Monday, June 16, 2014

The Problem Isn't Inequality, It's Subsidized Equality‏

Sultan Knish

On Monday, two millionaires showed off their latest inequality talking points as Obama used Elizabeth Warren's student loan bill to bash congressional Republicans.

"If you're a big oil company, they'll go to bat for you," Obama sneered. "If you're a student, good luck."

Good luck indeed. Warren's bill cynically piggybacks on a lower interest rate plan from last year that the House passed 392 to 31. The Republicans, who only care about oil companies, unlike Obama who doled out billions in Green Energy loans to the companies of his donors, voted for it almost en masse.

Unlike it, Warren's bill isn't really about student loans and isn't meant to pass. Like her Bank on Students Loan Fairness Act, it's political theater by a lifelong fraud who began her career as a fake Indian, was a fake Republican and is now a fake Socialist. It would be easier to find a garden spot on Mars than a single honest moment in the long career of Elizabeth Ann Herring.

Warren's bill is cynical manufactured outrage trying to link two unconnected things, supposed tax breaks for the rich to student loans, so that her equally corrupt colleagues can hold on to their fiefdom in the Senate by dragging out the overexploited youth vote for the midterm elections.

Elizabeth Warren, a tenured celebrity professor who jumped into politics, and Barack Obama, an untenured law school instructor, who made it big in politics, know exactly why student loan debt is so high and why their measures do nothing to address its real causes.

Harvard Law paid Warren $350,000 to teach a single course. When Scott Brown brought it up during a debate about student loans, she protested. "I want to talk about the issues. Senator Brown wants to launch attacks."

But Warren's outrageous compensation is the issue. Harvard pays the adjuncts who teach many of its undergraduate classes an average of $11,037. Elizabeth Warren, who likes comparing the salary of a company's employees to its CEO's, isn’t comparing the $429,981 that Harvard paid her before she ran for office to an adjunct's salary. And unlike a CEO, all Warren did was show up for a little bit and then go back to her real business as a lawyer and government consultant.

The untenured Obama was making a more modest $69,287 for teaching three courses. He was politically connected, but had yet to become a celebrity. After leaving the White House, he can expect to easily pull down a small fortune for showing up to teach a brief seminar at any college.

The price of celebrity professors is paid for by student loans. The successful celebrity professors go on to a career in politics condemning Republicans for not caring enough about student loans.

But while it's easy to blame Warren's ridiculous salary for the student loan problem, we didn't get to a trillion in student loan debt because of her or Clinton's former Labor Secretary turned inequality campaigner Robert Reich who pulls in $235,791 a year from a public university at UC-Berkeley to teach a course on "Wealth and Poverty" making him one of the highest paid state employees.

At the modern university, the tenured celebrity professor who doesn't teach and gets paid is the 1 percent and the adjunct that teaches, but is unlikely to ever get tenure or a decent paycheck, is the 99 percent. But just as national inequality did not happen because a few CEOs receive huge salaries, student loan debt didn't spin out of control because of a few celebrity Socialist 1 percent professors. 

The problem is always in the middle. In both the national economy and the campus, the biggest driver of inequality is bureaucracy.

The classic campus was top heavy with professors and light on administrators. The modern campus has more bureaucrats than professors. The ratio of professors to students may be a valid predictor of educational quality, but the ratio of administrators to professors is an excellent predictor of costs.  

The average ratio is two administrators to one full-time faculty member. In the 1960s it used to be two faculty members to one administrator. The runaway increase in administration has only increased in recent years and it will only continue to increase.

From 2001 to 2011 the number of administrators increased 50% faster than faculty. Faculty members, many of whom like big government in theory, are discovering that bureaucracy has an unstoppable moment. True to their radical roots, angry professors and adjuncts frame the issue as one of labor relations and bargaining power. Like Obama and Warren, they avoid dealing with the technical issues of why it's happening and skip straight to the “power to the people” chants.

The left's inability to understand any issue in any terms other than class warfare led it to frame the student loan debate as an attack on for-profit lenders and for-profit schools. (It's easy to understand why for-profit colleges have higher rates of loan defaults when looking at their student populations.) Faculty members blame the "corporatization" of education. Thomas Franks blamed a culture of greed created by Ronald Reagan even while admitting that there was no actual connection.

But it's not the culture of greed that is responsible. It's the culture of subsidized equality.

Colleges keep spending money irresponsibly because they can always make it up by raising tuition rates. And they can always raise tuition rates because students have no choice but to pay. And when millions of students need something, the government will eventually supply it.

College degrees have become mandatory, even for jobs that lack any skill-based reasons for requiring them, turning colleges into very expensive high schools. Politicians and college presidents speak glowingly of the increased job prospects and salaries for college graduates. They neglect to mention that this is often not due to any academic magic, but to a job market in which employers save time and weed out the unemployable by hiring college graduates.

After educational “reforms” devalued many high school diplomas, colleges became expensive four year filters that save employers the trouble of going through resumes. College graduates earn higher salaries because their fortune in student loan debt tells employers that they can read, write and show up on time. And that their pile of debt will force them to work at a job they hate.

Increasing college enrollments devalue the exclusivity of a college degree. When the college diploma becomes as poor of a predictor of literacy and job skills as the high school diploma, it will also become worthless. The devaluation of college diplomas is already leading some employers to unnecessarily demand graduate degrees. Eventually we will be stuck in a European system in which everyone has an armful of degrees and no one has a job.

Colleges have been able to get away with wildly irresponsible spending and tuition increases because student loans continue to be subsidized in one form or another. The ping pong ball bounces between private lenders and the government with plenty of money to be made by those in the loop from the boom and bust cycle of privatizing and subsidizing loans, deregulating and regulating, while piously lecturing about inequality, 'corporatization' and tax breaks for the rich.

Higher education is too big to fail and so is the student loan industry. As long as students are forced to attend college by the reform movements that destroyed public education standards, and are busy destroying the educational standards of higher education, their attendance will have to be subsidized. Americans will be forced to make bigger and bigger “investments” in the success of the next generation when they are really investing in corrupt and dysfunctional bureaucracies.

The rise of college administrators was driven by government regulations. The more colleges depended on the government to maintain their industry, the more they catered to government. The modern university isn't run by donors, by student demand or even by its endless ranks of administrators. Like most government subsidized industries, it is run by the government.

Normal businesses have a profit motive for controlling the growth of their internal bureaucracy. The profit motive of universities lies in expanding their bureaucracy to better interact with their government masters. The very business of student loans increases the size of university administrations even while the cost of that administration increases the size of student loans.

In universities, as in their government templates, bureaucracy, regulation and spending feed off each other. Regulation results in more bureaucracy and more bureaucracy results in more regulation until the system can no longer fulfill its default function.

That state was already reached long ago in the most broken public school systems.

In Newark's broken school system, there is an administrator to every six students. The institutions of higher learning with their swollen administrator ratios are following that same model. The administrators of every indebted, overbureaucratized and overpriced college know that just as in the Newark school system, the bill will eventually be passed to taxpayers.

Like the allied financial institutions feeding off the debt they create, they are too big to fail.

The problem with college education isn't inequality. It's a subsidized equality which devalues a signifier of merit while making it mandatory and pushes up the educational employment tier another level. It’s a race that no one except the institutions peddling sheepskin, celebrity professors and courses on income inequality taught by millionaires can win.

Completing high school used to be a way that a poor boy could get a job. Now it's college. Tomorrow it's graduate school. This system doesn't benefit him and it doesn't create equality. Instead it rewards the likes of Elizabeth Warren or Robert Reich with generous salaries for occasionally coming in to speak about inequality and it rewards even more generously the bureaucrats who make the system impermeable to real reform and change.

Tinkering with student loans provides a slight temporary benefit to students while protecting the corrupt system. Every liberal welfare policy uses clients as human shields, but keeps most of the money that is meant to go to them. Student loan reform uses students as human collateral for the expropriated money that will go to the system that exploits them.

The only way to reduce the trillion dollar mountain of student loan debt is by reforming higher education. Anything else is another cynical gambit by millionaire leftists who use inequality as a political weapon while denying the equality of merit that made higher education into the great equalizer to those who needed it the most.

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