GOP isn’t happy unless someone is getting hurt.
This political season is a mess, and the choices are awful. How we change the menu to provide us better choices and real solutions to issues that are simply ignored for now is a very hard problem that will take a long time to sort out. But from where I stand, there is no more important immediate priority than getting rid of as many of these willfully stupid and unenlightened people as we can in the next election.
In the meantime, those of you who can’t stand to vote for anyone now could at least be pounding on the Democrats to at least understand and start making the arguments that were once commonly accepted by an enlightened nation.




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“”"The enlightened general principle for hundreds of years has begun with this: an educated population is the foundation not only for democracy, hence a free, self-governing people; it’s also essential to a vibrant economy — something our competitors clearly understand. It’s also a foundation for a humane society.”"
If an educated populace is the key to economic growth then why do we talk in terms of subsidy?? Why not offer student loans at the very same rate we offer money to the too big to fail banks? Right now the Reserve has the FED window open daily to the 5 to big to exist at rates that are around 1/4 of 1% Surely, education is at least as important to fundamantal economic growth as Jamie Diamonds yearly bonus??? Even better lets make the Fed rate go up to the unsubsidized student loan rate and give the students the banker deal for next 4 years!!!
That would make too much sense. But you’re right, the arguments for saving the banks — to save the broader economy — apply with equal force to a lot of public programs.
Ya know what would make too much sense? 4 years of free college for anyone who wants it.
Sure, but then you’re talking about “helping” the 99%, which is strictly verboten by our 1% overlords.
Shortly you’ll have a passle of “libertarians” and other fellow-travelers swarming here to *lecture* us DFH that lending, you know, dirty students at – gasp! horror! shriek! – the same rates as our vaunted .00001% Bank Overlords get??? Why, you must be out of your mind! That would lead to the 99% being lazy slackers expecting a hand out and wanting to suck from the govt tit, doncha know??? Might even get those lousy drity 99%ers to become cadillac welfare queens ‘n all.
Not enough room on the gravy train for BOTH the 1%ers and the 99%ers, ya know. Come to your senses!!
Commie! (heh)
No kidding there doesn’t need to be a loan and there plenty of money if corp. and the elite pay their share. Oh right.
Great post, Scarecrow.
It got me thinking about some of the pounding I did a little over a year ago, especially this part:
Embedded links are at the original post.
Once upon a time, the Preamble to the Constitution fell into that category of “arguments that were once commonly accepted by an enlightened nation.” Today, not so much, apparently.
Sad but true almost everything (if not everything) that you list in your post is now a big huge anethema to conservatives & libertarians, most of whom have benefited quite a lot from all of these measures and govt agencies’ regulations & actions.
Said benefits flowing from these good institutions and efforts, of course, are rapidly dwindling even as I write. Yet most citizens shrug their shoulders and believe that it’s “just the way it has to be,” complacently accepting the propoganda shoveled at them by the 1%.
We’re broke; we’re in debt. So if spending money on student loans is a great idea, and I’m not saying it isn’t, then by all means make it your number one priority. But somewhere down the line, the lowest-level priority for spending has to get bumped off the line, or you’ll never close the deficit.
You could confiscate all the money of all the rich people in the country, but it wouldn’t relieve you of the duty of picking which spending priorities to keep and which to let go.
Okay, now you’re sounding like a what, socialist?
We are prepared to co-sign my youngest’s student loan, for a four year college in the fall.
Am I crazy? You bet. Crazy for that youngest of mine who is the smartest and probably nicest (there may be some argument there) of my progeny.
I’ll sign and then, and then, well, we’ll all see what happens.
((Kris))
Gotta take some risks sometime.
Okay, you said commie, I said socialist.
But, still, I think I owe you a beverage.
Hot Lemon Tea, with a splash?
Great points, Peterr. Thanks for the reminders.
Would anyone be left? (No pun intended)
Thank you, scarecrow, for this post.
I know you have all sorts of backstage work, but, I really am so thankful that you take the time to post other important pieces. As well, that I should thank you for your excellent talents with all that you do.
Gratefull Thanks!
A choice between feckless and reckless. What a country!
Sorry, but being in debt is not the same a being broke. The country is not broke, and can’t be.
But even in your framing of debt, the level of debt taken on by the feds relative to the economic wealth and it’s ability to create more is a mere fraction of what we could safely prudently do.
Moreover in the Keynesian analysis, cutting spending now is self defeating; by depressing the economy it does very little to reduce long-run debt. But pending more now would be a net positive over the long run, exactly the opposite of what many claim based on the myths we hear.
And in an MMT framework, even that argument misses the nation’s much greater ability to invest in its own needs.
We’re not broke; it’s only our conventional discourse and limited vision that are bankrupt.
I don’t assume there’s a threshold/litmus, and everyone who fails my personal cutoff point should be shot. I see a huge variety/degrees of ignorance to wisdom, malevolence to decency, etc, and as we look at the choices, we’re capable of making those distinctions that tend to move the range of the choices in a better direction.
And it’s not just right vs left. If you draw a picture of the range of views about the war on terror, about the militarist state, the use of surveillance and decline of the 4th Amendment, etc, it doesn’t stack up neatly along a left/right axis.
Appreciate the comment. thanks.
Thanks. I agree. Should have used a snark tag in my comment.
I would add that I see no proposals to increase need-based grant aid coming from the Ds. With college costs rising, constant or declining grant aid translates into higher loan burden for students and families.
Holding the interest rates down is important but it is a very small piece of making college affordable. And their embrace of austerity puts the Ds, including the WH, on the wrong side of investment in human capital. Certainly a lesser evil that the Rs, but still far from visionary or courageous.
The pie that rich people get is a delicious strawberry rheubarb pie baked by robert truitt…the pie we get is some cardboard with a dogshit filling, and the 1% are now telling us that we have to pay more for the dogshit or we cant have the carboard…
heh… Commie? Socialist? What’s the diff (esp to those who don’t know)??
Make mine a Mohito, please!
Then why don’t we just cut out all the middlemen and print a million dollars for every man woman and child. Then it wouldn’t matter if you go to college or not.
Meanwhile back at the reality ranch, the income “pie” is a total of all income produced, not a fixed sum from which distributions are made. If the 1% make 16% of the income, that’s the amount added to the pie, not taken.
Two, the reason college is so expensive is all the money being thrown at it. Make more money available, the more expensive it gets. You know, like houses.
To respond:
1. We could give everyone one million dollars. The Fed has effectively printed this much money in its Bank rescue.
2. I do not follow you pie analysis.
3. Why is college so expensive? Leads to: Where is the money being spent? One cannot take action until there is a diagnosis. You state no diagnosis, just a symptom.
You need to read up on demand pull vs cost push. You seem to fail to understand the different scenarios.
1. A million million is a trillion, yes? Then we’d be talking about $300 trillion. Even Ben can’t print that much.
2. A lot of people actually think that there is an real pot of money somewhere, and that the rich have “taken” more than their fair share. As in the 1% took “x” amount of dollars. In fact the “pie” is a pie chart showing who contributed what. One has to remember most people have no idea where or how their cornflakes arive.
3. I’m thinking demand push. There are a limited number of colleges, and a growing number of dollars pursuing placements. It’s no different than the real estate bubble.
loans are the wrong way to go to begin with…f the corporatocracy needs educated workers, then they should pay for their education; as it is now, college tuition has just become a vehicle to entrap naive young people into debt slavery…
Your personal finances must be impressive. But you know what? I can only hope that progressives keep spouting MMT nonsense, because it’s what’s going to lose them more and more elections.