Monday, June 16, 2014

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

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.


Dirty White Boy said...

As usual, a thoughtful and penetrating analysis. The same fraud was sold to high school students in the late 1950s. My Dad used to say; "You'll need that paper(diploma) to get ahead." He was well intentioned but wrong.

Learn a trade, something useful that people will always need. Enjoy the satisfaction of accomplishment in every task. Communicate with God through the honest sweat of working with your hands. Learn to 'own the work' and find peace and harmony in the doing.

Solve real problems, strive, create and understand the true meaning of changing things for the better. All work is noble, and the working class is the true American nobility. Live a long, prosperous and humble life that is immune to political fads and frauds. Pay yourself first by investing your energy in improving your skills on every job, large and small.

The Ray Esquivel said...

And to go along with the craziness is the meme that "everyone" should be able to get a college education, whether they are suited for it or not. And of course, if they can't afford it, well, the taxpayer should pick up the tab. Just like the open borders situation. "Hey, come on in. Never mind any requirements. You deserve to be here."

Anonymous said...

During the latter half of my working life, I worked in social services.. Every time I met with a group of higher ups, I spend a lot of the time wondering what most of them did every day. While working in the business world, there was little mystery as to each employee's duties.
It's not just education that has over paid and under-used employees, the public sector is much the same, if not worse..
Even though getting the proper degrees and certifications was a scramble, my public sector job could have been done by a somewhat serious graduate of a community college, with a bit of on the job training, and some real life experience.
Actually, the same could be said for the job of being President.


Anonymous said...

How costly can it be to herd in the know nothing high school graduates, already indoctrinated into the Socialist, we hate America and everything she stands for ideology, when all a college education does is solidify that ideology?

The greatest minds who have done more to make our lives better and more prosperous are not college graduates. Having a college degree today simply shows one was the good little fellow traveler and never questioned their Socialist professor.


Anonymous said...

How can anyone with a brain take Senator Pocahontas seriously?

Anon in TX

Bill Inaz said...

Well written piece. In these times a quote from Alexis de Toqueville comes to mind.

"There is, in fact, a manly and lawful passion for equality which excites men to wish all to be powerful and honored. This passion tends to elevate the humble to the rank of the great; but there exists also in the human heart a depraved taste for equality, which impels the weak to attempt to lower the powerful to their own level, and reduces men to prefer equality in slavery to inequality with freedom."

DIA, Volume I, Chapter 3

mushroom said...

Yes, the administrator to student ratio in public schools as well as the apparent compulsion to build the latest and greatest education mausoleums require that three-fourth of my real and personal property taxes as well as significant portions of my income tax, sales tax revenue and revenues from gaming go to feed the beast. If we protest we don't care about children, even though positive outcomes and standardized test scores correlate less with expenditures every year.

Johnny said...

If the desire is to expand the number of people who get college degrees, then the need is for more applicants and the easy way to get that is to lower the entrance bar. Following that standards in the college have to be dropped so that the new and less qualified students get passing grades. The net result is not teaching more but teaching slower. A good thing for the educational establishment because it expands the market for there services, but not such a good thing for the society that has to foot the bill.

fsy said...

The only way to reduce the trillion dollar mountain of student loan debt is by reforming higher education.

Not sure what that means.

I would say the only way to go is to fight the system. High school grads (and even dropouts) who know they can do the jobs that require college degrees for their 'filtering' value should start applying in droves and demanding a chance (even at lower wages). Companies should be willing to give them a try. Anyone who isn't interested in the careers that really need college (like engineering and science, for example) should stop feeding the monster.

This has to collapse eventually; maybe we can give it a push.

Anonymous said...

The student debt problem gets worse if one considers that nearly half of all freshman entering college today, do not graduate.

Daniel Greenfield @ the Sultan Knish blog said...

and those who don't graduate are also the likeliest to default

careyrowland said...

This rings true, Mr. Knish. As a sheepskin holder since 1973, I say its a good piece of analytical work. Thanks for your insight.

TheOldMan said...

1. Require the university to put up 50% (or more) of the loan amount.
2. Make that portion dischargeable in bankruptcy
3. Watch the rapid demise of *-studies, post-industrial critical feminist poetry degrees and Club Med resort style campuses

Anonymous said...

I do not mind anger. As a college professor I probably got angry about this before it was popular. But I have yet to see a decent solution. A high school diploma won't get you much of a job anymore because those jobs are gone and the high schools are not doing as good a job as they used to. Thus college becomes more important just as the demands of parents and students are pushing colleges to do more for students. These demands plus federal and state requirements that we account for both money and education increase costs. We have to do more or we cannot compete. Some of this is the fault of the governments trying to help people. More of this is the fault of the economy and the culture. The economy because of lost good jobs that did not require college and the culture because the demand for 'success for all' (or at least my kid) has destroyed the high schools.

One thing I should point out. While there are massively overpaid faculty stars, there are very few of them and they really do not have an effect on tuition overall. Many of us here went to big research universities, but most people do not. Studies have shown that faculty salary cannot account for the rise in college costs above inflation. (Admittedly most of these studies have been done by college professors, but that is the sort of thing we count on college professors to do these days.)

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