Monday, March 1, 2010

Good Stuff

Martin Wolf on deficit spending, the debt, and stimulus

Jonathan Chait on the use of the racism and anti-semtism cards

Roger Lowenstein on how Wall Street got post-modern: (hint: they're both too "meta")

Film Clip Break

The stunning montage from Alan J. Pakula's 1974 film, "The Parallax View."

Some Recurring Themes in the Year in Movies

Delivering bad news on major current events issues:
Up in the Air (unemployment)
The Messenger (Iraq)

A selfish man unable/uninterested to make (mostly filial) connections:
Up in the Air
Funny People

Non-human species who live in a tree and are attacked by villainous humans:
Avatar
Fantastic Mr. Fox

Leaving home, embarking on odyssey, and then returning:
Up
Where the Wild Things Are

Others?

What's Wrong with America: Exhibit B

Jim Bunning (and one man's power in the Senate).

What's Wrong with America: Exhibit A

Perfect evidence to demonstrate our government's inability to deal constructively with domestic policy:

Four months ago, it appeared all but certain that the White House and Democrats in Congress would succeed in overhauling the student loan business and ending government subsidies to private lenders.

President Obama called the idea a “no-brainer” last fall, predicting it would take billions of dollars from the profits of private lenders and give it directly to students, and many colleges were already moving to get loans directly from the federal government in anticipation of the next move by Congress. But an aggressive lobbying campaign by the nation’s biggest student lenders has now put one of the White House’s signature plans in peril, with lenders using sit-downs with lawmakers, town-hall-style meetings and petition drives to plead their case and stay in business.

As it stands, private lenders serve as "middle men" between the government and students to provide loans. The private lenders are subsidized by taxpayers, but if a borrower defaults, the government still picks up the tab. As the Times observes, "Private lenders get a cut of the federally backed loans that they originate and service, with little risk of their own." So what's the point of privatized, subsidized middle men if they run no risk of defaults? It's a lose-lose for the taxpayer. Good question.

Unsurprisingly, private lenders fighting this legislation, like Sallie Mae, are describing the plan as a "government takeover." This is deeply ironic of course, because, again, the government already has taken over the risk part of the student loan market, they just left the profit part to private lenders. This happened when Congress wanted to ensure access to student loans to those might not otherwise be able to qualify; in doing so, they guaranteed to cover any losses at the hands of private lenders.

If this sounds vaguely familiar the housing crisis, it's because an analogous (though not identical), story took place. The government wanted to encourage people to buy homes, and risky loans from Fannie Mae were guaranteed by the taxpayer. They weren't guaranteed by the taxpayer in the case of completely by private lenders like Citi and Bank of America, but alas, their losses were guaranteed by the taxpayer as well. It seems like a good way to solve this issue, whether in student loans or housing is fairly simple: if we're going to socialize risk, let's socialize profit too. And if we're going to privatize profit, privatize the risk also. (In the health sector, a different story is taking place, but on the fundamental question of efficiency opponents speak of a similar "government takeover.")

So why is news of a lobbying effort evidence of what's wrong with America? Well if it's not self-evident, let me explain: We have a political system that seems to be incapable of making good public policy. Republican politicians fuel anti-government fervor in their rhetoric and then come to Washington and proceed to subsidize and protect the interests of a few corporations that are rich enough to buy protection through gigantic lobbying efforts in the name of "limited government." What a load of claptrap. As far as Congress goes, the entire notion of limited government is mostly non-existant. Instead we simply have big government that subsidizes powerful industries instead of ordinary people. Hopefully, the Senate will pass student loan reform, make the system more efficient, and consequently prove me wrong. But it must first defeat the lobbying efforts of taxpayer subsidized middle men.