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The disastrous student loan mess

RGN 060309 Natural Bridge, VAYou have to wonder how many other things the federal government will louse up before people demand a return to constitutional limits.

The New York Times has published a widely re-printed report about the extent to which federally guaranteed and subsidized college loan programs have driven up the cost of tuition and leaving an entire generation “hobbled” by debt.

Federal promotion of student loans began as a benefit for veterans—part of the compensation authorized by the Constitution’s grant to Congress of power to “raise and support Armies” (Article I, Section 8, Clauses 12) and “provide and maintain a Navy” (I-8-13).  In the 1960s, however, Congress expanded eligibility to nearly all students. There was no real constitutional justification for such a move, although the pretextual basis is a spending power said to be found somewhere in I-8-1—a provision that, construed correctly, grants only enough spending authority to run the tax system. A fuller explanation appears in my book The Original Constitution: What It Actually Said and Meant.

The results of unrestrained federal subsidies were predictable. As federal health care involvement has done, federal college subsidies have bloated the nation’s academic establishment and, by increasing cost, have harmed those people the subsidies allegedly were designed to help. These programs also probably have hurt the economy.

To give you an idea what has happened to cost, consider Cornell Law School, where I received my law degree. When I began law study there in 1970, tuition was $3000 per year—or just under $18,000 in today’s inflated currency. (Maintaining a stable currency is another thing the federal government can’t seem to do.) Today, tuition at Cornell is over $55,000 per year. Fees and other expenses jack up the tab to nearly $75,000.

The ways some academics justify federal subsidies are intellectually shameless. For example, they point to studies showing that college-educated Americans earn more over their lives than other Americans. But they neglect to mention that college-educated Americans are initially smarter than those unable to succeed in college. Take away college and they would still outperform.

Also, it doesn’t always follow that more is better. Spending 1% of GDP on road building is better for the economy than spending nothing at all, but that doesn’t mean that it would help the economy to confiscate half of what the American people earn and blow it all on blacktop.

Government higher-ed spending is one area in which we are likely on the downside of the benefit curve. Partly this is because the federal government is encouraging some to attend college who would be better off not doing so. Partly it is because of the accompanying deterioration of academic integrity (political correctness). Partly it is because of the debt problem the feds have created.

Empirical support for the view that we are on the downside of the benefit curve comes from economist Richard Vedder in his book, Going Broke By Degree. Vedder’s statistical comparisons show that states spending less on their public universities actually enjoy better economic growth than states spending more. Now, that doesn’t mean state governments should spend nothing at all on higher ed. But it does suggest that current levels of subsidy (federal + state) are too high.

So if federal higher-education subsidies are hurting the economy and the students who were supposed to benefit, then whom are they really benefiting?

One clear answer is: “Left wing politicians and the academics who support them.”

Non-veteran higher-education subsidies are largely pay-offs to the  academic establishment. By greatly expanding the number of workers in the famously left-of-center academic industry, left-of-center politicians expand their vote and contribution base. Academics also support leftwing politicians in indirect ways—by promoting the leftist agenda on campus, by creating “academic” programs by which students provide politicians with support, and by providing public recognition to selected politicos through honorary degrees, graduation speaking opportunities, and the like.

The American Founders would have called this “corruption,” and they were keenly aware of the potential. They had experienced it under the British constitution. They understood that corruption occurs in all governments, but they installed in the U.S. Constitution several devices to curb it. Two of these were the “general Welfare” limitation on spending and the restriction of federal power to enumerated subjects.

The current student loan mess—like the health care mess—became possible because the Supreme Court stopped enforcing those restraints.

Rob Natelson